PROSPECTUS SUPPLEMENT
(To Prospectus dated April 8, 1997)
$341,424,000
CIT Home Equity Loan Trust 1998-1
Home Equity Loan Asset Backed Certificates, Series 1998-1
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 1998-1 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 and the Class A-8 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, the Class B-2 Certificates, the Class B-3
Certificates and the Class B-4 Certificates (collectively, the "Class B
Certificates" and collectively with the Mezzanine Certificates, the "Subordinate
Certificates"), (iv) the Class IO-X1 and Class IO-X2 interest only certificates
(collectively, the "Class IO Certificates") and (v) one or more residual classes
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
and the Class IO Certificates, distributions on the Class M-2 Certificates will
be subordinated to distributions on the Class M-1 Certificates, the Class A
Certificates and the Class IO Certificates, distributions on the Class B-1
Certificates will be subordinated to distributions on the Mezzanine
Certificates, the Class A Certificates and the Class IO Certificates,
distributions on the Class B-2 Certificates will be subordinated to
distributions on the Class B-1 Certificates, the Mezzanine Certificates, the
Class A Certificates and the Class IO Certificates, distributions on the Class
B-3 Certificates will be subordinated to distributions on the Class B-2
Certificates, the Class B-1 Certificates, the Mezzanine Certificates, the Class
A Certificates and the Class IO Certificates and distributions on the Class B-4
Certificates will be subordinated to distributions on the Class B-3
Certificates, the Class B-2 Certificates, the Class B-1 Certificates, the
Mezzanine Certificates, the Class A Certificates and the Class IO 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 1998-1, to be created pursuant to a Pooling and Servicing Agreement,
dated as of July 1, 1998, 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-21 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 Price Underwriting
Certificate Pass-Through to Discounts Proceeds to
Balance Rate Public and Commissions Depositor (1)
--------------- ------------ ------------ ----------------- -------------
<S> <C> <C> <C> <C> <C>
Per Class A-1 Certificate ........ $61,000,000 5.88%(2) 99.99706% 0.1500% 99.84706%
Per Class A-2 Certificate ........ $38,000,000 6.01%(2) 99.99755% 0.1750% 99.82255%
Per Class A-3 Certificate ........ $45,000,000 6.08%(2) 99.98466% 0.2300% 99.75466%
Per Class A-4 Certificate ........ $25,000,000 6.20%(2) 99.98338% 0.2500% 99.73338%
Per Class A-5 Certificate ........ $11,000,000 6.36%(2) 99.96653% 0.3500% 99.61653%
Per Class A-6 Certificate ........ $10,872,000 6.70%(2)(3) 99.96766% 0.2750% 99.69266%
Per Class A-7 Certificate ........ $19,000,000 6.30%(2) 99.99128% 0.3000% 99.69128%
Per Class A-8 Certificate ........ $51,317,000 (4) 100.00000% 0.3000% 99.70000%
Per Class M-1 Certificate ........ $23,046,000 6.44%(2) 99.96202% 0.4000% 99.56202%
Per Class M-2 Certificate ........ $19,632,000 6.72%(2) 99.99516% 0.4500% 99.54516%
Per Class B-1 Certificate ........ $11,950,000 7.37%(2) 99.99250% 0.6000% 99.39250%
Total ............................ $315,817,000 $315,783,764 $855,577 $314,928,187
</TABLE>
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(1) Before deducting expenses, estimated to be $650,000.
(2) The Pass-Through Rate with respect to the Offered Certificates (other than
the Class A-8 Certificates) will on any Distribution Date equal the lesser
of (x) the Pass-Through Rate for such Class set out above and (y) the
Adjusted Weighted Average Net Mortgage Rate applicable to such Distribution
Date.
(3) The Pass-Through Rate with respect to the Class A-6 Certificates set out
above will, on any Distribution Date which occurs after the Clean-up Call
Date, be increased to 7.45%.
(4) On each Distribution Date, the Pass-Through Rate on the Class A-8
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,
One-month LIBOR plus 0.16% per annum and for any Distribution Date
thereafter, One-month LIBOR plus 0.32% per annum, (y) 18% per annum (the
"Maximum Variable Rate") and (z) the Weighted Average Net Mortgage Rate
applicable to such Distribution Date.
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 Cedel Bank, societe anonyme ("CEDEL") and the Euroclear System
("Euroclear") in Europe on or about August 10, 1998.
MORGAN STANLEY DEAN WITTER
CREDIT SUISSE FIRST BOSTON
FIRST CHICAGO CAPITAL MARKETS, INC.
July 31, 1998
<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. 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
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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 1998-1 (the "Issuer").
Depositor............... The CIT Group Securitization Corporation III (the
"Depositor"), a Delaware corporation and a limited
purpose finance subsidiary of The CIT Group, Inc.
(f/k/a The CIT Group Holdings, Inc.) ("CIT"), a
Delaware corporation. See "The CIT Group
Securitization Corporation III, The Depositor"
herein and in the Prospectus and "The CIT Group,
Inc." herein and "The CIT Group Holdings, Inc." in
the Prospectus.
Seller.................. The CIT Group/Consumer Finance, Inc. ("CIT
Consumer Finance" or "Seller," as applicable). The
Mortgage Loans 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.
Cut-off Date............ July 1, 1998 (the "Cut-off Date").
Closing Date............ On or about August 10, 1998 (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 1998-1 (the "Certificates") will consist of
the Offered Certificates, the Class B-2
Certificates, the Class B-3 Certificates, the
Class B-4 Certificates, the Class IO Certificates
and the Class R Certificates. The Certificates
will be issued pursuant to a pooling and servicing
agreement (the "Pooling and Servicing Agreement")
to be dated as of July 1, 1998 among the
Depositor, the Seller, the Master Servicer and the
Trustee. The Class IO-X1 and Class IO-X2
Certificates (collectively, the "Class IO
Certificates") together with the Class B-2
Certificates, the Class B-3 Certificates and the
Class B-4 Certificates, (collectively, the
"Private Certificates") and the Class R
Certificates are not offered hereby. Only the
Offered Certificates are offered hereby. The
Depositor currently intends to retain the Class
B-4, the Class IO and the Class R Certificates.
Any information contained herein with respect to
the Private Certificates is provided only to
permit a better understanding of the Offered
Certificates.
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S-3
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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 may be issued in a
different denomination. Each Offered Certificate
and each Private Certificate (other than the Class
IO Certificates) will represent a percentage
interest (a "Percentage Interest") in the
respective Class determined as of any date of
determination by dividing the Certificate Balance
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
(including townhouses and manufactured housing
units on Mortgagor-owned land) 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").
Pass-Through Rates,
Certificate Balances Home Equity Loan Asset Backed Certificates, Series
and Notional Amounts... 1998-1, to be issued in (each, a "Class") and
Certificate Balances as of the Closing Date, set
forth below:
Pass- Original
Through Certificate
Class Rate Balance
----- ---- -------
Class A-1 Certificates 5.88% (1) $61,000,000
Class A-2 Certificates 6.01% (1) $38,000,000
Class A-3 Certificates 6.08% (1) $45,000,000
Class A-4 Certificates 6.20% (1) $25,000,000
Class A-5 Certificates 6.36% (1) $11,000,000
Class A-6 Certificates 6.70% (1)(2) $10,872,000
Class A-7 Certificates 6.30% (1) $19,000,000
Class A-8 Certificates (3) $51,317,000
Class IO-X1 Certificates(5) (4) (4)
Class IO-X2 Certificates(5) (4) (4)
Class M-1 Certificates 6.44% (1) $23,046,000
Class M-2 Certificates 6.72% (1) $19,632,000
Class B-1 Certificates 7.37% (1) $11,950,000
Class B-2 Certificates(5) 8.00% (1) $10,242,000
Class B-3 Certificates(5) 8.00% (1) $ 6,829,000
Class B-4 Certificates(5) 8.00% (1) $ 8,536,000
--------------
(1) The Pass-Through Rate with respect to the Offered
Certificates and the Private Certificates (other than
the Class A-8 Certificates and the Class IO
Certificates) will on any Distribution Date equal the
lesser of (x) the Pass-Through Rate for such Class set
out above and (y) the Adjusted Weighted Average Net
Mortgage Rate applicable to such Distribution Date.
(2) The Pass-Through Rate with respect to the Class A-6
Certificates set out above will, on any Distribution
Date which occurs after the Clean-up Call Date, be
increased to 7.45%.
(3) On each Distribution Date, the Pass-Through Rate on
the Class A-8 Certificates will be equal to the lesser
of (I) the lesser of (x) with respect to any
Distribution Date which occurs on or prior to the
Clean-up Call Date, One-month LIBOR plus 0.16% per
annum and for any Distribution Date thereafter,
One-month LIBOR plus 0.32% per annum (the "LIBOR Rate")
and (y) the Maximum Variable Rate (the lesser of (x)
and (y), the "Class A-8 Formula Rate") and (II) the
Weighted Average Net Mortgage Rate applicable to such
Distribution Date.
(4) The Class IO Certificates will not have a principal
balance nor will they entitle the holder thereof to
receive distributions of principal, but will entitle
such holders to receive payments of interest equal to
the sum of the interest accrued on the notional amount
of each of its Components.
(5) Not offered hereby. Accordingly, any information
herein regarding the terms of such Class of
Certificates is provided solely because of its
potential relevance to a prospective purchaser of an
Offered Certificate.
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S-4
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The Maximum Variable Rate" is equal to 18% per
annum.
The "Certificate Balance" of any Class of
Certificates (other than the Class IO and Class R
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 Certificates on account
of principal on all prior Distribution Dates and
any Applied Realized Loss Amounts that were
allocated to such Class of Certificates on all
prior Distribution Dates.
The Class IO Certificates will not have a
principal balance, but will represent the right to
receive the sum of the interest accrued on the
notional amount of each of its Components (each, a
"Component"), as described herein. Each such
Component will relate to each separate Class of
Certificates (other than the Class R Certificates)
with the same Class designation. As of any
Distribution Date, each Component will have a
notional amount equal to the Certificate Balance
of the related Class of Certificates immediately
prior to such Distribution Date. The Class IO-X1
Certificates will consist of thirteen Components
relating to each Class of Certificates (other than
the Class A-8 and the Class R Certificates). The
Class IO-X2 Certificates will consist of one
Component relating to the Class A-8 Certificates.
The Components do not represent separate Classes
of Certificates, but rather separate components,
each of which is a part of the Class IO
Certificates.
The Class R Certificates will not have a
Certificate Balance.
The "Adjusted Weighted Average Net Mortgage Rate"
for each Distribution Date is the Weighted Average
Net Mortgage Rate minus the applicable Strip Rate.
The "Weighted Average Net Mortgage Rate" for each
Distribution Date is the weighted average of the
Net Mortgage Rates for the Mortgage Loans as of
the first day of the related Due Period, weighted
on the basis of their respective Principal
Balances outstanding as of the first day of the
related Due Period. The "Net Mortgage Rate" for
each Mortgage Loan will equal (x) the Mortgage
Rate in effect for such Mortgage Loan as of the
first day of the related Due Period, minus (y) the
Monthly Servicing Fee for such Mortgage Loan.
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 and the Class A-8
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, the
Class B-2 Certificates, the Class B-3 Certificates
and the Class B-4 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."
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S-5
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The Subordinate Certificates are subordinate in
right of distribution to the Class A Certificates
and the Class IO Certificates to the extent
described herein. The Class M-1 Certificates are
subordinate in right of distribution to the Class
A Certificates and the Class IO Certificates to
the extent described herein. The Class M-2
Certificates are subordinate in right of
distribution to the Class A Certificates, the
Class IO 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, the
Class IO 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
Class IO Certificates, the Mezzanine Certificates
and the Class B-1 Certificates to the extent
described herein. The Class B-3 Certificates are
subordinate in right of distribution to the Class
A Certificates, the Class IO Certificates, the
Mezzanine Certificates, the Class B-1 Certificates
and the Class B-2 Certificates to the extent
described herein. The Class B-4 Certificates are
subordinate in right of distribution to the Class
A Certificates, the Class IO Certificates, the
Mezzanine Certificates, the Class B-1
Certificates, the Class B-2 Certificates and the
Class B-3 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 Private Certificates (other than the Class
IO 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 Fixed Rate
Mortgage Loans, the Adjustable Rate Mortgage Loans
or all of the Mortgage Loans in the Trust, in each
case as of the Cut-off Date. The aggregate
Principal Balance of the Fixed Rate Mortgage Loans
is $290,107,437 (or approximately 85% of the
Mortgage Pool) and the aggregate Principal Balance
of the Adjustable Rate Mortgage Loans is
$51,317,073 (or approximately 15% of the Mortgage
Pool).
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,
83.73% of the Mortgage Pool consists of Mortgage
Loans secured by first liens on the Mortgaged
Properties, and 16.27% 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
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S-6
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on any Adjustment Date (the "Periodic Rate Cap").
In addition, adjustments 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: December 15, 2007
Class A-2 Certificates: September 15, 2011
Class A-3 Certificates: January 15, 2013
Class A-4 Certificates: November 15, 2017
Class A-5 Certificates: February 15, 2024
Class A-6 Certificates: January 15, 2028
Class A-7 Certificates: January 15, 2013
Class A-8 Certificates: January 15, 2028
Class M-1 Certificates: November 15, 2027
Class M-2 Certificates: September 15, 2027
Class B-1 Certificates: July 15, 2027
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 17, 1998 (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 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 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, 1998 and will end
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S-7
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on and include July 31, 1998.
Distributions--General.. For each Distribution Date, interest due with
respect to the Certificates (other than the Class
IO Certificates) will be the interest which has
accrued thereon at the applicable Pass-Through
Rate (subject to the Adjusted Weighted Average Net
Mortgage Rate or, in the case of the Class A-8
Certificates, subject to the Weighted Average Net
Mortgage 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").
The Class IO-X1 Certificates will receive payments
of interest equal to the sum of the interest
accrued during the related Accrual Period on the
notional amount of each of its thirteen
Components. Each Component will accrue interest at
its applicable Component Rate on its related
notional amount. The "Component Rate" applicable
to each Component for each Distribution Date will
equal (I) the lesser of (i) the Weighted Average
Net Mortgage Rate for such Distribution Date and
(ii) 9.358%, minus (II) the applicable
Pass-Through Rate minus (III) the applicable Strip
Rate (but will not be less than zero). The Class
IO-X2 Certificates will receive payments of
interest equal to the interest accrued during the
related Accrual Period on the notional amount of
its Component at a rate equal to the Weighted
Average Net Mortgage Rate for such Distribution
Date minus the Class A-8 Formula Rate (but not
less than zero).
The "Strip Rate" for each Component is as follows:
Component Certificate Strip Rate
--------- ----------- ----------
IO-A-1 A-1 2.17%
IO-A-2 A-2 2.04%
IO-A-3 A-3 1.97%
IO-A-4 A-4 1.85%
IO-A-5 A-5 1.69%
IO-A-6 A-6 1.35%
IO-A-7 A-7 1.75%
IO-M-1 M-1 1.61%
IO-M-2 M-2 1.33%
IO-B-1 B-1 0.68%
IO-B-2 B-2 0.05%
IO-B-3 B-3 0.05%
IO-B-4 B-4 0.05%
All calculations of interest on the Certificates
(other than the Class A-8 and the Class IO-X2
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 Class A-8 and
the Class IO-X2 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
and the Class IO Certificates, the
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Class A Current Interest or the Class IO Current
Interest, as applicable, plus the Interest Carry
Forward Amount with respect to each such Class of
Class A Certificates and Class IO Certificates
without any priority among such Class A
Certificates and Class IO 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 and Class IO Certificates, the
Interest Remittance Amount will be distributed
among the outstanding Classes of Class A
Certificates and Class IO 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
plus the Interest Carry Forward Amount with
respect to the Class M-1 Certificates;
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
plus the Interest Carry Forward Amount with
respect to the Class M-2 Certificates;
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
plus the Interest Carry Forward Amount with
respect to the Class B-1 Certificates;
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
plus the Interest Carry Forward Amount with
respect to the Class B-2 Certificates;
Sixth, to the extent of the Interest Remittance
Amount then remaining, to the holders of the Class
B-3 Certificates, the Class B-3 Current Interest
plus the Interest Carry Forward Amount with
respect to the Class B-3 Certificates;
Seventh, to the extent of the Interest Remittance
Amount then remaining, to the holders of the Class
B-4 Certificates, the Class B-4 Current Interest
plus the Interest Carry Forward Amount with
respect to the Class B-4 Certificates;
Eighth, to the extent of the Interest Remittance
Amount then remaining, to the holders of the Class
A-8 Certificates, the Class A-8 Extra Interest;
Ninth, to the extent of the Interest Remittance
Amount then remaining, to pay the Master Servicing
Fee to the Master Servicer if CIT Consumer Finance
or one of its affiliates is the Master Servicer;
and
Tenth, to the extent of the Interest Remittance
Amount then remaining, to the holders of the Class
R Certificates.
"Current Interest" with respect to each Class of
Offered Certificates and the Private Certificates
(other than the Class IO 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 the Offered Certificates and the
Private Certificates immediately prior to such
Distribution Date at the applicable Pass-Through
Rate (subject to the Adjusted Weighted Average Net
Mortgage Rate or, in the case of the Class A-8
Certificates, subject to the Weighted Average Net
Mortgage Rate and the Maximum Variable Rate as
described herein). "Current Interest" with respect
to the Class IO-X1 Certificates means, with
respect to any Distribution Date, the
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sum of the interest accrued during the related
Accrual Period on the related notional amount
outstanding on each Component immediately prior to
such Distribution Date at the Component Rate
applicable to each such Component and such
Distribution Date. "Current Interest" with respect
to the Class IO-X2 Certificates means, with
respect to any Distribution Date, the interest
accrued during the related Accrual Period on the
notional amount outstanding on its Component
immediately prior to such Distribution Date at a
rate equal to the Weighted Average Net Mortgage
Rate for such Distribution Date minus the Class
A-8 Pass-Through Rate for such Distribution.
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, (ii) if CIT Consumer Finance or one of its
affiliates is the Master Servicer, all Mortgage
Fees collected by the Master Servicer during the
related Due Period, (iii) all Compensating
Interest paid by the Master Servicer with respect
to such Due Period, (iv) the portion of any
Substitution Adjustment relating to interest paid
by the Seller in connection with a substitution of
a Mortgage Loan with respect to the related Due
Period, (v) the interest portion of any Purchase
Price with respect to each Mortgage Loan that was
repurchased from the Trust during the related Due
Period and (vi) all Liquidation Proceeds actually
collected by the Master Servicer during the
related Due Period (to the extent such Liquidation
Proceeds related to interest). If CIT Consumer
Finance or one of its affiliates is not the Master
Servicer, the Interest Remittance Amount will be
reduced by the Master Servicing Fee.
The "Interest Carry Forward Amount" with respect
to any Class of the Offered Certificates or the
Private 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 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 Private Certificates.
"Class A-8 Extra Interest" means, if the Class A-8
Pass-Through Rate is based on the Weighted Average
Net Mortgage Rate, the excess of (i) the amount of
interest that the Class A-8 Certificateholder
would have been entitled to receive on such
Distribution Date had the Class A-8 Pass-Through
Rate been calculated based on the Class A-8
Formula Rate over (ii) the amount of interest that
the Class A-8 Certificateholders were entitled to
receive on such Distribution Date as a result of
the Class A-8 Pass-Through Rate being calculated
based on the Weighted Average Net Mortgage Rate.
If on a Distribution Date there are insufficient
funds to pay the Class A-8 Extra Interest, the
unpaid Class A-8 Extra Interest will not be
carried forward to the next Distribution Date (and
will not be included in the Interest Carry Forward
Amount).
The Class R Certificates will not bear interest,
but will represent the right to receive certain
limited amounts not otherwise payable to the
Offered Certificates and the Private Certificates.
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Principal............... On each Distribution Date, the Principal
Distribution Amount will be distributed in the
following order of priority:
First, the holders of the Class A Certificates
will be entitled to receive payment of the Class A
Principal Distribution Amount for such
Distribution Date in the following amounts and
priorities:
(1) to the holders of the Class A-8
Certificates; an amount equal to the Class
A-8 Principal Distribution Amount until the
Class A-8 Certificate Balance has been
reduced to zero;
(2) to the holders of the Class A-7
Certificates, an amount equal to the Class
A-7 Lockout Distribution Amount;
(3) to the holders of the Class A Certificates
(other than the Class A-7 Certificates and
the Class A-8 Certificates) in sequential
order until the Certificate Balance of each
such Class of Class A Certificates has been
reduced to zero;
(4) to the holders of the Class A-7 Certificates
until the Class A-7 Certificate Balance has
been reduced to zero; and
(5) to the holders of the Class A-8 Certificates
until the Class A-8 Certificate Balance is
reduced to zero.
Until the Stepdown Date, on each Distribution Date
no principal will be distributed to the
Subordinate Certificates. Thereafter, 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 Subordinate
Certificates will be entitled to receive payments
of principal, after distribution of principal to
the Class A Certificates as provided above, in the
amounts and the priorities set forth below and to
the extent of the remaining Principal Distribution
Amount as follows:
Second, the lesser of (x) the excess, if any, of
(i) the 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 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 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;
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Fifth, the lesser of (x) the excess, if any, of
(i) the 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;
Sixth, the lesser of (x) the excess, if any, of
(i) the 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, the amount distributed to
the holders of the Class B-1 Certificates pursuant
to clause "Fourth" above and the amount
distributed to the holders of the Class B-2
Certificates pursuant to clause "Fifth" above and
(y) the Class B-3 Principal Distribution Amount,
shall be distributed to the holders of the Class
B-3 Certificates, until the Class B-3 Certificate
Balance has been reduced to zero; and
Seventh, the lesser of (x) the excess, if any, of
(i) the 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, the amount distributed to
the holders of the Class B-1 Certificates pursuant
to clause "Fourth" above, the amount distributed
to the holders of the Class B-2 Certificates
pursuant to clause "Fifth" above and the amount
distributed to the holders of the Class B-3
Certificates pursuant to clause "Sixth" above and
(y) the Class B-4 Principal Distribution Amount,
shall be distributed to the holders of the Class
B-4 Certificates, until the Class B-4 Certificate
Balance has been reduced to zero.
Notwithstanding the foregoing, on each
Distribution Date on or after the Distribution
Date on which the Certificate Balance of the Class
A Certificates has been reduced to zero, if a
Trigger Event is in effect, the Principal
Distribution Amount (or the remaining Principal
Distribution Amount on the date on which the
Certificate Balance of the Class A Certificates is
reduced to zero) will be distributed to the
holders of each Class of the Subordinate
Certificates sequentially (in order of seniority),
and the holders of a Class of Certificates will
not receive any distribution of principal until
the Certificate Balance of each more senior Class
of Subordinate Certificates has been reduced to
zero.
"Class A-8 Principal Distribution Amount" means,
as of any Distribution Date, the lesser of (i) the
Principal Distribution Amount and (ii) the amount
required to reduce the Certificate Balance of the
Class A-8 Certificates such that the Certificate
Balance after such distribution is equal to the
Principal Balance of the Adjustable Rate Mortgage
Loans as of the last day of the related Due
Period.
The "Class A-7 Lockout Distribution Amount" for
any Distribution Date will be the product of (i)
the applicable Class A-7 Lockout Percentage for
such Distribution Date and (ii) the Class A-7
Lockout Pro Rata Distribution Amount
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for such Distribution Date.
The "Class A-7 Lockout Percentage" for each
Distribution Date shall be as follows:
Distribution Dates Lockout Percentage
------------------ ------------------
August 1998 - July 2001 0%
August 2001 - July 2003 45%
August 2003 - July 2004 80%
August 2004 - July 2005 100%
August 2005 and thereafter 300%
In no event shall the Class A-7 Lockout
Distribution Amount for a Distribution Date exceed
the Class A Principal Distribution Amount for such
Distribution Date.
The "Class A-7 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-7 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-8 Certificates) immediately prior to
such Distribution Date and (y) the Class A
Principal Distribution Amount minus the Class A-8
Principal Distribution Amount for such
Distribution Date.
The Class A Certificates (other than the Class A-8
Certificates and the Class A-7 Certificates) are
"sequential pay" classes such that 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 Certificate Balance of the
Subordinate Certificates is zero, any amounts of
principal payable to the holders of the Class A
Certificates (including the Class A-7 Certificates
and the Class A-8 Certificates) on such
Distribution Date shall be distributed pro rata
and not sequentially.
The holders of the Class A-7 Certificates are
entitled to receive, from funds available
therefor, payments of the Class A-7 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-7 and the Class A-8 Certificates) has
been reduced to zero, the holders of the Class A-7
Certificates will be entitled to receive any
remaining Class A Principal Distribution Amount
(after payment of the Class A-8 Principal
Distribution Amount to the Class A-8 Certificates
and after payment of the Class A Principal
Distribution Amount to the Class A-1 through Class
A-6 Certificates) until the Class A-7 Certificate
Balance has been reduced to zero.
"Principal Distribution Amount" means as of any
Distribution Date, the sum of
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(i) the principal actually collected by the Master
Servicer on the Mortgage Loans during the related
Due Period, (ii) the Principal Balance of each
Mortgage Loan 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 with
respect to the related Due Period, and (iv) all
Liquidation Proceeds actually collected by the
Master Servicer during the related Due Period (to
the extent such Liquidation Proceeds related to
principal).
A "Trigger Event" is in effect with respect to a
Distribution Date if the percentage obtained by
dividing (x) the aggregate outstanding Principal
Balance of the 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 40% of the
Senior Specified Enhancement Percentage.
"Stepdown Date" means the earlier to occur of (i)
the later to occur of (x) the Distribution Date in
August 2001 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 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 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-8
Certificates and (B) the Class A-8 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) 53.0% 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 $1,707,120.
"Class M-1 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, zero and (b) 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) and (ii) the
Class M-1 Certificate Balance immediately prior to
such Distribution Date (but after the application
of any Applied Realized Loss Amounts allocated to
the Class M-1 Certificates on such Distribution
Date) over (y) the lesser of (A) the product of
(i) 66.5% 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
$1,707,120.
"Class M-2 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, zero and (b) 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
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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 (but after the application of
any Applied Realized Loss Amounts allocated to the
Class M-2 Certificates on such Distribution Date)
over (y) the lesser of (A) the product of (i)
78.0% 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
$1,707,120.
"Class B-1 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, zero and (b) 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 (but
after the application of any Applied Realized Loss
Amounts allocated to the Class B-1 Certificates on
such Distribution Date) over (y) the lesser of (A)
the product of (i) 85.0% 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 $1,707,120.
"Class B-2 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, zero and (b) 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) and (v) the Class B-2
Certificate Balance immediately prior to such
Distribution Date (but after the application of
any Applied Realized Loss Amounts allocated to the
Class B-2 Certificates on such Distribution Date)
over (y) the lesser of (A) the product of (i)
91.0% 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
$1,707,120.
"Class B-3 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, zero and (b) 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
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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), (v) the Class B-2 Certificate Balance
(after taking into account the payment of the
Class B-2 Principal Distribution Amount on such
Distribution Date) and (vi) the Class B-3
Certificate Balance immediately prior to such
Distribution Date (but after the application of
any Applied Realized Loss Amounts allocated to the
Class B-3 Certificates on such Distribution Date)
over (y) the lesser of (A) the product of (i)
95.0% 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
$1,707,120.
"Class B-4 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, zero and (b) 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), (v) the Class B-2 Certificate
Balance (after taking into account the payment of
the Class B-2 Principal Distribution Amount on
such Distribution Date), (vi) the Class B-3
Certificate Balance (after taking into account the
payment of the Class B-3 Principal Distribution
Amount on such Distribution Date) and (vii) the
Class B-4 Certificate Balance immediately prior to
such Distribution Date (but after the application
of any Applied Realized Loss Amounts allocated to
the Class B-4 Certificates on such Distribution
Date) over (y) the outstanding aggregate Principal
Balance of the Mortgage Loans as of the last day
of the related Due Period.
"Senior Enhancement Percentage" for any
Distribution Date is the percentage obtained by
dividing (x) the aggregate Certificate Balance of
the Subordinate Certificates 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
47.0%.
Credit Enhancement...... The Credit Enhancement provided for the benefit of
the holders of the Class A Certificates and the
Class IO Certificates consists of the
subordination of distributions to the Subordinate
Certificates and, with respect to the Class A
Certificates, the priority of application of
Realized Losses.
Subordination of Subordinate Certificates. The
rights of the holders of the Subordinate
Certificates to receive distributions will be
subordinated, to the extent described herein, to
such rights of the holders of the Class A
Certificates and the Class IO Certificates. This
subordination is intended to enhance the
likelihood of regular receipt by the holders of
the Class A Certificates of the full
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S-16
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amount of their scheduled monthly payment of
interest and principal and to afford such holders
protection against Realized Losses and to enhance
the likelihood of regular receipt by the holders
of the Class IO Certificates of the full amount of
their scheduled monthly payment of interest.
The protection afforded to the holders of the
Class A Certificates and the Class IO Certificates
by means of the subordination of the Subordinate
Certificates will be accomplished by the
preferential right of the holders of the Class A
Certificates and the Class IO 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, with respect to the Class A
Certificates, 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 and the
Class IO Certificates to receive future
distributions of amounts that would otherwise be
payable to the holders of the Subordinate
Certificates.
In addition, the rights of the holders of the
Class M-2, Class B-1, Class B-2, Class B-3 and
Class B-4 Certificates to receive distributions
will be subordinated, to the extent described
herein, to such rights of the holders of the Class
A, Class IO and Class M-1 Certificates. This
subordination is intended to enhance the
likelihood of regular receipt by the holders of
the Class A, Class IO and Class M-1 Certificates
of the amount of interest due them and, other than
with respect to the Class IO Certificates,
principal available for distribution, and to
afford such holders (other than the Class IO
Certificates) with protection against Realized
Losses.
The rights of the holders of the Class B-1, Class
B-2, Class B-3 and Class B-4 Certificates to
receive distributions will be subordinated in the
same manner to such rights of the holders of the
Class A, Class IO, Class M-1 and Class M-2
Certificates, the rights of the holders of the
Class B-2 Certificates, Class B-3 and Class B-4
Certificates to receive distributions will be
subordinated in the same manner to such rights of
the holders of the Class A, Class IO, Class M-1,
Class M-2 and Class B-1 Certificates, the rights
of holders of the Class B-3 and Class B-4
Certificates to receive distributions will be
subordinated in the same manner to such rights of
the holders of the Class A, Class IO, Class M-1,
Class M-2, Class B-1 and Class B-2 Certificates
and the rights of the holders of the Class B-4
Certificates to receive distributions will be
subordinated in the same manner to such rights of
the holders of the Class A, Class IO, Class M-1,
Class M-2, Class B-1, Class B-2 and Class B-3
Certificates.
Application of Realized Losses. To the extent that
the Mortgage Loans experience Realized Losses in
any Due Period, the Certificate Balance of the
Subordinate Certificates will be reduced (in
effect, "written down") on the related
Distribution Date by the amount of such Realized
Losses. Such amount written down 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 Certificate
Balance of the Class B-4 Certificates until it is
reduced to zero, then against the Certificate
Balance of the Class B-3 Certificates until it is
reduced to zero, then against the Certificate
Balance of the Class B-2 Certificates until it is
reduced to zero, then against the Certificate
Balance of the Class B-1 Certificates until it is
reduced to zero, then against the Certificate
Balance of the Class M-2 Certificates until it is
reduced to zero and then against the Certificate
Balance of the Class M-1 Certificates until it is
reduced to zero). Applied Realized Loss Amounts
will not be applied as a
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reduction in the Certificate Balance of the Class
A Certificates. The only protection against
Realized Losses afforded to any Class of
Subordinate Certificates is the protection
afforded by the subordination of any more junior
class of Subordinate Certificates then
outstanding. It is expected that Realized Losses
will occur.
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." Any subsequent
recoveries on Mortgage Loans which became
Liquidated Mortgages (as defined in the
Prospectus) during a prior Due Period will not be
applied to "reinstate" the Certificate Balance of
a Subordinate Certificate.
Any Applied Realized Loss Amount allocated in
reduction of the Certificate Balance of any Class
of Certificates (other than the Class IO and Class
R Certificates) will result in a corresponding
reduction in the notional amount of the related
Component of the Class IO 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 (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 "Monthly Servicing Fee")
plus any late fees, prepayment fees and other
similar fees on the Mortgage Loans (the "Mortgage
Fees") collected by the Master Servicer during the
related Due Period (collectively, 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 (other than the
Class R 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 Cedel
Bank, societe anonyme ("CEDEL") or the Euroclear
System ("Euroclear") in
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<PAGE>
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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, 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.
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 Cut-off 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 "The Pooling
and Servicing Agreement--Optional Termination"
herein.
Auction Sale............ 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 Cut-off 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 each of
designated portions of the Trust Fund as a "real
estate mortgage investment conduit" ("REMIC") for
federal income tax purposes. The Offered
Certificates and the Private Certificates will
constitute "regular interests" in one such REMIC
and each Class R Certificate will constitute the
sole class of "residual interests" in each such
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 other than insurance company general
accounts that are able to rely on Prohibited
Transaction Class Exemption 95-60. See "ERISA
Considerations" herein and in the Prospectus.
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<PAGE>
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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.
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. The ratings do not address the likelihood
of the payment of the Class A-8 Extra Interest.
(The Class A-8 Extra Interest is not included in
the Interest Carry Forward Amounts).
Use of Proceeds......... Substantially all of the net proceeds to be
received from the sale of the Offered Certificates
and the Private 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-20
<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 and Class IO
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, Class IO and
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 IO, Class M-1 and Class M-2 Certificates to receive such distributions,
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 IO, Class M-1, Class M-2 and Class B-1
Certificates to receive such distributions, the rights of the holders of the
Class B-3 Certificates to receive distributions with respect to the Mortgage
Loans will be subordinate to the rights of the holders of the Class A, Class IO,
Class M-1, Class M-2, Class B-1 and Class B-2 Certificates to receive such
distributions and the rights of the holders of the Class B-4 Certificates to
receive distributions with respect to the Mortgage Loans will be subordinate to
the rights of the holders of the Class A, Class IO, Class M-1, Class M-2, Class
B-1, Class B-2 and Class B-3 Certificates to receive such distributions. The
subordination of the Subordinate Certificates relative to the Class A and Class
IO 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 and Class IO
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. Limited Credit Enhancement. There is no other credit enhancement for
the Offered Certificates other than the subordination described above. There is
no reserve fund or spread account to provide a source of payment of interest and
principal on the Certificates or to pay any extraordinary expenses that the
Trust may incur. Only the principal collected on the Mortgage Loans will be
available to make payments of principal on the Certificates. No other funds will
be available to make payments of principal on the Certificates. There will be no
overcollateralization whereby the aggregate principal amount of the Mortgage
Loans would exceed the Aggregate Certificate Balance of the Certificates.
5. Risk of Mortgage Loan Rates or the Maximum Variable Rate Reducing the
Amount of Interest the Class A-8 Certificates are Entitled to Receive. The
calculation of the Pass-Through Rate on the Class A-8 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 Adjustable Rate Mortgage Loans as described under
"The Mortgage Pool--Adjustable Rate Mortgage Loans" (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 all of the Mortgage Loans. The Pass-Through Rate on the
Class A-8 Certificates adjusts monthly based upon LIBOR as described under
"Description of the Certificates--Calculation of LIBOR" herein. However, 31.91%
of the Adjustable Rate Mortgage Loans 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 68.09%
adjust annually based upon the one-year constant maturity treasury ("One-year
CMT"). Consequently, the interest which becomes due on the Adjustable Rate
Mortgage Loans (net of (i) the Master Servicing Fee if CIT Consumer Finance or
one of its affiliates is not the Master Servicer and (ii) certain required
reductions) during any Due Period may not equal the amount of interest that
would accrue at the LIBOR Rate during the related Accrual Period. In addition,
75.78% of the Adjustable Rate Mortgage Loans 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 12.62% of the Adjustable Rate
Mortgage Loans 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 Class A-8 Certificates adjusts
monthly, while the interest rates of the Adjustable Rate Mortgage Loans adjust
less frequently, the Weighted Average Net Mortgage Rate may limit increases in
the Pass-Through Rate on
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<PAGE>
the Class A-8 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 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.
Prospective investors in the Class A-8 Certificates should recognize that,
unlike some other offerings of securities backed by home equity loans, the
interest payments on the Class A-8 Certificates are not based solely on the
interest rates (and interest collections) on the Adjustable Rate Mortgage Loans.
Instead, interest payments on all of the Certificates are made from interest
payments on all of the Mortgage Loans, and the Weighted Average Net Mortgage
Rate "cap" on the Pass-Though Rate on the Class A-8 Certificates takes into
account the interest rates on the Fixed Rate Mortgage Loans as well as the
Adjustable Rate Mortgage Loans. In a rising interest rate environment, even if
the interest rates on the Adjustable Rate Mortgage Loans were to increase at the
same rate as One-month LIBOR, the Weighted Average Net Mortgage Rate would not
increase at the same rate because it takes into account the interest rates on
the Fixed Rate Mortgage Loans (which do not increase). As a result, in a rising
interest rate environment the Pass-Through Rate on the Class A-8 Certificates
could be less than the interest rate applicable to the Class A-8 Certificates at
the Class A-8 Formula Rate. Investors in the Class A-8 Certificates would then
have to rely on any remaining Interest Remittance Amount available after payment
of interest on the other Certificates to receive the Class A-8 Extra Interest
and, if such funds are not sufficient, the excess of interest at the Class A-8
Formula Rate over interest at the Weighted Average Net Mortgage Rate will be
foregone permanently. Such funds may be available since the Certificates (other
than the Class A-8 and Class R Certificates) are "capped" at the Adjusted
Weighted Average Net Mortgage Rate. The Adjusted Weighted Average Net Mortgage
Rate is the Weighted Average Net Mortgage Rate reduced by the amount of the
applicable Strip Rate. In addition, if interest on the Class A-8 Certificates
determined at the Maximum Variable Rate is less than the LIBOR Rate, such excess
will be foregone permanently.
The Class A-8 Extra Interest is paid to the Class A-8 Certificates on a
subordinated basis after all interest is paid to the other Certificates, to the
extent of the remaining Interest Remittance Amount.
6. Prepayments May Affect Current Interest. The Pass-Through Rate on each
Class of Offered Certificates (other than the Class A-8 Certificates) is subject
to the Adjusted Weighted Average Net Mortgage Rate. The amount of interest to
which the Class A-8 Certificates are entitled (including the Class A-8 Extra
Interest) is subject to the availability of the Interest Remittance Amount.
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
will increase the possibility that the Pass-Through Rate for such Class of
Offered Certificates will be limited by their "cap". As a result, if interest
determined at the applicable fixed rate shown on the cover page for the
Certificates (other than the Class A-8 Certificates) is more than interest
determined at the "cap", such excess will be foregone permanently. In addition,
if interest determined at the Class A-8 Formula Rate for the Class A-8
Certificates is more than interest determined at the Weighted Average Net
Mortgage Rate, such excess will be foregone permanently (except to the extent of
the availability of the remaining Interest Remittance Amount to pay the Class
A-8 Extra Interest after payment of interest to the other Certificates).
7. 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.
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<PAGE>
The Mortgage Loans may be prepaid in whole or in part at any time. All
principal payments by the Mortgagors on the Mortgage Loans will be allocated
solely to the Class A Certificates for at least the first three years after the
Closing Date. Such allocation is intended to accelerate the amortization of the
Class A Certificates relative to that of the Subordinate Certificates. As a
result, the weighted average lives of the Subordinate Certificates will be
longer than would have been the case if such principal prepayments were to be
allocated proportionally between the Class A Certificates and the Subordinate
Certificates. If, as may be expected, delinquencies and defaults occur with
greater frequency as such Mortgage Loans in the Mortgage Pool become more
seasoned, holders of the Subordinate Certificates will be exposed to a greater
risk of loss due to the longer weighted average lives of such Certificates.
8. Yields on Subordinate Certificates will be Adversely Affected by
Realized Losses. Realized Losses will be allocated first to the Class B
Certificates and then to the Mezzanine Certificates, in the reverse order of
their numerical Class designations within such Class. Any such allocation will
be accomplished by reducing the Certificate Balance of the applicable Class
without any distribution of cash in respect of such reduction. Any such
reduction to a Class of Subordinate Certificates will result in a permanent loss
of the right to receive distributions to which the holders of such Class of
Subordinate Certificates otherwise would have been entitled in the absence of
such a reduction. In addition, any such reduction will result in a future
reduction of interest distributions, because interest at the applicable
Pass-Through Rate will be accruing on a smaller Certificate Balance.
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-4 Certificates will be more
sensitive than the Class B-3 Certificates, the Class B-3 Certificates will be
more sensitive than the Class B-2 Certificates, 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.
It is anticipated that Realized Losses will occur.
9. Principal Allocations Relating to Class A-8 Certificates. Approximately
85% of the Mortgage Loans in the Mortgage Pool are Fixed Rate Mortgage Loans and
the remainder of the Mortgage Loans in the Mortgage Pool are Adjustable Rate
Mortgage Loans. The Principal Distribution Amount is comprised of collections of
principal from all the Mortgage Loans and consequently the aggregate amount
available to pay principal on the Certificates will depend on the rate and
timing of payments on both the Fixed Rate Mortgage Loans and the Adjustable Rate
Mortgage Loans as well as the amount of Realized Losses incurred with respect to
all of the Mortgage Loans. On each Distribution Date, the Class A-8 Certificates
are entitled to receive from all principal collections of the Mortgage Loans
collected in the related Due Period an amount determined by reference to the
reduction in the Principal Balances of Adjustable Rate Mortgage Loans during the
related Due Period, including reductions thereof resulting from Realized Losses
on the Adjustable Rate Mortgage Loans. This principal to the Class A-8
Certificates is payable before any other principal is payable to the other
Certificates. Consequently, the rate and timing of principal payments on the
other Classes of Certificates will be reduced or delayed to the extent that
principal collections otherwise distributable to such Classes are required to be
distributed to the Class A-8 Certificates as a result of Realized Losses on the
Adjustable Rate Mortgage Loans thereby affecting the weighted average life and
yield on such other Classes of Certificates. Moreover, because the Subordinate
Certificates will be written down by the amount of any Realized Losses on the
Adjustable Rate Mortgage Loans (as well as on the Fixed Rate Mortgage Loans) as
described herein, if there is a higher rate of Realized Losses on the Adjustable
Rate Mortgage Loans than on the Fixed Rate Mortgage Loans, the Class A-8
Certificates will be repaid more rapidly than the other Class A Certificates and
at the same time Realized Losses will be applied to reduce the Certificate
Balance of the Subordinate Certificates thereby decreasing the amount of
subordination available to support the other Class A Certificates.
10. Geographic Concentration of Mortgaged Properties. As of the Cut-off
Date, approximately 19.19% (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. As of the Cut-off Date, approximately 17.57%
(by aggregate Principal Balance of the related Mortgage Loan) of the Mortgaged
Properties related to Fixed Rate Mortgage Loans are located in the states of
California and Pennsylvania and approximately 32.54% (by aggregate Principal
Balance of the related Mortgage Loan) of the Mortgaged Properties related to
Adjustable Rate Mortgage Loans 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
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<PAGE>
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.
11. Risk of Losses Associated with Balloon and Call Loans. As of the
Cut-off Date, 8.47% of the Fixed Rate Mortgage Loans (by Principal Balance as of
the Cut-Off Date) represent Balloon Loans. As of the Cut-off Date, 14.75% and
6.13% of the Fixed Rate Mortgage Loans and the Adjustable Rate Mortgage Loans,
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.
12. Risk of Losses Associated with Junior Liens. As of the Cut-off Date,
18.83% and 1.81% of the Fixed Rate Mortgage Loans and the Adjustable Rate
Mortgage Loans, 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.
13. ERISA Considerations. An investment in the Certificates by Plans may
give rise to a prohibited transaction under ERISA Section 406 and be subject to
tax under Code 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 other than insurance company general accounts that are able to rely on
Prohibited Transaction Class Exemption 95-60. See "ERISA Considerations" herein
and in the Prospectus.
14. Certain Other Aspects of the Mortgage Loans. A variety of factors may
limit the ability of the holders of the Certificates to realize proceeds 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.
Although CIT Consumer Finance requires evidence of valid hazard insurance
policies prior to closing, 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, such Realized Losses will be allocated to the Subordinate Certificates
as described herein. See "The Home Equity Lending Program--Underwriting-Other
Issues" and "The Pooling and Servicing Agreement--Hazard Insurance" in the
Prospectus.
15. Risks Associated with the Structure. Certain features of the structure
may pose additional risks to investors. In some other offerings of securities
backed by home equity loans, payments and losses on the fixed rate mortgage
loans are allocated primarily to Certificates which bear a fixed interest rate
and payments and losses on the adjustable rate mortgage loans are allocated
primarily to certificates which bear a variable interest rate. In such other
offerings, the "cap" on interest on the fixed rate certificates is based on the
interest rates on the fixed rate mortgage loans and the "cap" on interest on the
variable rate certificates is based on the interest rates on the adjustable rate
mortgage loans. However, for most purposes that is not the case in this
offering, in which payments and losses on all of the Mortgage Loans affect
payments on all of the Certificates and there is a single "cap" applicable to
all of the Certificates (other than the Class A-8 Certificates) which is
calculated based on the interest rates on all of the Mortgage Loans reduced by
the applicable Strip Rate. The "cap" on the Class A-8 Certificates is based on
the interest rates on all of the Mortgage Loans. Although the Subordinate
Certificates in this transaction bear interest at a fixed rate, they provide
credit support for all of the Certificates, including the Class A-8
Certificates. Consequently, although the Subordinate Certificates bear interest
at a fixed rate, they may be written down as a result of losses on Adjustable
Rate Mortgage Loans (as well as losses on the Fixed Rate Mortgage Loans).
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 Private Certificates will depend on the
payments of interest on the Fixed Rate Mortgage Loans and the Adjustable Rate
Mortgage Loans. The Principal Distribution Amount is comprised of collections of
principal from all Mortgage Loans and consequently, the amount available to pay
principal due on the Offered Certificates and the Private Certificates will
depend on the payments of principal and the amount of losses on the Fixed Rate
Mortgage Loans and the Adjustable Rate Mortgage Loans. The amortization of the
Certificates may be affected by the rate and timing of payments on all of the
Mortgage Loans. In making any investment in Certificates, an investor should
consider the
S-24
<PAGE>
potential effects of both the Fixed Rate Mortgage Loans and the Adjustable Rate
Mortgage Loans on the credit quality and expected yield on its Class of Offered
Certificates.
The "cap" on the interest payable on each of the Certificates (other than
the Class A-8, Class IO and Class R Certificates) is the Adjusted Weighted
Average Net Mortgage Rate. The Adjusted Weighted Average Net Mortgage Rate is
the Weighted Average Net Mortgage Rate (i.e., the weighted average of the
interest rates on all of the Mortgage Loans less the Monthly Servicing Fee)
reduced by the amount of the applicable Strip Rate.
16. Year 2000 Compliance. The Year 2000 compliance issue arises out of the
inability of computers, software and other equipment utilizing microprocessors
to recognize and properly process data fields containing a 2 digit year. In
response to this issue, CIT Consumer Finance has developed a comprehensive
project to ensure that its software applications and systems are Year 2000
compliant. The scope of this project includes, among other things, the
assessment of "at risk" applications and systems, an assessment of the
interdependencies of various systems and the relative importance of each system
to the business, the design and execution of required modifications to achieve
Year 2000 compliance, and the plans for testing of modifications to verify Year
2000 compliance. CIT Consumer Finance expects to complete substantially all Year
2000 remediation and testing by the end of the first quarter of 1999. CIT
Consumer Finance's ability to meet this timetable is in part dependent upon the
ability of third parties, such as software vendors and developers, to meet their
stated deadlines. In addition, CIT Consumer Finance is communicating with other
third parties, including vendors, borrowers and obligors, to determine the
status of their Year 2000 compliance efforts in an effort to reduce the CIT
Consumer Finance's potential exposure to such third parties' Year 2000 issues.
17. Potential Conflicts of Interest. It is anticipated that the Depositor,
an affiliate of the Master Servicer, may purchase all of the Class IO
Certificates, the Class B-4 Certificates and the Class R Certificates on the
Closing Date. The Pooling and Servicing Agreement will provide that 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 Private Certificates (other than
the Class IO Certificates) may exercise certain rights that could result in
termination of the rights and obligations of the Master Servicer under the
Pooling and Servicing Agreement, in which event the Depositor as an affiliate of
the Master Servicer could have different interests than the non-affiliated
Certificateholders. Although the Master Servicer will be obligated to observe
the terms of the Pooling and Servicing Agreement and will be governed by the
servicing standard described herein, it may, especially if it or an affiliate is
a Certificateholder, have interests when dealing with defaulted Mortgage Loans
that are in conflict with those of holders of other Classes of Certificates. For
instance, the Master Servicer could seek to mitigate the potential for loss to
the Class or Classes of Certificates held by an affiliate from a troubled
Mortgage Loan by deferring enforcement in the hope of maximizing future
proceeds. However, such delay in action could result in less proceeds to the
Trust than would have been realized if earlier action had been taken.
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 certain
of the servicing responsibilities of the Master Servicer under the Pooling and
Servicing Agreement. In the future, CIT Consumer Finance may perform all or a
portion of the servicing responsibilities delegated to CITSF under the
Subservicing Agreement, or CIT Consumer Finance may retain another third party
to perform all or a portion of such 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 lockbox arrangements or payment
processing, unless (i) a Termination Event has occurred and is continuing, in
which event the Trustee may terminate CIT Consumer Finance (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.
S-25
<PAGE>
As of March 31, 1998, CIT Consumer Finance serviced approximately 58,100
residential first and subordinate mortgages, representing an outstanding balance
of approximately $2.70 billion.
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 originated
or acquired and serviced by CIT Consumer Finance (including mortgage loans
previously securitized by CIT Consumer Finance), including home equity lines of
credit and Institutional Bulk Portfolios (as defined in the Prospectus) which
are excluded from the Mortgage Pool.
Delinquency Experience
(Dollar amounts in millions)
<TABLE>
<CAPTION>
December 31,
March 31, --------------------------------------------------------
1998 1997 1996 1995 1994 1993
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Number of Accounts
(in thousands)(1)............. 58.1 57.3 52.6 27.1 13.2 3.5
Principal Balance(1) .......... $2,704.4 $2,446.1 $2,005.5 $1,039.0 $570.8 $131.3
Principal Balance of
Delinquent Accounts(2)
30-59 Days Past Due....... $ 77.1 $ 84.8 $ 50.2 $ 18.7 $ 3.5 $ 0.1
60-89 Days Past Due....... 23.2 27.5 14.6 7.2 0.6 --
90 Days or More Past Due.. 62.0 51.2 27.4 9.6 0.5 --
------ ------ ----- ----- ---- ----
Total.......................... $162.3 $163.5 $92.2 $35.5 $4.6 $0.1
====== ====== ===== ===== ==== ====
Principal Balance of Delinquent
Accounts as a percentage of
Principal Balance.......... 6.00% 6.68% 4.60% 3.42% 0.81% 0.02%
REO Property(3)
Number of Properties........... 155 132 43 -- -- --
Book Value(3).................. $8.15 $7.35 $1.98 -- -- --
</TABLE>
- ----------
(1) Excludes REO Properties which are presented separately.
(2) Amounts include balances for which the underlying collateral is currently
in the foreclosure process.
(3) 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.
Loss Experience
(Dollar amounts in thousands)
<TABLE>
<CAPTION>
Three Months
Ended Year Ended December 31,
March 31, -------------------------------------------------------
1998 1997 1996 1995 1994 1993
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Charge-offs(1).................. $1,379 $6,331 $4,706 $ 783 $54 $103
Valuation Reserve (Net)(2)...... 2,915 10,249 3,474 630 14 (43)
------ ------- ------ ------ --- ---
Total Net Losses................ $4,294 $16,580 $8,180 $1,413 $68 $60
====== ======= ====== ====== === ===
Total Net Losses as a percentage
of average principal balance
outstanding.................... 0.69%(3) 0.75% 0.61% 0.18% 0.02% 0.11%
Units Charged-off............... 52 258 176 36 6 5
</TABLE>
- ----------
(1) Represents actual losses (including all expenses of foreclosure and
liquidation but not including accrued interest) recorded at the time of
liquidation net of recoveries.
(2) Represents net change in valuation reserves recorded against CIT Consumer
Finance-owned delinquent mortgage loans and REO Property which have yet to
be liquidated.
(3) Annualized. This ratio has been annualized and may not reflect the actual
loss experience for the entire year.
S-26
<PAGE>
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. For any given reporting
period, the inclusion of unseasoned loans results in reporting delinquencies and
losses as percentages of Principal Balances which are lower than would otherwise
be reported. 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 after December 31, 1995 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, the March 31, 1998 loan balances include an institutional bulk
portfolio of approximately $160 million, purchased in March of 1998 with minimal
delinquencies.
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 85% ("HLTV"). The increase in net loss experience since 1995
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. Additionally, in July of 1997,
CIT Consumer Finance securitized approximately $500 million in mortgages for
which losses in the table above are recognized as charge-offs only at the time
of liquidation and are not included in the valuation reserve.
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-27
<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 (including townhouses and manufactured
housing units on Mortgagor-owned land) 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 (including townhouses, condominiums and manufactured
housing units on Mortgagor-owned land) 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 "The Pooling and
Servicing Agreement -- 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 Fixed Rate Mortgage Loans, the Adjustable Rate
Mortgage Loans or all of the Mortgage Loans in the Trust, in each case as of the
Cut-off Date.
The Mortgage Pool is expected to consist of 5,488 Mortgage Loans with an
initial aggregate Principal Balance expected to be $341,424,511. 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 Principal Balance of any Liquidated Mortgage (as defined in the
Prospectus) is zero. 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.
As of the Cut-off Date, the aggregate Principal Balance of the Fixed Rate
Mortgage Loans was $290,107,437 and the aggregate Principal Balance of the
Adjustable Rate Mortgage Loans was $51,317,073.
S-28
<PAGE>
As of the Cut-off Date, 99.23% of the Mortgage Loans were Simple Interest
Loans (as defined in the Prospectus). As of the Cut-off Date, 0.77% of the
Mortgage Loans were Scheduled Accrual Loans (as defined in the Prospectus).
The Mortgage Pool includes 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") are 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 was $24,585,522 and the
aggregate Principal Balance of Call Loans was $45,939,701.
As of the Cut-off Date, no Mortgage Loan was delinquent more than 59 days.
As of the Cut-off Date, 92 Mortgage Loans with an aggregate principal balance of
$4,721,262 were delinquent 30 to 59 days.
No Mortgage Loan had a Combined Loan-to-Value Ratio of more than 100.36%
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 78.29%.
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.
As of the Cut-off Date, 10.06% and 9.13% of the 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 7.29% of
the Mortgage Loans (by Principal Balance as of the Cut-off Date) were secured by
Mortgaged Properties located in any one state. No more than 0.29% of the
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 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 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 51 Mortgage Loans (with Principal Balances as
of the Cut-off Date aggregating $3,645,683) 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.
The following information sets forth in tabular format certain
information, as of the Cut-Off Date relating to the Mortgage Loans.
S-29
<PAGE>
All Mortgage Loans
Geographic Distribution of Mortgaged Properties
<TABLE>
<CAPTION>
Percentage of
Mortgage Pool Weighted Percent of Percent
by Aggregate Average Full of
Aggregate Principal Original Document- Owner-
Number Principal Balance Weighted Average Combined ation Occupied
of 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 406 $34,364,194.57 10.06% 9.593% $84,641 78.904% 78.88% 96.52%
Ohio 519 31,166,153.54 9.13 9.842 60,050 78.897 90.58 94.69
Florida 418 24,887,090.71 7.29 9.743 59,538 77.487 91.49 92.11
Pennsylvania 415 23,007,292.54 6.74 9.264 55,439 77.115 94.27 97.04
Indiana 444 21,849,581.15 6.40 9.857 49,211 78.647 90.59 95.30
New York 252 17,233,224.37 5.05 10.478 68,386 76.530 89.31 87.24
New Jersey 240 15,570,818.29 4.56 10.746 64,878 77.349 83.71 95.33
North Carolina 238 13,900,168.92 4.07 9.425 58,404 78.646 94.97 96.97
Kentucky 271 13,617,928.23 3.99 9.651 50,251 77.794 93.84 98.64
Michigan 181 11,518,195.33 3.37 10.864 63,636 79.561 90.44 97.34
Arizona 162 10,669,457.67 3.12 9.609 65,861 78.985 79.96 92.61
Georgia 162 10,599,084.32 3.10 9.778 65,426 77.345 95.48 93.69
Washington 131 9,842,669.97 2.88 9.471 75,135 80.037 76.14 93.78
Nevada 149 9,717,097.53 2.85 9.491 65,215 79.551 87.45 94.94
Illinois 147 9,712,794.38 2.84 10.089 66,073 78.997 86.47 94.49
Oklahoma 180 9,339,302.93 2.74 9.275 51,885 79.531 91.47 97.26
Oregon 102 8,202,935.33 2.40 9.294 80,421 79.442 82.80 97.12
Utah 91 7,135,404.11 2.09 9.462 78,411 80.367 72.97 96.41
Maryland 103 6,782,406.10 1.99 9.473 65,849 79.178 91.63 96.04
Missouri 131 6,714,689.03 1.97 10.074 51,257 77.191 93.49 96.40
Wisconsin 108 6,299,626.96 1.85 10.979 58,330 77.369 90.80 97.51
Colorado 71 4,810,802.10 1.41 9.944 67,758 77.371 81.05 96.33
Tennessee 84 4,786,158.97 1.40 10.466 56,978 78.777 96.01 96.24
Virginia 64 4,441,825.57 1.30 10.336 69,404 78.652 93.29 91.91
Texas 51 3,342,004.10 0.98 11.320 65,529 74.502 76.81 98.95
Delaware 53 3,298,066.43 0.97 9.474 62,228 77.619 96.79 97.20
Nebraska 53 2,783,306.50 0.82 10.338 52,515 77.284 91.05 93.53
Connecticut 27 2,607,342.24 0.76 10.337 96,568 76.697 99.18 72.89
Iowa 41 2,226,221.81 0.65 10.350 54,298 79.646 96.05 95.04
West Virginia 40 2,093,737.09 0.61 9.854 52,343 80.434 97.08 100.00
South Carolina 32 2,009,575.53 0.59 9.911 62,799 77.356 92.16 96.22
Massachusetts 14 1,347,997.74 0.39 10.437 96,286 71.527 81.46 100.00
Minnesota 16 1,074,715.36 0.31 10.336 67,170 80.527 90.78 100.00
Louisiana 21 1,049,502.57 0.31 10.081 49,976 74.931 84.15 100.00
Idaho 16 865,855.29 0.25 9.677 54,116 70.293 76.61 100.00
Kansas 19 658,652.44 0.19 10.056 34,666 73.692 100.00 100.00
Montana 6 572,120.66 0.17 9.707 95,353 87.820 66.77 100.00
Mississippi 11 475,490.91 0.14 11.044 43,226 76.748 100.00 100.00
New Mexico 4 223,380.11 0.07 8.945 55,845 87.757 100.00 100.00
Rhode Island 4 219,537.17 0.06 10.411 54,884 88.045 100.00 100.00
Wyoming 6 206,355.98 0.06 9.702 34,393 79.823 100.00 100.00
District of Columbia 2 97,864.54 0.03 9.322 48,932 53.650 100.00 100.00
South Dakota 2 80,308.25 0.02 9.355 40,154 68.834 100.00 100.00
Vermont 1 23,573.90 0.01 11.000 23,574 78.340 100.00 100.00
- --------------- ----- --------------- ------ ----- ------- ------ ----- -----
Total 5,488 $341,424,511.24 100.00% 9.858% $62,213 78.291% 88.37% 95.08%
=============== ===== =============== ====== ===== ======= ====== ===== =====
</TABLE>
S-30
<PAGE>
All Mortgage Loans
Distribution by Current Principal Balances
<TABLE>
<CAPTION>
Percentage of
Mortgage Pool Weighted Percent of Percent
by Aggregate Average Full of
Aggregate Principal Original Document- Owner-
Number Principal Balance Weighted Average Combined ation Occupied
of 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 29 $ 269,024.63 0.08% 11.666% $ 9,277 79.425% 100.00% 100.00%
$ 10,001 - $20,000 513 8,089,330.82 2.37 11.061 15,769 73.232 94.30 95.40
$ 20,001 - $30,000 797 20,217,096.59 5.92 10.891 25,366 75.054 91.39 95.83
$ 30,001 - $40,000 798 28,325,593.94 8.30 10.738 35,496 76.211 93.54 92.19
$ 40,001 - $50,000 759 34,319,500.19 10.05 10.286 45,217 76.150 92.21 93.08
$ 50,001 - $60,000 576 31,644,499.57 9.27 10.161 54,938 77.261 91.85 93.73
$ 60,001 - $70,000 405 26,313,147.82 7.71 9.943 64,971 78.328 90.86 96.37
$ 70,001 - $80,000 369 27,627,958.30 8.09 9.630 74,873 79.500 92.47 95.58
$ 80,001 - $90,000 245 20,798,534.50 6.09 9.768 84,892 78.893 88.06 94.30
$ 90,001 -$100,000 199 18,932,498.38 5.55 9.475 95,138 78.452 88.83 98.03
$100,001 -$120,000 283 31,001,034.38 9.08 9.646 109,544 79.669 88.45 95.09
$120,001 -$140,000 147 19,079,263.13 5.59 9.503 129,791 80.441 89.11 94.61
$140,001 -$160,000 118 17,594,990.99 5.15 9.446 149,110 78.942 75.34 98.33
$160,001 -$180,000 63 10,689,395.03 3.13 9.197 169,673 81.549 82.51 96.82
$180,001 -$200,000 55 10,523,819.98 3.08 9.431 191,342 80.801 83.65 96.49
$200,001 -$220,000 33 6,912,816.40 2.02 8.891 209,479 79.783 84.64 94.02
$220,001 -$240,000 24 5,506,067.02 1.61 8.917 229,419 80.830 78.91 95.92
$240,001 -$260,000 16 3,973,336.04 1.16 9.134 248,334 80.972 74.81 100.00
$260,001 -$280,000 14 3,767,305.02 1.10 9.120 269,093 82.949 63.98 92.87
$280,001 -$300,000 15 4,358,894.75 1.28 8.651 290,593 81.509 66.64 100.00
$300,001 -$320,000 6 1,832,442.07 0.54 8.753 305,407 74.595 66.58 100.00
$320,001 -$340,000 4 1,337,509.92 0.39 8.879 334,377 79.746 100.00 100.00
$340,001 -$360,000 4 1,406,757.37 0.41 9.236 351,689 77.810 75.03 100.00
$360,001 -$380,000 5 1,828,910.14 0.54 8.973 365,782 78.963 59.95 80.15
$380,001 -$400,000 5 1,967,546.82 0.58 8.563 393,509 78.252 100.00 100.00
Over $400,001 6 3,107,237.44 0.91 8.665 517,873 79.092 100.00 85.79
- ------------------ ----- --------------- ------ ----- -------- ------ ----- -----
Total 5,488 $341,424,511.24 100.00% 9.858% $ 62,213 78.291% 88.37% 95.08%
================== ===== =============== ====== ===== ======== ====== ===== =====
</TABLE>
S-31
<PAGE>
All Mortgage Loans
Distribution by Current Mortgage Rates
<TABLE>
<CAPTION>
Percentage of
Mortgage Pool Weighted Percent of Percent
by Aggregate Average Full of
Aggregate Principal Original Document- Owner-
Number Principal Balance Weighted Average Combined ation Occupied
of 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>
6.501% - 7.000% 5 $ 321,129.25 0.09% 6.990% $ 64,226 66.279% 100.00% 100.00%
7.001% - 7.500% 112 11,998,466.62 3.51 7.408 107,129 75.222 95.88 99.83
7.501% - 8.000% 306 27,013,748.40 7.91 7.892 88,280 74.388 95.07 99.18
8.001% - 8.500% 395 33,123,047.79 9.70 8.350 83,856 75.879 91.85 98.14
8.501% - 9.000% 609 46,449,624.55 13.60 8.832 76,272 77.608 91.39 97.79
9.001% - 9.500% 604 39,090,453.09 11.45 9.334 64,719 79.027 87.51 94.23
9.501% - 10.000% 804 55,888,351.80 16.37 9.818 69,513 80.134 86.85 91.47
10.001% - 10.500% 558 32,083,084.86 9.40 10.346 57,497 78.101 81.85 93.23
10.501% - 11.000% 637 33,200,187.94 9.72 10.832 52,120 78.171 81.85 92.48
11.001% - 11.500% 346 16,049,786.38 4.70 11.322 46,387 78.536 85.04 95.58
11.501% - 12.000% 367 16,418,423.22 4.81 11.842 44,737 80.715 85.63 93.85
12.001% - 12.500% 205 8,790,475.20 2.57 12.349 42,880 81.451 90.85 93.61
12.501% - 13.000% 216 8,523,288.47 2.50 12.801 39,460 82.127 91.50 96.05
13.001% - 13.500% 72 3,092,479.94 0.91 13.315 42,951 77.479 90.41 94.82
13.501% - 14.000% 139 5,001,951.26 1.47 13.898 35,985 85.411 92.88 98.14
14.001% - 14.500% 45 1,913,792.21 0.56 14.211 42,529 76.861 96.71 82.16
14.501% - 15.000% 25 929,630.86 0.27 14.807 37,185 80.084 97.44 100.00
15.001% - 15.500% 32 1,047,366.32 0.31 15.361 32,730 85.232 94.53 100.00
15.501% - 16.000% 4 176,275.02 0.05 15.752 44,069 68.615 100.00 100.00
16.001% - 16.500% 3 105,466.85 0.03 16.339 35,156 53.227 100.00 100.00
16.501% - 17.000% 2 76,563.49 0.02 16.950 38,282 60.136 100.00 100.00
17.001% - 17.500% 2 130,917.72 0.04 17.385 65,459 65.000 100.00 100.00
- ------------------ ----- --------------- ------ ----- -------- ------ ----- -----
Total 5,488 $341,424,511.24 100.00% 9.858% $ 62,213 78.291% 88.37% 95.08%
================== ===== =============== ====== ===== ======== ====== ===== =====
</TABLE>
S-32
<PAGE>
All Mortgage Loans
Distribution by Remaining Months to Stated Maturity
<TABLE>
<CAPTION>
Percentage of
Mortgage Pool Weighted Percent of Percent
by Aggregate Average Full of
Aggregate Principal Original Document- Owner-
Number Principal Balance Weighted Average Combined ation Occupied
Remaining Months of 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>
49- 60 27 $ 649,107.14 0.19% 9.743% $ 24,041 61.002% 97.75% 96.71%
61- 72 6 218,482.29 0.06 8.846 36,414 74.187 100.00 100.00
73- 84 19 482,670.17 0.14 9.468 25,404 67.880 100.00 88.34
85- 96 3 108,298.47 0.03 8.943 36,099 58.252 100.00 100.00
97- 108 1 49,515.13 0.01 10.880 49,515 78.580 0.00 100.00
109- 120 283 8,918,625.02 2.61 9.898 31,515 69.922 95.28 97.41
133- 144 6 293,301.09 0.09 9.250 48,884 80.786 100.00 100.00
145- 156 3 122,426.26 0.04 8.841 40,809 67.593 100.00 100.00
157- 168 3 141,418.21 0.04 9.061 47,139 91.442 100.00 100.00
169- 180 3,134 154,726,474.37 45.32 10.292 49,370 78.896 88.65 95.84
181- 192 1 146,623.65 0.04 7.490 146,624 77.090 100.00 100.00
217- 228 2 128,530.15 0.04 10.468 64,265 69.426 100.00 100.00
229- 240 363 21,687,605.40 6.35 9.659 59,745 76.933 89.97 97.81
289- 300 14 1,066,593.99 0.31 8.537 76,185 78.990 100.00 100.00
349- 360 1,623 152,684,839.90 44.72 9.462 94,076 78.482 87.25 93.74
- -------------- ----- --------------- ------ ----- -------- ------ ----- -----
Total 5,488 $341,424,511.24 100.00% 9.858% $ 62,213 78.291% 88.37% 95.08%
============== ===== =============== ====== ===== ======== ====== ===== =====
</TABLE>
All Mortgage Loans
Distribution by Number of Months of Seasoning
<TABLE>
<CAPTION>
Percentage of
Mortgage Pool Weighted Percent of Percent
by Aggregate Average Full of
Aggregate Principal Original Document- Owner-
Number Principal Balance Weighted Average Combined ation Occupied
Months of of Mortgage Balance of Mortgage Average Current Loan-to-Value Mortgage Mortgage
Seasoning Loans Outstanding Loans Coupon Balance Ratio Loans Loans
--------- ----- ----------- ----- ------ ------- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
2 - 3 1,512 $100,676,296.48 29.49% 9.543% $66,585 77.757% 89.82% 93.07%
4 - 6 3,672 226,399,539.19 66.31 9.905 61,656 78.408 87.42 95.87
7 -12 301 14,156,493.58 4.15 11.337 47,032 80.185 93.17 96.75
13 -18 3 192,181.99 0.06 10.851 64,061 80.786 100.00 100.00
- ------------- ----- --------------- ------ ----- ------- ------ ----- -----
Total 5,488 $341,424,511.24 100.00% 9.858% $62,213 78.291% 88.37% 95.08%
============= ===== =============== ====== ===== ======= ====== ===== =====
</TABLE>
S-33
<PAGE>
All Mortgage Loans
Distribution by Original Combined Loan-to-Value Ratios
<TABLE>
<CAPTION>
Percentage of
Mortgage Pool Weighted Percent of Percent
by Aggregate Average Full of
Original Aggregate Principal Original Document- Owner-
Combined Number Principal Balance Weighted Average Combined ation Occupied
Loan-to-Value of Mortgage Balance of Mortgage Average Current Loan-to-Value Mortgage Mortgage
Ratios Loans Outstanding Loans Coupon Balance Ratio Loans Loans
------------- ----- ----------- ----- ------ ------- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
5.01% - 10.00% 3 $ 45,764.67 0.01% 8.418% $15,255 8.614% 100.00% 100.00%
10.01% - 15.00% 12 330,268.95 0.10 8.958 27,522 13.085 75.09 100.00
15.01% - 20.00% 16 364,612.41 0.11 10.168 22,788 17.869 60.82 95.90
20.01% - 25.00% 26 677,442.61 0.20 9.462 26,055 23.022 86.00 97.45
25.01% - 30.00% 29 1,001,529.08 0.29 9.868 34,535 28.302 95.12 77.06
30.01% - 35.00% 47 1,611,147.33 0.47 9.646 34,280 32.420 78.24 97.53
35.01% - 40.00% 59 2,144,814.44 0.63 9.451 36,353 37.903 84.20 95.94
40.01% - 45.00% 67 2,951,391.95 0.86 9.959 44,051 42.947 85.08 85.75
45.01% - 50.00% 89 3,697,940.29 1.08 10.067 41,550 47.532 87.83 93.38
50.01% - 55.00% 105 5,246,313.57 1.54 9.488 49,965 52.574 82.12 96.32
55.01% - 60.00% 146 6,442,600.92 1.89 9.976 44,127 57.857 76.45 97.09
60.01% - 65.00% 213 11,269,619.69 3.30 10.047 52,909 62.868 85.23 92.66
65.01% - 70.00% 383 22,542,941.59 6.60 10.098 58,859 68.369 84.48 86.35
70.01% - 75.00% 571 36,212,859.42 10.61 9.827 63,420 73.567 86.90 94.49
75.01% - 80.00% 1,236 88,391,315.77 25.89 9.630 71,514 78.741 85.62 94.74
80.01% - 85.00% 1,152 80,323,439.17 23.53 9.575 69,725 82.595 88.11 94.46
85.01% - 90.00% 713 47,784,662.44 14.00 9.759 67,019 87.161 93.89 99.31
90.01% - 95.00% 229 14,010,454.96 4.10 10.391 61,181 92.500 98.59 100.00
95.01% - 100.00% 384 16,137,180.58 4.73 12.029 42,024 99.006 100.00 99.82
100.01% - 101.00% 8 238,211.40 0.07 12.554 29,776 100.136 100.00 100.00
- ----------------- ----- --------------- ------ ----- ------- ------ ----- -----
Total 5,488 $341,424,511.24 100.00% 9.858% $62,213 78.291% 88.37% 95.08%
================= ===== =============== ====== ===== ======= ====== ===== =====
</TABLE>
S-34
<PAGE>
All Mortgage Loans
Distribution by Original Loan-to-Value Ratios
<TABLE>
<CAPTION>
Percentage of
Mortgage Pool Weighted Percent of Percent
by Aggregate Average Full of
Aggregate Principal Original Document- Owner-
Original Number Principal Balance Weighted Average Combined ation Occupied
Loan-to-Value of Mortgage Balance of Mortgage Average Current Loan-to-Value Mortgage Mortgage
Ratios Loans Outstanding Loans Coupon Balance Ratio Loans Loans
- --------------- ----- -------------- ----- ------ ------- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
0.01% - 5.00% 9 $ 146,140.24 0.04% 11.224% $ 16,238 83.018% 77.38% 100.00%
5.01% - 10.00% 159 4,198,083.81 1.23 11.004 26,403 79.806 71.63 98.64
10.01% - 15.00% 297 8,597,534.60 2.52 10.962 28,948 79.444 77.37 99.56
15.01% - 20.00% 386 12,313,414.28 3.61 11.435 31,900 82.662 82.09 98.53
20.01% - 25.00% 303 10,689,369.48 3.13 11.441 35,278 82.407 89.04 98.41
25.01% - 30.00% 193 7,362,999.26 2.16 10.886 38,150 76.711 86.89 96.75
30.01% - 35.00% 159 6,765,265.26 1.98 10.469 42,549 72.558 83.68 98.26
35.01% - 40.00% 131 5,658,162.30 1.66 10.325 43,192 65.831 80.55 98.46
40.01% - 45.00% 105 4,901,234.17 1.44 10.194 46,678 57.623 84.21 90.80
45.01% - 50.00% 104 4,421,313.93 1.29 10.236 42,513 56.429 90.94 94.46
50.01% - 55.00% 109 5,742,455.74 1.68 9.588 52,683 56.163 83.47 96.64
55.01% - 60.00% 123 5,607,208.63 1.64 9.901 45,587 59.726 80.02 97.20
60.01% - 65.00% 176 10,086,698.65 2.95 9.991 57,311 63.478 88.27 92.83
65.01% - 70.00% 311 19,926,736.70 5.84 10.053 64,073 68.655 87.63 84.56
70.01% - 75.00% 444 31,925,126.80 9.35 9.713 71,903 73.658 88.96 94.07
75.01% - 80.00% 1,007 79,284,049.61 23.22 9.555 78,733 78.802 87.81 94.34
80.01% - 85.00% 880 70,722,509.23 20.71 9.448 80,366 82.577 90.04 93.74
85.01% - 90.00% 444 38,391,124.07 11.24 9.457 86,466 87.043 92.99 99.44
90.01% - 95.00% 92 9,307,273.31 2.73 9.676 101,166 92.615 98.33 100.00
95.01% -100.00% 56 5,377,811.17 1.58 10.311 96,032 99.053 100.00 99.46
- --------------- ----- --------------- ------ ----- -------- ------ ----- -----
Total 5,488 $341,424,511.24 100.00% 9.858% $ 62,213 78.291% 88.37% 95.08%
=============== ===== =============== ====== ===== ======== ====== ===== =====
</TABLE>
S-35
<PAGE>
All Mortgage Loans
Distribution by Junior Lien Ratios
<TABLE>
<CAPTION>
Percentage of
Mortgage Pool Weighted Percent of Percent
by Aggregate Average Full of
Aggregate Principal Original Document- Owner-
Number Principal Balance Weighted Average Combined ation Occupied
of 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% 1 $ 17,510.31 0.03% 11.750% $17,510 93.430% 100.00% 100.00%
5.01% -10.00% 64 1,586,746.50 2.86 11.118 24,793 82.605 69.26 98.44
10.01% - 15.00% 213 5,815,400.41 10.47 11.233 27,302 85.426 78.64 99.44
15.01% - 20.00% 319 9,804,575.04 17.65 11.601 30,735 87.392 85.70 100.00
20.01% - 25.00% 292 9,844,919.10 17.73 11.603 33,715 87.174 84.42 99.19
25.01% - 30.00% 189 7,287,831.52 13.12 11.370 38,560 84.735 87.39 97.18
30.01% - 35.00% 141 5,148,773.16 9.27 10.787 36,516 81.741 84.79 99.02
35.01% - 40.00% 93 4,071,335.01 7.33 10.851 43,778 83.571 85.79 97.35
40.01% - 45.00% 75 3,459,615.37 6.23 10.568 46,128 81.032 76.46 100.00
45.01% - 50.00% 52 2,313,552.16 4.17 10.806 44,491 77.795 69.07 100.00
50.01% - 55.00% 33 1,473,869.39 2.65 10.268 44,663 77.617 82.70 100.00
55.01% - 60.00% 21 755,211.13 1.36 9.942 35,962 70.229 87.66 100.00
60.01% - 65.00% 19 741,577.17 1.34 10.076 39,030 75.319 82.06 97.32
65.01% - 70.00% 12 464,664.62 0.84 9.888 38,722 75.029 100.00 100.00
70.01% - 75.00% 16 892,004.92 1.61 9.957 55,750 62.188 55.75 100.00
75.01% - 80.00% 11 431,208.05 0.78 10.492 39,201 64.065 100.00 92.92
80.01% - 85.00% 11 600,217.24 1.08 10.032 54,565 67.107 100.00 100.00
85.01% - 90.00% 7 405,211.31 0.73 9.791 57,887 70.013 100.00 100.00
90.01% - 95.00% 4 322,951.45 0.58 8.986 80,738 58.712 100.00 100.00
95.01% -100.00% 2 105,114.33 0.19 8.151 52,557 61.650 100.00 100.00
- --------------- ----- -------------- ------ ------ ------- ------ ----- -----
Total 1,575 $55,542,288.19 100.00% 11.111% $35,265 83.159% 83.16% 99.01%
=============== ===== ============== ====== ====== ======= ====== ===== =====
</TABLE>
All Mortgage Loans
Distribution by Property Type
<TABLE>
<CAPTION>
Percentage of
Mortgage Pool Weighted Percent of Percent
by Aggregate Average Full of
Aggregate Principal Original Document- Owner-
Number Principal Balance Weighted Average Combined ation Occupied
of 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 5,114 $315,464,802.43 92.40% 9.841% $61,687 78.349% 88.44% 96.64%
2-4 Family 208 14,765,928.29 4.32 10.294 70,990 76.053 90.84 67.17
Condo 161 11,009,968.06 3.22 9.767 68,385 79.670 83.10 88.53
Townhouse 5 183,812.46 0.05 10.216 36,762 75.899 100.00 56.86
- ------------- ----- --------------- ------ ----- ------- ------ ----- -----
Total 5,488 $341,424,511.24 100.00% 9.858% $62,213 78.291% 88.37% 95.08%
============= ===== =============== ====== ===== ======= ====== ===== =====
S-36
<PAGE>
All Mortgage Loans
Distribution by Loan Purpose
Percentage of
Mortgage Pool Weighted Percent of Percent
by Aggregate Average Full of
Aggregate Principal Original Document- Owner-
Number Principal Balance Weighted Average Combined ation Occupied
of 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>
Refinance and/or
Cashout 5,048 $303,340,438.49 88.85% 9.848% $60,091 77.988% 87.89% 95.12%
Purchase 440 38,084,072.75 11.15 9.944 86,555 80.704 92.26 94.75
- ---------------- ----- --------------- ------ ----- ------- ------ ----- -----
Total 5,488 $341,424,511.24 100.00% 9.858% $62,213 78.291% 88.37% 95.08%
================ ===== =============== ====== ===== ======= ====== ===== =====
</TABLE>
All Mortgage Loans
Distribution by Occupancy Status
<TABLE>
<CAPTION>
Percentage of
Mortgage Pool Weighted Percent of Percent
by Aggregate Average Full of
Aggregate Principal Original Document- Owner-
Number Principal Balance Weighted Average Combined ation Occupied
of 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 5,200 $324,635,016.48 95.08% 9.835% $62,430 78.543% 87.77% 100.00%
Non-owner
Occupied 288 16,789,494.76 4.92 10.312 58,297 73.414 100.00 0.00
- --------------- ----- --------------- ------ ----- ------- ------ ----- -----
Total 5,488 $341,424,511.24 100.00% 9.858% $62,213 78.291% 88.37% 95.08%
=============== ===== =============== ====== ===== ======= ====== ===== =====
</TABLE>
S-37
<PAGE>
All Mortgage Loans
Distribution by Product Type
<TABLE>
<CAPTION>
Percentage of
Mortgage Pool Weighted Percent of Percent
by Aggregate Average Full of
Aggregate Principal Original Document- Owner-
Number Principal Balance Weighted Average Combined ation Occupied
of Mortgage Balance of Mortgage Average Current Loan-to-Value Mortgage Mortgage
Product Type Loans Outstanding Loans Coupon Balance Ratio Loans Loans
---------------- ----- -------------- ----- ------ ------- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Fixed - 30 Year 1,496 $128,677,377.95 37.69% 9.439% $ 86,014 77.586% 90.37% 93.41%
Fixed - 15 Year 2,426 94,047,748.72 27.55 10.252 38,767 77.692 88.42 97.45
Fixed - Call 596 42,796,788.54 12.53 9.575 71,807 79.673 91.13 94.47
Balloon - 15/30 390 24,585,522.33 7.20 11.505 63,040 77.889 88.56 92.06
ARM - 2 Year/1 Year 243 22,904,337.70 6.71 9.507 94,257 81.124 77.69 96.18
ARM - 2 Year/6 Month 175 13,451,534.48 3.94 10.093 76,866 78.464 88.35 95.93
ARM - 3 Year/1 Year 50 6,278,383.10 1.84 9.314 125,568 80.621 70.88 98.71
ARM - 1 Year 36 2,615,379.14 0.77 9.065 72,649 78.846 75.24 100.00
ARM - 2 Year/1 Year Call 36 2,534,710.12 0.74 10.193 70,409 79.957 89.59 98.89
ARM - 6 Month 23 1,932,459.51 0.57 9.426 84,020 81.498 100.00 97.00
ARM - 1 Year/6 Month 7 923,192.72 0.27 9.016 131,885 78.944 70.66 100.00
ARM - 1 Year Call 6 481,779.53 0.14 9.001 80,297 82.950 79.95 100.00
ARM - 3 Year/1 Year Call 2 126,422.89 0.04 10.966 63,211 86.428 100.00 100.00
ARM - 3 Year/6 Month 2 68,874.51 0.02 10.371 34,437 81.769 61.53 100.00
- ------------------------ ----- --------------- ------ ----- -------- ------ ----- -----
Total 5,488 $341,424,511.24 100.00% 9.858% $ 62,213 78.291% 88.37% 95.08%
======================== ===== =============== ====== ===== ======== ====== ===== =====
</TABLE>
All Mortgage Loans
Distribution by Index Type
<TABLE>
<CAPTION>
Percentage of
Mortgage Pool Weighted Percent of Percent
by Aggregate Average Full of
Aggregate Principal Original Document- Owner-
Number Principal Balance Weighted Average Combined ation Occupied
of Mortgage Balance of Mortgage Average Current Loan-to-Value Mortgage Mortgage
Index Type Loans Outstanding Loans Coupon Balance Ratio Loans Loans
------------ ----- -------------- ----- ------ ------- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Fixed Rate 4,908 $290,107,437.54 84.97% 9.898% $59,109 77.954% 89.70% 94.76%
Treasury - 1 Year 373 34,941,012.48 10.23 9.487 93,676 80.823 77.26 97.19
Libor - 6 Month 207 16,376,061.22 4.80 9.955 79,111 78.863 88.62 96.30
- ------------------ ----- --------------- ------ ----- ------- ------ ----- -----
Total 5,488 $341,424,511.24 100.00% 9.858% $62,213 78.291% 88.37% 95.08%
================== ===== =============== ====== ===== ======= ====== ===== =====
</TABLE>
S-38
<PAGE>
Fixed Rate Mortgage Loans
Each Fixed Rate Mortgage Loan was originated or acquired by CIT Consumer
Finance on or after January 2, 1998. As of the Cut-off Date, the latest date on
which any Fixed Rate Mortgage Loan matures is May 10, 2028 and the earliest
stated maturity date of any Fixed Rate Mortgage Loan is December 1, 2002.
As of the Cut-off Date, 81.17% of the Fixed Rate Mortgage Loans (by
Principal Balance) were secured by first mortgages, and 18.83% 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 77.95%.
As of the Cut-off Date, 9.99% of the Fixed Rate Mortgage Loans (by
Principal Balance as of the Cut-off Date) were secured by Mortgaged Properties
located in California. Otherwise, no more than 7.58% 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 0.34% 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-39
<PAGE>
Fixed Rate Mortgage Loans
Geographic Distribution of Mortgaged Properties
<TABLE>
<CAPTION>
Percentage of
Mortgage Pool Weighted Percent of Percent
by Aggregate Average Full of
Aggregate Principal Original Document- Owner-
Number Principal Balance Weighted Average Combined ation Occupied
of 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 371 $ 28,974,761.98 9.99% 9.686% $78,099 78.576% 80.74% 96.02%
Pennsylvania 403 22,000,394.55 7.58 9.259 54,592 76.985 95.81 97.05
Florida 374 21,411,578.94 7.38 9.813 57,250 77.623 92.80 91.20
Ohio 367 19,858,290.43 6.85 9.849 54,110 77.760 91.75 91.87
Indiana 402 19,184,199.09 6.61 9.780 47,722 78.548 89.28 94.93
New York 247 16,640,202.58 5.74 10.507 67,369 76.349 89.51 86.78
New Jersey 230 14,183,257.04 4.89 10.840 61,666 77.108 86.09 95.23
North Carolina 235 13,640,547.22 4.70 9.417 58,045 78.580 94.87 96.91
Kentucky 262 13,053,105.13 4.50 9.661 49,821 77.749 93.58 98.58
Georgia 160 10,455,869.08 3.60 9.765 65,349 77.289 95.41 93.60
Nevada 142 8,794,544.18 3.03 9.557 61,933 79.448 86.43 96.10
Oklahoma 177 8,694,119.91 3.00 9.371 49,119 79.379 94.19 97.06
Michigan 150 8,591,457.30 2.96 11.209 57,276 78.533 91.41 97.11
Washington 116 7,836,772.71 2.70 9.545 67,558 79.427 82.50 94.49
Arizona 129 7,674,702.16 2.65 9.593 59,494 77.993 82.88 93.97
Oregon 92 6,985,071.76 2.41 9.276 75,925 79.498 86.72 96.61
Illinois 108 6,399,604.62 2.21 10.226 59,256 78.529 91.95 93.25
Maryland 96 6,091,172.44 2.10 9.520 63,450 79.220 90.68 96.09
Missouri 112 5,687,081.47 1.96 10.091 50,778 76.663 96.02 96.24
Utah 74 4,889,644.79 1.69 9.606 66,076 80.121 72.16 94.77
Wisconsin 82 4,509,407.16 1.55 11.090 54,993 77.944 92.35 97.23
Colorado 69 4,327,490.56 1.49 9.990 62,717 77.138 78.93 95.92
Virginia 63 4,237,901.71 1.46 10.413 67,268 77.918 92.96 91.52
Tennessee 72 4,023,898.67 1.39 10.523 55,887 78.668 95.25 96.31
Texas 50 3,316,737.96 1.14 11.315 66,335 74.483 76.63 98.95
Delaware 52 3,153,322.10 1.09 9.518 60,641 77.484 96.64 97.07
Nebraska 51 2,616,678.00 0.90 10.380 51,307 77.456 90.48 93.12
Connecticut 24 2,313,663.50 0.80 10.354 96,403 77.437 99.07 82.14
South Carolina 31 1,852,115.78 0.64 9.882 59,746 77.556 100.00 95.89
West Virginia 29 1,459,745.29 0.50 9.862 50,336 81.606 96.87 100.00
Massachusetts 14 1,347,997.74 0.46 10.437 96,286 71.527 81.46 100.00
Iowa 27 1,204,841.54 0.42 10.593 44,624 78.706 100.00 95.45
Louisiana 19 829,986.37 0.29 10.301 43,683 74.069 100.00 100.00
Idaho 15 791,145.08 0.27 9.753 52,743 69.488 74.40 100.00
Minnesota 10 638,185.56 0.22 10.901 63,819 79.088 84.47 100.00
Kansas 18 610,697.57 0.21 9.955 33,928 73.462 100.00 100.00
Montana 6 572,120.66 0.20 9.707 95,353 87.820 66.77 100.00
Mississippi 11 475,490.91 0.16 11.044 43,226 76.748 100.00 100.00
New Mexico 4 223,380.11 0.08 8.945 55,845 87.757 100.00 100.00
Wyoming 6 206,355.98 0.07 9.702 34,393 79.823 100.00 100.00
Rhode Island 3 148,151.22 0.05 11.235 49,384 89.512 100.00 100.00
District of Columbia 2 97,864.54 0.03 9.322 48,932 53.650 100.00 100.00
South Dakota 2 80,308.25 0.03 9.355 40,154 68.834 100.00 100.00
Vermont 1 23,573.90 0.01 11.000 23,574 78.340 100.00 100.00
- ---------------- ----- --------------- ------ ----- ------- ------ ----- -----
Total 4,908 $290,107,437.54 100.00% 9.898% $59,109 77.954% 89.70% 94.76%
================ ===== =============== ====== ===== ======= ====== ===== =====
</TABLE>
S-40
<PAGE>
Fixed Rate Mortgage Loans
Distribution by Current Principal Balances
<TABLE>
<CAPTION>
Percentage of
Mortgage Pool Weighted Percent of Percent
by Aggregate Average Full of
Aggregate Principal Original Document- Owner-
Number Principal Balance Weighted Average Combined ation Occupied
of 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 28 $ 259,266.75 0.09% 11.757% $ 9,260 79.502% 100.00% 100.00%
$10,001 - $20,000 502 7,907,580.20 2.73 11.082 15,752 73.347 94.59 95.30
$20,001 - $30,000 775 19,625,599.63 6.76 10.892 25,323 75.189 91.54 96.11
$30,001 - $40,000 752 26,710,018.98 9.21 10.749 35,519 76.261 93.67 92.57
$40,001 - $50,000 689 31,099,563.49 10.72 10.282 45,137 76.346 92.31 92.97
$50,001 - $60,000 503 27,611,344.13 9.52 10.158 54,893 77.277 91.29 93.62
$60,001 - $70,000 347 22,580,453.21 7.78 9.950 65,073 78.075 91.38 95.77
$70,001 - $80,000 301 22,505,194.63 7.76 9.600 74,768 79.444 93.09 95.57
$80,001 - $90,000 207 17,576,738.82 6.06 9.791 84,912 78.517 86.86 94.68
$90,001 - $100,000 170 16,151,798.79 5.57 9.447 95,011 78.015 89.29 97.69
$100,001 - $120,000 232 25,417,287.37 8.76 9.636 109,557 79.523 89.40 94.83
$120,001 - $140,000 117 15,203,223.27 5.24 9.425 129,942 80.455 93.31 93.23
$140,001 - $160,000 98 14,628,120.22 5.04 9.432 149,267 78.125 76.42 97.99
$160,001 - $180,000 50 8,463,617.15 2.92 9.215 169,272 80.603 81.80 95.98
$180,001 - $200,000 38 7,282,875.49 2.51 9.487 191,655 80.412 81.45 97.40
$200,001 - $220,000 27 5,653,719.63 1.95 8.869 209,397 78.053 84.88 92.69
$220,001 - $240,000 19 4,345,550.54 1.50 8.956 228,713 80.440 89.34 94.82
$240,001 - $260,000 12 2,972,515.14 1.02 9.251 247,710 79.780 83.27 100.00
$260,001 - $280,000 10 2,692,628.60 0.93 9.037 269,263 82.940 79.58 90.02
$280,001 - $300,000 5 1,454,702.73 0.50 8.688 290,941 84.516 100.00 100.00
$300,001 - $320,000 5 1,524,637.31 0.53 8.829 304,927 73.504 59.83 100.00
$320,001 - $340,000 4 1,337,509.92 0.46 8.879 334,377 79.746 100.00 100.00
$340,001 - $360,000 3 1,055,545.53 0.36 8.902 351,849 79.560 100.00 100.00
$360,001 - $380,000 5 1,828,910.14 0.63 8.973 365,782 78.963 59.95 80.15
$380,001 - $400,000 4 1,568,719.79 0.54 8.541 392,180 76.434 100.00 100.00
Over $400,001 5 2,650,316.08 0.91 8.609 530,063 77.860 100.00 83.34
- ------------------- ----- --------------- ------ ----- -------- ------ ----- -----
Total 4,908 $290,107,437.54 100.00% 9.898% $ 59,109 77.954% 89.70% 94.76%
=================== ===== =============== ====== ===== ======== ====== ===== =====
</TABLE>
S-41
<PAGE>
Fixed Rate Mortgage Loans
Distribution by Current Mortgage Rates
<TABLE>
<CAPTION>
Percentage of
Mortgage Pool Weighted Percent of Percent
by Aggregate Average Full of
Aggregate Principal Original Document- Owner-
Number Principal Balance Weighted Average Combined ation Occupied
of 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>
6.501% - 7.000% 5 $ 321,129.25 0.11% 6.990% $ 64,226 66.279% 100.00% 100.00%
7.001% - 7.500% 106 11,298,387.18 3.89 7.408 106,589 74.982 98.21 99.82
7.501% - 8.000% 293 25,353,078.52 8.74 7.896 86,529 73.886 94.86 99.12
8.001% - 8.500% 354 28,029,391.91 9.66 8.342 79,179 75.063 94.89 98.10
8.501% - 9.000% 526 36,251,540.15 12.50 8.826 68,919 76.384 94.71 97.99
9.001% - 9.500% 528 31,792,583.24 10.96 9.332 60,213 78.440 88.89 93.59
9.501% -10.000% 685 45,531,237.28 15.69 9.819 66,469 79.933 89.41 89.99
10.001% -10.500% 461 24,799,592.00 8.55 10.349 53,795 77.699 83.02 92.50
10.501% -11.000% 566 28,847,432.35 9.94 10.835 50,967 78.333 80.34 92.61
11.001% -11.500% 313 13,884,065.23 4.79 11.323 44,358 78.579 84.08 95.40
11.501% -12.000% 339 14,813,046.57 5.11 11.848 43,696 81.326 84.78 93.18
12.001% -12.500% 202 8,628,494.40 2.97 12.347 42,715 81.551 90.68 93.49
12.501% -13.000% 209 8,200,231.35 2.83 12.799 39,236 82.811 91.16 96.29
13.001% -13.500% 71 3,061,065.63 1.06 13.316 43,114 77.708 90.31 94.77
13.501% -14.000% 137 4,916,150.01 1.69 13.898 35,884 85.935 92.75 98.11
14.001% -14.500% 45 1,913,792.21 0.66 14.211 42,529 76.861 96.71 82.16
14.501% -15.000% 25 929,630.86 0.32 14.807 37,185 80.084 97.44 100.00
15.001% -15.500% 32 1,047,366.32 0.36 15.361 32,730 85.232 94.53 100.00
15.501% -16.000% 4 176,275.02 0.06 15.752 44,069 68.615 100.00 100.00
16.001% -16.500% 3 105,466.85 0.04 16.339 35,156 53.227 100.00 100.00
16.501% -17.000% 2 76,563.49 0.03 16.950 38,282 60.136 100.00 100.00
17.001% -17.500% 2 130,917.72 0.05 17.385 65,459 65.000 100.00 100.00
- ---------------- ----- --------------- ------ ----- -------- ------ ----- -----
Total 4,908 $290,107,437.54 100.00% 9.898% $ 59,109 77.954% 89.70% 94.76%
================ ===== =============== ====== ===== ======== ====== ===== =====
</TABLE>
S-42
<PAGE>
Fixed Rate Mortgage Loans
Distribution by Remaining Months to Stated Maturity
<TABLE>
<CAPTION>
Percentage of
Mortgage Pool Weighted Percent of Percent
by Aggregate Average Full of
Aggregate Principal Original Document- Owner-
Number Principal Balance Weighted Average Combined ation Occupied
Remaining Months of 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>
49 - 60 27 $ 649,107.14 0.22% 9.743% $ 24,041 61.002% 97.75% 96.71%
61 - 72 6 218,482.29 0.08 8.846 36,414 74.187 100.00 100.00
73 - 84 19 482,670.17 0.17 9.468 25,404 67.880 100.00 88.34
85 - 96 3 108,298.47 0.04 8.943 36,099 58.252 100.00 100.00
97 - 108 1 49,515.13 0.02 10.880 49,515 78.580 0.00 100.00
109 - 120 280 8,781,554.94 3.03 9.900 31,363 69.766 95.21 97.37
133 - 144 6 293,301.09 0.10 9.250 48,884 80.786 100.00 100.00
145 - 156 3 122,426.26 0.04 8.841 40,809 67.593 100.00 100.00
157 - 168 3 141,418.21 0.05 9.061 47,139 91.442 100.00 100.00
169 - 180 3,064 150,583,285.89 51.91 10.296 49,146 78.861 88.70 95.74
181 - 192 1 146,623.65 0.05 7.490 146,624 77.090 100.00 100.00
217 - 228 2 128,530.15 0.04 10.468 64,265 69.426 100.00 100.00
229 - 240 358 21,461,194.20 7.40 9.653 59,947 76.902 89.98 97.79
289 - 300 13 1,006,472.94 0.35 8.488 77,421 79.669 100.00 100.00
349 - 360 1,122 105,934,557.01 36.52 9.406 94,416 77.715 90.34 92.44
- ----------- ----- --------------- ------ ----- -------- ------ ----- -----
Total 4,908 $290,107,437.54 100.00% 9.898% $ 59,109 77.954% 89.70% 94.76%
=========== ===== =============== ====== ===== ======== ====== ===== =====
</TABLE>
Fixed Rate Mortgage Loans
Distribution by Number of Months of Seasoning
<TABLE>
<CAPTION>
Percentage of
Mortgage Pool Weighted Percent of Percent
by Aggregate Average Full of
Aggregate Principal Original Document- Owner-
Number Principal Balance Weighted Average Combined ation Occupied
Months of of Mortgage Balance of Mortgage Average Current Loan-to-Value Mortgage Mortgage
Seasoning Loans Outstanding Loans Coupon Balance Ratio Loans Loans
- ---------- ----- -------------- ----- ------ ------- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
2- 3 1,383 $ 88,811,540.54 30.61% 9.538% $64,217 77.275% 91.14% 92.88%
4- 6 3,257 189,410,861.48 65.29 9.962 58,155 78.092 88.80 95.55
7- 12 265 11,692,853.53 4.03 11.568 44,124 80.825 93.12 96.06
13- 18 3 192,181.99 0.07 10.851 64,061 80.786 100.00 100.00
- ------------- ----- --------------- ------ ----- ------- ------ ----- -----
Total 4,908 $290,107,437.54 100.00% 9.898% $59,109 77.954% 89.70% 94.76%
============= ===== =============== ====== ===== ======= ====== ===== =====
</TABLE>
S-43
<PAGE>
Fixed Rate Mortgage Loans
Distribution by Original Combined Loan-to-Value Ratios
<TABLE>
<CAPTION>
Percentage of
Mortgage Pool Weighted Percent of Percent
by Aggregate Average Full of
Aggregate Principal Original Document- Owner-
Original Combined Number Principal Balance Weighted Average Combined ation Occupied
Loan-to-Value of Mortgage Balance of Mortgage Average Current Loan-to-Value Mortgage Mortgage
Ratios Loans Outstanding Loans Coupon Balance Ratio Loans Loans
----------------- ----- --------------- ----- ------ ------- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
5.01% - 10.00% 3 $ 45,764.67 0.02% 8.418% $15,255 8.614% 100.00% 100.00%
10.01% - 15.00% 12 330,268.95 0.11 8.958 27,522 13.085 75.09 100.00
15.01% - 20.00% 16 364,612.41 0.13 10.168 22,788 17.869 60.82 95.90
20.01% - 25.00% 24 589,901.03 0.20 9.529 24,579 23.078 92.30 97.07
25.01% - 30.00% 28 984,737.35 0.34 9.849 35,169 28.282 95.03 76.67
30.01% - 35.00% 45 1,490,577.66 0.51 9.649 33,124 32.325 76.48 97.33
35.01% - 40.00% 58 2,091,854.43 0.72 9.458 36,066 37.962 83.80 95.83
40.01% - 45.00% 66 2,901,471.21 1.00 9.944 43,962 42.938 84.82 87.23
45.01% - 50.00% 85 3,530,447.22 1.22 9.951 41,535 47.512 87.26 93.06
50.01% - 55.00% 97 4,814,190.60 1.66 9.415 49,631 52.501 86.11 95.99
55.01% - 60.00% 134 5,915,894.57 2.04 9.929 44,148 57.828 75.50 96.83
60.01% - 65.00% 198 10,461,329.62 3.61 10.067 52,835 62.830 85.88 92.40
65.01% - 70.00% 341 19,792,563.08 6.82 10.077 58,043 68.383 85.83 87.75
70.01% - 75.00% 511 31,396,142.81 10.82 9.795 61,441 73.540 88.01 94.65
75.01% - 80.00% 1,064 72,707,399.64 25.06 9.623 68,334 78.677 87.90 94.22
80.01% - 85.00% 1,016 68,159,868.55 23.49 9.603 67,086 82.586 88.82 93.61
85.01% - 90.00% 620 37,070,556.03 12.78 9.846 59,791 87.177 96.76 99.10
90.01% - 95.00% 200 11,241,837.50 3.88 10.643 56,209 92.549 98.24 100.00
95.01% - 100.00% 382 15,979,808.81 5.51 12.056 41,832 99.029 100.00 99.82
100.01% - 101.00% 8 238,211.40 0.08 12.554 29,776 100.136 100.00 100.00
- ----------------- ----- --------------- ------ ----- ------- ------ ----- -----
Total 4,908 $290,107,437.54 100.00% 9.898% $59,109 77.954% 89.70% 94.76%
================= ===== =============== ====== ===== ======= ====== ===== =====
</TABLE>
S-44
<PAGE>
Fixed Rate Mortgage Loans
Distribution by Original Loan-to-Value Ratios
<TABLE>
<CAPTION>
Percentage
of Mortgage
Pool Weighted Percent
by Aggregate Average Percent of of
Aggregate Principal Original Full Owner-
Original Number of Principal Balance of Weighted Average Combined Documentation Occupied
Loan-to-Value Mortgage Balance Mortgage Average Current Loan-to-Value Mortgage Mortgage
Ratios Loans Outstanding Loans Coupon Balance Ratio Loans Loans
--------------- --------- -------------- ------------ -------- -------- ------------- ------------ --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
0.01% - 5.00% 8 $ 126,883.74 0.04% 11.428% $ 15,860 82.725% 73.94% 100.00%
5.01% - 10.00% 154 4,065,743.74 1.40 11.032 26,401 80.021 71.46 98.60
10.01% - 15.00% 293 8,344,149.24 2.88 10.978 28,478 79.225 76.68 99.55
15.01% - 20.00% 380 12,028,861.67 4.15 11.473 31,655 82.819 81.82 98.49
20.01% - 25.00% 300 10,540,773.49 3.63 11.466 35,136 82.864 89.36 98.39
25.01% - 30.00% 190 7,195,461.35 2.48 10.887 37,871 76.639 87.39 96.67
30.01% - 35.00% 156 6,619,429.45 2.28 10.479 42,432 73.251 83.32 98.22
35.01% - 40.00% 130 5,605,202.29 1.93 10.336 43,117 66.116 80.37 98.45
40.01% - 45.00% 104 4,851,313.43 1.67 10.187 46,647 57.769 84.05 91.73
45.01% - 50.00% 100 4,253,820.86 1.47 10.146 42,538 56.763 90.59 94.24
50.01% - 55.00% 101 5,310,332.77 1.83 9.530 52,578 56.390 87.19 96.36
55.01% - 60.00% 112 5,097,508.33 1.76 9.839 45,513 59.885 79.36 96.92
60.01% - 65.00% 164 9,368,412.84 3.23 10.011 57,124 63.464 89.04 92.62
65.01% - 70.00% 270 17,276,243.13 5.96 10.016 63,986 68.723 89.75 85.97
70.01% - 75.00% 384 27,108,410.19 9.34 9.656 70,595 73.642 90.61 94.18
75.01% - 80.00% 839 63,664,996.63 21.95 9.530 75,882 78.744 90.92 93.65
80.01% - 85.00% 749 58,786,052.33 20.26 9.456 78,486 82.555 91.21 92.63
85.01% - 90.00% 355 28,021,205.20 9.66 9.470 78,933 87.045 96.53 99.23
90.01% - 95.00% 65 6,622,197.46 2.28 9.817 101,880 92.718 97.65 100.00
95.01% -100.00% 54 5,220,439.40 1.80 10.342 96,675 99.124 100.00 99.45
--------------- ----- --------------- ------ ------ -------- ------ ------ ------
Total 4,908 $290,107,437.54 100.00% 9.898% $ 59,109 77.954% 89.70% 94.76%
=============== ===== =============== ====== ====== ======== ====== ====== ======
</TABLE>
S-45
<PAGE>
Fixed Rate Mortgage Loans
Distribution by Junior Lien Ratios
<TABLE>
<CAPTION>
Percentage
of Mortgage
Pool Weighted Percent
by Aggregate Average Percent of of
Aggregate Principal Original Full Owner-
Number of Principal Balance of Weighted Average Combined Documentation Occupied
Junior Lien Mortgage Balance Mortgage Average Current Loan-to-Value Mortgage Mortgage
Ratio Loans Outstanding Loans Coupon Balance Ratio Loans Loans
----------- --------- -------------- ------------ -------- -------- ------------- ------------ --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
0.01% - 5.00% 1 $ 17,510.31 0.03% 11.750% $17,510 93.430% 100.00% 100.00%
5.01% - 10.00% 63 1,567,490.00 2.87 11.133 24,881 82.577 68.88 98.42
10.01% - 15.00% 208 5,649,226.53 10.34 11.265 27,160 85.683 78.55 99.43
15.01% - 20.00% 313 9,477,472.68 17.35 11.640 30,279 87.392 85.21 100.00
20.01% - 25.00% 290 9,727,150.83 17.81 11.634 33,542 87.368 84.42 99.18
25.01% - 30.00% 186 7,116,090.36 13.03 11.385 38,259 84.707 87.09 97.11
30.01% - 35.00% 139 5,049,480.20 9.25 10.798 36,327 81.933 85.65 99.00
35.01% - 40.00% 93 4,071,335.01 7.45 10.851 43,778 83.571 85.79 97.35
40.01% - 45.00% 74 3,434,349.23 6.29 10.557 46,410 81.061 76.29 100.00
45.01% - 50.00% 52 2,313,552.16 4.24 10.806 44,491 77.795 69.07 100.00
50.01% - 55.00% 33 1,473,869.39 2.70 10.268 44,663 77.617 82.70 100.00
55.01% - 60.00% 21 755,211.13 1.38 9.942 35,962 70.229 87.66 100.00
60.01% - 65.00% 19 741,577.17 1.36 10.076 39,030 75.319 82.06 97.32
65.01% - 70.00% 12 464,664.62 0.85 9.888 38,722 75.029 100.00 100.00
70.01% - 75.00% 16 892,004.92 1.63 9.957 55,750 62.188 55.75 100.00
75.01% - 80.00% 11 431,208.05 0.79 10.492 39,201 64.065 100.00 92.92
80.01% - 85.00% 11 600,217.24 1.10 10.032 54,565 67.107 100.00 100.00
85.01% - 90.00% 7 405,211.31 0.74 9.791 57,887 70.013 100.00 100.00
90.01% - 95.00% 4 322,951.45 0.59 8.986 80,738 58.712 100.00 100.00
95.01% -100.00% 2 105,114.33 0.19 8.151 52,557 61.650 100.00 100.00
--------------- ----- -------------- ------ ------ ------- ------ ------ ------
Total 1,555 $54,615,686.92 100.00% 11.125% $35,123 83.193% 83.07% 98.99%
=============== ===== ============== ====== ====== ======= ====== ====== ======
</TABLE>
Fixed Rate Mortgage Loans
Distribution by Property Type
<TABLE>
<CAPTION>
Percentage
of Mortgage
Pool Weighted Percent
by Aggregate Average Percent of of
Aggregate Principal Original Full Owner-
Number of Principal Balance of Weighted Average Combined Documentation Occupied
Mortgage Balance 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 4,580 $267,679,972.57 92.27% 9.880% $58,445 78.025% 89.73% 96.43%
2-4 Family 184 13,044,317.77 4.50 10.334 70,893 75.944 93.11 65.19
Condo 139 9,199,334.74 3.17 9.793 66,182 78.779 83.86 88.80
Townhouse 5 183,812.46 0.06 10.216 36,762 75.899 100.00 56.86
- -------------- ----- --------------- ------ ------ ------- ------ ------ -----
Total 4,908 $290,107,437.54 100.00% 9.898% $59,109 77.954% 89.70% 94.76%
============== ===== =============== ====== ====== ======= ====== ====== =====
</TABLE>
S-46
<PAGE>
Fixed Rate Mortgage Loans
Distribution by Loan Purpose
<TABLE>
<CAPTION>
Percentage
of Mortgage
Pool Weighted Percent
by Aggregate Average Percent of of
Aggregate Principal Original Full Owner-
Number of Principal Balance of Weighted Average Combined Documentation Occupied
Mortgage Balance 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>
Refinance and/or
Cashout 4,589 $263,279,908.33 90.75% 9.884% $57,372 77.721% 89.36% 94.75%
Purchase 319 26,827,529.21 9.25 10.034 84,099 80.234 93.03 94.86
---------------- ------ --------------- ------ ------ ------- ------ ----- -----
Total 4,908 $290,107,437.54 100.00% 9.898% $59,109 77.954% 89.70% 94.76%
================ ====== =============== ====== ====== ======= ====== ===== =====
</TABLE>
Fixed Rate Mortgage Loans
Occupancy Status Distribution by Occupancy Status
<TABLE>
<CAPTION>
Percentage
of Mortgage
Pool Weighted Percent
by Aggregate Average Percent of of
Aggregate Principal Original Full Owner-
Number of Principal Balance of Weighted Average Combined Documentation Occupied
Occupancy Mortgage Balance Mortgage Average Current Loan-to-Value Mortgage Mortgage
Status Loans Outstanding Loans Coupon Balance Ratio Loans Loans
--------- --------- -------------- ------------ -------- -------- ------------- ------------ --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Owner Occupied 4,647 $274,906,234.74 94.76% 9.873% $59,158 78.198% 89.13% 100.00%
Non-owner
Occupied 261 15,201,202.80 5.24 10.347 58,242 73.528 100.00 0.00
-------------- ----- --------------- ------ ------ ------- ------ ------ ------
Total 4,908 $290,107,437.54 100.00% 9.898% $59,109 77.954% 89.70% 94.76%
============== ===== =============== ====== ====== ======= ====== ====== ======
</TABLE>
Fixed Rate Mortgage Loans
Distribution by Product Type
<TABLE>
<CAPTION>
Percentage
of Mortgage
Pool Weighted Percent
by Aggregate Average Percent of of
Aggregate Principal Original Full Owner-
Number of Principal Balance of Weighted Average Combined Documentation Occupied
Mortgage Balance Mortgage Average Current Loan-to-Value Mortgage Mortgage
Product Type Loans Outstanding Loans Coupon Balance Ratio Loans Loans
------------ --------- -------------- ------------ -------- -------- ------------- ------------ --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Fixed - 30 Year 1,496 $128,677,377.95 44.36% 9.439% $86,014 77.586% 90.37% 93.41%
Fixed - 15 Year 2,426 94,047,748.72 32.42 10.252 38,767 77.692 88.42 97.45
Fixed - Call 596 42,796,788.54 14.75 9.575 71,807 79.673 91.13 94.47
Balloon - 15/30 390 24,585,522.33 8.47 11.505 63,040 77.889 88.56 92.06
--------------- ----- --------------- ------ ------ ------- ------ ----- -----
Total 4,908 $290,107,437.54 100.00% 9.898% $59,109 77.954% 89.70% 94.76%
=============== ===== =============== ====== ====== ======= ====== ===== =====
</TABLE>
S-47
<PAGE>
Adjustable Rate Mortgage Loans
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, 1998.
As of the Cut-off Date, the latest date on which any Adjustable Rate
Mortgage Loan matures is May 5, 2028 and the earliest stated maturity date of
any Adjustable Rate Mortgage Loan is January 6, 2013.
As of the Cut-off Date, 98.19% of the Adjustable Rate Mortgage Loans (by
Principal Balance as of the Cut-off Date) were secured by first mortgages, and
1.81% 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 80.20%.
As of the Cut-off Date, 22.04% and 10.50% of the Adjustable Rate Mortgage
Loans (by Principal Balance as of the Cut-off Date) were secured by Mortgaged
Properties located in Ohio and California, respectively. Otherwise, no more than
6.77% 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 1.09% 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.
The following information sets forth in tabular format certain
information, as of the Cut-off Date, relating to the Adjustable Rate Mortgage
Loans.
S-48
<PAGE>
Adjustable Rate Mortgage Loans
Geographic Distribution of Mortgaged Properties
<TABLE>
<CAPTION>
Percentage
of Mortgage
Pool Weighted Percent
by Aggregate Average Percent of of
Aggregate Principal Original Full Owner-
Number of Principal Balance of Weighted Average Combined Documentation Occupied
Mortgage Balance 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 152 $11,307,863.11 22.04% 9.830% $ 74,394 80.895% 88.54% 99.65%
California 35 5,389,432.59 10.50 9.091 153,984 80.665 68.88 99.19
Florida 44 3,475,511.77 6.77 9.309 78,989 76.649 83.42 97.74
Illinois 39 3,313,189.76 6.46 9.824 84,954 79.901 75.90 96.89
Arizona 33 2,994,755.51 5.84 9.652 90,750 81.526 72.47 89.11
Michigan 31 2,926,738.03 5.70 9.851 94,411 82.579 87.58 98.02
Indiana 42 2,665,382.06 5.19 10.409 63,461 79.355 100.00 97.97
Utah 17 2,245,759.32 4.38 9.149 132,103 80.902 74.72 100.00
Washington 15 2,005,897.26 3.91 9.181 133,726 82.422 51.30 91.00
Wisconsin 26 1,790,219.80 3.49 10.700 68,855 75.921 86.91 98.20
New Jersey 10 1,387,561.25 2.70 9.785 138,756 79.817 59.38 96.40
Oregon 10 1,217,863.57 2.37 9.399 121,786 79.122 60.37 100.00
Missouri 19 1,027,607.56 2.00 9.980 54,085 80.112 79.46 97.25
Iowa 14 1,021,380.27 1.99 10.063 72,956 80.756 91.38 94.56
Pennsylvania 12 1,006,897.99 1.96 9.379 83,908 79.964 60.63 96.62
Nevada 7 922,553.35 1.80 8.863 131,793 80.533 97.13 83.87
Tennessee 12 762,260.30 1.49 10.170 63,522 79.355 100.00 95.88
Maryland 7 691,233.66 1.35 9.058 98,748 78.811 100.00 95.56
Oklahoma 3 645,183.02 1.26 7.969 215,061 81.575 54.76 100.00
West Virginia 11 633,991.80 1.24 9.836 57,636 77.735 97.57 100.00
New York 5 593,021.79 1.16 9.658 118,604 81.612 83.81 100.00
Kentucky 9 564,823.10 1.10 9.427 62,758 78.834 100.00 100.00
Colorado 2 483,311.54 0.94 9.529 241,656 79.460 100.00 100.00
Minnesota 6 436,529.80 0.85 9.510 72,755 82.631 100.00 100.00
Connecticut 3 293,678.74 0.57 10.207 97,893 70.872 100.00 0.00
North Carolina 3 259,621.70 0.51 9.831 86,541 82.139 100.00 100.00
Louisiana 2 219,516.20 0.43 9.247 109,758 78.192 24.23 100.00
Virginia 1 203,923.86 0.40 8.750 203,924 93.910 100.00 100.00
Nebraska 2 166,628.50 0.32 9.666 83,314 74.573 100.00 100.00
South Carolina 1 157,459.75 0.31 10.250 157,460 75.000 0.00 100.00
Delaware 1 144,744.33 0.28 8.500 144,744 80.560 100.00 100.00
Georgia 2 143,215.24 0.28 10.752 71,608 81.465 100.00 100.00
Idaho 1 74,710.21 0.15 8.880 74,710 78.820 100.00 100.00
Rhode Island 1 71,385.95 0.14 8.700 71,386 85.000 100.00 100.00
Kansas 1 47,954.87 0.09 11.350 47,955 76.620 100.00 100.00
Texas 1 25,266.14 0.05 11.990 25,266 77.000 100.00 100.00
-------------- --- -------------- ------ ------ -------- ------ ------ ------
Total 580 $51,317,073.70 100.00% 9.637% $ 88,478 80.197% 80.88% 96.90%
============== === ============== ====== ====== ======== ====== ====== =======
</TABLE>
S-49
<PAGE>
Adjustable Rate Mortgage Loans
Distribution by Current Principal Balances
<TABLE>
<CAPTION>
Percentage
of Mortgage
Pool Weighted Percent
by Aggregate Average Percent of of
Aggregate Principal Original Full Owner-
Number of Principal Balance of Weighted Average Combined Documentation Occupied
Mortgage Balance 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 1 $ 9,757.88 0.02% 9.240% $ 9,758 77.370% 100.00% 100.00%
$10,001 - $20,000 11 181,750.62 0.35 10.138 16,523 68.247 81.67 100.00
$20,001 - $30,000 22 591,496.96 1.15 10.848 26,886 70.575 86.31 86.62
$30,001 - $40,000 46 1,615,574.96 3.15 10.554 35,121 75.388 91.39 85.79
$40,001 - $50,000 70 3,219,936.70 6.27 10.323 45,999 74.255 91.23 94.07
$50,001 - $60,000 73 4,033,155.44 7.86 10.178 55,249 77.153 95.65 94.49
$60,001 - $70,000 58 3,732,694.61 7.27 9.902 64,357 79.855 87.70 100.00
$70,001 - $80,000 68 5,122,763.67 9.98 9.762 75,335 79.746 89.77 95.62
$80,001 - $90,000 38 3,221,795.68 6.28 9.643 84,784 80.947 94.60 92.19
$90,001 -$100,000 29 2,780,699.59 5.42 9.641 95,886 80.990 86.17 100.00
$100,001 -$120,000 51 5,583,747.01 10.88 9.694 109,485 80.333 84.11 96.24
$120,001 -$140,000 30 3,876,039.86 7.55 9.807 129,201 80.386 72.62 100.00
$140,001 -$160,000 20 2,966,870.77 5.78 9.516 148,344 82.974 70.02 100.00
$160,001 -$180,000 13 2,225,777.88 4.34 9.130 171,214 85.146 85.20 100.00
$180,001 -$200,000 17 3,240,944.49 6.32 9.308 190,644 81.677 88.61 94.43
$200,001 -$220,000 6 1,259,096.77 2.45 8.991 209,849 87.552 83.53 100.00
$220,001 -$240,000 5 1,160,516.48 2.26 8.771 232,103 82.289 39.84 100.00
$240,001 -$260,000 4 1,000,820.90 1.95 8.786 250,205 84.509 49.69 100.00
$260,001 -$280,000 4 1,074,676.42 2.09 9.328 268,669 82.970 24.88 100.00
$280,001 -$300,000 10 2,904,192.02 5.66 8.633 290,419 80.003 49.93 100.00
$300,001 -$320,000 1 307,804.76 0.60 8.380 307,805 80.000 100.00 100.00
$340,001 -$360,000 1 351,211.84 0.68 10.240 351,212 72.550 0.00 100.00
$380,001 -$400,000 1 398,827.03 0.78 8.650 398,827 85.400 100.00 100.00
Over $400,001 1 456,921.36 0.89 8.990 456,921 86.240 100.00 100.00
- ------------------ --- -------------- ------ ------ -------- ------ ------ ------
Total 580 $51,317,073.70 100.00% 9.637% $ 88,478 80.197% 80.88% 96.90%
================== === ============== ====== ====== ======== ====== ====== ======
</TABLE>
S-50
<PAGE>
Adjustable Rate Mortgage Loans
Distribution by Current Mortgage Rates
<TABLE>
<CAPTION>
Percentage
of Mortgage
Pool Weighted Percent
by Aggregate Average Percent of of
Aggregate Principal Original Full Owner-
Number of Principal Balance of Weighted Average Combined Documentation Occupied
Mortgage Balance 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>
7.001% - 7.500% 6 $ 700,079.44 1.36% 7.410% $116,680 79.092% 58.31% 100.00%
7.501% - 8.000% 13 1,660,669.88 3.24 7.832 127,744 82.057 98.27 100.00
8.001% - 8.500% 41 5,093,655.88 9.93 8.394 124,236 80.371 75.17 98.35
8.501% - 9.000% 83 10,198,084.40 19.87 8.854 122,868 81.957 79.58 97.11
9.001% - 9.500% 76 7,297,869.85 14.22 9.341 96,025 81.582 81.48 96.98
9.501% - 10.000% 119 10,357,114.52 20.18 9.809 87,035 81.019 75.59 97.98
10.001% - 10.500% 97 7,283,492.86 14.19 10.336 75,088 79.472 77.87 95.71
10.501% - 11.000% 71 4,352,755.59 8.48 10.809 61,306 77.096 91.83 91.65
11.001% - 11.500% 33 2,165,721.15 4.22 11.315 65,628 78.261 91.18 96.71
11.501% - 12.000% 28 1,605,376.65 3.13 11.779 57,335 75.076 93.49 100.00
12.001% - 12.500% 3 161,980.80 0.32 12.412 53,994 76.160 100.00 100.00
12.501% - 13.000% 7 323,057.12 0.63 12.853 46,151 64.751 100.00 90.04
13.001% - 13.500% 1 31,414.31 0.06 13.240 31,414 55.260 100.00 100.00
13.501% - 14.000% 2 85,801.25 0.17 13.895 42,901 55.400 100.00 100.00
----------------- --- -------------- ------ ------ -------- ------ ------ ------
Total 580 $51,317,073.70 100.00% 9.637% $ 88,478 80.197% 80.88% 96.90%
================= === ============== ====== ====== ======== ====== ====== ======
</TABLE>
Adjustable Rate Mortgage Loans
Distribution by Gross Margins
<TABLE>
<CAPTION>
Percentage
of Mortgage
Pool Weighted Percent
by Aggregate Average Percent of of
Aggregate Principal Original Full Owner-
Number of Principal Balance of Weighted Average Combined Documentation Occupied
Mortgage Balance 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>
3.501% - 4.000% 1 $ 53,193.83 0.10% 7.050% $ 53,194 72.540% 100.00% 100.00%
4.001% - 4.500% 14 1,192,396.72 2.32 8.771 85,171 80.879 82.61 82.87
4.501% - 5.000% 25 2,953,406.04 5.76 8.706 118,136 80.267 88.70 100.00
5.001% - 5.500% 138 16,647,582.19 32.44 9.134 120,635 81.530 73.24 96.64
5.501% - 6.000% 117 10,226,232.70 19.93 9.555 87,404 79.977 69.93 98.96
6.001% - 6.500% 67 5,473,732.92 10.67 9.944 81,698 81.545 85.58 96.89
6.501% - 7.000% 108 7,700,060.99 15.00 10.323 71,297 79.147 94.33 94.89
7.001% - 7.500% 77 5,048,827.68 9.84 10.287 65,569 77.490 89.85 98.11
7.501% - 8.000% 22 1,336,764.50 2.60 10.881 60,762 78.516 100.00 97.96
8.001% - 8.500% 5 353,176.50 0.69 12.030 70,635 76.400 100.00 100.00
8.501% - 9.000% 3 170,674.61 0.33 10.849 56,892 77.096 100.00 81.15
9.001% - 9.500% 3 161,025.02 0.31 10.604 53,675 67.492 100.00 100.00
--------------- --- -------------- ------ ------ -------- ------ ------ ------
Total 580 $51,317,073.70 100.00% 9.637% $ 88,478 80.197% 80.88% 96.90%
=============== === ============== ====== ====== ======== ====== ====== ======
</TABLE>
S-51
<PAGE>
Adjustable Rate Mortgage Loans
Distribution by Maximum Mortgage Rates
<TABLE>
<CAPTION>
Percentage
of Mortgage
Pool Weighted Percent
by Aggregate Average Percent of of
Aggregate Principal Original Full Owner-
Number of Principal Balance of Weighted Average Combined Documentation Occupied
Maximum Mortgage Balance Mortgage Average Current Loan-to-Value Mortgage Mortgage
Mortgage Rate Loans Outstanding Loans Coupon Balance Ratio Loans Loans
--------------- --------- -------------- ------------ -------- -------- ------------- ------------ ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
10.501% - 11.000% 1 $ 239,306.62 0.47% 10.000% $239,307 79.990% 0.00% 100.00%
11.001% - 11.500% 1 291,882.12 0.57 7.500 291,882 76.990 0.00 100.00
11.501% - 12.000% 2 114,579.79 0.22 7.675 57,290 81.983 74.95 100.00
12.501% - 13.000% 2 353,227.14 0.69 8.685 176,614 85.369 75.71 100.00
13.001% - 13.500% 5 380,906.39 0.74 7.920 76,181 79.184 100.00 100.00
13.501% - 14.000% 14 1,606,116.72 3.13 8.149 114,723 80.685 100.00 100.00
14.001% - 14.500% 34 4,401,951.25 8.58 8.528 129,469 81.439 77.25 96.12
14.501% - 15.000% 76 9,379,654.94 18.28 8.985 123,417 81.792 80.17 97.41
15.001% - 15.500% 80 7,763,462.99 15.13 9.253 97,043 82.116 73.71 97.13
15.501% - 16.000% 115 9,706,952.94 18.92 9.729 84,408 81.299 78.82 97.53
16.001% - 16.500% 91 6,643,582.26 12.95 10.224 73,006 78.340 79.69 95.89
16.501% - 17.000% 74 4,837,638.07 9.43 10.459 65,373 77.368 90.37 97.40
17.001% - 17.500% 34 2,418,380.77 4.71 11.075 71,129 79.092 93.75 98.35
17.501% - 18.000% 32 2,081,869.77 4.06 11.128 65,058 74.533 88.50 89.93
18.001% - 18.500% 5 308,680.79 0.60 11.486 61,736 80.563 100.00 89.81
18.501% - 19.000% 7 413,326.67 0.81 12.342 59,047 73.212 100.00 92.22
19.001% - 19.500% 2 68,999.78 0.13 12.630 34,500 68.736 100.00 100.00
19.501% - 20.000% 3 159,828.87 0.31 13.183 53,276 57.214 100.00 100.00
20.501% - 21.000% 2 146,725.82 0.29 11.612 73,363 82.081 100.00 100.00
----------------- --- -------------- ------ ------ --------- ------ ------ ------
Total 580 $51,317,073.70 100.00% 9.637% $ 88,478 80.197% 80.88% 96.90%
================= === ============== ====== ====== ========= ====== ====== ======
</TABLE>
S-52
<PAGE>
Adjustable Rate Mortgage Loans
Distribution by Month of Next Adjustment Date
<TABLE>
<CAPTION>
Percentage
of Mortgage
Pool Weighted Percent
by Aggregate Average Percent of of
Aggregate Principal Original Full Owner-
Number of Principal Balance of Weighted Average Combined Documentation Occupied
Month of Next Mortgage Balance 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>
August 1998 9 $ 819,991.06 1.60% 9.430% $ 91,110 82.554% 100.00% 92.94%
September 1998 8 651,382.66 1.27 9.677 81,423 81.289 100.00 100.00
October 1998 3 230,382.31 0.45 9.098 76,794 81.512 100.00 100.00
November 1998 2 148,478.36 0.29 9.240 74,239 76.594 100.00 100.00
December 1998 7 661,290.06 1.29 8.497 94,470 74.719 48.38 100.00
January 1999 11 1,015,467.86 1.98 9.386 92,315 78.822 70.20 100.00
February 1999 17 1,311,740.96 2.56 9.073 77,161 80.709 86.55 100.00
March 1999 9 621,173.46 1.21 8.833 69,019 79.868 84.22 100.00
April 1999 4 338,365.79 0.66 8.842 84,591 87.702 71.46 100.00
May 1999 2 154,538.38 0.30 10.035 77,269 72.123 100.00 100.00
September 1999 1 31,414.31 0.06 13.240 31,414 55.260 100.00 100.00
October 1999 1 87,561.04 0.17 10.800 87,561 86.030 100.00 100.00
November 1999 14 1,031,318.50 2.01 10.166 73,666 79.977 73.02 100.00
December 1999 35 2,293,350.80 4.47 10.321 65,524 79.245 91.35 100.00
January 2000 86 6,533,295.16 12.73 9.836 75,969 79.875 84.32 95.39
February 2000 104 9,579,107.19 18.67 9.753 92,107 79.966 77.92 97.57
March 2000 106 9,890,266.39 19.27 9.618 93,304 80.189 86.50 97.08
April 2000 88 7,694,542.99 14.99 9.696 87,438 81.546 82.27 96.93
May 2000 19 1,749,725.92 3.41 9.389 92,091 76.770 64.29 77.69
December 2000 1 42,378.76 0.08 10.990 42,379 85.000 100.00 100.00
January 2001 8 890,328.57 1.73 9.575 111,291 77.095 76.84 100.00
February 2001 17 1,676,891.42 3.27 9.693 98,641 79.519 83.52 100.00
March 2001 20 2,500,438.62 4.87 9.081 125,022 80.397 56.81 96.77
April 2001 8 1,363,643.13 2.66 9.261 170,455 85.151 78.56 100.00
-------------- --- -------------- ------ ------ --------- ------ ----- ------
Total 580 $51,317,073.70 100.00% 9.637% $ 88,478 80.197% 80.88% 96.90%
============== === ============== ====== ====== ========= ====== ===== ======
</TABLE>
S-53
<PAGE>
Adjustable Rate Mortgage Loans
Distribution by Remaining Months to Stated Maturity
<TABLE>
<CAPTION>
Percentage
of Mortgage
Pool Weighted Percent
by Aggregate Average Percent of of
Aggregate Principal Original Full Owner-
Remaining Months Number of Principal Balance of Weighted Average Combined Documentation Occupied
to Stated Mortgage Balance Mortgage Average Current Loan-to-Value Mortgage Mortgage
Maturity Loans Outstanding Loans Coupon Balance Ratio Loans Loans
---------------- --------- -------------- ------------ -------- -------- ------------- ------------ ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
109 - 120 3 $ 137,070.08 0.27% 9.784% $45,690 79.897% 100.00% 100.00%
169 - 180 70 4,143,188.48 8.07 10.152 59,188 80.164 86.56 99.32
229 - 240 5 226,411.20 0.44 10.231 45,282 79.907 88.62 100.00
289 - 300 1 60,121.05 0.12 9.350 60,121 67.630 100.00 100.00
349 - 360 501 46,750,282.89 91.10 9.588 93,314 80.219 80.26 96.66
------------- --- -------------- ------ ------ ------- ------ ------ ------
Total 580 $51,317,073.70 100.00% 9.637% $88,478 80.197% 80.88% 96.90%
============= === ============== ====== ====== ======= ====== ====== ======
</TABLE>
Adjustable Rate Mortgage Loans
Distribution by Number of Months of Seasoning
<TABLE>
<CAPTION>
Percentage
of Mortgage
Pool Weighted Percent
by Aggregate Average Percent of of
Aggregate Principal Original Full Owner-
Number of Principal Balance of Weighted Average Combined Documentation Occupied
Months of Mortgage Balance Mortgage Average Current Loan-to-Value Mortgage Mortgage
Seasoning Loans Outstanding Loans Coupon Balance Ratio Loans Loans
----------- --------- -------------- ------------ -------- -------- ------------- ------------ ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
2 -3 129 $11,864,755.94 23.12% 9.578% $91,975 81.368% 79.95% 94.46%
4 -6 415 36,988,677.71 72.08 9.615 89,129 80.025 80.35 97.48
7 -12 36 2,463,640.05 4.80 10.244 68,434 77.147 93.41 100.00
-------------- --- -------------- ------ ------ ------- ------ ----- ------
Total 580 $51,317,073.70 100.00% 9.637% $88,478 80.197% 80.88% 96.90%
============== === ============== ====== ====== ======= ====== ===== ======
</TABLE>
S-54
<PAGE>
Adjustable Rate Mortgage Loans
Distribution by Original Combined Loan-to-Value Ratios
<TABLE>
<CAPTION>
Percentage
of Mortgage
Pool Weighted Percent
by Aggregate Average Percent of of
Original Aggregate Principal Original Full Owner-
Combined Number of Principal Balance of Weighted Average Combined Documentation Occupied
Loan-to-Value Mortgage Balance Mortgage Average Current Loan-to-Value Mortgage Mortgage
Ratios Loans Outstanding Loans Coupon Balance Ratio Loans Loans
------------- --------- -------------- ------------ -------- -------- ------------- ------------ ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
20.01% - 25.00% 2 $ 87,541.58 0.17% 9.006% $ 43,771 22.644% 43.49% 100.00%
25.01% - 30.00% 1 16,791.73 0.03 10.950 16,792 29.470 100.00 100.00
30.01% - 35.00% 2 120,569.67 0.23 9.610 60,285 33.590 100.00 100.00
35.01% - 40.00% 1 52,960.01 0.10 9.200 52,960 35.570 100.00 100.00
40.01% - 45.00% 1 49,920.74 0.10 10.870 49,921 43.480 100.00 0.00
45.01% - 50.00% 4 167,493.07 0.33 12.518 41,873 47.949 100.00 100.00
50.01% - 55.00% 8 432,122.97 0.84 10.300 54,015 53.384 37.74 100.00
55.01% - 60.00% 12 526,706.35 1.03 10.505 43,892 58.189 87.01 100.00
60.01% - 65.00% 15 808,290.07 1.58 9.791 53,886 63.356 76.78 96.02
65.01% - 70.00% 42 2,750,378.51 5.36 10.246 65,485 68.269 74.77 76.30
70.01% - 75.00% 60 4,816,716.61 9.39 10.034 80,279 73.749 79.64 93.45
75.01% - 80.00% 172 15,683,916.13 30.56 9.662 91,186 79.035 75.08 97.16
80.01% - 85.00% 136 12,163,570.62 23.70 9.419 89,438 82.650 84.11 99.24
85.01% - 90.00% 93 10,714,106.41 20.88 9.459 115,205 87.109 83.95 100.00
90.01% - 95.00% 29 2,768,617.46 5.40 9.368 95,470 92.300 100.00 100.00
95.01% - 100.00% 2 157,371.77 0.31 9.309 78,686 96.708 100.00 100.00
----------------- --- -------------- ------ ------ -------- ------ ------ ------
Total 580 $51,317,073.70 100.00% 9.637% $ 88,478 80.197% 80.88% 96.90%
================= === ============== ====== ====== ======== ====== ====== ======
</TABLE>
S-55
<PAGE>
Adjustable Rate Mortgage Loans
Distribution by Original Loan-to-Value Ratios
<TABLE>
<CAPTION>
Percentage
of Mortgage
Pool Weighted Percent
by Aggregate Average Percent of of
Aggregate Principal Original Full Owner-
Original Number of Principal Balance of Weighted Average Combined Documentation Occupied
Loan-to-Value Mortgage Balance Mortgage Average Current Loan-to-Value Mortgage Mortgage
Ratios Loans Outstanding Loans Coupon Balance Ratio Loans Loans
-------------- --------- -------------- ------------ -------- -------- ------------- ------------ ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
0.01% - 5.00% 1 $ 19,256.50 0.04% 9.880% $ 19,257 84.950% 100.00% 100.00%
5.01% - 10.00% 5 132,340.07 0.26 10.134 26,468 73.211 76.75 100.00
10.01% - 15.00% 4 253,385.36 0.49 10.423 63,346 86.675 100.00 100.00
15.01% - 20.00% 6 284,552.61 0.55 9.818 47,425 76.042 93.72 100.00
20.01% - 25.00% 3 148,595.99 0.29 9.616 49,532 49.970 66.71 100.00
25.01% - 30.00% 3 167,537.91 0.33 10.812 55,846 79.835 65.20 100.00
30.01% - 35.00% 3 145,835.81 0.28 10.022 48,612 41.111 100.00 100.00
35.01% - 40.00% 1 52,960.01 0.10 9.200 52,960 35.570 100.00 100.00
40.01% - 45.00% 1 49,920.74 0.10 10.870 49,921 43.480 100.00 0.00
45.01% - 50.00% 4 167,493.07 0.33 12.518 41,873 47.949 100.00 100.00
50.01% - 55.00% 8 432,122.97 0.84 10.300 54,015 53.384 37.74 100.00
55.01% - 60.00% 11 509,700.30 0.99 10.517 46,336 58.140 86.58 100.00
60.01% - 65.00% 12 718,285.81 1.40 9.726 59,857 63.664 78.15 95.52
65.01% - 70.00% 41 2,650,493.57 5.16 10.298 64,646 68.213 73.82 75.41
70.01% - 75.00% 60 4,816,716.61 9.39 10.034 80,279 73.749 79.64 93.45
75.01% - 80.00% 168 15,619,052.98 30.44 9.657 92,971 79.039 75.09 97.14
80.01% - 85.00% 131 11,936,456.90 23.26 9.406 91,118 82.682 84.29 99.22
85.01% - 90.00% 89 10,369,918.87 20.21 9.420 116,516 87.038 83.42 100.00
90.01% - 95.00% 27 2,685,075.85 5.23 9.328 99,447 92.359 100.00 100.00
95.01% - 100.00% 2 157,371.77 0.31 9.309 78,686 96.708 100.00 100.00
----------------- --- -------------- ------ ------ -------- ------ ------ ------
Total 580 $51,317,073.70 100.00% 9.637% $ 88,478 80.197% 80.88% 96.90%
================= === ============== ====== ====== ======== ====== ====== ======
</TABLE>
S-56
<PAGE>
Adjustable Rate Mortgage Loans
Distribution by Junior Lien Ratios
<TABLE>
<CAPTION>
Percentage
of Mortgage
Pool Weighted Percent
by Aggregate Average Percent of of
Aggregate Principal Original Full Owner-
Number of Principal Balance of Weighted Average Combined Documentation Occupied
Mortgage Balance 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% 1 $ 19,256.50 2.08% 9.880% $19,257 84.950% 100.00% 100.00%
10.01% - 15.00% 5 166,173.88 17.93 10.131 33,235 76.702 81.48 100.00
15.01% - 20.00% 6 327,102.36 35.30 10.476 54,517 87.390 100.00 100.00
20.01% - 25.00% 2 117,768.27 12.71 9.106 58,884 71.190 84.81 100.00
25.01% - 30.00% 3 171,741.16 18.53 10.747 57,247 85.885 100.00 100.00
30.01% - 35.00% 2 99,292.96 10.72 10.226 49,646 71.982 41.29 100.00
40.01% - 45.00% 1 25,266.14 2.73 11.990 25,266 77.000 100.00 100.00
--------------- -- ----------- ------ ------ ------- ------ ------ ------
Total 20 $926,601.27 100.00% 10.293% $46,330 81.150% 88.46% 100.00%
=============== == =========== ====== ====== ======= ====== ====== ======
</TABLE>
Adjustable Rate Mortgage Loans
Distribution by Property Type
<TABLE>
<CAPTION>
Percentage
of Mortgage
Pool Weighted Percent
by Aggregate Average Percent of of
Aggregate Principal Original Full Owner-
Number of Principal Balance of Weighted Average Combined Documentation Occupied
Mortgage Balance 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 534 $47,784,829.86 93.12% 9.624% $89,485 80.165% 81.21% 97.81%
Condo 22 1,810,633.32 3.53 9.635 82,302 84.197 79.20 87.13
2-4 Family 24 1,721,610.52 3.35 9.986 71,734 76.884 73.65 82.18
------------- --- -------------- ------ ----- ------- ------ ----- -----
Total 580 $51,317,073.70 100.00% 9.637% $88,478 80.197% 80.88% 96.90%
============= === ============== ====== ===== ======= ====== ===== =====
</TABLE>
S-57
<PAGE>
Adjustable Rate Mortgage Loans
Distribution by Loan Purpose
<TABLE>
<CAPTION>
Percentage
of Mortgage
Pool Weighted Percent
by Aggregate Average Percent of of
Aggregate Principal Original Full Owner-
Number of Principal Balance of Weighted Average Combined Documentation Occupied
Mortgage Balance 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>
Refinance and/or
Cashout 459 $40,060,530.16 78.06% 9.611% $87,278 79.740% 78.20% 97.59%
Purchase 121 11,256,543.54 21.94 9.728 93,029 81.825 90.44 94.48
---------------- --- -------------- ------ ----- ------- ------ ----- -----
Total 580 $51,317,073.70 100.00% 9.637% $88,478 80.197% 80.88% 96.90%
================ === ============== ====== ===== ======= ====== ===== =====
</TABLE>
Adjustable Rate Mortgage Loans
Distribution by Occupancy Status
<TABLE>
<CAPTION>
Percentage
of Mortgage
Pool Weighted Percent
by Aggregate Average Percent of of
Aggregate Principal Original Full Owner-
Number of Principal Balance of Weighted Average Combined Documentation Occupied
Mortgage Balance 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 553 $49,728,781.74 96.90% 9.626% $89,925 80.449% 80.27% 100.00%
Non-owner
Occupied 27 1,588,291.96 3.10 9.983 58,826 72.322 100.00 0.00
-------------- --- -------------- ------ ----- ------- ------ ------ ------
Total 580 $51,317,073.70 100.00% 9.637% $88,478 80.197% 80.88% 96.90%
============== === ============== ====== ===== ======= ====== ====== ======
</TABLE>
S-58
<PAGE>
Adjustable Rate Mortgage Loans
Distribution by Product Type
<TABLE>
<CAPTION>
Percentage
of Mortgage
Pool Weighted Percent
by Aggregate Average Percent of of
Aggregate Principal Original Full Owner-
Number of Principal Balance of Weighted Average Combined Documentation Occupied
Mortgage Balance Mortgage Average Current Loan-to-Value Mortgage Mortgage
Product Type Loans Outstanding Loans Coupon Balance Ratio Loans Loans
--------------------- --------- -------------- ------------ -------- -------- ------------- ------------ ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
ARM - 2 Year/1 Year 243 $22,904,337.70 44.63% 9.507% $ 94,257 81.124% 77.69% 96.18%
ARM - 2 Year/6 Month 175 13,451,534.48 26.21 10.093 76,866 78.464 88.35 95.93
ARM - 3 Year/1 Year 50 6,278,383.10 12.23 9.314 125,568 80.621 70.88 98.71
ARM - 1 Year 36 2,615,379.14 5.10 9.065 72,649 78.846 75.24 100.00
ARM - 2 Year/1 Year Call 36 2,534,710.12 4.94 10.193 70,409 79.957 89.59 98.89
ARM - 6 Month 23 1,932,459.51 3.77 9.426 84,020 81.498 100.00 97.00
ARM - 1 Year/6 Month 7 923,192.72 1.80 9.016 131,885 78.944 70.66 100.00
ARM - 1 Year Call 6 481,779.53 0.94 9.001 80,297 82.950 79.95 100.00
ARM - 3 Year/1 Year Call 2 126,422.89 0.25 10.966 63,211 86.428 100.00 100.00
ARM - 3 Year/6 Month 2 68,874.51 0.13 10.371 34,437 81.769 61.53 100.00
------------------------ --- -------------- ------ ------ -------- ------ ------ ------
Total 580 $51,317,073.70 100.00% 9.637% $ 88,478 80.197% 80.88% 96.90%
======================== === ============== ====== ====== ======== ====== ====== ======
</TABLE>
Adjustable Rate Mortgage Loans
Distribution by Index Type
<TABLE>
<CAPTION>
Percentage
of Mortgage
Pool Weighted Percent
by Aggregate Average Percent of of
Aggregate Principal Original Full Owner-
Number of Principal Balance of Weighted Average Combined Documentation Occupied
Mortgage Balance Mortgage Average Current Loan-to-Value Mortgage Mortgage
Index Type Loans Outstanding Loans Coupon Balance Ratio Loans Loans
------------- --------- -------------- ------------ -------- -------- ------------- ------------ ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Treasury - 1 Year 373 $34,941,012.48 68.09% 9.487% $93,676 80.823% 77.26% 97.19%
Libor - 6 Month 207 16,376,061.22 31.91 9.955 79,111 78.863 88.62 96.30
----------------- --- -------------- ------ ----- ------- ------ ----- -----
Total 580 $51,317,073.70 100.00% 9.637% $88,478 80.197% 80.88% 96.90%
================= === ============== ====== ===== ======= ====== ===== =====
</TABLE>
S-59
<PAGE>
YIELD AND PREPAYMENT CONSIDERATIONS
General
The weighted average life of, and 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.
The Subordinate Certificates
The weighted average life of, and the yield to maturity on, the
Subordinate Certificates, in increasing order of their numerical Class
designation, will be progressively more sensitive to the rate and timing of
Mortgagor defaults and the severity of ensuing losses on the Mortgage Loans. In
particular, the rate and timing of the Mortgagor defaults and the severity of
ensuing losses on the Mortgage Loans may be affected by the characteristics of
the Mortgage Loans included in the Mortgage Pool. If the actual rate and
severity of losses on the Mortgage Loans are higher than those assumed by a
holder of a Subordinate Certificate, the actual yield to maturity of such
Certificate may be lower than the yield expected by such holder based on such
assumption. The timing of losses on 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. Realized Losses on the Mortgage Loans will
reduce the Certificate Balance of the applicable Class of Subordinate
Certificates to the extent of any losses allocated thereto (as described under
"Credit Enhancement-Application of Realized Losses"), without the receipt of
cash attributable to such reduction. As a result of such reductions, less
interest will accrue on such Class of Subordinate Certificates than otherwise
would be the case.
The Class A-7 Certificates
Investors in the Class A-7 Certificates should be aware that because the
Class A-7 Certificates are not expected to receive any portion of principal
payments prior to the Distribution Date occurring in August 2001 and will
receive a disproportionately small or large portion of principal payments
thereafter (unless the Certificate Balances of the Class A-1, Class A-2, Class
A-3, Class A-4, Class A-5 and Class A-6 Certificates have been reduced to zero),
the weighted average life of the Class A-7 Certificates will be longer or
shorter than would otherwise be the case if the Class A-7 Certificates were paid
on a pro rata basis with the other Class A Certificates, and the effect on the
market value of the Class A-7 Certificates of changes in market interest rates
or market yields for similar securities may be greater or lesser than for other
Class A Certificates entitled to such distributions.
Projected Prepayments and Yields for Offered Certificates
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.
S-60
<PAGE>
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. 68.48% of the Fixed Rate
Mortgage Loans by aggregate principal balance were subject to prepayment
penalties.
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. 78.99% of the Adjustable Rate Mortgage Loans by
aggregate principal balance were subject to prepayment penalties.
The level and rate of prepayments on the Fixed Rate Mortgage Loans and the
Adjustable Rate Mortgage Loans are subject to the factors described above and
are difficult to predict.
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 1997
- -------------------- ------ ------ ------ ------ --------
Volume (1) $110.5 $371.7 $504.9 $756.4 $1,083.5
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 $357.3
3/31/95 .......... 78.4 346.8
6/30/95 .......... 74.0 329.1
9/30/95 .......... 69.7 307.9
12/31/95 ......... 65.8 285.7 $469.2
3/31/96 .......... 61.0 262.5 443.5
6/30/96 .......... 56.8 239.6 413.2
9/30/96 .......... 52.4 221.0 380.3
12/31/96 ......... 48.6 199.6 346.5 $741.6
3/31/97 .......... 44.4 181.8 316.8 710.6
6/30/97 .......... 41.1 164.8 290.6 669.8
9/30/97 .......... 37.6 149.3 266.8 617.4
12/31/97 ......... 33.9 134.2 242.9 552.6 $1,029.6
3/31/98 .......... 30.5 121.4 221.1 498.3 969.8
- ----------
(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.
The model used in this Prospectus Supplement is the prepayment assumption
(the "Prepayment Assumption") which represents an assumed rate of prepayment
each month relative to the then outstanding principal balance of a pool of
mortgage loans for the life of such mortgage loans. A 100% Prepayment Assumption
assumes constant prepayment rates of 4% per annum
S-61
<PAGE>
of the then outstanding principal balance of the Mortgage Loans in the first
month of the life of the mortgage loans and an additional 1.455% per annum in
each month thereafter until the twelfth month. Beginning in the twelfth month
and in each month thereafter during the life of the mortgage loans, 100%
Prepayment Assumption assumes a constant prepayment rate of 20% per annum each
month. As used in the table below, 0% Prepayment Assumption assumes prepayment
rates equal to 0% of the Prepayment Assumption i.e., no prepayments.
Correspondingly, 100% Prepayment Assumption assumes prepayment rates equal to
100% of the Prepayment Assumption, and so forth. The Prepayment Assumption does
not purport to be a historical description of prepayment experience or a
prediction of the anticipated rate of prepayment of any pool of mortgage loans,
including the Mortgage Loans. The Depositor believes that no existing statistics
of which it is aware provide a reliable basis for holders of Offered
Certificates to predict the amount or the timing of receipt of prepayments on
the Mortgage Loans.
Since the tables were prepared on the basis of the assumptions in the
following paragraph, there are discrepancies between the characteristics of the
actual Mortgage Loans and the characteristics of the mortgage loans assumed in
preparing the tables. Any such discrepancy may have an effect upon the
percentages of the Certificate Balances outstanding and weighted average lives
of the Offered Certificates set forth in the tables. In addition, since the
actual Mortgage Loans in the Trust have characteristics which differ from those
assumed in preparing the tables set forth below, the distributions of principal
on the Offered Certificates may be made earlier or later than as indicated in
the tables.
"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.
For the purpose of the tables below, it is assumed that: (i) the Mortgage
Loans which consist of pools of mortgage loans with level-pay and balloon
amortization methodologies, Principal Balances, gross mortgage rates, net
mortgage rates, original and remaining terms to maturity, and original
amortization terms, as applicable, are as set forth in the "Representative Loan
Pools" tables below, (ii) the Closing Date for the Certificates occurs on August
10, 1998, (iii) distributions on the Certificates are made on the 15th day of
each month regardless of the day on which the Distribution Date actually occurs,
commencing August 15, 1998, in accordance with the priorities described herein,
(iv) the difference between the Gross Mortgage Rate and the Net Mortgage Rate is
equal to the Monthly Servicing Fee, (v) the Fixed Rate Mortgage Loans'
prepayment rates are a multiple of the applicable Prepayment Assumption and the
Adjustable Rate Mortgage Loans are constant percentages of conditional
prepayment rates ("CPR") each as stated in the "Prepayment Scenarios" table
below; (vi) prepayments include 30 days' interest thereon, (vii) no optional
termination or auction sale is exercised, (viii) Call Loans are called on their
Call Date, (ix) the Mortgage Rate for each Adjustable Rate Mortgage Loan is
adjusted on its next Adjustment Date (and on subsequent Adjustment Dates, if
necessary) to equal the sum of (a) the assumed level of the applicable Index and
(b) the respective Gross Margin (such sum being subject to the applicable
Periodic Rate Cap and Maximum Rate) and (x) the Pass-Through Rate for the Class
A-8 Certificates remains constant at its respective initial rates up to and
including the Clean-Up Call Date and, thereafter, at its respective initial
rates plus the step-up required after the Clean-Up Call Date. The Original Term
to Maturity as set forth in the "Representative Loan Pools" tables below was
calculated as the sum of the remaining months to stated maturity and the number
of months of seasoning.
PREPAYMENT SCENARIOS
<TABLE>
<CAPTION>
Scenario I Scenario II Scenario III Scenario IV Scenario V Scenario VI Scenario VII
---------- ----------- ------------ ----------- ---------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Fixed Rate 0% 50% 85% 120% 150% 175% 200%
Mortgage
Loans (1)
Adjustable
Rate Mortgage 0% 15% 21% 27% 33% 40% 50%
Loans(2)
</TABLE>
- ----------
(1) As a percentage of the Prepayment Assumption.
(2) As a conditional prepayment rate (CPR) percentage.
S-62
<PAGE>
REPRESENTATIVE LOAN POOLS
FIXED RATE MORTGAGE LOANS
<TABLE>
<CAPTION>
Original Remaining Original
Gross Net Term to Term to Amortization
Pool Principal Mortgage Mortgage Maturity (in Maturity (in Term Amortization
Number Balance Rate Rate months) months) (in months) Method
- ---------- -------------- ---------- --------- ------------ ------------ ------------ -------------
<S> <C> <C> <C> <C> <C> <C> <C>
1 67,382,310.87 10.2790 9.779 179 352 357 Balloon/Call
2 8,980,263.30 9.8170 9.317 113 109 113 Level Pay
3 85,067,485.42 10.2980 9.798 180 176 180 Level Pay
4 21,736,348.00 9.6430 9.143 240 236 240 Level Pay
5 1,006,472.94 8.4880 7.988 300 296 300 Level Pay
6 105,934,119.47 9.4060 8.906 359 355 359 Level Pay
</TABLE>
ADJUSTABLE RATE MORTGAGE LOANS
<TABLE>
<CAPTION>
Next Original Remaining Original
Principal Gross Net Months Current Periodic Maximum Term to Term to Amortization Amort-
Pool Balance Mortgage Mortgage Rate Gross Periodic Rate Mortgage Maturity Maturity Term ization
Number Rate Rate Change Margin Margin Rate Cap Cap Rate (in months) (in months) (in months) Method
- ------ ----------- --------- -------- ------- ------ -------- -------- -------- ----------- ----------- ------------ --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 579,064.94 8.4750 7.975 5 6.2320 1.4960 1.4960 13.4670 361 355 361 Level Pay
2 2,036,314.20 9.2330 8.733 7 5.9090 1.9710 1.9710 15.2350 352 347 352 Level Pay
3 3,142,912.54 10.0410 9.541 18 6.1700 1.8940 1.8940 15.0540 177 353 358 Call
4 22,904,264.00 9.5070 9.007 19 5.9060 2.0070 2.0070 15.4320 353 349 353 Level Pay
5 6,278,383.10 9.3140 8.814 32 5.4560 2.0000 2.0000 15.3290 349 345 349 Level Pay
6 819,991.06 9.4300 8.930 1 6.4970 1.1550 1.1550 15.8300 357 352 357 Level Pay
7 651,382.66 9.6770 9.177 2 6.2200 1.0000 1.0000 15.7650 359 355 359 Level Pay
8 230,382.31 9.0980 8.598 3 6.2210 2.1760 2.1760 15.0980 359 356 359 Level Pay
9 148,478.36 9.2400 8.740 4 6.2200 1.0000 1.0000 15.2400 361 355 361 Level Pay
10 82,225.12 8.6500 8.150 5 5.9000 1.0000 1.0000 14.6500 361 356 361 Level Pay
11 923,192.72 9.0160 8.516 7 5.4970 1.6280 1.6280 15.1100 360 355 360 Level Pay
12 13,451,534.48 10.0930 9.593 19 6.4430 1.2800 1.2800 16.5830 359 354 359 Level Pay
13 68,874.51 10.3710 9.871 30 5.8080 1.3840 1.3850 16.2740 290 284 290 Level Pay
</TABLE>
S-63
<PAGE>
The following tables set forth the percentages of the initial principal
amount of the Offered Certificates that would be outstanding after each of the
dates shown, based on prepayment scenarios described in the table entitled
"Prepayment Scenarios." The percentages have been rounded to the nearest 1%.
PERCENTAGE OF INITIAL CERTIFICATE BALANCE
<TABLE>
<CAPTION>
Class A-1 Scenario
------------------------------------------------------------------------
Distribution Date I II III IV V VI VII
--- --- --- --- --- --- ---
<S> <C> <C> <C> <C> <C> <C> <C>
Initial Percent 100 100 100 100 100 100 100
7/15/1999 92 53 25 0 0 0 0
7/15/2000 84 3 0 0 0 0 0
7/15/2001 74 0 0 0 0 0 0
7/15/2002 64 0 0 0 0 0 0
7/15/2003 53 0 0 0 0 0 0
7/15/2004 41 0 0 0 0 0 0
7/15/2005 28 0 0 0 0 0 0
7/15/2006 17 0 0 0 0 0 0
7/15/2007 5 0 0 0 0 0 0
7/15/2008 0 0 0 0 0 0 0
7/15/2009 0 0 0 0 0 0 0
7/15/2010 0 0 0 0 0 0 0
7/15/2011 0 0 0 0 0 0 0
7/15/2012 0 0 0 0 0 0 0
7/15/2013 0 0 0 0 0 0 0
7/15/2014 0 0 0 0 0 0 0
7/15/2015 0 0 0 0 0 0 0
7/15/2016 0 0 0 0 0 0 0
7/15/2017 0 0 0 0 0 0 0
7/15/2018 0 0 0 0 0 0 0
7/15/2019 0 0 0 0 0 0 0
7/15/2020 0 0 0 0 0 0 0
7/15/2021 0 0 0 0 0 0 0
7/15/2022 0 0 0 0 0 0 0
7/15/2023 0 0 0 0 0 0 0
7/15/2024 0 0 0 0 0 0 0
7/15/2025 0 0 0 0 0 0 0
7/15/2026 0 0 0 0 0 0 0
7/15/2027 0 0 0 0 0 0 0
7/15/2028 0 0 0 0 0 0 0
Weighted Average Life to 5.05 1.03 0.67 0.50 0.41 0.36 0.32
Maturity (Years) (1)
Weighted Average Life to 5.05 1.03 0.67 0.50 0.41 0.36 0.32
Call (Years) (1)
</TABLE>
<TABLE>
<CAPTION>
Class A-2 Scenario
------------------------------------------------------------------------
Distribution Date I II III IV V VI VII
--- --- --- --- --- --- ---
<S> <C> <C> <C> <C> <C> <C> <C>
Initial Percent 100 100 100 100 100 100 100
7/15/1999 100 100 100 96 57 25 0
7/15/2000 100 100 21 0 0 0 0
7/15/2001 100 33 0 0 0 0 0
7/15/2002 100 0 0 0 0 0 0
7/15/2003 100 0 0 0 0 0 0
7/15/2004 100 0 0 0 0 0 0
7/15/2005 100 0 0 0 0 0 0
7/15/2006 100 0 0 0 0 0 0
7/15/2007 100 0 0 0 0 0 0
7/15/2008 86 0 0 0 0 0 0
7/15/2009 62 0 0 0 0 0 0
7/15/2010 35 0 0 0 0 0 0
7/15/2011 3 0 0 0 0 0 0
7/15/2012 0 0 0 0 0 0 0
7/15/2013 0 0 0 0 0 0 0
7/15/2014 0 0 0 0 0 0 0
7/15/2015 0 0 0 0 0 0 0
7/15/2016 0 0 0 0 0 0 0
7/15/2017 0 0 0 0 0 0 0
7/15/2018 0 0 0 0 0 0 0
7/15/2019 0 0 0 0 0 0 0
7/15/2020 0 0 0 0 0 0 0
7/15/2021 0 0 0 0 0 0 0
7/15/2022 0 0 0 0 0 0 0
7/15/2023 0 0 0 0 0 0 0
7/15/2024 0 0 0 0 0 0 0
7/15/2025 0 0 0 0 0 0 0
7/15/2026 0 0 0 0 0 0 0
7/15/2027 0 0 0 0 0 0 0
7/15/2028 0 0 0 0 0 0 0
Weighted Average Life to 11.36 2.74 1.72 1.25 1.01 0.87 0.77
Maturity (Years) (1)
Weighted Average Life to 11.36 2.74 1.72 1.25 1.01 0.87 0.77
Call (Years) (1)
</TABLE>
- ----------
(1) The weighted average life of the Offered Certificates is determined by (i)
multiplying the amount of each principal payment by the number of years
from the date of issuance to the related Distribution Date, (ii) adding the
results, and (iii) dividing the sum by the initial respective Certificate
Balance for such Class of Offered Certificates.
S-64
<PAGE>
PERCENTAGE OF INITIAL CERTIFICATE BALANCE
<TABLE>
<CAPTION>
Class A-3 Scenario
------------------------------------------------------------------------
Distribution Date I II III IV V VI VII
--- --- --- --- --- --- ---
<S> <C> <C> <C> <C> <C> <C> <C>
Initial Percent 100 100 100 100 100 100 100
7/15/1999 100 100 100 100 100 100 94
7/15/2000 100 100 100 52 0 0 0
7/15/2001 100 100 35 0 0 0 0
7/15/2002 100 77 0 0 0 0 0
7/15/2003 100 32 0 0 0 0 0
7/15/2004 100 8 0 0 0 0 0
7/15/2005 100 0 0 0 0 0 0
7/15/2006 100 0 0 0 0 0 0
7/15/2007 100 0 0 0 0 0 0
7/15/2008 100 0 0 0 0 0 0
7/15/2009 100 0 0 0 0 0 0
7/15/2010 100 0 0 0 0 0 0
7/15/2011 100 0 0 0 0 0 0
7/15/2012 72 0 0 0 0 0 0
7/15/2013 0 0 0 0 0 0 0
7/15/2014 0 0 0 0 0 0 0
7/15/2015 0 0 0 0 0 0 0
7/15/2016 0 0 0 0 0 0 0
7/15/2017 0 0 0 0 0 0 0
7/15/2018 0 0 0 0 0 0 0
7/15/2019 0 0 0 0 0 0 0
7/15/2020 0 0 0 0 0 0 0
7/15/2021 0 0 0 0 0 0 0
7/15/2022 0 0 0 0 0 0 0
7/15/2023 0 0 0 0 0 0 0
7/15/2024 0 0 0 0 0 0 0
7/15/2025 0 0 0 0 0 0 0
7/15/2026 0 0 0 0 0 0 0
7/15/2027 0 0 0 0 0 0 0
7/15/2028 0 0 0 0 0 0 0
Weighted Average Life to 14.14 4.65 2.81 2.00 1.60 1.37 1.19
Maturity (Years) (1)
Weighted Average Life to 14.14 4.65 2.81 2.00 1.60 1.37 1.19
Call (Years) (1)
</TABLE>
<TABLE>
<CAPTION>
Class A-4 Scenario
------------------------------------------------------------------------
Distribution Date I II III IV V VI VII
--- --- --- --- --- --- ---
<S> <C> <C> <C> <C> <C> <C> <C>
Initial Percent 100 100 100 100 100 100 100
7/15/1999 100 100 100 100 100 100 100
7/15/2000 100 100 100 100 100 28 0
7/15/2001 100 100 100 21 0 0 0
7/15/2002 100 100 88 11 0 0 0
7/15/2003 100 100 48 0 0 0 0
7/15/2004 100 100 20 0 0 0 0
7/15/2005 100 89 0 0 0 0 0
7/15/2006 100 76 0 0 0 0 0
7/15/2007 100 60 0 0 0 0 0
7/15/2008 100 44 0 0 0 0 0
7/15/2009 100 28 0 0 0 0 0
7/15/2010 100 12 0 0 0 0 0
7/15/2011 100 0 0 0 0 0 0
7/15/2012 100 0 0 0 0 0 0
7/15/2013 37 0 0 0 0 0 0
7/15/2014 30 0 0 0 0 0 0
7/15/2015 22 0 0 0 0 0 0
7/15/2016 13 0 0 0 0 0 0
7/15/2017 3 0 0 0 0 0 0
7/15/2018 0 0 0 0 0 0 0
7/15/2019 0 0 0 0 0 0 0
7/15/2020 0 0 0 0 0 0 0
7/15/2021 0 0 0 0 0 0 0
7/15/2022 0 0 0 0 0 0 0
7/15/2023 0 0 0 0 0 0 0
7/15/2024 0 0 0 0 0 0 0
7/15/2025 0 0 0 0 0 0 0
7/15/2026 0 0 0 0 0 0 0
7/15/2027 0 0 0 0 0 0 0
7/15/2028 0 0 0 0 0 0 0
Weighted Average Life to 15.49 9.57 5.05 2.98 2.22 1.88 1.62
Maturity (Years) (1)
Weighted Average Life to 15.49 9.57 5.05 2.98 2.22 1.88 1.62
Call (Years) (1)
</TABLE>
- ----------
(1) The weighted average life of the Offered Certificates is determined by (i)
multiplying the amount of each principal payment by the number of years
from the date of issuance to the related Distribution Date, (ii) adding the
results, and (iii) dividing the sum by the initial respective Certificate
Balance for such Class of Offered Certificates.
S-65
<PAGE>
PERCENTAGE OF INITIAL CERTIFICATE BALANCE
<TABLE>
<CAPTION>
Class A-5 Scenario
------------------------------------------------------------------------
Distribution Date I II III IV V VI VII
--- --- --- --- --- --- ---
<S> <C> <C> <C> <C> <C> <C> <C>
Initial Percent 100 100 100 100 100 100 100
7/15/1999 100 100 100 100 100 100 100
7/15/2000 100 100 100 100 100 100 8
7/15/2001 100 100 100 100 0 0 0
7/15/2002 100 100 100 100 0 0 0
7/15/2003 100 100 100 45 0 0 0
7/15/2004 100 100 100 0 0 0 0
7/15/2005 100 100 97 0 0 0 0
7/15/2006 100 100 86 0 0 0 0
7/15/2007 100 100 62 0 0 0 0
7/15/2008 100 100 36 0 0 0 0
7/15/2009 100 100 11 0 0 0 0
7/15/2010 100 100 0 0 0 0 0
7/15/2011 100 92 0 0 0 0 0
7/15/2012 100 60 0 0 0 0 0
7/15/2013 100 0 0 0 0 0 0
7/15/2014 100 0 0 0 0 0 0
7/15/2015 100 0 0 0 0 0 0
7/15/2016 100 0 0 0 0 0 0
7/15/2017 100 0 0 0 0 0 0
7/15/2018 87 0 0 0 0 0 0
7/15/2019 74 0 0 0 0 0 0
7/15/2020 60 0 0 0 0 0 0
7/15/2021 45 0 0 0 0 0 0
7/15/2022 28 0 0 0 0 0 0
7/15/2023 10 0 0 0 0 0 0
7/15/2024 0 0 0 0 0 0 0
7/15/2025 0 0 0 0 0 0 0
7/15/2026 0 0 0 0 0 0 0
7/15/2027 0 0 0 0 0 0 0
7/15/2028 0 0 0 0 0 0 0
Weighted Average Life to 22.52 13.96 9.39 4.98 2.60 2.20 1.90
Maturity (Years) (1)
Weighted Average Life to 22.52 13.96 9.29 4.98 2.60 2.20 1.90
Call (Years) (1)
</TABLE>
<TABLE>
<CAPTION>
Class A-6 Scenario
------------------------------------------------------------------------
Distribution Date I II III IV V VI VII
--- --- --- --- --- --- ---
<S> <C> <C> <C> <C> <C> <C> <C>
Initial Percent 100 100 100 100 100 100 100
7/15/1999 100 100 100 100 100 100 100
7/15/2000 100 100 100 100 100 100 100
7/15/2001 100 100 100 100 10 0 0
7/15/2002 100 100 100 100 10 0 0
7/15/2003 100 100 100 100 10 0 0
7/15/2004 100 100 100 100 0 0 0
7/15/2005 100 100 100 74 0 0 0
7/15/2006 100 100 100 74 0 0 0
7/15/2007 100 100 100 69 0 0 0
7/15/2008 100 100 100 56 0 0 0
7/15/2009 100 100 100 42 0 0 0
7/15/2010 100 100 88 31 0 0 0
7/15/2011 100 100 69 22 0 0 0
7/15/2012 100 100 52 15 0 0 0
7/15/2013 100 81 24 0 0 0 0
7/15/2014 100 70 19 0 0 0 0
7/15/2015 100 60 15 0 0 0 0
7/15/2016 100 51 11 0 0 0 0
7/15/2017 100 42 4 0 0 0 0
7/15/2018 100 35 0 0 0 0 0
7/15/2019 100 30 0 0 0 0 0
7/15/2020 100 25 0 0 0 0 0
7/15/2021 100 20 0 0 0 0 0
7/15/2022 100 16 0 0 0 0 0
7/15/2023 100 11 0 0 0 0 0
7/15/2024 92 4 0 0 0 0 0
7/15/2025 71 0 0 0 0 0 0
7/15/2026 49 0 0 0 0 0 0
7/15/2027 24 0 0 0 0 0 0
7/15/2028 0 0 0 0 0 0 0
Weighted Average Life to 27.80 18.92 14.30 10.29 3.10 2.42 2.09
Maturity (Years) (1)
Weighted Average Life to 26.85 14.43 10.51 7.36 3.10 2.42 2.09
Call (Years) (1)
</TABLE>
- ----------
(1) The weighted average life of the Offered Certificates is determined by (i)
multiplying the amount of each principal payment by the number of years
from the date of issuance to the related Distribution Date, (ii) adding the
results, and (iii) dividing the sum by the initial respective Certificate
Balance for such Class of Offered Certificates.
S-66
<PAGE>
PERCENTAGE OF INITIAL CERTIFICATE BALANCE
<TABLE>
<CAPTION>
Class A-7 Scenario
------------------------------------------------------------------------
Distribution Date I II III IV V VI VII
--- --- --- --- --- --- ---
<S> <C> <C> <C> <C> <C> <C> <C>
Initial Percent 100 100 100 100 100 100 100
7/15/1999 100 100 100 100 100 100 100
7/15/2000 100 100 100 100 100 100 100
7/15/2001 100 100 100 100 100 7 0
7/15/2002 99 91 87 97 100 7 0
7/15/2003 97 81 80 85 100 7 0
7/15/2004 93 70 67 67 77 7 0
7/15/2005 89 61 54 49 52 7 0
7/15/2006 74 40 27 25 35 7 0
7/15/2007 60 25 13 9 24 7 0
7/15/2008 48 16 7 3 16 7 0
7/15/2009 37 10 3 1 11 1 0
7/15/2010 27 6 1 0 6 0 0
7/15/2011 18 3 1 0 1 0 0
7/15/2012 11 2 0 0 0 0 0
7/15/2013 0 0 0 0 0 0 0
7/15/2014 0 0 0 0 0 0 0
7/15/2015 0 0 0 0 0 0 0
7/15/2016 0 0 0 0 0 0 0
7/15/2017 0 0 0 0 0 0 0
7/15/2018 0 0 0 0 0 0 0
7/15/2019 0 0 0 0 0 0 0
7/15/2020 0 0 0 0 0 0 0
7/15/2021 0 0 0 0 0 0 0
7/15/2022 0 0 0 0 0 0 0
7/15/2023 0 0 0 0 0 0 0
7/15/2024 0 0 0 0 0 0 0
7/15/2025 0 0 0 0 0 0 0
7/15/2026 0 0 0 0 0 0 0
7/15/2027 0 0 0 0 0 0 0
7/15/2028 0 0 0 0 0 0 0
Weighted Average Life to 9.97 7.48 6.84 6.82 7.69 3.27 2.38
Maturity (Years) (1)
Weighted Average Life to 9.97 7.48 6.78 6.49 5.98 2.90 2.38
Call (Years) (1)
</TABLE>
<TABLE>
<CAPTION>
Class A-8 Scenario
------------------------------------------------------------------------
Distribution Date I II III IV V VI VII
--- --- --- --- --- --- ---
<S> <C> <C> <C> <C> <C> <C> <C>
Initial Percent 100 100 100 100 100 100 100
7/15/1999 99 84 78 73 67 60 50
7/15/2000 99 71 62 53 44 36 25
7/15/2001 98 60 48 38 30 21 0
7/15/2002 98 51 38 28 20 13 0
7/15/2003 97 43 30 20 13 8 0
7/15/2004 96 36 23 15 9 4 0
7/15/2005 95 31 18 11 6 3 0
7/15/2006 94 26 14 8 4 2 0
7/15/2007 93 22 11 5 3 1 0
7/15/2008 92 18 9 4 2 1 0
7/15/2009 90 15 7 3 1 0 0
7/15/2010 89 13 5 2 1 0 0
7/15/2011 87 11 4 1 0 0 0
7/15/2012 85 9 3 1 0 0 0
7/15/2013 78 7 2 1 0 0 0
7/15/2014 75 6 2 0 0 0 0
7/15/2015 73 5 1 0 0 0 0
7/15/2016 70 4 1 0 0 0 0
7/15/2017 67 3 1 0 0 0 0
7/15/2018 63 2 1 0 0 0 0
7/15/2019 59 2 0 0 0 0 0
7/15/2020 54 2 0 0 0 0 0
7/15/2021 49 1 0 0 0 0 0
7/15/2022 43 1 0 0 0 0 0
7/15/2023 37 1 0 0 0 0 0
7/15/2024 30 0 0 0 0 0 0
7/15/2025 21 0 0 0 0 0 0
7/15/2026 12 0 0 0 0 0 0
7/15/2027 2 0 0 0 0 0 0
7/15/2028 0 0 0 0 0 0 0
Weighted Average Life to 20.92 5.68 4.04 3.06 2.42 1.90 1.19
Maturity (Years) (1)
Weighted Average Life to 20.70 5.34 3.77 2.82 2.23 1.77 1.19
Call (Years) (1)
</TABLE>
- ----------
(1) The weighted average life of the Offered Certificates is determined by (i)
multiplying the amount of each principal payment by the number of years
from the date of issuance to the related Distribution Date, (ii) adding the
results, and (iii) dividing the sum by the initial respective Certificate
Balance for such Class of Offered Certificates.
S-67
<PAGE>
PERCENTAGE OF INITIAL CERTIFICATE BALANCE
<TABLE>
<CAPTION>
Class M-1 Scenario
------------------------------------------------------------------------
Distribution Date I II III IV V VI VII
--- --- --- --- --- --- ---
<S> <C> <C> <C> <C> <C> <C> <C>
Initial Percent 100 100 100 100 100 100 100
7/15/1999 100 100 100 100 100 100 100
7/15/2000 100 100 100 100 100 100 100
7/15/2001 100 100 100 100 100 100 62
7/15/2002 100 100 88 63 96 100 62
7/15/2003 100 100 71 47 38 83 62
7/15/2004 100 91 57 34 21 51 40
7/15/2005 100 79 46 25 14 30 23
7/15/2006 100 68 36 18 10 17 12
7/15/2007 100 58 29 13 6 8 4
7/15/2008 100 50 23 10 4 1 0
7/15/2009 100 42 18 7 2 0 0
7/15/2010 100 36 14 5 0 0 0
7/15/2011 100 30 11 3 0 0 0
7/15/2012 100 25 8 1 0 0 0
7/15/2013 78 14 4 0 0 0 0
7/15/2014 75 12 3 0 0 0 0
7/15/2015 71 10 1 0 0 0 0
7/15/2016 67 8 0 0 0 0 0
7/15/2017 63 7 0 0 0 0 0
7/15/2018 58 6 0 0 0 0 0
7/15/2019 54 5 0 0 0 0 0
7/15/2020 50 4 0 0 0 0 0
7/15/2021 45 3 0 0 0 0 0
7/15/2022 40 1 0 0 0 0 0
7/15/2023 34 0 0 0 0 0 0
7/15/2024 28 0 0 0 0 0 0
7/15/2025 21 0 0 0 0 0 0
7/15/2026 13 0 0 0 0 0 0
7/15/2027 4 0 0 0 0 0 0
7/15/2028 0 0 0 0 0 0 0
Weighted Average Life to 21.49 10.94 7.57 5.77 5.36 6.39 5.26
Maturity (Years) (1)
Weighted Average Life to 21.26 10.25 6.98 5.23 4.92 5.04 3.78
Call (Years) (1)
</TABLE>
<TABLE>
<CAPTION>
Class M-2 Scenario
------------------------------------------------------------------------
Distribution Date I II III IV V VI VII
--- --- --- --- --- --- ---
<S> <C> <C> <C> <C> <C> <C> <C>
Initial Percent 100 100 100 100 100 100 100
7/15/1999 100 100 100 100 100 100 100
7/15/2000 100 100 100 100 100 100 100
7/15/2001 100 100 100 100 100 100 100
7/15/2002 100 100 88 63 46 74 91
7/15/2003 100 100 71 47 31 21 22
7/15/2004 100 91 57 34 21 13 8
7/15/2005 100 79 46 25 14 8 5
7/15/2006 100 68 36 18 10 5 0
7/15/2007 100 58 29 13 6 1 0
7/15/2008 100 50 23 10 4 0 0
7/15/2009 100 42 18 7 0 0 0
7/15/2010 100 36 14 5 0 0 0
7/15/2011 100 30 11 1 0 0 0
7/15/2012 100 25 8 0 0 0 0
7/15/2013 78 14 3 0 0 0 0
7/15/2014 75 12 1 0 0 0 0
7/15/2015 71 10 0 0 0 0 0
7/15/2016 67 8 0 0 0 0 0
7/15/2017 63 7 0 0 0 0 0
7/15/2018 58 6 0 0 0 0 0
7/15/2019 54 5 0 0 0 0 0
7/15/2020 50 3 0 0 0 0 0
7/15/2021 45 0 0 0 0 0 0
7/15/2022 40 0 0 0 0 0 0
7/15/2023 34 0 0 0 0 0 0
7/15/2024 28 0 0 0 0 0 0
7/15/2025 21 0 0 0 0 0 0
7/15/2026 13 0 0 0 0 0 0
7/15/2027 4 0 0 0 0 0 0
7/15/2028 0 0 0 0 0 0 0
Weighted Average Life to 21.49 10.89 7.52 5.67 4.89 4.71 4.70
Maturity (Years) (1)
Weighted Average Life to 21.26 10.25 6.98 5.16 4.48 4.36 4.25
Call (Years) (1)
</TABLE>
- ----------
(1) The weighted average life of the Offered Certificates is determined by (i)
multiplying the amount of each principal payment by the number of years
from the date of issuance to the related Distribution Date, (ii) adding the
results, and (iii) dividing the sum by the initial respective Certificate
Balance for such Class of Offered Certificates.
S-68
<PAGE>
PERCENTAGE OF INITIAL CERTIFICATE BALANCE
<TABLE>
<CAPTION>
Class B-1 Scenario
------------------------------------------------------------------------
Distribution Date I II III IV V VI VII
--- --- --- --- --- --- ---
<S> <C> <C> <C> <C> <C> <C> <C>
Initial Percent 100 100 100 100 100 100 100
7/15/1999 100 100 100 100 100 100 100
7/15/2000 100 100 100 100 100 100 100
7/15/2001 100 100 100 100 100 100 100
7/15/2002 100 100 88 63 46 34 24
7/15/2003 100 100 71 47 31 21 14
7/15/2004 100 91 57 34 21 13 8
7/15/2005 100 79 46 25 14 8 0
7/15/2006 100 68 36 18 10 2 0
7/15/2007 100 58 29 13 6 0 0
7/15/2008 100 50 23 10 0 0 0
7/15/2009 100 42 18 7 0 0 0
7/15/2010 100 36 14 1 0 0 0
7/15/2011 100 30 11 0 0 0 0
7/15/2012 100 25 8 0 0 0 0
7/15/2013 78 14 0 0 0 0 0
7/15/2014 75 12 0 0 0 0 0
7/15/2015 71 10 0 0 0 0 0
7/15/2016 67 8 0 0 0 0 0
7/15/2017 63 7 0 0 0 0 0
7/15/2018 58 3 0 0 0 0 0
7/15/2019 54 0 0 0 0 0 0
7/15/2020 50 0 0 0 0 0 0
7/15/2021 45 0 0 0 0 0 0
7/15/2022 40 0 0 0 0 0 0
7/15/2023 34 0 0 0 0 0 0
7/15/2024 28 0 0 0 0 0 0
7/15/2025 21 0 0 0 0 0 0
7/15/2026 13 0 0 0 0 0 0
7/15/2027 0 0 0 0 0 0 0
7/15/2028 0 0 0 0 0 0 0
Weighted Average Life to 21.48 10.80 7.48 5.59 4.71 4.32 4.09
Maturity (Years) (1)
Weighted Average Life to 21.26 10.25 6.98 5.14 4.34 4.00 3.83
Call (Years) (1)
</TABLE>
- ----------
(1) The weighted average life of the Offered Certificates is determined by (i)
multiplying the amount of each principal payment by the number of years
from the date of issuance to the related Distribution Date, (ii) adding the
results, and (iii) dividing the sum by the initial respective Certificate
Balance for such Class of Offered Certificates.
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<PAGE>
THE CIT GROUP, INC.
In September 1997, CIT changed its name to The CIT Group, Inc. and filed a
registration statement with the Securities and Exchange Commission for an
initial public offering of approximately 22.8% of its common stock. In November
1997, CIT completed its initial public offering of 36,225,000 shares of its
common stock.
The proceeds from the offering (other than the proceeds received from the
exercise of the over-allotment option of the underwriters) were used to acquire
from The Dai-Ichi Kangyo Bank, Limited ("DKB") its option to purchase the 20
percent interest in CIT owned by The Chase Manhattan Corporation ("Chase") and
to exercise such option. The proceeds received from the exercise of the
underwriters' over-allotment option were used for general corporate purposes.
As a consequence of the completion of the offering, DKB continues to own a
majority of the issued and outstanding shares of common stock of CIT. Chase is
no longer a stockholder. The Stockholders Agreement (as defined in the
Prospectus) no longer exists and Chase cannot designate a nominee to the Board
of Directors of CIT.
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
(973) 535-3514.
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 Depositor presently anticipates that it will be the initial holder of
the Class IO Certificates, the Class B-4 Certificates and the Class R
Certificates. However, the Depositor may at any time transfer any of such
Certificates to its affiliates or to unaffiliated third parties.
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 (973) 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.
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<PAGE>
CIT Consumer Finance is the master servicer for the loans held in its
portfolio. CITSF performs certain 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 at its Marlton, New
Jersey office and its original document retention and processing facility in
Cherry Hill, New Jersey.
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 certain of the servicing responsibilities
of the Master Servicer under the Pooling and Servicing Agreement. In the future,
CIT Consumer Finance may perform all or a portion of the servicing
responsibilities delegated to CITSF under the Subservicing Agreement, or CIT
Consumer Finance may retain another third party to perform all or a portion of
such 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 lockbox arrangements or payment processing unless (i) a
Termination Event has occurred and is continuing, in which event the Trustee may
terminate CIT Consumer Finance (See "The Pooling and Servicing
Agreement--Termination Events" herein) or (ii) the Rating Agency Condition is
satisfied.
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 certain 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 (973) 740-5000.
CITSF originates, purchases and services retail installment sales
contracts, direct loans and mortgages for manufactured housing, recreation
vehicles, recreational boat 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, 1998, CITSF serviced at its Asset Service Center, for itself
and others, approximately 291,500 consumer finance accounts (including
recreation vehicle, recreational boat, manufactured housing and mortgage
receivables) representing an outstanding balance of approximately $8.1 billion.
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 0.50% per annum and the Principal Balance of each
Mortgage Loan as of the first day of the related Due Period (the "Monthly
Servicing Fee") plus any Mortgage Fees collected by the Master Servicer during
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
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<PAGE>
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 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.
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<PAGE>
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 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 17, 1998, 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 Private 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 Private 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 Private 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 Private 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 Private
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 Private Certificates (other than the Class IO Certificates) will be entitled
to receive such holder's Percentage Interest in the amounts due such Class on
such Distribution Date.
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<PAGE>
Pass-Through Rates, Certificate Balances and Notional Amounts
The Pass-Through Rate applicable to each Class of Certificates (other than
the Class R Certificates) for each Distribution Date is set forth under
"Summary-Pass Through Rates, Certificate Balances and Notional Amounts".
The "Certificate Balance" of any Class of Certificates (other than the
Class IO and Class R 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 Certificates on account of principal
on all prior Distribution Dates and any Applied Realized Loss Amounts that were
allocated to such Class of Certificates on all prior Distribution Dates.
The Class IO Certificates will not have a principal balance, but will
represent the right to receive the sum of the interest accrued on the notional
amount of each of its Components, as described herein. Each such Component will
relate to each separate Class of Certificates (other than the Class R
Certificates) with the same Class designation. As of any Distribution Date, each
Component will have a notional amount equal to the Certificate Balance of the
related Class of Certificates immediately prior to such Distribution Date. The
Class IO-XI Certificates will consist of thirteen Components relating to each
Class of Certificates (other than the Class A-8 and the Class R Certificates).
The IO-X2 Certificates will consist of one Component relating to the Class A-8
Certificates. The Components do not represent separate Classes of Certificates,
but rather separate components, each of which is a part of the Class IO
Certificates.
The Class R Certificates will not have a Certificate Balance.
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 (i) the total of the principal and interest collections and any Mortgage
Fees including all cash amounts (net of Liquidation Expenses (as defined in the
Prospectus) and net of any unreimbursed hazard insurance premiums paid by the
Master Servicer) 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 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 Private Certificates (each, a
"Pass-Through Rate") as set forth in the Summary of Terms herein, subject to the
Adjusted Weighted Average Net Mortgage Rate or, in the case of the Class A-8
Certificates, subject to the Weighted Average Net Mortgage 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 and the Class IO
Certificates, the Class A Current Interest or the Class IO Current
Interest, as applicable, plus the Interest Carry Forward Amount with
respect to each such Class of Class A Certificates and each such Class IO
Certificates without any priority among such Class A Certificates and
Class IO 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 and Class IO Certificates, the
Interest Remittance Amount will be distributed among the outstanding
Classes of Class A Certificates and Class IO 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
plus the Interest Carry Forward Amount with respect to the Class M-1
Certificates;
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<PAGE>
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
plus the Interest Carry Forward Amount with respect to the Class M-2
Certificates;
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
plus the Interest Carry Forward Amount with respect to the Class B-1
Certificates;
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
plus the Interest Carry Forward Amount with respect to the Class B-2
Certificates;
Sixth, to the extent of the Interest Remittance Amount then remaining, to
the holders of the Class B-3 Certificates, the Class B-3 Current Interest
plus the Interest Carry Forward Amount with respect to the Class B-3
Certificates;
Seventh, to the extent of the Interest Remittance Amount then remaining,
to the holders of the Class B-4 Certificates, the Class B-4 Current
Interest plus the Interest Carry Forward Amount with respect to the Class
B-4 Certificates;
Eighth, to the extent of the Interest Remittance Amount then remaining, to
the holders of the Class A-8 Certificates, the Class A-8 Extra Interest;
Ninth, to the extent of the Interest Remittance Amount then remaining, to
pay the Master Servicing Fee to the Master Servicer if CIT Consumer
Finance or one of its affiliates is the Master Servicer; and
Tenth, to the extent of the Interest Remittance Amount then remaining, to
the holders of the Class R Certificates.
The Class IO-X1 Certificates will receive payments of interest equal to
the sum of the interest accrued during the related Accrual Period on the
notional amount of each of its thirteen Components. Each Component will accrue
interest at its applicable Component Rate on its related notional amount. The
"Component Rate" applicable to each Component for each Distribution Date will
equal (I) the lesser of (i) the Weighted Average Net Mortgage Rate for such
Distribution Date and (ii) 9.358%, (II) minus the applicable Pass-Through Rate
minus (III) the applicable Strip Rate (but not less than zero). The Class IO-X2
Certificates will receive payments of interest equal to the interest accrued
during the related Accrual Period on the notional amount of its Component at a
rate equal to the Weighted Average Net Mortgage Rate for such Distribution Date
minus the Class A-8 Formula Rate (but not less than zero).
The "Adjusted Weighted Average Net Mortgage Rate" for each Distribution
Date is the Weighted Average Net Mortgage Rate minus the applicable Strip Rate.
The "Weighted Average Net Mortgage Rate" for each Distribution Date is the
weighted average of the Net Mortgage Rates for the Mortgage Loans as of the
first day of the related Due Period, weighted on the basis of their respective
Principal Balances outstanding as of the first day of the related Due Period.
The "Net Mortgage Rate" for each Mortgage Loan will equal (x) the Mortgage Rate
in effect for such Mortgage Loan as of the first day of the related Due Period,
minus (y) the Monthly Servicing Fee for such Mortgage Loan.
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"Strip Rate" for each Component is as follows:
Component Certificate Strip Rate
--------- ----------- ----------
IO-A-1 A-1 2.17%
IO-A-2 A-2 2.04%
IO-A-3 A-3 1.97%
IO-A-4 A-4 1.85%
IO-A-5 A-5 1.69%
IO-A-6 A-6 1.35%
IO-A-7 A-7 1.75%
IO-M-1 M-1 1.61%
IO-M-2 M-2 1.33%
IO-B-1 B-1 0.68%
IO-B-2 B-2 0.05%
IO-B-3 B-3 0.05%
IO-B-4 B-4 0.05%
"Class A-8 Extra Interest" means, if the Class A-8 Pass-Through Rate is
based on the Weighted Average Net Mortgage Rate, the excess of (i) the amount of
interest that the Class A-8 Certificateholder would have been entitled to
receive on such Distribution Date had the Class A-8 Pass-Through Rate been
calculated based on the Class A-8 Formula Rate over (ii) the amount of interest
that the Class A-8 Certificateholders were entitled to receive on such
Distribution Date as a result of the Class A-8 Pass-Through Rate being
calculated based on the Weighted Average Net Mortgage Rate.
If on a Distribution Date there are insufficient funds to pay the Class
A-8 Extra Interest, the unpaid Class A-8 Extra Interest will not be carried
forward to the next Distribution Date (and will not be included in the Interest
Carry Forward Amount).
The Class R Certificates will not bear interest, but will represent the
right to receive certain limited amounts not otherwise payable to the Offered
Certificates and the Private Certificates.
Principal. On each Distribution Date, the Principal Distribution Amount will be
distributed in the following order of priority:
First, the holders of the Class A Certificates will be entitled to receive
payment of the Class A Principal Distribution Amount for such Distribution
Date in the following amounts and priorities:
(1) to the holders of the Class A-8 Certificates, an amount equal to the
Class A-8 Principal Distribution Amount, until the Class A-8
Certificate Balance has been reduced to zero;
(2) to the holders of the Class A-7 Certificates, in an amount equal to
the Class A-7 Lockout Distribution Amount;
(3) to the holders of the Class A Certificates (other than the Class A-7
Certificates and the Class A-8 Certificates) in sequential order
until the Certificate Balance of each such Class of Class A
Certificates has been reduced to zero;
(4) to the holders of the Class A-7 Certificates until the Class A-7
Certificate Balance has been reduced to zero; and
(5) to the extent not previously distributed, to the holders of the
Class A-8 Certificates, until the Class A-8 Certificate Balance is
reduced to zero;
Until the Stepdown Date, on each Distribution Date no principal will be
distributed to the Subordinate Certificates. Thereafter, 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 Subordinate Certificates will be entitled to
receive payments of principal, after distribution of principal to the Class A
Certificates as provided above, in the amounts and the priorities set forth
below and to the extent of the remaining Principal Distribution Amount as
follows:
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Second, the lesser of (x) the excess, if any, of (i) the 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 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 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 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;
Sixth, the lesser of (x) the excess, if any, of (i) the 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, the amount
distributed to the holders of the Class B-1 Certificates pursuant to
clause "Fourth" above and the amount distributed to the holders of the
Class B-2 Certificates pursuant to clause "Fifth" above and (y) the Class
B-3 Principal Distribution Amount, shall be distributed to the holders of
the Class B-3 Certificates, until the Class B-3 Certificate Balance has
been reduced to zero; and
Seventh, the lesser of (x) the excess, if any, of (i) the 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, the amount
distributed to the holders of the Class B-1 Certificates pursuant to
clause "Fourth" above, the amount distributed to the holders of the Class
B-2 Certificates pursuant to clause "Fifth" above and the amount
distributed to the holders of the Class B-3 Certificates pursuant to
clause "Sixth" above and (y) the Class B-4 Principal Distribution Amount,
shall be distributed to the holders of the Class B-4 Certificates, until
the Class B-4 Certificate Balance has been reduced to zero.
Notwithstanding the foregoing, on each Distribution Date on or after the
Distribution Date on which the Certificate Balance of the Class A Certificates
has been reduced to zero, if a Trigger Event is in effect, the Principal
Distribution Amount (or the remaining Principal Distribution Amount on the date
on which the Certificate Balance of the Class A Certificates is reduced to zero)
will be distributed to the holders of each class of the Subordinate Certificates
sequentially (in order of seniority), and the holders of a Class of Certificates
will not receive any distribution of principal until the Certificate Balance of
each more senior Class of Subordinate Certificates has been reduced to zero.
The Class A Certificates (other than the Class A-8 Certificates and the
Class A-7 Certificates) are "sequential pay" classes such that 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
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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 Certificate
Balance of the Subordinate Certificates is zero, any amounts of principal
payable to the holders of the Class A Certificates (including the Class A-7
Certificates and the Class A-8 Certificates) on such Distribution Date shall be
distributed pro rata and not sequentially.
The holders of the Class A-7 Certificates are entitled to receive, from
funds available therefor, payments of the Class A-7 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-7 and the Class A-8
Certificates) has been reduced to zero, the holders of the Class A-7
Certificates will be entitled to receive any remaining Class A Principal
Distribution Amount (after payment of the Class A-8 Principal Distribution
Amount to the Class A-8 Certificates and after payment of the Class A Principal
Distribution Amount to the Class A-1 through Class A-6 Certificates) until the
Class A-7 Certificate Balance has been reduced to zero.
The general effect of these provisions is that initially all distributions
of principal will be allocated to the Class A Certificates. The principal
distributions will be allocated between the Class A Certificates and the
Subordinate Certificates beginning on the Stepdown Date which will occur on the
Distribution Date, on or subsequent to August 2001, on which the Certificate
Balance of the Class A Certificates as a percentage of the then outstanding
Principal Balance of the Mortgage Loans is reduced to 53.0% or less.
Distributions of principal will be allocated first, to the Class A Certificates
to reduce their Certificate Balance so that it is not more than the lesser of
53.0% of the Principal Balance of the Mortgage Loans or the Principal Balance of
the Mortgage Loans less $1,707,120, and the remaining principal distribution
will be allocated to each Class of Subordinate Certificates (in the order of the
priority specified above) to reduce its Certificate Balance to the lesser of a
specified percentage of the Principal Balance of the Mortgage Loans (13.5% for
Class M-1, 11.5% for Class M-2, 7.0% for Class B-1, 6.0% for Class B-2, 4.0% for
Class B-3, and 5.0% for Class B-4) or the Principal Balance of the Mortgage
Loans less $1,707,120.
However, if on a Distribution Date the percentage of the Principal Balance
of the Mortgage Loans in the Pool as to which payments aggregating at least $65
are 60 days or more delinquent rises to more than 18.8% of the Mortgage Loans in
the Pool, a "Trigger Event" will be in effect. On such a Distribution Date and
on any subsequent Distribution Date on which a Trigger Event is in effect, all
principal distributions will be allocated to the Class A Certificates until the
Certificate Balance of the Class A Certificates has been reduced to zero and
then such principal distributions will be allocated to the most senior
outstanding Class of Subordinate Certificates until it is reduced to zero.
The holders of the Class A-7 Certificates are entitled to receive a pro
rata portion (based on the Certificate Balance of the Class A Certificates
(other than the Class A-8 Certificates) of the Class A Principal Distribution
Amount adjusted by the Class A-7 Lockout Percentage. The purpose of the Class
A-7 Lockout Percentage is to initially delay and then disproportionately
accelerate the pro rata distribution of the Class A Principal Distribution
Amount to the Class A-7 Certificates.
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 Class A-8
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.
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 Class A-8 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
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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 Class A-8 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 and the Class IO Certificates consists of the subordination
of distributions to the Subordinate Certificates and, with respect to the Class
A Certificates, the priority of application of Realized Losses. Distributions on
the Subordinate Certificates will be subordinated to distributions on the Class
A Certificates and the Class IO Certificates (with respect to interest only)
such that, after distributions on the Class A Certificates and the Class IO
Certificates, distributions will be made in the following order of priority:
first on the Class M-1 Certificates, second on the Class M-2 Certificates, third
on the Class B-1 Certificates, fourth on the Class B-2 Certificates, fifth on
the Class B-3 Certificates and sixth on the Class B-4 Certificates. Realized
Losses will be applied in the following order of priority: first on the Class
B-4 Certificates, second on the Class B-3 Certificates, third on the Class B-2
Certificates, fourth on the Class B-1 Certificates, fifth on the Class M-2
Certificates and sixth on the Class M-1 Certificates. Realized Losses will not
be applied on the Class A Certificates.
Subordination of Subordinate Certificates
The rights of the holders of the Subordinate Certificates to receive
distributions will be subordinated, to the extent described herein, to such
rights of the holders of the Class A Certificates and the Class IO 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 and to enhance the likelihood of regular receipt by the
holders of the Class IO Certificates of the full amount of their scheduled
monthly payment of interest.
The protection afforded to the holders of the Class A Certificates and the
Class IO Certificates by means of the subordination of the Subordinate
Certificates will be accomplished by the preferential right of the holders of
the Class A Certificates and the Class IO 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, with respect to
the Class A Certificates, 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 and the Class IO Certificates to receive future distributions of amounts that
would otherwise be payable to the holders of the Subordinate Certificates.
In addition, the rights of the holders of the Class M-2, Class B-1, Class
B-2, Class B-3 and Class B-4 Certificates to receive distributions will be
subordinated, to the extent described herein, to such rights of the holders of
the Class A, Class IO and Class M-1 Certificates. This subordination is intended
to enhance the likelihood of regular receipt by the holders of the Class A,
Class IO and Class M-1 Certificates of the amount of interest due them and,
other than with respect to the Class IO Certificates, principal available for
distribution, and to afford such holders (other than the Class IO Certificates)
with protection against Realized Losses.
The rights of the holders of the Class B-1, Class B-2, Class B-3 and Class
B-4 Certificates to receive distributions will be subordinated in the same
manner to such rights of the holders of the Class A, Class IO, Class M-1 and
Class M-2 Certificates, the rights of the holders of the Class B-2 Certificates,
Class B-3 and Class B-4 Certificates to receive distributions will be
subordinated in the same manner to such rights of the holders of the Class A,
Class IO, Class M-1, Class M-2 and Class B-1 Certificates, the rights of holders
of the Class B-3 and Class B-4 Certificates to receive distributions will be
subordinated in the same manner to such rights of the holders of the Class A,
Class IO, Class M-1, Class M-2, Class B-1 and Class B-2 Certificates and the
rights of the holders of the Class B-4 Certificates to receive distributions
will be subordinated in the same manner to such rights of the holders of the
Class A, Class IO, Class M-1, Class M-2, Class B-1, Class B-2 and Class B-3
Certificates.
Application of Realized Losses
If a Mortgage Loan becomes a Liquidated Mortgage 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
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holders of the Class B-4 Certificates, second, by the holders of the Class B-3
Certificates, third, by the holders of Class B-2 Certificates, fourth, by the
holders of the Class B-1 Certificates, fifth, by the holders of the Class M-2
Certificates, and sixth, by the holders of the Class M-1 Certificates.
To the extent that the Mortgage Loans experience Realized Losses in any
Due Period, the Certificate Balance of the Subordinate Certificates will be
reduced (in effect, "written down") on the related Distribution Date by the
amount of such Realized Losses. Such amount written down 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 Certificate Balance of the Class B-4 Certificates until it is reduced to
zero, then against the Certificate Balance of the Class B-3 Certificates until
it is reduced to zero, then against the Certificate Balance of the Class B-2
Certificates until it is reduced to zero, then against the Certificate Balance
of the Class B-1 Certificates until it is reduced to zero, then against the
Certificate Balance of the Class M-2 Certificates until it is reduced to zero
and then against the Certificate Balance of the Class M-1 Certificates until it
is reduced to zero. Applied Realized Loss Amounts will not be applied as a
reduction in the Certificate Balance of the Class A Certificates. The only
protection against Realized Losses afforded to any Class of Subordinate
Certificates is the protection afforded by the subordination of any more junior
class of Subordinate Certificates then outstanding. It is expected that Realized
Losses will occur. There will be no reserve fund or "excess spread" (i.e., the
difference between the interest collected on the Mortgage Loans and the interest
due on the Certificates at the Pass-Through Rate) available to make payments of
principal on the Certificates equal to the Realized Losses on the Mortgage
Loans.
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." Any subsequent
recoveries on Mortgage Loans which became Liquidated Mortgages during a prior
Due Period will not be applied to "reinstate" the Certificate Balance of a
Subordinate Certificate.
Any Applied Realized Loss Amount allocated in reduction of the Certificate
Balance of any Class of Certificates (other than the Class IO and Class R
Certificates) will result in a corresponding reduction in the notional amount of
the related Component of the Class IO Certificates.
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
interest due and payable 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, assignments of the related Mortgages in
recordable form, any title insurance policies with respect to the Mortgages and
any assumption or modification agreement (collectively, the "Mortgage
Documents"). Within 90 days of the Closing Date, 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 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.
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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 either designated portion
of 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 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% per annum less than, 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.
Repurchases
The Master Servicer will have the right and the option, but not the
obligation, to purchase for its own account any Mortgage Loan which becomes
delinquent, in whole or in part, as to four consecutive monthly installments or
any Mortgage Loan as to which enforcement proceedings have been brought by the
Master Servicer; provided, however, that the Master Servicer may not purchase
any such Mortgage Loan unless the Master Servicer has delivered to the Trustee
an opinion of counsel addressed to and acceptable to the Trustee to the effect
that such repurchase would not disqualify either designated portion of the Trust
Fund as a REMIC or result in a "prohibited transaction" tax as defined in
Section 860F of the Code. The purchase price for any such Mortgage Loan is equal
to the Purchase Price thereof, which purchase price shall be delivered to the
Trustee.
Release of Collateral
The Master Servicer may, if it is consistent with the servicing standard
set forth in the Pooling and Servicing Agreement, release a portion of the land
securing a Mortgage Loan from the lien of the Mortgage. For example, under its
current servicing practices, the Master Servicer may do so (i) if the Mortgagor
(as defined in the Prospectus) intends to sub-divide the Mortgaged Property or
(ii) if in the event of an eminent domain proceeding, the Master Servicer
determines that such proceeding will result in a taking of the land, and the
Master Servicer releases such land in exchange for partial or complete repayment
of the outstanding Principal Balance of the Mortgage Loan. The Master Servicer
may not release such land unless an opinion of counsel is provided to the effect
that such release would not disqualify either designated portion of the Trust
Fund as a REMIC or result in a "prohibited transaction" tax as defined in
Section 860F of the Code.
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;
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(ii) the Principal Distribution Amount separately identifying Principal
Prepayments, and the portion of any Purchase Price, Substitution
Adjustment and Liquidation Proceeds relating to principal;
(iii) the Class A-8 Principal Distribution Amount;
(iv) 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);
(v) 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);
(vi) 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);
(vii) the Interest Carry Forward Amount for each Class;
(viii)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;
(ix) the aggregate Principal Balance of all Mortgage Loans, the aggregate
Principal Balance of the Fixed Rate Mortgage Loans and the aggregate
Principal Balance of the Adjustable Rate Mortgage Loans after giving
effect to any payment of principal on such Distribution Date;
(x) the Adjusted Weighted Average Net Mortgage Rate, the Weighted
Average Net Mortgage Rate and the weighted average remaining stated
term to maturity of the Mortgage Loans;
(xi) whether a Trigger Event has occurred;
(xii) the Senior Enhancement Percentage;
(xiii) the Class A-8 Extra Interest, if any; and
(xiv) the amount of any Applied 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:
(a) the number and aggregate Principal Balance of Mortgage Loans as to
which payments aggregating $65 are (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 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; and
(d) the amount of cumulative Realized Losses.
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 Cut-off Date, the
Master Servicer will
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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
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 Cut-off
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 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 (other than the
Class IO Certificates and the Class R Certificates) 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 (other than the
Class IO Certificates and the Class R Certificates) evidencing not less than 51%
of the aggregate Percentage Interests constituting such Class; (iii) certain
events of insolvency, readjustment of debt, marshaling 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.
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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 Private Certificates (other than
the Class IO Certificates and the Class R 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 Private Certificates (other than
the Class IO Certificates and the Class R 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.
USE OF PROCEEDS
The Depositor will apply the net proceeds of the sale of the Offered
Certificates and the Private 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 Elections
Under the Internal Revenue Code of 1986, as amended (the "Code"),
elections will be made to treat each of the designated portions of the Trust
Fund as a REMIC. The Offered Certificates and the Private Certificates will be
designated as "regular interests" in one such REMIC (within the meaning of
Section 860G(a)(1) of the Code) and each Class R Certificate will be designated
as the "residual interest" in each such 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 of either of the designated portions as a
REMIC, one or both of such portions of the Trust Fund 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 either of the
designated portions of the Trust Fund as a REMIC may cause one or both of such
portions to be treated as an association taxable as a corporation. Such
treatment could result in income of one or both of such portions 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.
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Certificates
The Trustee will elect to treat each of the designated portions of the
Trust Fund 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) proper and timely REMIC elections, 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, each of the
designated portions of the Trust Fund will be a REMIC, the Offered Certificates
and the Private Certificates will be considered to evidence ownership of
"regular interests" in one such REMIC within the meaning of Section 860G(a)(1)
of the Code and each Class R Certificate will be considered to evidence
ownership of the "residual interest" in each such REMIC within the meaning of
the Section 860G(a)(2) of the Code.
Status of Certificates as Real Property Loans. Solely for purposes of this
paragraph, the REMIC elections made by the Trustee will be treated as creating a
single REMIC. The Certificates will be "real estate assets" for purposes of
Section 856(c)(4)(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 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)(4)(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. The Trustee does not intend to treat any of the
Offered Certificates as issued with "original issue discount" within the meaning
of Section 1273(a) of the Code.
Holders of debt instruments 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. In
general, a debt instrument is 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 Regulations issued under Sections 1271-1273 and 1275
of the Code ("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 intends 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.
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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 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 rate (the "OID
Prepayment Assumption") used in pricing the initial offering of the Offered
Certificates (the respective prepayment rate described in Scenario IV in the
"Prepayment Scenarios" table in Yield and Prepayment Considerations" herein) 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.
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 it does not otherwise provide for contingent principal
payments, 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. Although 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, the Trustee intends to treat the Offered
Certificates as qualifying as "variable rate debt instruments," and the
qualifying interest payments on such Offered Certificates as qualified stated
interest. However, it is also possible that interest 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.
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 OID 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 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
OID 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
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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 "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.
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 "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 made in cash and 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.
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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 the regular interests or the residual interests, 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. Each REMIC will terminate shortly following its receipt of
the final payment in respect of the Mortgage Assets. The last distribution on a
Certificate should be treated as a payment in full retirement of a debt
instrument.
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 treated as a
corporation or a partnership for U.S. federal income tax purposes, 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 persons have the authority
to control all of its substantial decisions, as well as certain trusts in
existence on August 20, 1996 that were treated as U.S. Persons prior to such
date and who have elected in a manner consistent with guidance provided by the
IRS to continue to be treated as U.S. Persons. 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 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 a Class R Certificate) and does not own actually or
constructively 10% or more of the voting stock of the Depositor (or subsequent
holder of a Class R Certificate). 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 securities clearing organization, bank or other financial
institution that holds customers' securities in the ordinary course of its trade
or business, 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 recently
issued Treasury Regulations, current IRS Forms W-8 and 4224 are expected to be
replaced by a new replacement form by 1999. Such regulations also provide
certain alternative means for qualifying for interest withholding exemptions for
payments made after December 31, 1999.
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
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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.
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 a Class R Certificate).
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, provided that all necessary proof of exempt status is furnished.
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.
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
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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; as amended by Prohibited Transaction
Exemption 97-34; Exemption Application Nos. D-10245 and D-10246) (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;
(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. ("DCR") or Fitch IBCA, Inc. ("Fitch");
(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
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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, other than an insurance company general account, which may be able to rely
on Section III of PTE 95-60 (discussed below).
Section III of Prohibited Transaction Class Exemption 95-60 ("PTE 95-60")
exempts from the application of the prohibited transaction provisions of
Sections 406(a), 406(b) and 407(a) of ERISA and Section 4975 of the Code
transactions in connection with the servicing, management and operation of a
trust (such as the Trust Fund) in which an insurance company general account has
an interest as a result of its acquisition of certificates issued by the trust,
provided that certain conditions are satisfied. If these conditions are met,
insurance company general accounts would be allowed to purchase classes of
Certificates (such as the Subordinate Certificates) which do not meet the
requirements of the Exemption solely because they (I) are subordinated to other
classes of Certificates in the Trust Fund and/or (ii) have not received a rating
at the time of the acquisition in one of the three highest rating categories
from S&P, Moody's, DCR or Fitch. All other conditions of the Exemption would
have to be satisfied in order for PTE 95-60 to be available. Before purchasing
Subordinate Certificates, an insurance company general account seeking to rely
on Section III of PTE 95-60 should itself confirm that all applicable conditions
and other requirements have been satisfied.
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.
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 20,333,334
Credit Suisse First Boston Corporation 20,333,333
First Chicago Capital Markets, Inc. 20,333,333
Class A-2 Certificates
Underwriters Certificate Balance
------------ -------------------
Morgan Stanley & Co. Incorporated 12,666,668
Credit Suisse First Boston Corporation 12,666,666
First Chicago Capital Markets, Inc. 12,666,666
Class A-3 Certificates
Underwriters Certificate Balance
------------ -------------------
Morgan Stanley & Co. Incorporated 15,000,000
Credit Suisse First Boston Corporation 15,000,000
First Chicago Capital Markets, Inc. 15,000,000
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Class A-4 Certificates
Underwriters Certificate Balance
------------ -------------------
Morgan Stanley & Co. Incorporated 8,333,334
Credit Suisse First Boston Corporation 8,333,333
First Chicago Capital Markets, Inc. 8,333,333
Class A-5 Certificates
Underwriters Certificate Balance
------------ -------------------
Morgan Stanley & Co. Incorporated 3,666,668
Credit Suisse First Boston Corporation 3,666,666
First Chicago Capital Markets, Inc. 3,666,666
Class A-6 Certificates
Underwriters Certificate Balance
------------ -------------------
Morgan Stanley & Co. Incorporated 3,624,000
Credit Suisse First Boston Corporation 3,624,000
First Chicago Capital Markets, Inc. 3,624,000
Class A-7 Certificates
Underwriters Certificate Balance
------------ -------------------
Morgan Stanley & Co. Incorporated 6,333,334
Credit Suisse First Boston Corporation 6,333,333
First Chicago Capital Markets, Inc. 6,333,333
Class A-8 Certificates
Underwriters Certificate Balance
------------ -------------------
Morgan Stanley & Co. Incorporated 17,105,668
Credit Suisse First Boston Corporation 17,105,666
First Chicago Capital Markets, Inc. 17,105,666
Class M-1 Certificates
Underwriters Certificate Balance
------------ -------------------
Morgan Stanley & Co. Incorporated 7,682,000
Credit Suisse First Boston Corporation 7,682,000
First Chicago Capital Markets, Inc. 7,682,000
Class M-2 Certificates
Underwriters Certificate Balance
------------ -------------------
Morgan Stanley & Co. Incorporated 6,544,000
Credit Suisse First Boston Corporation 6,544,000
First Chicago Capital Markets, Inc. 6,544,000
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<PAGE>
Class B-1 Certificates
Underwriters Certificate Balance
------------ -------------------
Morgan Stanley & Co. Incorporated 3,983,334
Credit Suisse First Boston Corporation 3,983,333
First Chicago Capital Markets, Inc. 3,983,333
In the Underwriting Agreement, the Underwriters have agreed, subject to
the terms and conditions set forth therein, to purchase all of the Offered
Certificates, if any are purchased. The Depositor has been advised by the
Underwriters that they propose initially to offer the Offered Certificates to
the public at the respective offering prices set forth on the cover page hereof
and to certain dealers at such price less a concession not in excess of the
respective amounts set forth in the table below (expressed as a percentage of
the relative Certificate Balance). The Underwriters may allow and such dealers
may reallow a discount not in excess of the respective amounts set forth in the
table below to certain other dealers.
Selling Reallowance
Class Concession Discount
----- ---------- --------
A-1 0.0900 0.0450
A-2 0.1050 0.0525
A-3 0.1380 0.0690
A-4 0.1500 0.0750
A-5 0.2100 0.1050
A-6 0.1650 0.0825
A-7 0.1800 0.0900
A-8 0.1800 0.0900
M-1 0.2400 0.1200
M-2 0.2700 0.1350
B-1 0.3600 0.1800
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.
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.
S-93
<PAGE>
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 ratings do not address the likelihood of the payment of the Class A-8
Extra Interest. (The Class A-8 Extra Interest is not included in the Interest
Carry Forward Amounts).
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.
S-94
<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
S-95
<PAGE>
include interest accrued on the Global Securities from and including the last
coupon payment date 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 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;
(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
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<PAGE>
(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.
Treasury regulations issued on October 14, 1997, which will be applicable
to payments made after December 31, 1999 (with certain transition rules),
provide for the unification and simplification of certain current certification
procedures. Under these regulations, a new Form W-8 will replace current Forms
W-8, 1001 and 4224. Further, pursuant to the new regulations, while a beneficial
owner will still be required to submit a Form W-8 to a "qualified intermediary"
through which it holds a Global Security, such qualified intermediary (i.e., a
foreign clearing organization or financial institution that enters into a
withholding agreement with the IRS) generally will not be required to forward
the Form W-8 to the withholding agent. Investors are urged to consult their own
tax advisors with respect to the application of these new regulations.
The term "U.S. Person" means (i) a citizen or resident of the United
States, (ii) a corporation, partnership or other entity treated as a corporation
or partnership for U.S federal income tax purposes, 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 one or more United States persons have
the authority to control all substantial decisions of the trust, as well as
certain trusts in existence on August 20, 1996 that were treated as U.S. Persons
prior to such date and who have elected in a manner consistent with guidance
provided by the IRS to continue to be treated as U.S. Persons. 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.
S-97
<PAGE>
INDEX TO DEFINED TERMS
Page
----
1933 Act.....................................................................S-2
Accrual Period...............................................................S-8
Adjustable Rate..............................................................S-6
Adjustable Rate Mortgage Loan................................................S-6
Adjusted Weighted Average Net Mortgage Rate............................S-5, S-75
Adjustment Date.............................................................S-48
Advance...............................................................S-18, S-72
Aggregate Certificate Balance................................................S-6
Applied Realized Loss Amount................................................S-80
Asset Service Center........................................................S-71
Balloon Loans..........................................................S-7, S-29
Balloon Payments.......................................................S-7, S-29
Beneficial owner......................................................S-18, S-72
Book-Entry Certificates.....................................................S-73
Business Day...........................................................S-7, S-78
Call Date..............................................................S-7, S-29
Call Loans.............................................................S-7, S-29
Cede........................................................................S-19
CEDEL..................................................................S-1, S-18
Certificate Account.........................................................S-73
Certificate Balance....................................................S-5, S-74
Certificate Register........................................................S-73
Certificate Registrar.......................................................S-73
Certificateholders..........................................................S-28
Certificates.................................................................S-3
CIT..........................................................................S-3
CIT Consumer Finance....................................................S-1, S-3
Citibank....................................................................S-19
Class........................................................................S-4
Class A Certificates....................................................S-1, S-5
Class A Principal Distribution Amount.......................................S-14
Class A-7 Lockout Distribution Amount.......................................S-12
Class A-7 Lockout Percentage................................................S-12
Class A-7 Lockout Pro Rata Distribution Amount..............................S-13
Class A-8 Principal Distribution Amount.....................................S-12
Class A-8 Extra Interest..............................................S-10, S-76
Class A-8 Formula Rate.......................................................S-4
Class B Certificates....................................................S-1, S-5
Class B-1 Principal Distribution Amount ....................................S-15
Class B-2 Principal Distribution Amount.....................................S-15
Class B-3 Principal Distribution Amount.....................................S-15
Class B-4 Principal Distribution Amount.....................................S-16
Class M-1 Principal Distribution Amount.....................................S-14
Class M-2 Principal Distribution Amount.....................................S-14
Class R Certificates.........................................................S-1
Clean-up Call Date....................................................S-19, S-82
Closing Date.................................................................S-3
Code........................................................................S-84
Combined Loan-to-Value Ratio................................................S-29
Commission...................................................................S-2
Compensating Interest.................................................S-18, S-72
S-98
<PAGE>
Component....................................................................S-5
Component Rate.........................................................S-8, S-75
Current Interest.......................................................S-9, S-10
Cut-off Date.................................................................S-3
DCR.........................................................................S-90
Definitive Certificate......................................................S-72
Deleted Mortgage Loan.......................................................S-81
Depositor.........................................................S-1, S-3, S-70
Determination Date...........................................................S-7
Distribution Date......................................................S-7, S-73
DOL.........................................................................S-89
DTC....................................................................S-1, S-18
Due Dates...................................................................S-72
Due Period...................................................................S-7
ERISA.......................................................................S-90
Euroclear..............................................................S-1, S-18
Exemption...................................................................S-90
Final Scheduled Distribution Date............................................S-7
Fitch.......................................................................S-89
Fixed Rate...................................................................S-6
Fixed Rate Mortgage Loan.....................................................S-6
Gross Margin...........................................................S-6, S-48
HLTV........................................................................S-27
Index.......................................................................S-48
Interest Carry Forward Amount...............................................S-10
Interest Determination Date.................................................S-78
Interest Remittance Amount..................................................S-10
Issuer.......................................................................S-3
LIBOR Rate...................................................................S-4
Liquidation Proceeds........................................................S-74
Master Servicer....................................................S-1,S-3, S-70
Master Servicing Fee..................................................S-18, S-71
Maximum Rate...........................................................S-7, S-48
Maximum Variable Rate...................................................S-1, S-5
Mezzanine Certificates..................................................S-1, S-5
Moody's...............................................................S-20, S-94
Morgan......................................................................S-19
Mortgage...............................................................S-4, S-28
Mortgage Assets........................................................S-4, S-28
Mortgage Documents..........................................................S-80
Mortgage Fees...............................................................S-18
Mortgage Loan..........................................................S-4, S-28
Mortgage Note..........................................................S-4, S-28
Mortgage Pool..........................................................S-4, S-28
Mortgage Rate................................................................S-6
Mortgaged Property.....................................................S-4, S-28
Net Mortgage Rate......................................................S-5, S-75
Offered Certificates.........................................................S-1
OID Prepayment Assumption...................................................S-86
OID Regulations.............................................................S-85
One-month LIBOR.............................................................S-78
One-year CMT.....................................................S-6, S-21, S-48
Pass-Through Rate......................................................S-4, S-74
Percentage Interest..........................................................S-4
Periodic Rate Cap......................................................S-7, S-48
S-99
<PAGE>
Plans.......................................................................S-89
Pool...................................................................S-4, S-28
Pooling and Servicing Agreement..............................................S-3
Prepayment Assumption.......................................................S-61
Principal Balance...........................................................S-28
Principal Prepayment........................................................S-18
Private Certificates.........................................................S-3
Prospectus...................................................................S-2
PTE 95-60...................................................................S-91
Purchase Agreement..........................................................S-28
Purchase Price..............................................................S-81
Qualified Substitute Mortgage Loan..........................................S-81
Rating Agencies.............................................................S-94
Rating Agency Condition.....................................................S-25
Realized Loss...............................................................S-79
Record Date..................................................................S-7
Reference Banks.............................................................S-78
REMIC.......................................................................S-19
Reserve Interest Rate.......................................................S-78
Restricted Group............................................................S-90
S&P...................................................................S-20, S-94
Seller..................................................................S-1, S-3
Senior Enhancement Percentage...............................................S-16
Senior Specified Enhancement Percentage.....................................S-16
Service.....................................................................S-84
Six-month LIBOR..................................................S-6, S-21, S-48
SMMEA.................................................................S-20, S-91
Stepdown Date...............................................................S-14
Strip Rate.............................................................S-8, S-76
Subordinate Certificates................................................S-1, S-5
Subservicing Agreement................................................S-25, S-71
Substitution Adjustment.....................................................S-81
Telerate Page 3750..........................................................S-78
Termination Events..........................................................S-83
Trigger Event.........................................................S-14, S-78
Trust.............................................................S-1, S-4, S-28
Trust Fund........................................................S-1, S-4, S-28
Trustee...........................................................S-1, S-3, S-28
Weighted Average Net Mortgage Rate.....................................S-5, S-75
S-100
<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.
-3-
<PAGE>
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
of this Prospectus at any time does not imply that information herein is correct
as of any time subsequent to its date.
-4-
<PAGE>
---------------------
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.
-5-
<PAGE>
- --------------------------------------------------------------------------------
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.
- --------------------------------------------------------------------------------
-6-
<PAGE>
- --------------------------------------------------------------------------------
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
- --------------------------------------------------------------------------------
-7-
<PAGE>
- --------------------------------------------------------------------------------
accordance with a schedule or formula or on
the basis of collections from designated
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
- --------------------------------------------------------------------------------
-8-
<PAGE>
- --------------------------------------------------------------------------------
(as defined herein) 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.
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
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<PAGE>
- --------------------------------------------------------------------------------
otherwise specified in the related
Prospectus Supplement, such Mortgage Loans
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.
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(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 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
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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.
(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,
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(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
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-
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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 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.
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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
the Subordinated Certificates of a Series
(the "Subordinated Certificateholders") to
receive distributions 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
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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 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
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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 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.
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
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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 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.
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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 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
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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.
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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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
prepayment penalties for partial prepayments on any Mortgage Loan. Such
penalties or premiums will be property of
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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,
repurchases or purchases from a Trust of Mortgage Loans or substitution
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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,
CIT Consumer Finance may, in its role as Master Servicer, be required to make
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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
values) may affect the
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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
and administration of loans on the
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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
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ability of the Master Servicer to foreclose on 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 or CITSF 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
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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.
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
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systems, the ability of a Certificateholder to use effectively the 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.
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
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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 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.
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(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
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
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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 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
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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
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
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
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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
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.
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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
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
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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
(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.
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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
(973) 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
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").
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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 (973) 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 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 at its Marlton,
New Jersey office and its original document retention and processing facility in
Cherry Hill, New Jersey.
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 (973) 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.
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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 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.
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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. A mortgage broker
may be paid for its services by CIT Consumer Finance and the borrower. 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.
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
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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.
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.
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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 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.
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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
bank statements 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. The Combined Loan-to-Value Ratio is generally lower for
self-employed individuals, and is generally reduced in respect of three and four
unit multi-family 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.
These appraisals may be ordered by CIT Consumer Finance or the broker. 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 collateral risk manager before the loan is
funded. 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 will have the property
appraisal reviewed by a CIT Consumer Finance collateral risk manager prior to
funding.
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
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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
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 generally "force place" casualty insurance coverage if CIT Consumer
Finance discovers that casualty insurance coverage has lapsed.
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Instead, CIT Consumer Finance requires its borrowers to 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 and
certain wage earners 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.
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
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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 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
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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.
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.
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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 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 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.
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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.
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
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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 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
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"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, "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
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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.
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.
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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).
- ----------
(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. Generally, 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.
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
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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;
(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;
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(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 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
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"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.
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
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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.
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)
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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
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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, 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.
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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
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.
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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.
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.
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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
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.
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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 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
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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
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.
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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
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
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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
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.
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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
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.
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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,
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
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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 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.
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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.
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
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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.
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;
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(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").
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
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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;
(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.
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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.
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.
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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 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
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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 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
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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.
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.
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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
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.
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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.
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
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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
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
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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
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.
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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
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)
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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 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.
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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
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.
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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.
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
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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 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.
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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.
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
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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.
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
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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 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
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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 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.
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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
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
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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 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.
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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
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.
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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
(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.
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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.
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.
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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.
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.
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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
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
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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.
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
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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,
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
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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
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.
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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,
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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INDEX TO DEFINED TERMS
Accrual Certificates..........................................................56
Adjustable Rate...........................................................10, 34
Adjustable Rate Mortgage Loan.............................................10, 34
Adjusted Mortgage Loan Remittance Rate........................................59
Advance...................................................................18, 59
Agreement..................................................................6, 37
AMTPA........................................................................101
Asset Service Center..........................................................42
Available Funds...............................................................55
Balloon Loans.............................................................11, 34
Balloon Payments..........................................................11, 34
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.................................................................11, 34
Call Loans................................................................11, 34
CBC...........................................................................40
CBC Holding...................................................................40
Cede.......................................................................5, 21
Cedel..................................................................5, 21, 31
CERCLA........................................................................99
Certificate Account...........................................................77
Certificate Balance...........................................................56
Certificate Guaranty Insurance Policy.....................................16, 67
Certificate Guaranty Insurer..................................................67
Certificate Register..........................................................55
Certificateholders.........................................................2, 33
Certificates............................................................1, 6, 53
Chase.........................................................................40
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....................................................76
Credit Enhancement............................................................30
Credit Enhancer...............................................................30
Cut-off Date...............................................................9, 53
Definitive Certificate........................................................62
Delayed Deposits..............................................................79
Deposit Date..................................................................79
Depositor...........................................................1, 6, 22, 41
Depository....................................................................62
Detailed Description..........................................................34
Determination Date.........................................................8, 56
Distribution Date..........................................................8, 55
DKB...........................................................................40
DOL......................................................................20, 104
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DTC....................................................................5, 21, 31
Due Period.................................................................9, 56
EPA...........................................................................99
ERISA....................................................................20, 104
Escrow Account................................................................83
Euroclear..............................................................5, 21, 31
Exchange Act...................................................................3
FICO..........................................................................46
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
Institutional Bulk Portfolios.................................................44
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, 41
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............................................17, 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
Parties in Interest..........................................................105
Plan Asset Regulations........................................................20
Plans........................................................................104
PMBS Agreement................................................................38
PMBS Issuer...............................................................14, 38
PMBS Servicer.............................................................14, 38
PMBS Trustee..............................................................14, 38
Policy Statement.............................................................106
Pool.......................................................................9, 33
Pool Insurer..................................................................68
Precomputed Loan..............................................................36
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Pre-Funded Amount.........................................................14, 33
Pre-Funding Account....................................................1, 14, 33
Primary Insurer...............................................................85
Primary Mortgage Insurance Policy.............................................34
Principal Prepayment......................................................19, 59
Principal Prepayments.........................................................57
Private Mortgage-Backed Securities.........................................9, 38
PTE 83-1.....................................................................105
Purchase Price................................................................82
Qualified Substitute Mortgage Loan............................................82
Rating Agency.............................................................18, 77
Record Date...................................................................55
Registration Statement.........................................................3
Released Mortgaged Property Proceeds..........................................79
Relief Act....................................................................28
REMIC..................................................................2, 20, 54
REO Property..................................................................53
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.............................................................88
Simple Interest Loans.........................................................35
SMMEA....................................................................19, 105
Special Hazard Insurance Policy...........................................17, 69
Special Hazard Insurer........................................................69
Standard Hazard Insurance Policy..........................................12, 34
Stockholders Agreement........................................................41
Subordinated Certificateholders...........................................15, 65
Subordinated Certificates..................................................7, 57
Sub-Servicer...............................................................6, 37
Sub-servicing Account.........................................................79
Substitution Adjustment.......................................................82
The Pooling and Servicing Agreement...........................................42
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-21
The Portfolio of Mortgage Loans .......................................... S-25
The Mortgage Pool ........................................................ S-28
Yield and Prepayment Considerations ...................................... S-60
The CIT Group, Inc. ...................................................... S-70
The CIT Group Securitization Corporation III, The Depositor .............. S-70
The CIT Group/Consumer Finance, Inc., Seller
and Master Servicer ...................................................... S-70
The CIT Group/Sales Financing, Inc., Sub-Servicer ........................ S-71
Servicing of Mortgage Loans .............................................. S-71
Description of the Certificates .......................................... S-72
Credit Enhancement ....................................................... S-79
The Pooling and Servicing Agreement ...................................... S-80
Use of Proceeds .......................................................... S-84
Certain Federal Income Tax Consequences .................................. S-84
ERISA Considerations ..................................................... S-89
Legal Investment ......................................................... S-91
Underwriting ............................................................. S-91
Legal Matters ............................................................ S-93
Ratings .................................................................. S-94
Annex I - Global Clearance, Settlement and
Tax Documentation Procedures ............................................. S-95
Index to Defined Terms ................................................... S-98
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 .................................................................. 107
Experts .................................................................. 108
Index to Defined Terms ................................................... 109
================================================================================
================================================================================
$341,424,000
THE CIT GROUP SECURITIZATION
CORPORATION III
Depositor
The CIT Group/Consumer
Finance, Inc.
Master Servicer
Home Equity Loan Asset Backed
Certificates, Series 1998-1
-----------------
PROSPECTUS SUPPLEMENT
----------------------------
MORGAN STANLEY DEAN WITTER
CREDIT SUISSE FIRST BOSTON
FIRST CHICAGO CAPITAL MARKETS, INC.
July 31, 1998
================================================================================
