<PAGE>
PROSPECTUS SUPPLEMENT TO PROSPECTUS DATED MARCH 23, 1994
$256,949,704 (APPROXIMATE)
CITICORP MORTGAGE SECURITIES, INC.
(PACKAGER AND SERVICER)
REMIC Pass-Through Certificates, Series 1994-5
$240,121,000 (Approximate)
Senior Class A CitiCertificates
$16,828,704 (Approximate)
Subordinated Class B-1 CitiCertificates
-----------------
The REMIC Pass-Through Certificates, Series 1994-5, will consist of one
senior class of REMIC Pass-Through Certificates (the "Class A CitiCertificates")
in an approximate aggregate Initial Stated Amount of $240,121,000, subject to a
permitted upward or downward variance of up to 5.0%, one subordinated class of
REMIC Pass-Through Certificates (the "Class B CitiCertificates") in an
approximate aggregate Initial Stated Amount of $18,770,390, subject to a
permitted variance based on final credit enhancement levels, and one class of
residual interests (the "Residual Certificates"), representing interests in a
trust (the "Trust") to be created by Citicorp Mortgage Securities, Inc. (the
"Issuer" or "CMSI") on or about March 29, 1994, which Trust will elect to be
treated as a real estate mortgage investment conduit (a "REMIC") for federal
income tax purposes. The Class A and Class B CitiCertificates are collectively
referred to as the "CitiCertificates" and will constitute regular interests in
the REMIC. The Class A CitiCertificates will consist of Class A-1, Class A-2,
Class A-3, Class A-4, Class A-5, Class A-6 and Class A-7 CitiCertificates (each,
a "Class A Subclass"). The Class A-1, Class A-2, Class A-3, Class A-4, Class A-5
and Class A-6 CitiCertificates are targeted amortization class certificates
(collectively, the "TAC Certificates"). The Class A-7 CitiCertificates are
sometimes referred to as the "Companion Class". The Class B CitiCertificates
will consist of Class B-1 and Class B-2 CitiCertificates (each, a "Class B
Subclass"). The Class B-1 CitiCertificates are referred to herein as the
"Offered Class B CitiCertificates" and the Class B-2 CitiCertificates are
referred to herein as the "Unoffered Class B CitiCertificates." The Class A
CitiCertificates will initially evidence an undivided beneficial ownership
interest in the
(CONTINUED ON FOLLOWING PAGE)
THE OFFERED CITICERTIFICATES DO NOT REPRESENT AN INTEREST IN OR
OBLIGATION OF CMSI, CMI, CITIBANK, ANY OTHER AFFILIATE OF CMSI OR
THEIR ULTIMATE PARENT, CITICORP, EXCEPT AS SET FORTH HEREIN.
NEITHER THE OFFERED CITICERTIFICATES 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>
INITIAL STATED STATED LAST SCHEDULED
AMOUNT (APPROX.) RATE DISTRIBUTION DATE (1)
<S> <C> <C> <C>
Class A-1 CitiCertificates................... $ 24,158,000 6.25% March 25, 2024
Class A-2 CitiCertificates................... $ 63,987,000 6.25% March 25, 2024
Class A-3 CitiCertificates................... $ 46,499,000 6.25% March 25, 2024
Class A-4 CitiCertificates................... $ 49,858,000 6.25% March 25, 2024
Class A-5 CitiCertificates................... $ 16,803,000 6.25% March 25, 2024
Class A-6 CitiCertificates................... $ 18,431,000 6.25% March 25, 2024
Class A-7 CitiCertificates................... $ 20,385,000 6.25% March 25, 2024
Class B-1 CitiCertificates................... $ 16,828,704 6.25% March 25, 2024
<FN>
(1) Determined as described herein under "Summary of Prospectus and Prospectus
Supplement--Last Scheduled Distribution Date."
</TABLE>
---------------------
The Offered CitiCertificates are being offered by Prudential Securities
Incorporated (the "Underwriter") from time to time in negotiated transactions or
otherwise at varying prices to be determined at the time of sale. The aggregate
proceeds to the Issuer from the sale of the Offered CitiCertificates will be
97.531101% of the aggregate Initial Stated Amount of the Class A
CitiCertificates and 90.166666667% of the aggregate Initial Stated Amount of the
Offered Class B CitiCertificates, plus accrued interest at the rate of 6.25% per
annum from March 1, 1994 (the "Cut-Off Date"), before deduction of expenses
payable by the Issuer, subject to a limited adjustment depending on the
aggregate Initial Stated Amount of the Class A CitiCertificates on the Closing
Date. See "Plan of Distribution" herein.
The Offered CitiCertificates are offered subject to receipt and acceptance
by the Underwriter, to prior sale and to the Underwriter's right to reject any
order in whole or in part. It is expected that on or about March 29, 1994
delivery will be made through the facilities of The Depository Trust Company
("DTC"), in the case of the Class A CitiCertificates, and in definitive, fully
registered form, in the case of the Offered Class B CitiCertificates.
PRUDENTIAL SECURITIES INCORPORATED
------------
THE DATE OF THIS PROSPECTUS SUPPLEMENT IS MARCH 24, 1994.
<PAGE>
(CONTINUED FROM PREVIOUS PAGE)
property of the Trust ranging from 91.75% to 93.75%, the Offered Class B
CitiCertificates will initially evidence an undivided beneficial ownership
interest in the property of the Trust ranging from 5.50% to 7.50% and the
Unoffered Class B CitiCertificates will evidence the remaining undivided
interest therein. Only the Class A CitiCertificates and the Offered Class B
CitiCertificates (the "Offered CitiCertificates") are offered hereby.
The Trust property (the "Pool") will consist primarily of a pool of 20-to
30-year fixed-rate conventional one-to four-family mortgage loans (the "Mortgage
Loans") originated or acquired by Citicorp Mortgage, Inc. ("CMI") or originated
by Citibank, N.A. ("Citibank," and together with CMI, the "Originators") as the
case may be, with an aggregate Adjusted Balance as of the Cut-Off Date (the
"Initial Mortgage Loan Balance") equal to approximately $258,891,390, subject to
a permitted upward or downward variance of up to 5.0%, and certain related
property, as described herein. Mortgage Loans acquired by CMI include Mortgage
Loans originated or acquired by Citibank, Federal Savings Bank ("CFSB").
Interest on the Offered CitiCertificates will be distributed on the 25th day
of each month, commencing (except with respect to the Class A-7
CitiCertificates) in April 1994 (or, if such day is not a business day, on the
next succeeding business day) (each, a "Distribution Date"). The Class A-7
CitiCertificates are Accrual CitiCertificates. The Class A-2, Class A-3, Class
A-4, Class A-5, Class A-6 and Class A-7 CitiCertificates are sometimes referred
to collectively as the "Accretion Directed CitiCertificates." Distributions of
interest on the Class A-7 CitiCertificates will commence on the earlier to occur
of (i) the Distribution Date on which the Stated Amount of the Class A-6
CitiCertificates has been reduced to zero and (ii) the Subordination Depletion
Date. Prior to the commencement of interest distributions on the Class A-7
CitiCertificates, interest will accrue thereon and the amounts so accrued and
available for distribution will be added to the Stated Amount thereof on the
applicable Distribution Date and will be distributed in reduction of the Stated
Amounts of the Accretion Directed CitiCertificates as described herein under
"SUMMARY OF PROSPECTUS AND PROSPECTUS SUPPLEMENT--Distributions in Reduction of
Stated Amount of the Offered CitiCertificates." Interest will accrue on the
CitiCertificates from the first through the last day of the month preceding the
month of such Distribution Date. The rights of holders of the Class B
CitiCertificates to receive distributions of interest will be subordinated to
the rights of holders of the Class A CitiCertificates to receive distributions
to the extent described herein. The rights of holders of the Unoffered Class B
CitiCertificates to receive distributions of interest will be subordinated to
the rights of holders of the Offered CitiCertificates to receive distributions
to the extent described herein.
On each Distribution Date, distributions in reduction of Stated Amount of
the Class A CitiCertificates, in an amount equal to the Class A Principal
Distribution Amount, will be allocated among the Class A Subclasses then
entitled to receive such distributions in accordance with the priorities set
forth herein. On each Distribution Date, distributions in reduction of Stated
Amount of the Offered Class B CitiCertificates will be made only after the Class
A CitiCertificates have received all distributions to which they are entitled
and the Offered Class B CitiCertificates have received the amount of interest
due them with respect to such Distribution Date. The rights of holders of the
Unoffered Class B CitiCertificates to receive distributions in reduction of
Stated Amount will be subordinated to the rights of holders of the Offered
CitiCertificates to receive distributions to the extent described herein.
THE YIELD TO INVESTORS IN THE OFFERED CITICERTIFICATES WILL BE SENSITIVE IN
VARYING DEGREES TO THE RATE OF PRINCIPAL PAYMENTS (INCLUDING PREPAYMENTS) ON THE
MORTGAGE LOANS, WHICH GENERALLY CAN BE PREPAID AT ANY TIME, GENERALLY WITHOUT
PENALTY. IN ADDITION, THE YIELD TO MATURITY ON THE OFFERED CITICERTIFICATES MAY
VARY DEPENDING ON THE EXTENT TO WHICH SUCH CITICERTIFICATES ARE PURCHASED AT A
DISCOUNT OR PREMIUM. HOLDERS OF OFFERED CITICERTIFICATES SHOULD CONSIDER, IN THE
CASE OF ANY OFFERED CITICERTIFICATE PURCHASED AT A DISCOUNT, THE RISK THAT A
SLOWER THAN ANTICIPATED RATE OF PRINCIPAL PAYMENTS WOULD RESULT IN AN ACTUAL
YIELD THAT IS LOWER THAN THE ANTICIPATED YIELD AND, IN THE CASE OF ANY OFFERED
CITICERTIFICATE PURCHASED AT A PREMIUM, THE RISK THAT A FASTER THAN ANTICIPATED
RATE OF PRINCIPAL PAYMENTS WOULD RESULT IN AN ACTUAL YIELD THAT IS LOWER THAN
ANTICIPATED. IN ADDITION, BECAUSE THE CLASS A-7 CITICERTIFICATES ARE A COMPANION
CLASS TO THE TAC CERTIFICATES, THE WEIGHTED AVERAGE LIFE OF SUCH CLASS A
SUBCLASS WILL BE PARTICULARLY SENSITIVE TO THE RATE OF PREPAYMENTS ON THE
MORTGAGE LOANS. NO REPRESENTATION IS MADE AS TO THE ANTICIPATED RATE OF
PREPAYMENT ON THE MORTGAGE LOANS OR AS TO THE ANTICIPATED YIELD TO MATURITY OF
ANY OFFERED CITICERTIFICATES.
THE YIELD TO MATURITY ON THE OFFERED CLASS B CITICERTIFICATES WILL BE MORE
SENSITIVE TO LOSSES DUE TO LIQUIDATIONS OF THE MORTGAGE LOANS (AND THE TIMING
THEREOF) THAN THE CLASS A CITICERTIFICATES, IN THE EVENT THAT THE STATED AMOUNT
OF THE UNOFFERED CLASS B CITICERTIFICATES HAS BEEN REDUCED TO ZERO. SEE
"DESCRIPTION OF THE OFFERED CITICERTIFICATES--PREPAYMENT AND YIELD
CONSIDERATIONS" AND "--YIELD CONSIDERATIONS WITH RESPECT TO THE OFFERED CLASS B
CITICERTIFICATES" IN THIS PROSPECTUS SUPPLEMENT. INVESTORS SHOULD FULLY CONSIDER
THE RISKS ASSOCIATED WITH AN INVESTMENT IN THE OFFERED CLASS B CITICERTIFICATES
INCLUDING THE POSSIBILITY THAT SUCH INVESTORS MAY NOT FULLY RECOVER THEIR
INITIAL INVESTMENT AS A RESULT OF SUCH LOSSES ON THE MORTGAGE LOANS.
The Offered Class B CitiCertificates may not be acquired by or on behalf of,
or with the assets of, any employee benefit plan, trust or account including an
individual retirement account, that is subject to the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), or the corresponding provisions of
the Internal Revenue Code of 1986, as amended (the "Code") or a governmental
plan subject to any federal, state or local law which is, to a material extent,
similar to the foregoing provisions of ERISA or the Code, except upon the
delivery of an opinion of counsel or as otherwise provided herein. See "CERTAIN
INVESTMENT CONSIDERATIONS FOR PURCHASERS OF OFFERED CLASS B
CITICERTIFICATES--Restrictions on Transfer" herein.
The closing of the sale of the Offered CitiCertificates is conditioned upon
the closing of the sale of the Unoffered Class B CitiCertificates. Prudential
Securities Incorporated is committed to purchase all of the Unoffered Class B
CitiCertificates if any Offered CitiCertificates are purchased.
There is currently no secondary market for the Offered CitiCertificates. The
Underwriter anticipates making a secondary market in the Offered
CitiCertificates but is not obligated to do so. There can be no assurance that
such a market will develop or, if it does develop, that it will provide holders
of Offered CitiCertificates with liquidity of investment or will continue for
the life of the Offered CitiCertificates.
The Class A CitiCertificates will be issued in book-entry form only (the
"Book-Entry CitiCertificates"), and purchasers thereof will not be entitled to
receive definitive certificates except in the limited circumstances set forth
herein. The Book-Entry CitiCertificates will be registered in the name of Cede &
Co. ("Cede"), as nominee of DTC, which will be the "holder" or
"Certificateholder" of such Book-Entry CitiCertificates, as such terms are used
herein. See "DESCRIPTION OF THE OFFERED CITICERTIFICATES--Book-Entry
Registration" and "--Definitive Certificates" herein. The Offered Class B
CitiCertificates will be issued in definitive, fully registered form.
---------------------
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITER MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE OFFERED
CITICERTIFICATES AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
---------------------
THIS PROSPECTUS SUPPLEMENT DOES NOT CONTAIN COMPLETE INFORMATION ABOUT THE
OFFERING OF THE OFFERED CITICERTIFICATES. ADDITIONAL INFORMATION IS CONTAINED IN
THE PROSPECTUS AND PURCHASERS ARE URGED TO READ BOTH THIS PROSPECTUS SUPPLEMENT
AND THE PROSPECTUS IN FULL. SALES OF THE OFFERED CITICERTIFICATES MAY NOT BE
CONSUMMATED UNLESS THE PURCHASER HAS RECEIVED BOTH THIS PROSPECTUS SUPPLEMENT
AND THE PROSPECTUS.
<PAGE>
SUMMARY OF PROSPECTUS AND PROSPECTUS SUPPLEMENT
THE FOLLOWING SUMMARY IS QUALIFIED BY REFERENCE TO THE DETAILED INFORMATION
APPEARING ELSEWHERE IN THIS PROSPECTUS SUPPLEMENT AND IN THE PROSPECTUS.
CAPITALIZED TERMS USED HEREIN SHALL HAVE THE MEANINGS GIVEN ELSEWHERE IN THIS
PROSPECTUS SUPPLEMENT AND IN THE PROSPECTUS. SEE "INDEX OF PRINCIPAL DEFINITIONS
IN PROSPECTUS SUPPLEMENT" AT THE END OF THIS PROSPECTUS SUPPLEMENT.
<TABLE>
<S> <C>
SECURITIES OFFERED................. REMIC Pass-Through Certificates, Series 1994-5, Senior Class
A CitiCertificates, consisting of Class A-1, Class A-2,
Class A-3, Class A-4, Class A-5, Class A-6 and Class A-7
CitiCertificates, and the Subordinated Class B-1
CitiCertificates, in the respective approximate aggregate
Initial Stated Amounts set forth on the cover page hereof.
Each Offered CitiCertificate represents an undivided
beneficial ownership interest in the Trust created under
the Pooling Agreement, the property of which will consist
of a pool of assets comprised primarily of the Mortgage
Loans conveyed to the Issuer by the Originators and
simultaneously conveyed to such Trust by the Issuer. The
rights of holders of the Offered Class B CitiCertificates
to receive distributions will be subordinated to the
rights of holders of the Class A CitiCertificates to the
extent described herein.
Each Class A CitiCertificate will qualify at issuance as a
"mortgage related security" within the meaning of the
Secondary Mortgage Market Enhancement Act of 1984
("SMMEA") and will retain such qualification so long as it
is rated in one of the two highest rating categories by at
least one nationally recognized statistical rating
organization. The Offered Class B CitiCertificates will
not constitute "mortgage related securities" within the
meaning of SMMEA. See "LEGAL INVESTMENT" in this
Prospectus Supplement and "LEGAL INVESTMENT" in the
Prospectus.
In addition to the Offered CitiCertificates, the REMIC
Pass-Through Certificates, Series 1994-5, include the
Class B-2 CitiCertificates (the "Unoffered Class B
CitiCertificates") and one class of Residual Certificates
representing the residual interest in the REMIC. The
rights of holders of the Unoffered Class B
CitiCertificates to receive distributions will be
subordinated to the rights of holders of the Offered
CitiCertificates to receive distributions to the extent
described herein. The Unoffered Class B CitiCertificates
will be sold separately in one or more private
transactions and the Residual Certificates will be
retained by the Originators. Neither the Unoffered Class B
CitiCertificates nor the Residual Certificates are being
offered by this Prospectus Supplement and the related Pro-
spectus. Accordingly, to the extent this Prospectus
Supplement contains information relating to the terms of
the Unoffered Class B CitiCertificates and the Residual
Certificates, such information is provided solely because
of its potential relevance to a prospective purchaser of
the Offered CitiCertificates. The issuance and sale of the
Offered CitiCertificates are conditioned upon the issuance
and sale of the Unoffered Class B CitiCertificates.
The CitiCertificates and the Residual Certificates will be
issued pursuant to a pooling and servicing agreement (the
"Pooling Agreement") dated as of March 1, 1994, between
the Issuer and State Street Bank and Trust Company, a
Massachusetts banking corporation, in its individual
capacity and as trustee (the "Trustee").
</TABLE>
S-3
<PAGE>
<TABLE>
<S> <C>
STATED AMOUNT OF THE OFFERED
CITICERTIFICATES................. The aggregate "Initial Stated Amount" of the Class A
CitiCertificates will be approximately $240,121,000, subject
to a permitted upward or downward variance of up to 5.0%,
and will be initially from 91.75% to 93.75% of the Initial
Mortgage Loan Balance. The aggregate Initial Stated Amount
of the Offered Class B CitiCertificates will be
approximately $16,828,704, subject to a permitted upward
or downward variance based on final credit enhancement
levels, and will be initially from 5.50% to 7.50% of the
Initial Mortgage Loan Balance. The aggregate Initial
Stated Amount of the Unoffered Class B CitiCertificates
will correspond to the remaining percentage of the Initial
Mortgage Loan Balance. The Initial Mortgage Loan Balance
will be approximately $258,891,390, subject to a permitted
upward or downward variance of up to 5.0%. The Initial
Stated Amount of a CitiCertificate represents the maximum
specified dollar amount to which the holder of such
CitiCertificate is entitled (in addition to distributions
of interest, and in the case of the Class A-7
CitiCertificates, Accretion Distribution Amounts added to
the Stated Amount thereof) from the cash flow on the
assets in the Pool.
The aggregate of the Stated Amounts of the Class A
Subclasses as of any Distribution Date is referred to as
the "Class A Stated Amount." The "Class A Subclass Stated
Amount" of each Class A Subclass as of any Distribution
Date will equal the Initial Stated Amount thereof (plus,
in the case of the Class A-7 CitiCertificates, all accrued
interest thereon that has been added to the Stated Amount
thereof prior to such Distribution Date) less certain
distributions and the allocation of certain losses as
described herein. See "DESCRIPTION OF THE OFFERED
CITICERTIFICATES--Distributions in Reduction of Stated
Amount" in this Prospectus Supplement.
The aggregate of the Stated Amounts of the Class B
Subclasses as of any Distribution Date is referred to as
the "Class B Stated Amount" and will be equal to the Pool
Adjusted Balance minus the Class A Stated Amount, each as
of the immediately preceding Distribution Date (after
giving effect to any distributions in reduction of Stated
Amount and the allocation of any Excess Special Hazard
Losses, Excess Fraud Losses and Excess Bankruptcy Losses
on such date). The "Offered Class B Stated Amount" as of
any Distribution Date will equal the Initial Stated Amount
thereof less certain distributions and the allocation of
certain losses as described herein. In addition, after the
Stated Amount of the Unoffered Class B CitiCertificates
(the "Unoffered Class B Stated Amount") has been reduced
to zero, the Offered Class B Stated Amount may be subject
to a further reduction such that the Offered Class B
Stated Amount will equal the difference between the Pool
Adjusted Balance and the Class A Stated Amount. On each
Distribution Date, the aggregate Stated Amount of the
CitiCertificates will be no more than the Pool Adjusted
Balance.
CUT-OFF DATE....................... March 1, 1994.
DENOMINATIONS...................... The denominations of the Offered CitiCertificates will be an
Initial Stated Amount of $25,000 and integral multiples of
$1,000 in excess thereof except that one Offered Class B
CitiCertificate may be issued in a different denomination.
</TABLE>
S-4
<PAGE>
<TABLE>
<S> <C>
BOOK-ENTRY FORM.................... The Class A CitiCertificates will be issued in book-entry
form. No person acquiring an interest in the Book-Entry
CitiCertificates (a "Beneficial Owner") will be entitled
to receive a definitive certificate representing such
person's interest in the Trust, except under the limited
circumstances described herein. The Book-Entry
CitiCertificates will be each represented initially by a
single certificate registered in the name of Cede, as the
nominee of DTC which will be the "holder" or
"Certificateholder" of such CitiCertificates, as such
terms are used herein. The rights of Beneficial Owners may
only be exercised through DTC and its participating
organizations, except as otherwise specified herein. See
"DESCRIPTION OF THE OFFERED CITICERTIFICATES--Book-Entry
Registration" and "--Definitive Certificates" in this
Prospectus Supplement.
DEFINITIVE FORM.................... The Offered Class B Citicertificates will be issued in fully
registered, certificated form. See "DESCRIPTION OF THE
OFFERED CITICERTIFICATES--Definitive Certificates" in this
Prospectus Supplement.
CLOSING DATE....................... On or about March 29, 1994.
ISSUER AND SERVICER................ CMSI. The Servicer intends to subcontract its servicing
duties to CMI.
CREDIT ENHANCEMENT................. The rights of holders of the Class B CitiCertificates to
receive distributions will be subordinated to the rights of
holders of the Class A CitiCertificates to receive
distributions to the extent described herein and the
rights of holders of the Unoffered Class B CitiCertifi-
cates to receive distributions will be subordinated to the
rights of holders of the Offered CitiCertificates to
receive distributions to the extent described herein. This
subordination provides a certain amount of protection to
holders of the Class A CitiCertificates (to the extent of
the subordination of the Class B CitiCertificates) and to
holders of the Offered Class B CitiCertificates (to the
extent of the subordination of the Unoffered Class B
CitiCertificates) against delays in the receipt of
scheduled payments of interest and principal and against
losses associated with the liquidation of defaulted
Mortgage Loans and certain losses resulting from the
bankruptcy of a Mortgagor.
The protection afforded holders of the Class A
CitiCertificates by means of this subordination will be
effected in two ways: (i) by the preferential right of
holders of the Class A CitiCertificates to receive, prior
to any distribution being made on any Distribution Date in
respect of the Class B CitiCertificates, the amounts of
interest and principal due holders of the Class A
CitiCertificates on such date and, if necessary, by the
right of such holders to receive future distributions on
the Mortgage Loans that would otherwise have been
allocated to holders of the Class B CitiCertificates and
(ii) by the allocation to holders of the Class B
CitiCertificates of certain losses resulting from the
liquidation of defaulted Mortgage Loans or the bankruptcy
of Mortgagors prior to the allocation of such losses to
holders of the Class A CitiCertificates.
The protection afforded holders of the Offered Class B
CitiCertificates by means of this subordination will be
effected in two ways: (i) by the preferential right of
holders of the Offered Class B CitiCertificates to
receive, prior to any distribution being made on any
Distribution Date, in respect of the Unoffered Class B
CitiCertificates, the amounts of interest and principal
due holders of the Offered Class B CitiCertificates on
such date and, if necessary, by
</TABLE>
S-5
<PAGE>
<TABLE>
<S> <C>
the right of such holders to receive future distributions
on the Mortgage Loans that would otherwise have been
allocated to holders of such Unoffered Class B
CitiCertificates, and (ii) by the allocation to holders of
the Unoffered Class B CitiCertificates of certain losses
resulting from the liquidation of defaulted Mortgage Loans
or the bankruptcy of Mortgagors prior to the allocation of
such losses to holders of the Offered Class B
CitiCertificates.
In addition, in order to increase the period during which
the principal balance of the Class B CitiCertificates
remains available as credit enhancement to the Class A
CitiCertificates, a disproportionate amount of prepayments
and certain unscheduled recoveries with respect to the
Mortgage Loans will be allocated to the Class A
CitiCertificates. This allocation has the effect of
accelerating the amortization of the Class A
CitiCertificates while, in the absence of Realized Losses,
increasing the respective percentage interest in the Trust
evidenced by the Class B CitiCertificates. See "--Distri-
butions in Reduction of Stated Amount of the Offered
CitiCertificates" below.
EXTENT OF LOSS COVERAGE. Realized Losses on Mortgage Loans,
including Realized Losses that are (i) attributable to
Special Hazards not insured against under a standard
hazard insurance policy, (ii) incurred on defaulted
Mortgage Loans as to which there was fraud in the
origination of such Mortgage Loans or (iii) attributable
to certain actions which may be taken by a bankruptcy
court in connection with a Mortgage Loan, including a
reduction by a bankruptcy court of the principal balance
of or the interest rate on a Mortgage Loan or an extension
of its maturity, up to the respective limits described
below, will not be allocated to the Class A
CitiCertificates until the date on which the Stated Amount
of the Class B CitiCertificates has been reduced to zero
(the "Subordination Depletion Date").
Prior to the Subordination Depletion Date, Realized Losses
will be allocated first to the Unoffered Class B
CitiCertificates until the Stated Amount thereof has been
reduced to zero and then to the Offered Class B
CitiCertificates until the Stated Amount thereof has been
reduced to zero.
With respect to any Distribution Date subsequent to the
first Distribution Date, the availability of the credit
enhancement provided by the Class B CitiCertificates will
be affected by the prior reduction of the Stated Amount of
the Class B CitiCertificates, which reduction will result
from (i) the prior allocation of losses to the Class B
CitiCertificates due to the liquidation of defaulted
Mortgage Loans, including losses due to Special Hazards
and fraud losses up to the respective limits referred to
below, (ii) the prior allocation of bankruptcy losses up
to the limit referred to below and (iii) the prior receipt
of distributions in reduction of Stated Amount by holders
of the Class B CitiCertificates. As of the Closing Date,
the amount of losses attributable to Special Hazards,
fraud and bankruptcy that will be absorbed first by
holders of the Unoffered Class B CitiCertificates and then
to the holders of the Offered Class B CitiCertificates
will be approximately 1.00%, 2.00% and 0.04%,
respectively, of the Initial Mortgage Loan Balance. The
exact amount of such
</TABLE>
S-6
<PAGE>
<TABLE>
<S> <C>
losses that will be absorbed by holders of the Class B
CitiCertificates will be at least those amounts required
by the rating agency (or rating agencies) rating the
Offered CitiCertificates as a condition to the issuance of
the ratings set forth below under "--Certificate Ratings."
If losses due to Special Hazards, fraud or bankruptcy
exceed any of such respective amounts prior to the
Subordination Depletion Date, the principal portion of
such losses will be shared pro rata by the Class A
CitiCertificates and the Class B CitiCertificates based on
their respective aggregate outstanding Stated Amounts, and
the interest portion of such losses will be allocated
proportionately between the CitiCertificates and the
Residual Certificates, based on (in the case of the
CitiCertificates) interest accrued thereon or (in the case
of the Residual Certificates) the excess of interest
accrued on the Mortgage Loans over the sum of the
Servicing Fee and interest accrued on the CitiCer-
tificates. The principal portion of any such losses
allocated to the Class A CitiCertificates will be shared
pro rata by the Class A Subclasses based on their then
outstanding Stated Amounts or, in the case of the Class
A-7 CitiCertificates, the Initial Stated Amount thereof,
if lower. After the Subordination Depletion Date, the
principal portion of such losses will be shared pro rata
by the Class A Subclasses based on their then outstanding
Stated Amounts or, in the case of the Class A-7
CitiCertificates, the Initial Stated Amount thereof, if
lower, and the interest portion of such losses will be
shared pro rata by the Class A CitiCertificates and the
Residual Certificates as described above. Under certain
circumstances, the limits set forth above may be reduced.
See "DESCRIPTION OF THE OFFERED
CITICERTIFICATES--Subordination of the Class B CitiCer-
tificates--Allocation of Losses" in this Prospectus
Supplement.
On each Distribution Date an amount equal to the amount of
interest whether or not received (net of the Servicing Fee
and any Prepayment Interest Shortfall allocated to the
Residual Certificates) with respect to the Mortgage Loans
that is in excess of interest accrued at the rate of 6.25%
per annum on the aggregate Stated Amounts of the
CitiCertificates (less the pro rata share of the interest
portion of any Excess Special Hazard Losses, Excess Fraud
Losses and Excess Bankruptcy Losses allocated to the
Residual Certificates, and after the Subordination
Depletion Date, the pro rata share of the interest portion
of any losses or delinquencies allocated to the Residual
Certificates) will be distributed to holders of the
Residual Certificates and will not be available to cover
any current or future shortfalls in amounts available for
distribution to holders of the CitiCertificates.
PRIORITY OF DISTRIBUTIONS.......... Unless and until the Subordination Depletion Date has
occurred, amounts available for distribution on the
CitiCertificates will be distributed to pay the following
amounts in the following order of priority: (1) the Class
A Interest Amount, (2) any Class A Unpaid Interest
Shortfall, (3) the Class A Principal Amount, (4) the
Offered Class B Interest Amount, (5) any Offered Class B
Unpaid Interest Shortfall, (6) the Offered Class B
Principal Distribution Amount and (7) all distributions
with respect to the Unoffered Class B CitiCertificates.
</TABLE>
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On and after the Subordination Depletion Date, all
distributions on the CitiCertificates will be distributed
to holders of the Class A CitiCertificates in accordance
with the preceding priorities.
If the Class A Stated Amount has been reduced to zero before
the Subordination Depletion Date, all distributions on the
CitiCertificates will be distributed to holders of the
Class B CitiCertificates in accordance with the preceding
priorities.
DISTRIBUTIONS OF INTEREST.......... Each of the Class A Subclasses and the Offered Class B
CitiCertificates will accrue interest on their respective
Stated Amounts at the Stated Rate per annum specified on
the cover page hereof at the Stated Rates described below,
net of (i) any Non-Supported Interest Shortfalls, as
described below, and (ii) the interest portion of certain
losses allocated to such Class A Subclass and the Offered
Class B CitiCertificates as described below and under
"DESCRIPTION OF THE OFFERED
CITICERTIFICATES--Distributions of Interest" in this
Prospectus Supplement (in the aggregate, for the Class A
CitiCertificates, the "Class A Interest Amount" and for
the Offered Class B CitiCertificates, the "Offered Class B
Interest Amount"). Interest will be distributable monthly
on each Distribution Date commencing, except with respect
to the Class A-7 CitiCertificates, in April 1994 to
holders of record on the applicable Record Date. The Class
A-7 CitiCertificates are Accrual CitiCertificates.
Distributions of interest on the Class A-7
CitiCertificates will commence on the earlier to occur of
(i) the Distribution Date on which the aggregate Stated
Amount of the Class A-6 CitiCertificates has been reduced
to zero and (ii) the Subordination Depletion Date (the
"Class A-7 Accretion Termination Date"). Prior to the
Class A-7 Accretion Termination Date, interest will accrue
on the Class A-7 CitiCertificates and the amount so
accrued and available for distribution on any Distribution
Date will be added to the Stated Amount thereof on each
Distribution Date. However, distributions in reduction of
Stated Amount of the Class A-7 CitiCertificates may be
made before holders of the Class A-7 CitiCertificates are
entitled to distributions of interest. Interest will
accrue on the Offered CitiCertificates from the first
through the last day of the month preceding the month of
the then current Distribution Date (each such period, an
"Interest Accrual Period"). Interest accrued on the
Offered CitiCertificates during any Interest Accrual
Period will be calculated on the assumption that
distributions in reduction of Stated Amount made on the
Offered CitiCertificates then entitled to such
distributions, the losses allocated to such
CitiCertificates and any accrued interest added to the
Stated Amount of the Class A-7 CitiCertificates on the
Distribution Date occurring during such Interest Accrual
Period, were made, allocated or added on the day
immediately following the last day of the preceding
Interest Accrual Period, and not on the following
Distribution Date when actually made, allocated or added.
See "DESCRIPTION OF THE OFFERED
CITICERTIFICATES--Distribution of Interest" in this
Prospectus Supplement.
The effective yield to holders of the Offered
CitiCertificates will be reduced below the yield otherwise
produced by the respective Stated Rates thereof because
distributions of interest (or, with respect to the Class
A-7 CitiCertificates, any amounts added to the Stated
Amount thereof) and distributions in reduction of Stated
Amount distributable with respect to an Interest Accrual
Period will
</TABLE>
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not be distributed until the 25th day of the month
following the end of such Interest Accrual Period and the
amount distributable in reduction of Stated Amount on the
related Distribution Date will not accrue interest during
such delay.
To the extent that collections of interest from Mortgagors
on account of full or partial principal prepayments on
Mortgage Loans are less than one full month's interest at
the applicable Note Rate ("Prepayment Interest
Shortfalls"), such Prepayment Interest Shortfalls will be
paid by the Servicer to the extent of its Servicing Fee
received with respect to the related Distribution Date.
The aggregate Prepayment Interest Shortfalls with respect to
a Distribution Date will be allocated proportionately,
between the CitiCertificates and the Residual
Certificates, based on (in the case of the
CitiCertificates) interest accrued thereon or (in the case
of the Residual Certificates) the excess of interest
accrued on the Mortgage Loans over the sum of the
Servicing Fee and interest accrued on the
CitiCertificates. Any excess of the amount of aggregate
Prepayment Interest Shortfalls so allocated to the
CitiCertificates over the Servicing Fee (the
"Non-Supported Interest Shortfall") will be allocated
among the CitiCertificates, proportionately on the basis
of interest accrued. The amount, if any, of the Servicing
Fee in excess of the amount of aggregate Prepayment
Interest Shortfalls allocated to the CitiCertificates will
be paid to the Residual Certificates up to the amount of
Prepayment Interest Shortfall allocated to the Residual
Certificates.
In the unlikely event that on a particular Distribution Date
the Pool Distribution Amount is less than the aggregate
amount of interest accrued (net of any Non-Supported
Interest Shortfall and the interest portion of certain
losses allocable to the Class A Subclasses) on each Class
A Subclass, including any accrued interest to be added to
the Stated Amount of the Class A-7 CitiCertificates (the
shortfall allocable to each such Class A Subclass, its
respective "Class A Subclass Interest Shortfall Amount"),
the aggregate amount of the shortfall (the "Class A Unpaid
Interest Shortfall") will be carried forward and added to
the amount distributable to holders of Class A
CitiCertificates until distribution thereof is made as
provided below. Any Class A Unpaid Interest Shortfall will
be allocated among the Class A Subclasses pro rata on the
basis of the respective amounts of accrued interest
thereon. In such case, an amount, if any, equal to the
Accretion Amount would be distributed to the Accretion
Directed CitiCertificates then entitled to receive
distributions in reduction of Stated Amount as described
below under "Distributions in Reduction of Stated Amount
of the Offered CitiCertificates," notwithstanding that the
holders of the Class A CitiCertificates have received less
than the full amount of interest accrued thereon during
the related Interest Accrual Period. No interest will
accrue on the amount of any Class A Unpaid Interest
Shortfall.
The "Accretion Amount" with respect to any Distribution Date
prior to the Class A-7 Accretion Termination Date will be
equal to the portion of the Class A Interest Amount on
such Distribution Date allocated to the Class A-7
CitiCertificates less the Class A Subclass Interest
Shortfall Amount allocated to the Class A-7 CitiCer-
tificates for such Distribution Date.
</TABLE>
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On each Distribution Date, funds in the Certificate Account
available for payment on any Class A Unpaid Interest
Shortfall will be allocated among the then outstanding
Class A Subclasses pro rata in accordance with their
respective unpaid Class A Subclass Interest Shortfall
Amounts immediately prior to such Distribution Date. Funds
which become available to pay any Class A Subclass Inter-
est Shortfall Amount previously allocated to the Class A-7
CitiCertificates shall not be distributed (prior to the
Class A-7 Accretion Termination Date) to the Class A-7
CitiCertificates but will instead be distributed in
reduction of Stated Amount of the Accretion Directed
CitiCertificates then entitled to receive such
distribution and the Stated Amount of the Class A-7
CitiCertificates will be increased by such amount.
In the event that on a particular Distribution Date the Pool
Distribution Amount, net of amounts distributable on the
Class A CitiCertificates, is less than the aggregate
amount of interest accrued on the Offered Class B
CitiCertificates (net of any Non-Supported Interest
Shortfall and the interest portion of certain losses
allocable to the Offered Class B CitiCertificates), such
shortfall (the "Offered Class B Unpaid Interest
Shortfall") will be carried forward and added to the
amount distributable to holders of the Offered Class B
CitiCertificates until distribution thereof is made as de-
scribed herein under "DESCRIPTION OF THE OFFERED
CITICERTIFICATES--Distributions of Interest." No interest
will accrue on the amount of any Offered Class B Unpaid
Interest Shortfall.
DISTRIBUTIONS IN REDUCTION OF
STATED AMOUNT OF THE OFFERED
CITICERTIFICATES................. Distributions in reduction of Stated Amount will be made on
each Distribution Date to each Class A Subclass and to the
Offered Class B CitiCertificates then entitled to receive
such distributions in accordance with the priorities set
forth below. Amounts distributed in reduction of Stated
Amount of any Class A Subclass will be allocated pro rata
to all CitiCertificates of such Class A Subclass until the
aggregate amount of such distributions has reduced the
Stated Amount of each such Class A Subclass to zero, and
amounts distributed in reduction of Stated Amount of the
Offered Class B CitiCertificates will be allocated pro
rata to all CitiCertificates of such Class B Subclass
until the aggregate amount of such distributions has
reduced the Stated Amount of the Offered Class B
CitiCertificates to zero.
On or prior to the Class A-7 Accretion Termination Date, the
Accretion Distribution Amount will be allocated to the
Accretion Directed CitiCertificates FIRST, concurrently,
65.1165551771394% to the Class A-2 CitiCertificates,
26.5257371397519% to the Class A-3 CitiCertificates and
8.3577076831087% to the Class A-4 CitiCertificates until
they each have received their respective TAC Balance
Amounts (as described below) for such Distribution Date;
SECOND, to the Class A-3, Class A-4, Class A-5 and Class
A-6 CitiCertificates in the priorities and in the
percentages set forth in clauses SECOND through FOURTH in
the next paragraph; THIRD, to the Class A-7
CitiCertificates until the Stated Amount thereof has been
reduced to zero; and FOURTH, to the Accretion Directed
CitiCertificates in the priorities and in the percentages
set forth in clauses FIRST and SECOND without regard to
their TAC Balance Amounts.
</TABLE>
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Except under certain circumstances described in the last
paragraph under this heading, the Class A Principal Amount
will be allocated on each Distribution Date FIRST,
concurrently, (i) 19.7331663353936% to the Class A-1
CitiCertificates, and (ii) 80.2668336646064% concurrently,
65.1165551771394% to the Class A-2 CitiCertificates,
26.5257371397519% to the Class A-3 CitiCertificates and
8.3577076831087% to the Class A-4 CitiCertificates until
they each have received their respective TAC Balance
Amounts (as described below) for such Distribution Date;
SECOND, (i) concurrently, 19.7331663353936% to the Class
A-1 CitiCertificates (to the extent such Class A Subclass
is then outstanding) and (ii) the remainder concurrently,
32.9153268994053% to the Class A-3 CitiCertificates and
67.0846731005947% to the Class A-4 CitiCertificates until
they each have received their respective TAC Balance
Amounts for such Distribution Date; THIRD, to the Class
A-5 CitiCertificates until they have received their TAC
Balance Amount for such Distribution Date; FOURTH, to the
Class A-6 CitiCertificates until they have received their
TAC Balance Amount for such Distribution Date; FIFTH, to
the Class A-7 CitiCertificates until the Stated Amount
thereof has been reduced to zero; SIXTH, concurrently, (i)
19.7331663353936% to the Class A-1 CitiCertificates, and
(ii) 80.2668336646064% concurrently, 65.1165551771394% to
the Class A-2 CitiCertificates, 26.5257371397519% to the
Class A-3 CitiCertificates and 8.3577076831087% to the
Class A-4 CitiCertificates, without regard to their TAC
Balance Amounts until the Stated Amounts of the Class A-1
and Class A-2 CitiCertificates have been reduced to zero;
SEVENTH, concurrently, 32.9153268994053% to the Class A-3
CitiCertificates and 67.0846731005947% to the Class A-4
CitiCertificates, without regard to their TAC Balance
Amounts until the Stated Amounts of the Class A-3 and
Class A-4 CitiCertificates have been reduced to zero;
EIGHTH, to the Class A-5 CitiCertificates without regard
to their TAC Balance Amount until the Stated Amount
thereof has been reduced to zero; and NINTH, to the Class
A-6 CitiCertificates without regard to their TAC Balance
Amount until the Stated Amount thereof has been reduced to
zero.
The "TAC Balance Amount" for each Class A Subclass of TAC
CitiCertificates for any Distribution Date will be equal
to the amount, if any, required to reduce the outstanding
Stated Amount of such Class A Subclass (prior to giving
effect to distributions in reduction thereof to be made on
such Distribution Date), to the Stated Amount for such
Distribution Date as set forth in the table on pages S-29
through S-31 hereof (each such balance, a "Targeted
Balance"). See "DESCRIPTION OF THE OFFERED CITICER-
TIFICATES--Distributions in Reduction of Stated Amount of
the TAC CitiCertificates" in this Prospectus Supplement.
The aggregate amount of principal to which holders of the
Class A CitiCertificates are entitled each month will be
comprised of the Class A Percentage of the scheduled
payments of principal on the Mortgage Loans and the Class
A Prepayment Percentage of certain unscheduled recoveries
and prepayments of principal on the Mortgage Loans. See
"DESCRIPTION OF THE OFFERED
CITICERTIFICATES--Distributions in Reduction of Stated
Amount" in this Prospectus Supplement.
</TABLE>
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Until the date on which the aggregate Stated Amount of the
Class A CitiCertificates has been reduced to zero, the
amounts to be distributed each month in reduction of the
Stated Amount of the Offered Class B CitiCertificates (the
"Offered Class B Principal Distribution Amount") will be
the lesser of (i) the Pool Distribution Amount after
distribution of all amounts distributable on such Dis-
tribution Date on the Class A CitiCertificates and all
amounts senior in priority to distribution in reduction of
Stated Amount of the Offered Class B CitiCertificates as
set forth above under "--Priority of Distributions" and
(ii) the Offered Class B Optimal Principal Amount.
The "Pool Distribution Amount" for a particular Distribution
Date will be equal to the aggregate of all previously
undistributed amounts of principal (including any full or
partial principal prepayments) and interest in respect of
the Mortgage Loans received and posted after the Cut-Off
Date and before the related Determination Date (including,
with respect to such Distribution Date, amounts advanced
by the Servicer or the Trustee (in its individual
capacity), advanced from amounts in the Certificate
Account or paid by the Servicer with respect to Prepayment
Interest Shortfalls), excluding in each case (i) payments
due on or before the Cut-Off Date, (ii) full or partial
principal prepayments posted during the month of such
Distribution Date and any related payments of interest
representing all or a portion of interest for such month,
(iii) payments representing early receipts of scheduled
principal and interest due subsequent to the first day of
the month in which such Distribution Date occurs, (iv) an
amount equal to the amount of interest whether or not
received (net of the Servicing Fee and any Prepayment
Interest Shortfall allocated to the Residual Certificates)
with respect to the Mortgage Loans that is in excess of
interest accrued at the rate of 6.25% per annum on the
aggregate Stated Amounts of the CitiCertificates (less the
pro rata share of the interest portion of Excess Special
Hazard Losses, Excess Fraud Losses and Excess Bankruptcy
Losses allocated to the Residual Certificates and after
the Subordination Depletion Date, the pro rata share of
the interest portion of any losses or delinquencies
allocated to the Residual Certificates), (v) the portion
of interest received on each Mortgage Loan representing
the Servicing Fee, (vi) the portion of the liquidation
proceeds of defaulted Mortgage Loans representing the Ser-
vicing Fee and (vii) receipts of overdue amounts with
respect to which the Servicer or the Trustee (in its
individual capacity) has made advances and certain other
amounts reimbursable to the Servicer. See "DESCRIPTION OF
CERTIFICATES--Distributions to Cer-
tificateholders--General" in the Prospectus.
The allocation of a disproportionate amount of prepayments
and certain recoveries as described above to the Class A
CitiCertificates in reduction of Stated Amount will have
the effect of accelerating the amortization of the Class A
CitiCertificates while, in the absence of Realized Losses,
increasing the respective percentage interest in the Trust
evidenced by the Class B CitiCertificates. Increasing the
respective percentage interest of the Class B
CitiCertificates relative to that of the Class A
CitiCertificates is intended to preserve the availability
of the subordination provided by the Class B
CitiCertificates.
</TABLE>
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Scheduled payments on the Mortgage Loans will be sufficient
to make timely distributions of interest on the Offered
CitiCertificates and to reduce the Stated Amount of each
Class A Subclass and the Offered Class B CitiCertificates
to zero not later than its Last Scheduled Distribution
Date set forth on the cover page hereof. See "DESCRIPTION
OF CERTIFICATES--Distributions to Certificateholders" in
the Prospectus.
In the event that on any Distribution Date the Offered Class
B Subordination Percentage is less than the Offered Class
B Subordination Percentage on the Closing Date, then the
Unoffered Class B CitiCertificates will not be entitled to
any distributions in reduction of Stated Amount on such
Distribution Date and all of such distributions will
instead be allocated in reduction of the Stated Amount of
the Offered Class B CitiCertificates. The "Offered Class B
Subordination Percentage" is the percentage obtained by
dividing the
Stated Amount of the Unoffered Class B CitiCertificates by
the Pool Adjusted Balance, each as of the immediately
preceding Distribution Date (after giving effect to any
distributions in reduction of Stated Amount and any
allocation of losses on such date). The Offered Class B
Subordination Percentage on the Closing Date is expected
to be between 0.55% and 0.95%.
On any Distribution Date on or after the Subordination
Depletion Date, funds available for distribution in
reduction of Stated Amount of the Class A CitiCertificates
will be distributed pro rata to each Class A Subclass
notwithstanding the priorities described in the third
paragraph under this heading. Under the circumstances de-
scribed in this paragraph, the amount allocated to each
Class A Subclass will be distributed pro rata among
holders of CitiCertificates of such Class A Subclass.
LAST SCHEDULED DISTRIBUTION
DATE............................ The Last Scheduled Distribution Date for the Offered
CitiCertificates coincides with the date on which the last
distribution in respect of the Mortgage Loans is scheduled
to be made. See "DESCRIPTION OF THE OFFERED
CITICERTIFICATES--Weighted Average Lives of the Offered
CitiCertificates" in this Prospectus Supplement. Since the
rate of payment (including prepayments) of principal on
the Mortgage Loans can be expected to exceed the scheduled
rate of payments, and could exceed the scheduled rate by a
substantial amount, the actual final Distribution Date for
the Offered CitiCertificates may be earlier, and could be
substantially earlier, than the Last Scheduled
Distribution Date.
The Offered CitiCertificates are subject to early
termination by CMSI as described under "DESCRIPTION OF THE
OFFERED CITICERTIFICATES--Optional Termination" in this
Prospectus Supplement.
PREPAYMENT AND YIELD
CONSIDERATIONS.................. The yield to maturity and weighted average lives of the
Class A CitiCertificates and the Offered Class B
CitiCertificates will be sensitive in varying degrees to,
among other things, the rate of prepayment of the Mortgage
Loans, the allocation of such prepayments to the Class A
and Offered Class B CitiCertificates, and the timing and
extent of losses, if any, allocated to the Class A and
Offered Class B CitiCertificates. No representation is
made as to whether the Mortgage Loans will prepay at any
particular rate. See
</TABLE>
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"DESCRIPTION OF THE OFFERED CITICERTIFICATES--Weighted
Average Lives of the Offered CitiCertificates" and
"--Prepayment and Yield Considerations" in this Prospectus
Supplement.
AN INVESTOR THAT PURCHASES ANY OFFERED CITICERTIFICATES AT A
DISCOUNT SHOULD CAREFULLY CONSIDER THE RISK THAT A SLOWER
THAN ANTICIPATED RATE OF PRINCIPAL PAYMENTS ON THE
MORTGAGE LOANS WILL RESULT IN AN ACTUAL YIELD THAT IS
LOWER THAN SUCH INVESTOR'S EXPECTED YIELD. AN INVESTOR
THAT PURCHASES ANY OFFERED CITICERTIFICATE AT A PREMIUM
SHOULD CONSIDER THE RISK THAT A FASTER THAN ANTICIPATED
RATE OF PRINCIPAL PAYMENTS ON THE MORTGAGE LOANS WILL
RESULT IN AN ACTUAL YIELD THAT IS LOWER THAN SUCH
INVESTOR'S EXPECTED YIELD.
THE YIELD TO MATURITY ON THE OFFERED CLASS B
CITICERTIFICATES WILL BE MORE SENSITIVE TO LOSSES DUE TO
LIQUIDATIONS OF THE MORTGAGE LOANS (AND THE TIMING
THEREOF) THAN THE CLASS A CITICERTIFICATES, IN THE EVENT
THAT THE STATED AMOUNT OF THE UNOFFERED CLASS B
CITICERTIFICATES HAS BEEN REDUCED TO ZERO. SEE
"DESCRIPTION OF THE OFFERED CITICERTIFICATES--Prepayment
and Yield Considerations" and "--Yield Considerations With
Respect to the Offered Class B CitiCertificates" in this
Prospectus Supplement.
THE MORTGAGE LOANS
A. GENERAL...................... The Mortgage Loans will have mortgage rates ranging from
6.50% to 12.375% per annum. The initial weighted average
mortgage rate of the Mortgage Loans is expected to be at
least 7.18% but no more than 7.58% per annum. The weighted
average remaining term to stated maturity of the Mortgage
Loans will be at least 340 months but no more than 346
months.
The Mortgage Loans will consist of 20-to 30-year fixed rate
conventional mortgage loans originated or acquired by CMI
or originated by Citibank, as the case may be. Mortgage
Loans acquired by CMI include Mortgage Loans originated or
acquired by CFSB. See "DESCRIPTION OF THE POOL AND THE
MORTGAGED PROPERTIES" in this Prospectus Supplement and
"THE POOLS--Mortgage Loans" in the Prospectus for
additional information concerning the Mortgage Loans.
B. CERTIFICATE ACCOUNT.......... All payments received in respect of the Mortgage Loans,
beginning with the April 1994 distribution, will be remitted
directly to a certificate account (the "Certificate
Account") to be established with the Trustee on the
Closing Date as part of the assets of the REMIC. Such
payments will be available for distributions in reduction
of Stated Amount of, and of interest on, the
CitiCertificates on the Distribution Date on which such
funds are remitted to the Certificate Account.
ALLOCATION OF LOSSES.............. Shortfalls in receipts of interest on the Mortgage Loans and
receipts of principal with respect to the Mortgage Loans in
an amount less than the decrease in the Pool Adjusted
Balance from the prior Distribution Date with respect to a
Distribution Date may arise due to losses incurred on
Liquidated Loans and to delinquencies not advanced by the
Servicer or the Trustee (in its individual capacity).
Realized Losses (other than Excess Special Hazard Losses,
Excess Fraud Losses or Excess Bankruptcy Losses) will not
be allocated to holders of the Class A CitiCertificates
until the Subordination Depletion Date. Prior to such
time, such Realized Losses will be allocated first to the
Unoffered Class B CitiCertificates until the
</TABLE>
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<S> <C>
Stated Amount of the Unoffered Class B CitiCertificates
has been reduced to zero and second to the Offered Class B
CitiCertificates until the Stated Amount thereof has been
reduced to zero.
The principal portion of any Excess Special Hazard Loss,
Excess Fraud Loss or Excess Bankruptcy Loss will be
allocated between the Class A and Class B CitiCertificates
pro rata based on their respective aggregate Stated
Amounts, and among the Class A and Class B Subclasses,
respectively, as to the amounts allocated to the Class A
and Class B CitiCertificates pro rata based on, with
respect to each Class A and Class B Subclass, the then
current Stated Amount of such Class A or Class B Subclass
or, in the case of the Class A-7 CitiCertificates, the
Initial Stated Amount thereof, if lower, and among the
outstanding Class A and Class B CitiCertificates pro rata
within each Class A or Class B Subclass, as the case may
be. Any such allocation will be accomplished by reducing
the outstanding Stated Amount of each Class A Subclass and
each Class B Subclass and the outstanding Stated Amounts
of each Class A CitiCertificate within each Class A
Subclass and each Class B CitiCertificate within each
Class B Subclass by the appropriate pro rata share of any
such principal losses.
On each Distribution Date that occurs on or after the
Subordination Depletion Date, holders of Class A
CitiCertificates will generally receive their respective
pro rata share of net Liquidation Proceeds realized on
Liquidated Loans (after reimbursement to the Servicer and
the Trustee of any previously unreimbursed advances made
in respect of such loans).
ADVANCES.......................... The Servicer intends to make advances in respect of
delinquencies on the Mortgage Loans in an amount equal to
the delinquent payments to the extent the Servicer
determines that such advances will be recoverable from
future payments and collections on the Mortgage Loans. The
Servicer will contract with the Trustee (in its individual
capacity and not as Trustee) for the limited purpose of
providing for advances by the Trustee (in such individual
capacity) in respect of delinquencies to the extent that
the Servicer fails to make such advances. The Trustee (in
such individual capacity) will make such advances to the
extent it determines that such advances will be
recoverable from future payments and collections on the
related Mortgage Loans. Recoveries in respect of amounts
advanced will be applied to reimbursement of the ad-
vances. On each Distribution Date, the Servicer and the
Trustee will be entitled to withdraw funds from the
Certificate Account (a) in reimbursement of all
unreimbursed advances deemed by the Servicer to be
nonrecoverable and (b) in reimbursement of all other
unreimbursed advances made by them, but only (in the case
of clause (b)) from funds not distributable to holders of
CitiCertificates on such Distribution Date.
OPTIONAL TERMINATION.............. Holders of CitiCertificates may receive distributions
reducing the Stated Amount of such CitiCertificates to zero
in connection with a termination of the Trust made at the
option of CMSI on any Distribution Date after which the
Pool Adjusted Balance is less than 5% of the Initial
Mortgage Loan Balance. Any such final distribution in
reduction of Stated Amount with respect to the
CitiCertificates will be in an amount equal to the
outstanding Stated Amount thereof
</TABLE>
S-15
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<S> <C>
together with accrued interest thereon. See "DESCRIPTION
OF THE OFFERED CITICERTIFICATES--Optional Termination" in
this Prospectus Supplement.
RECORD DATE....................... The Record Date for each Distribution Date will be the close
of business on the last day of the month preceding the month
of the applicable Distribution Date.
CERTAIN FEDERAL INCOME TAX
CONSEQUENCES.................... The Trust will elect to be treated and will qualify as a
REMIC for purposes of Sections 860A through 860G of the
Internal Revenue Code of 1986, as amended (the "Code").
The Offered CitiCertificates will be designated as regular
interests in the REMIC and generally will be treated as
newly originated debt instruments for federal income tax
purposes. Beneficial Owners (or holders, in the case of
the Offered Class B CitiCertificates) of the Offered
CitiCertificates will be required to report interest
income on such Offered CitiCertificates in accordance with
the accrual method of accounting. The Class A-7
CitiCertificates will be issued with original issue
discount in an amount equal to the excess of all
distributions of principal and interest (whether current
or accrued) expected to be received thereon over their
issue price (including accrued interest). It is
anticipated that the Class A-2, Class A-3, Class A-4,
Class A-5 and Class A-6 CitiCertificates and the Offered
Class B CitiCertificates will be issued with original
issue discount in an amount equal to the excess of their
Initial Stated Amounts (plus accrued interest) over their
respective issue prices (including accrued interest). It
is further anticipated that the Class A-1 CitiCertificates
will be issued at a premium for federal income tax
purposes.
The Prepayment Assumption on the Mortgage Loans, as
described in the Prospectus, that is to be used, among
other things, in determining the rate of accrual of
original issue discount, and that may be used by the
Beneficial Owner (or holder, in the case of an Offered
Class B CitiCertificate) of an Offered CitiCertificate to
amortize premium, is 350% of the Prepayment Model's (as
defined herein) assumed prepayment rates. See "DESCRIPTION
OF THE OFFERED CITICERTIFICATES--Weighted Average Lives of
the Offered CitiCertificates" in this Prospectus
Supplement. No representation is made as to the rate at
which the Mortgage Loans will prepay.
The Offered CitiCertificates will be treated as "qualifying
real property loans" for mutual savings banks and domestic
building and loan associations, "regular interests in a
REMIC" for domestic building and loan associations, and
"real estate assets" for real estate investment trusts, to
the extent described in the Prospectus. See "CERTAIN
FEDERAL INCOME TAX CONSEQUENCES" in the Prospectus.
ERISA CONSIDERATIONS.............. A fiduciary of any employee benefit plan subject to the
Employee Retirement Income Security Act of 1974, as amended
("ERISA"), or the corresponding provisions of the Code (an
"ERISA Plan") or a governmental plan, subject to any
federal, state or local law ("Similar Law"), which is, to
a material extent, similar to the foregoing provisions of
ERISA or the Code (collectively, with an ERISA Plan, a
"Plan"), should carefully review with its own legal
advisors whether the purchase or holding of the Offered
CitiCertificates could give rise to a transaction
prohibited or otherwise impermissible under ERISA, the
Code or Similar Law, and should carefully
</TABLE>
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<TABLE>
<S> <C>
review the discussion in this Prospectus Supplement and
the Prospectus under the caption "ERISA CONSIDERATIONS,"
especially the discussion thereunder of the potential
application of PTE 83-1 (as defined therein).
On June 6, 1990, the Department of Labor issued to the
Underwriter Prohibited Transaction Exemption 90-32 (the
"Exemption"), which Exemption generally was intended to
apply to the purchase and holding by ERISA Plans of
securities such as the Class A CitiCertificates, which
represent beneficial interests in pass-through trusts that
meet the requirements of the Exemption. The Exemption
should apply to the acquisition, holding and resale of the
Class A CitiCertificates by an ERISA Plan, provided that
specified conditions (certain of which are described
herein, including the condition that the ERISA Plan be an
"accredited investor" (as defined in Rule 501(a)(1) of
Regulation D of the Securities and Exchange Commission
(the "Commission") under the Securities Act of 1933)) are
met. See "ERISA CONSIDERATIONS" in this Prospectus
Supplement.
Neither the Exemption nor PTE 83-1 apply to the purchase or
holding of securities such as the Offered Class B
CitiCertificates because such CitiCertificates are
subordinated to the Class A CitiCertificates. Accordingly,
Plans may not purchase the Offered Class B
CitiCertificates except upon the delivery of an opinion of
counsel or otherwise as provided herein. See "CERTAIN
INVESTMENT CONSIDERATIONS FOR PURCHASERS OF OFFERED CLASS
B CITICERTIFICATES--Restrictions on Transfer" and "ERISA
CONSIDERATIONS" in this Prospectus Supplement.
TRUSTEE........................... State Street Bank and Trust Company.
CERTIFICATE RATINGS............... It is a condition to the issuance of the Offered
CitiCertificates that the Class A CitiCertificates be rated
"AAA" by Standard & Poor's Ratings Group ("S&P") and "Aaa"
by Moody's Investors Service, Inc. ("Moody's") and that
the Offered Class B CitiCertificates be rated at least
"Baa3" by Moody's. Ratings of the Offered CitiCertificates
other than those indicated above have not been requested.
However, there can be no assurance as to whether another
rating agency will rate the Offered CitiCertificates, and,
if so, what ratings would be so assigned to the Offered
CitiCertificates. The ratings so assigned may be lower
than those indicated above.
The ratings of the Offered CitiCertificates should be
evaluated independently from similar ratings on other
types of securities. A security rating is not a
recommendation to buy, sell or hold securities and may be
subject to revision or withdrawal at any time by the
assigning rating agency.
</TABLE>
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DESCRIPTION OF THE POOL
AND THE MORTGAGED PROPERTIES
The Pool to be evidenced by the CitiCertificates will include Mortgage Loans
evidenced by mortgage notes with an aggregate Adjusted Balance as of the Cut-Off
Date of approximately $258,891,390. This amount is subject to a permitted upward
or downward variance of up to 5.0%.
The "Adjusted Balance" of any Mortgage Loan as of the first day of any month
is the scheduled principal balance thereof as of the close of business on such
day (whether or not any scheduled payments have been received and before any
adjustment to the related amortization schedule by reason of bankruptcy (other
than a Deficient Valuation)), less any Principal Prepayments thereon or in
respect thereof received or posted prior to the close of business on the
business day preceding such first day (or, in the case of the Cut-Off Date, any
Principal Prepayments thereon or in respect thereof received or posted prior to
the close of business on the Cut-Off Date).
A detailed description (the "Detailed Description") of the Mortgage Loans
will be available at the time of issuance of the CitiCertificates. The Detailed
Description will specify the Initial Mortgage Loan Balance as of the Cut-Off
Date and will also set forth tables reflecting the following information
regarding the Mortgage Loans: years of origination, types of dwellings on the
underlying properties, sizes of Mortgage Loans, distribution of Mortgage Loans
by loan-to-value ratios, mortgage rates and geographical distribution of
Mortgage Loans by state. The Detailed Description will also specify the Special
Hazard Loss Amount, Fraud Loss Amount and Bankruptcy Loss Amount as of the
Cut-Off Date, the aggregate Initial Stated Amounts of the Class A
CitiCertificates, the Offered Class B CitiCertificates and the Unoffered Class B
CitiCertificates, the Class B CitiCertificate Percentage and the Offered Class B
Subordination Percentage as of the Cut-Off Date. The information contained in
the Detailed Description will be set forth in a report on Form 8-K which will be
filed with the Commission within 15 days of the issuance of the
CitiCertificates.
The following paragraphs set forth detailed information as of the Cut-Off
Date with respect to the Mortgage Loans expected to be in the Pool. To the
extent that the Mortgage Loans differ from the descriptions contained herein,
immaterial variances in such information may result.
The weighted average Note Rate of the Mortgage Loans as of the Cut-Off Date
will be at least 7.18% but no more than 7.58% per annum. The Mortgage Loans will
have Note Rates of at least 6.50% but no more than 12.375% per annum. The
weighted average remaining term to stated maturity of the Mortgage Loans as of
the Cut-Off Date will be at least 340 months but no longer than 346 months. All
of the Mortgage Loans will have original maturities of 20 to 30 years. None of
the Mortgage Loans will have been originated prior to September 1, 1973 or after
March 1, 1994. None of the Mortgage Loans will have a scheduled maturity later
than March 1, 2024.
The Mortgage Loans will have the following additional characteristics as of
the Cut-Off Date (expressed as a percentage of the aggregate Adjusted Balance of
the Mortgage Loans having such characteristics relative to the Initial Mortgage
Loan Balance):
At least 85% of the Mortgage Loans will be Mortgage Loans originated using
loan underwriting policies effective April 1, 1991 which require, among other
things, proof of income and liquid assets and telephone verification of
employment. See "LOAN UNDERWRITING POLICIES AND LOSS AND DELINQUENCY
CONSIDERATIONS" in the Prospectus.
At least 35% of the Mortgage Loans will be Mortgage Loans each having an
Adjusted Balance of less than $250,000.
At least 90% of the Mortgage Loans will be Mortgage Loans each having an
Adjusted Balance of less than $500,000.
No more than 10% of the Mortgage Loans will be Mortgage Loans each having an
Adjusted Balance of at least $500,000 but less than $1,000,000.
No more than 20% of the Mortgage Loans will have had loan-to-value ratios at
origination in excess of 80%; no more than 1% will have had loan-to-value ratios
at origination in excess of 90% and none of the Mortgage Loans will have had
loan-to-value ratios at origination in excess of 95%. The weighted average
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loan-to-value ratio at origination of the Mortgage Loans as of the Cut-Off Date
will be no more than 76%. For more information on Mortgage Loans having
loan-to-value ratios at origination in excess of 80%, see "APPENDIX A: THE
MORTGAGE LOANS AND CITIMORTGAGE CERTIFICATES--The Mortgage Loans--General" in
the Prospectus.
No more than 15% of the Mortgage Loans were originated between 1986 and
1992.
At least 95% of the Mortgage Loans will be secured by one-family dwellings.
No more than 15% of the Mortgage Loans will be secured by condominiums,
shares issued by cooperative housing corporations, townhouses and rowhouses.
No more than 5% of the Mortgage Loans will be secured by Mortgaged
Properties located in any one zip code.
No more than 25%, 20% and 15% of the Mortgage Loans will be secured by
Mortgaged Properties located in California, New York and Virginia, respectively.
No more than 10% of the Mortgage Loans will be secured by Mortgaged Properties
located in any other state.
A portion of the Mortgaged Properties located in California are located in
areas which were affected by the earthquake on January 17, 1994. Substantially
all of such Mortgaged Properties have been checked for exterior damage. Based on
such efforts to determine the condition of the Mortgaged Properties, CMI
believes that Mortgaged Properties representing less than 1% of the Initial
Mortgage Loan Balance warrant further review. The Pooling Agreement contains a
representation by CMI that each Mortgaged Property is in good repair and free of
material damage as of the Closing Date. If that representation is determined to
be inaccurate in respect of a Mortgage Loan, and such inaccuracy has a material
and adverse effect on the interests of the Certificateholders in such Mortgage
Loan, CMI is obligated to repurchase or substitute a comparable mortgage loan
for such Mortgage Loan. If any such repurchase is made, such repurchase will be
treated as a prepayment of the related Mortgage Loan and, consequently, may
affect the yields and the weighted average lives of the CitiCertificates.
At least 90% of the Mortgage Loans will be determined by the Issuer to be
secured by a Mortgage on the primary residence of the borrower. No more than 5%
of the Mortgage Loans will be secured by investment properties. See " APPENDIX
A: THE MORTGAGE LOANS AND CITIMORTGAGE CERTIFICATES--The Mortgage Loans--
General" in the Prospectus.
CERTAIN INVESTMENT CONSIDERATIONS
FOR PURCHASERS OF OFFERED CLASS B CITICERTIFICATES
Investors should consider, among other things, the factors discussed below
in connection with any purchase of Offered Class B CitiCertificates.
SUBORDINATION
The Offered Class B CitiCertificates are subordinated in right of payments
to the Class A CitiCertificates as described herein. Holders of the Class A
CitiCertificates will have a preferential right to receive out of the Pool
Distribution Amount for a Distribution Date, prior to any distribution being
made on such date in respect of the Offered Class B CitiCertificates, all
distributions due on the Class A CitiCertificates. Shortfalls in distributions
in reduction of Stated Amount of the Class A CitiCertificates will be applied
first to the Stated Amount of the Unoffered Class B CitiCertificates and then to
the Offered Class B CitiCertificates before being applied to the Stated Amount
of the Class A CitiCertificates. See "DESCRIPTION OF THE OFFERED
CITICERTIFICATES" in this Prospectus Supplement.
DELINQUENCIES AND ADVANCES
The Servicer may, but is not obligated to, make advances in respect of
delinquent scheduled payments of principal of or interest on the Mortgage Loans.
The Servicer intends to make advances to the extent the Servicer determines the
amounts of such advances will be recoverable from future payments and
collections on the related Mortgage Loans. The Servicer will contract with the
Trustee (in its individual capacity and not as Trustee) for the limited purpose
of providing for advances by the Trustee (in such individual capacity) in
respect of delinquencies to the extent that the Servicer fails to make any such
advance. The Trustee (in such
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individual capacity) will make such advances to the extent it determines that
such advances will be recoverable from future payments and collections on the
related Mortgage Loans. The Offered Class B CitiCertificates will have the
benefit of all such advances. To the extent that the Servicer and the Trustee
(in such individual capacity) do not make such advances, the only source of cash
for distributions to holders of CitiCertificates will be the Pool Distribution
Amount and therefore holders of the Offered Class B CitiCertificates may not
receive any payment for certain Distribution Dates.
ALLOCATION OF LOAN LOSSES
LIQUIDATED LOANS: Realized Losses on the Mortgage Loans as a result of
losses realized on Liquidated Loans will be allocated first to the Unoffered
Class B CitiCertificates up to the Stated Amount thereof and accrued interest
thereon and then to the Offered Class B CitiCertificates up to the Stated Amount
thereof and accrued interest thereon. Holders of the Class A CitiCertificates
will be entitled to receive the Class A Prepayment Percentage of the principal
portion of net liquidation proceeds.
SPECIAL HAZARD LOSSES: Until the Special Hazard Termination Date, all
Special Hazard Losses will reduce the Stated Amount of, and accrued interest on,
the Class B CitiCertificates, in the order of priority set forth in the
preceding paragraph. Holders of the Class A CitiCertificates will be entitled to
receive, in respect of each Mortgage Loan that becomes a Special Hazard Mortgage
Loan in the preceding month, an amount equal to the Class A Prepayment
Percentage of the principal portion of the related net liquidation proceeds.
After the Special Hazard Termination Date, the Class A and Class B
CitiCertificateholders will bear their pro rata share of the principal portion
of Excess Special Hazard Losses. Excess Special Hazard Losses are Special Hazard
Losses in excess of the Special Hazard Loss Amount, which will initially be
equal to approximately 1.00% of the Initial Mortgage Loan Balance. See
"DESCRIPTION OF THE OFFERED CITICERTIFICATES-- Subordination of the Class B
CitiCertificates--Allocation of Losses" in this Prospectus Supplement.
FRAUD LOSSES: Until the Fraud Coverage Termination Date, all Fraud Losses
will reduce the Stated Amount of, and accrued interest on, the Class B
CitiCertificates, in the order of priority set forth in the second preceding
paragraph. Holders of the Class A CitiCertificates will be entitled to receive,
in respect of each Mortgage Loan that was subject to a Fraud Loss in the
preceding month, an amount equal to the Class A Prepayment Percentage of the
principal portion of the related net liquidation proceeds. After the Fraud
Coverage Termination Date, the Class A and Class B CitiCertificateholders will
bear their pro rata share of the principal portion of Excess Fraud Losses.
Excess Fraud Losses are Fraud Losses in excess of the Fraud Loss Amount, which
will initially be equal to approximately 2.00% of the Initial Mortgage Loan
Balance. See "DESCRIPTION OF THE OFFERED CITICERTIFICATES--Subordination of the
Class B CitiCertificates--Allocation of Losses" in this Prospectus Supplement.
BANKRUPTCY LOSSES: Until the Bankruptcy Coverage Termination Date, all
Bankruptcy Losses will reduce the Stated Amount of, and accrued interest on, the
Class B CitiCertificates, in the order of priority set forth in the third
preceding paragraph. On each Distribution Date occurring prior to the Bankruptcy
Coverage Termination Date, the Stated Amount of the Class B CitiCertificates
will be reduced, in respect of each Mortgage Loan that was subject to a
Bankruptcy Loss in the preceding month, in an amount equal to the principal
portion of such Bankruptcy Loss. After the Bankruptcy Coverage Termination Date,
the Class A and Class B CitiCertificateholders will bear their pro rata share of
the principal portion of Excess Bankruptcy Losses. Excess Bankruptcy Losses are
Bankruptcy Losses in excess of the Bankruptcy Loss Amount, which will initially
be equal to approximately 0.04% of the Initial Mortgage Loan Balance. See
"DESCRIPTION OF THE OFFERED CITICERTIFICATES--Subordination of the Class B
CitiCertificates--Allocation of Losses" in this Prospectus Supplement.
The exact amounts of Special Hazard Losses, Fraud Losses and Bankruptcy
Losses to be allocated to the Class B CitiCertificates (in each case only prior
to the related termination date) will be those amounts required by the rating
agency (or rating agencies) rating the Offered CitiCertificates as a condition
of the ratings set forth in "SUMMARY OF PROSPECTUS AND PROSPECTUS
SUPPLEMENT--Certificate Ratings" in this Prospectus Supplement.
The interest portion of any Excess Special Hazard Losses, Excess Fraud
Losses and Excess Bankruptcy Losses will be allocated proportionately between
the CitiCertificates and the Residual Certificates, based on (in the case of the
CitiCertificates) the interest accrued thereon and (in the case of the Residual
Certificates)
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<PAGE>
the excess of the interest accrued on the Mortgage Loans over the sum of the
Servicing Fee and the interest accrued on the CitiCertificates, and pro rata
between the Class A and Class B CitiCertificates based on the interest accrued
on each such Class.
EFFECT OF LOSSES AND OTHER SHORTFALLS
The ultimate payment to holders of the Offered Class B CitiCertificates of
the Stated Amount thereof is dependent upon the timing and the level of losses
realized on the Mortgage Loans and other shortfalls in distributions on the
Mortgage Loans. Special Hazard Losses (up to the Special Hazard Loss Amount),
Fraud Losses (up to the Fraud Loss Amount) and Bankruptcy Losses (up to the
Bankruptcy Loss Amount) and other Realized Losses on Liquidated Loans will be
allocated first to the Unoffered Class B CitiCertificates and then to the
Offered Class B CitiCertificates until the Subordination Depletion Date.
To the extent that all such amounts and shortfalls are allocated as
described above, holders of the Offered Class B CitiCertificates may experience
shortfalls in distributions of interest and may not receive distributions equal
to the Initial Stated Amount of their Offered Class B CitiCertificates and may,
depending on the purchase price of such Offered Class B CitiCertificates, suffer
a reduction in yield or experience a loss on their investment in the Offered
Class B CitiCertificates.
Also, on or prior to the Subordination Depletion Date, because the Residual
Certificates are entitled to receive from funds deposited into the Certificate
Account before such funds are distributed to the CitiCertificateholders the
portion of interest whether or not received (net of Servicing Fee and Prepayment
Interest Shortfalls allocated to the Residual Certificates) on the Mortgage
Loans that is in excess of 6.25% per annum on the aggregate Stated Amount of the
CitiCertificates, any shortfall in interest paid on a Mortgage Loan which is not
advanced by the Servicer or the Trustee will result in a shortfall in
distributions to the Class B CitiCertificates and, depending on the extent of
such shortfall of interest, may result in a shortfall in distributions to
holders of the Offered Class B CitiCertificates.
RESTRICTIONS ON TRANSFER
Under current law, the purchase and holding of the Offered Class B
CitiCertificates by or on behalf of a Plan may result in "prohibited
transactions" within the meaning of ERISA and Code Section 4975 or Similar Law.
Transfer of the Offered Class B CitiCertificates will not be registered unless
the transferee (i) executes a representation letter in form and substance
satisfactory to the Trustee stating that it is not, and is not acting on behalf
of, any such Plan or using the assets of any such Plan to effect such purchase
or (ii) provides an opinion of counsel in form and substance satisfactory to the
Trustee that the purchase or holding of the Offered Class B CitiCertificates by
or on behalf of such Plan will not result in the assets of the Trust being
deemed to be "plan assets" and subject to the prohibited transaction provisions
of ERISA and the Code or Similar Law and will not subject the Servicer (or its
designee), the Issuer or the Trustee to any obligation in addition to those
undertaken in the Pooling Agreement.
LEGAL INVESTMENT
Institutions whose investment activities are subject to legal investment
laws and regulations or to review by certain regulatory authorities may be
subject to restrictions on investment in the Offered Class B CitiCertificates.
The Issuer makes no representations or warranties concerning whether the Offered
Class B CitiCertificates are legal investments under any federal or state law,
regulation, rule or order of any court. An Offered Class B CitiCertificate does
not constitute a "mortgage related security" within the meaning of SMMEA.
Prospective investors are advised to consult their counsel as to qualification
of the Offered Class B CitiCertificates as legal investments under any such
laws, regulations, rules and orders.
DESCRIPTION OF THE OFFERED CITICERTIFICATES
The Offered CitiCertificates will be issued pursuant to the Pooling
Agreement, a form of which is filed as an exhibit to the Registration Statement
of which this Prospectus Supplement is a part. The Trustee will make available
for inspection a copy of the Pooling Agreement to holders of CitiCertificates
upon written request. Reference is made to the Prospectus for important
additional information regarding the terms and conditions of the Pooling
Agreement and the CitiCertificates. Each Class A CitiCertificate at the time of
issuance will qualify as a "mortgage related security" within the meaning of
SMMEA and will retain such qualification so
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long as it is rated in one of the two highest rating categories by at least one
nationally recognized statistical rating organization. An Offered Class B
CitiCertificate will not qualify as a "mortgage related security" within the
meaning of SMMEA.
Distributions on the Offered CitiCertificates generally will be made by the
Trustee by wire transfer (if wiring instructions are received from the Person
entitled thereto) in the case of a holder of Offered CitiCertificates having an
aggregate Initial Stated Amount of $1,000,000 or more, or by check or by such
other means as the Person entitled thereto and the Trustee shall agree. Unless
and until Definitive Certificates are issued, Cede, as nominee of DTC, will be
the holder of the Book-Entry CitiCertificates. However, the final distribution
in reduction of Stated Amount will be made only upon presentation and surrender
of such CitiCertificate at the office of the Trustee. Payments will be made to
or for the account of the Person entitled thereto or as specified by such Person
in accordance with the terms of the Pooling Agreement.
DISTRIBUTIONS OF INTEREST
The amount of interest that will accrue on each Class A Subclass during each
Interest Accrual Period is referred to herein as the "Class A Subclass Interest
Amount" for such Class A Subclass. The Class A Subclass Interest Amount for each
Class A Subclass will equal the interest accrued for an Interest Accrual Period
at the rate of 6.25% per annum on the Class A Subclass Stated Amount of such
Class A Subclass, reduced by (i) the portion of any Non-Supported Interest
Shortfall allocable to such Class A Subclass and (ii) the interest portion of
Excess Special Hazard Losses, Excess Fraud Losses and Excess Bankruptcy Losses
allocable to such Class A Subclass as described below. The sum of the Class A
Subclass Interest Amounts for a particular Distribution Date is the "Class A
Interest Amount."
The amount of interest that will accrue on the Offered Class B
CitiCertificates and the Unoffered Class B CitiCertificates during each Interest
Accrual Period is referred to herein as the "Offered Class B Interest Amount"
and the "Unoffered Class B Interest Amount," respectively. The Offered Class B
Interest Amount will equal the interest accrued for an Interest Accrual Period
at the rate of 6.25% per annum on the Stated Amount of the Offered Class B
CitiCertificates and the Unoffered Class B Interest Amount will equal the
interest accrued for an Interest Accrual Period at the rate of 6.25% per annum,
in each case, reduced by (i) the portion of any Non-Supported Interest Shortfall
allocable to such Class B Subclass and (ii) the interest portion of Excess
Special Hazard Losses, Excess Fraud Losses and Excess Bankruptcy Losses
allocable to such Class B Subclass as described below. The sum of the Offered
Class B Interest Amount and the Unoffered Class B Interest Amount for a
particular Distribution Date is the "Class B Interest Amount."
The "Class A Subclass Stated Amount" of a Class A Subclass as of any
Distribution Date before the Subordination Depletion Date will be the Initial
Stated Amount of such Class A Subclass plus, in the case of the Class A-7
CitiCertificates, the Accretion Distribution Amount, as described under
"--Distributions in Reduction of Stated Amount," below, previously added to the
Stated Amount of the Class A-7 CitiCertificates, less (i) all amounts previously
distributed to holders of CitiCertificates of such Class A Subclass in reduction
of the Stated Amount of such Class A Subclass and (ii) such Class A Subclass's
pro rata share of the principal portion of Excess Special Hazard Losses, Excess
Fraud Losses and Excess Bankruptcy Losses previously allocated to holders of
Class A CitiCertificates in the manner described below under "--Subordination of
the Class B CitiCertificates--Allocation of Losses." After the Subordination
Depletion Date, the Class A Subclass Stated Amount of a Class A Subclass may be
subject to further reduction in an amount equal to such Class A Subclass's pro
rata share of the difference, if any, between (a) the Class A Stated Amount as
of such Distribution Date without regard to this provision and (b) the Pool
Adjusted Balance for the preceding Distribution Date. Any pro rata allocation
among the Class A Subclasses described in this paragraph will be made among the
Class A Subclasses on the basis of their then outstanding Class A Subclass
Stated Amounts or, in the case of the Class A-7 CitiCertificates the Initial
Stated Amount, if lower, as of the preceding Distribution Date. The "Class A
Stated Amount" as of any Distribution Date will be equal to the sum of the Class
A Subclass Stated Amounts as of such date.
The "Offered Class B Stated Amount" as of any Distribution Date will be the
lesser of (a) the Initial Stated Amount of the Offered Class B CitiCertificates
less (i) all amounts previously distributed to holders of the Offered Class B
CitiCertificates in reduction of the Stated Amount thereof and (ii) the
principal portion of Excess Special Hazard Losses, Excess Fraud Losses and
Excess Bankruptcy Losses previously allocated to holders of the Offered Class B
CitiCertificates in the manner described below under "--Subordination of the
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Class B CitiCertificates-- Allocation of Losses" and (b) the Pool Adjusted
Balance minus the Class A Stated Amount, each as of the immediately preceding
Distribution Date (after taking into account distributions in reduction of
Stated Amount and the allocation of any Excess Special Hazard Losses, Excess
Fraud Losses and Excess Bankruptcy Losses on such date).
The "Unoffered Class B Stated Amount" as of any Distribution Date will be
the lesser of (a) the Initial Stated Amount of the Unoffered Class B
CitiCertificates less (i) all amounts previously distributed to holders of the
Unoffered Class B CitiCertificates in reduction of the Stated Amount thereof and
(ii) the principal portion of Excess Special Hazard Losses, Excess Fraud Losses
and Excess Bankruptcy Losses previously allocated to holders of the Unoffered
Class B CitiCertificates in the manner described below under "--Subordination of
Class B CitiCertificates--Allocation of Losses" and (b) the Pool Adjusted
Balance minus the sum of the Class A Stated Amount and the Offered Class B
Stated Amount, each as of the immediately preceding Distribution Date (after
taking into account distributions in reduction of Stated Amount and the
allocation of any Excess Special Hazard Losses, Excess Fraud Losses and Excess
Bankruptcy Losses on such date). The "Class B Stated Amount" as of any
Distribution Date will be the Pool Adjusted Balance less the Class A Stated
Amount, each as of the immediately preceding Distribution Date (after taking
into account distributions in reduction of Stated Amount and the allocation of
any Excess Special Hazard Losses, Excess Fraud Losses and Excess Bankruptcy
Losses on such date), and will equal the sum of the Offered Class B Stated
Amount and the Unoffered Class B Stated Amount.
With respect to any Distribution Date, the "Pool Adjusted Balance" will
equal the aggregate Adjusted Balances of the Mortgage Loans as of such
Distribution Date.
Interest shortfalls resulting from full or partial principal prepayments of
Mortgage Loans ("Prepayment Interest Shortfalls") will be offset to the extent
of the aggregate Servicing Fees relating to Mortgagor payments distributed on
the related Distribution Date. The aggregate Prepayment Interest Shortfalls with
respect to a Distribution Date will be allocated proportionately between the
CitiCertificates and the Residual Certificates based on (in the case of the
CitiCertificates) interest accrued thereon or (in the case of the Residual
Certificates) the excess of interest accrued on the Mortgage Loans over the sum
of the Servicing Fee and interest accrued on the CitiCertificates. The amount,
if any, of the Servicing Fee in excess of the amount of aggregate Prepayment
Interest Shortfalls allocated to the CitiCertificates will be paid to the
Residual Certificates up to the amount of the Prepayment Interest Shortfall
allocated to the Residual Certificates. Any excess of the amount of aggregate
Prepayment Interest Shortfalls so allocated to the CitiCertificates over the
Servicing Fee (the "Non-Supported Interest Shortfall") will be allocated among
the CitiCertificates proportionately based on interest accrued and accordingly
will reduce the amount of interest due to be distributed to holders of the
CitiCertificates then entitled to distributions in respect of interest and, in
the case of the Class A-7 CitiCertificates, will reduce the amount accrued and
added to the Stated Amount thereof. Any such reduction in respect of interest
allocated to the Class A CitiCertificates (or to the Class B CitiCertificates)
will be allocated among the Class A Subclasses (and, in the case of the Class B
CitiCertificates, between the Class B Subclasses) pro rata on the basis of their
respective amounts of accrued interest for such Distribution Date.
The interest portion of any Excess Special Hazard Losses, Excess Fraud
Losses or Excess Bankruptcy Losses will be allocated proportionately between the
CitiCertificates and the Residual Certificates based on (in the case of the
CitiCertificates) the interest accrued thereon and (in the case of the Residual
Certificates) the excess of the interest accrued on the Mortgage Loans over the
sum of the Servicing Fee and the interest accrued on the CitiCertificates,
between the Class A and Class B CitiCertificates, pro rata on the basis of the
amount of interest accrued on each such Class and among the Class A Subclasses
and between the Class B Subclasses, respectively, pro rata on the basis of their
respective amounts of interest accrued for such Distribution Date.
Allocations of the interest portion of Realized Losses (other than Excess
Special Hazard Losses, Excess Fraud Losses or Excess Bankruptcy Losses) first to
the Unoffered Class B CitiCertificates, second to the Offered Class B
CitiCertificates and finally to the Class A CitiCertificates will result from
the priority of distributions first to the Class A CitiCertificateholders,
second to the Offered Class B CitiCertificateholders and finally to the
Unoffered Class B CitiCertificateholders of the Pool Distribution Amount.
On each Distribution Date on which the Pool Distribution Amount equals or
exceeds the Class A Interest Amount, distributions in respect of interest to
each Class A Subclass of Class A CitiCertificates will equal such
S-23
<PAGE>
Class A Subclass's Class A Subclass Interest Amount. Prior to the Class A-7
Accretion Termination Date, an amount equal to the Class A Subclass Interest
Amount for the Class A-7 CitiCertificates will not be distributed as interest to
holders of the Class A-7 CitiCertificates but instead will be added to the Class
A Subclass Stated Amount of the Class A-7 CitiCertificates and distributed in
reduction of the Class A Subclass Stated Amounts of the Accretion Directed
CitiCertificates.
In the unlikely event that, on any Distribution Date, the Pool Distribution
Amount is less than the Class A Interest Amount, the amount of interest
currently distributed on the Class A CitiCertificates will equal the Pool
Distribution Amount and will be allocated among the Class A Subclasses pro rata
in accordance with the Class A Subclass Interest Amounts. Any Class A Subclass
Interest Shortfall Amount will be added to the amount to be distributed to the
related Class A Subclass on subsequent Distribution Dates to the extent that the
Pool Distribution Amount is sufficient therefor and the related Class A Subclass
is then outstanding. No interest will accrue on the unpaid Class A Subclass
Interest Shortfall Amounts.
On each Distribution Date on which the Pool Distribution Amount exceeds the
Class A Interest Amount, any excess will then be allocated first to pay
previously unpaid Class A Subclass Interest Shortfall Amounts of outstanding
Class A Subclasses. Such amounts will be allocated among the then outstanding
Class A Subclasses pro rata in accordance with the respective unpaid Class A
Subclass Interest Shortfall Amounts immediately prior to such Distribution Date.
Prior to the Class A-7 Accretion Termination Date, any amounts allocated to the
Class A-7 CitiCertificates will not be distributed to holders of the Class A-7
CitiCertificates but will instead be added to the Class A Subclass Stated Amount
of the Class A-7 CitiCertificates and distributed in reduction of the Class A
Subclass Stated Amounts of the Accretion Directed CitiCertificates.
On each Distribution Date on which the Pool Distribution Amount equals or
exceeds the sum of (i) the Offered Class B Interest Amount and (ii) all amounts
distributable on the Class A CitiCertificates, distributions in respect of
interest to the Offered Class B CitiCertificates will equal the Offered Class B
Interest Amount.
If, on any Distribution Date, the Pool Distribution Amount is less than the
sum of (i) the Offered Class B Interest Amount and (ii) all amounts
distributable on the Class A CitiCertificates, then the amount of interest
currently distributed on the Offered Class B CitiCertificates will equal the
Pool Distribution Amount, net of all amounts distributable with a higher order
of priority as provided above under "SUMMARY OF PROSPECTUS AND PROSPECTUS
SUPPLEMENT--Priority of Distributions." Any Offered Class B Unpaid Interest
Shortfall will be added to the amount to be distributed to the Offered Class B
CitiCertificates on subsequent Distribution Dates to the extent that the Pool
Distribution Amount is sufficient therefor and the Offered Class B
CitiCertificates are then outstanding. No interest will accrue on any Offered
Class B Unpaid Interest Shortfall.
If, on any Distribution Date, the Pool Distribution Amount is less than the
sum of all amounts distributable on the Class A CitiCertificates, then the Class
B CitiCertificates will not be entitled to receive any amounts in respect of
interest or principal.
DISTRIBUTIONS IN REDUCTION OF STATED AMOUNT
Distributions in reduction of Stated Amount of the Class A CitiCertificates
will be made on each Distribution Date in an aggregate amount equal to the Class
A Principal Distribution Amount. The "Class A Principal Distribution Amount"
with respect to any Distribution Date will be equal to the sum of (i) the
Accretion Distribution Amount, if any, with respect to such Distribution Date
and (ii) the Class A Principal Amount with respect to such Distribution Date.
The "Accretion Distribution Amount" with respect to any Distribution Date will
be equal to the sum of (i) the Accretion Amount for such Distribution Date and
(ii) prior to the Class A-7 Accretion Termination Date, the portion of any
payment with respect to the Class A Unpaid Interest Shortfall allocated to the
Class A-7 CitiCertificates on such Distribution Date. The "Class A Principal
Amount" with respect to any Distribution Date is the amount distributed pursuant
to clause (3) as set forth in the first paragraph under "SUMMARY OF PROSPECTUS
AND PROSPECTUS SUPPLEMENT--Priority of Distributions" in an amount up to the
Class A Optimal Principal Amount. Amounts distributed in reduction of Stated
Amount of any Class A Subclass will be allocated pro rata to all
CitiCertificates of such Class A Subclass.
The Class B CitiCertificates will be entitled, on each Distribution Date, to
the remaining portion, if any, of the applicable Pool Distribution Amount, after
payment of the Class A Interest Amount, any unreimbursed
S-24
<PAGE>
Class A Unpaid Interest Shortfall and the Class A Optimal Principal Amount for
such date. Amounts so distributed to Class B CitiCertificateholders will not be
available to cover delinquencies or Realized Losses in respect of subsequent
Distribution Dates.
Holders of the Offered Class B CitiCertificates will be entitled to receive,
on each Distribution Date, an amount up to the Offered Class B Optimal
Distribution Amount for such date, subject to the priorities and conditions set
forth above under "SUMMARY OF PROSPECTUS AND PROSPECTUS SUPPLEMENT--Priority of
Distributions" in this Prospectus Supplement. The "Offered Class B Optimal
Distribution Amount" for each Distribution Date shall equal the sum of (i) the
Offered Class B Interest Amount, (ii) the Offered Class B Unpaid Interest
Shortfall and (iii) the Offered Class B Optimal Principal Amount.
The "Class A Optimal Principal Amount" with respect to each Distribution
Date will be an amount equal to the sum of (i) the Class A Percentage of (A) all
scheduled payments of principal due on each outstanding Mortgage Loan (including
each defaulted Mortgage Loan, other than a Liquidated Loan, with respect to
which the related Mortgaged Property has been acquired by the Trust) on the
first day of the month in which the Distribution Date occurs, less (B) if the
Bankruptcy Coverage Termination Date has occurred, the principal portion of Debt
Service Reductions, (ii) the Class A Prepayment Percentage of the Adjusted
Balance of each Mortgage Loan which, during the month preceding the month of
such Distribution Date was repurchased by the Issuer, as described in "APPENDIX
A: THE MORTGAGE LOANS AND CITIMORTGAGECERTIFICATES--Assignment of Loans" in the
Prospectus, (iii) the Class A Prepayment Percentage of the aggregate net
Liquidation Proceeds on all Mortgage Loans that became Liquidated Loans during
such preceding month, less the amounts allocable to principal of any
unreimbursed advances previously made by the Servicer with respect to such
Liquidated Loans and the portion of the net Liquidation Proceeds allocable to
interest, (iv) the Class A Prepayment Percentage of the Adjusted Balance of each
Mortgage Loan which was the subject of a principal prepayment in full during the
month preceding the month of such Distribution Date and (v) the Class A
Prepayment Percentage of all partial principal prepayments received by the
Servicer in the month preceding the month in which such Distribution Date
occurs.
The "Offered Class B Optimal Principal Amount" with respect to each
Distribution Date will be an amount equal to the sum of (i) the Offered Class B
Percentage of (A) all scheduled payments of principal due on each outstanding
Mortgage Loan (including each defaulted Mortgage Loan, other than a Liquidated
Loan, with respect to which the related Mortgaged Property has been acquired by
the Trust) on the first day of the month in which the Distribution Date occurs,
less (B) if the Bankruptcy Coverage Termination Date has occurred, the principal
portion of Debt Service Reductions, (ii) the Offered Class B Prepayment
Percentage of the Adjusted Balance of each Mortgage Loan which, during the month
preceding the month of such Distribution Date was repurchased by the Issuer,
(iii) the Offered Class B Prepayment Percentage of the aggregate net Liquidation
Proceeds on all Mortgage Loans that became Liquidated Loans during such
preceding month, less the amounts allocable to principal of any unreimbursed
advances previously made by the Servicer with respect to such Liquidated Loans
and the portion of the net Liquidation Proceeds allocated to interest, (iv) the
Offered Class B Prepayment Percentage of the Adjusted Balance of each Mortgage
Loan which was the subject of a principal prepayment in full during the month
preceding the month of such Distribution Date and (v) the Offered Class B
Prepayment Percentage of all partial principal prepayments received by the
Servicer in the month preceding the month in which such Distribution Date
occurs.
In addition to the foregoing, in the event that there is any recovery of an
amount in respect of principal which had previously been allocated as a Realized
Loss, the amount of such recovery will be allocated among the then outstanding
CitiCertificates first to the Class A CitiCertificates, to the extent and up to
the amount of any Realized Losses allocated to the Class A CitiCertificates,
second to the Offered Class B CitiCertificates, to the extent and up to the
amount of any Realized Losses Allocated to the Offered Class B CitiCertificates,
and then to the Unoffered Class B CitiCertificates.
A "Liquidated Loan" is a Mortgage Loan with respect to which the Servicer
has determined that all recoverable liquidation and insurance proceeds have been
received or the Issuer has accepted payment by a Mortgagor in consideration for
the release of the Mortgage in an amount equal to less than the outstanding
principal balance of the Mortgage Loan as a result of a determination that
liquidation expenses for such Mortgage Loan would exceed the amount by which the
cash portion of such payment is less than the outstanding principal balance of
such Mortgage Loan.
S-25
<PAGE>
A "Liquidated Loan Loss" on a Liquidated Loan is equal to the excess, if
any, of (i) the unpaid principal balance of such Liquidated Loan, plus interest
thereon in accordance with the amortization schedule at the Note Rate through
the last day of the month in which such Mortgage Loan was liquidated, over (ii)
net Liquidation Proceeds. For purposes of calculating the amount of any
Liquidated Loan Loss, all net Liquidation Proceeds (after reimbursement to the
Servicer and the Trustee for any previously unreimbursed related advances and
related liquidation expenses) will be applied first to accrued interest and then
to the unpaid principal balance of the Liquidated Loan. "Liquidation Proceeds"
are all amounts received by the Servicer in connection with the liquidation of
defaulted Mortgage Loans or property acquired in respect thereof. A "Special
Hazard Loss" is a Liquidated Loan Loss occurring as a result of a Special
Hazard. "Special Hazards" are all risks of direct physical loss or damage which
occur from any cause excluding (a) the extraordinary events referred to in the
last paragraph under "--Subordination of the Subordinated
CitiCertificates--Allocation of Losses" and (b) any risk of direct physical loss
or damage that is insured against under either (i) the Mortgagor's homeowner's
policy, fire insurance policy, flood insurance (if otherwise required) and
extended coverage policies (if any), as required to be maintained pursuant to
the applicable Mortgage Loan or (ii) hazard insurance with respect to such
Mortgaged Property which is required to be maintained by the Servicer under the
Pooling Agreement. A "Fraud Loss" is a Liquidated Loan Loss incurred on a
Liquidated Loan as to which there was fraud in the origination of such Mortgage
Loan. A "Bankruptcy Loss" is a loss attributable to certain actions which may be
taken by a bankruptcy court in connection with a Mortgage Loan, including a
reduction by a bankruptcy court of the principal balance of or the interest rate
on a Mortgage Loan or an extension of its maturity. A "Debt Service Reduction"
means a reduction in the amount of monthly payments due to certain bankruptcy
proceedings, but does not include any permanent forgiveness of principal. A
"Deficient Valuation" with respect to a Mortgage Loan means a valuation by a
court of the Mortgaged Property in an amount less than the outstanding
indebtedness under the Mortgage Loan or any reduction in the amount of monthly
payments that results in a permanent forgiveness of principal, which valuation
or reduction results from a bankruptcy proceeding. Liquidated Loan Losses
(including Special Hazard Losses and Fraud Losses) and Bankruptcy Losses are
referred to herein as "Realized Losses."
The "Class A Percentage" for any Distribution Date occurring prior to the
Subordination Depletion Date is the percentage, which in no event will exceed
100%, obtained by dividing the Class A Stated Amount by the Pool Adjusted
Balance, both as of the immediately preceding Distribution Date (after taking
into account distributions in reduction of Stated Amount and the allocation of
any losses on such date). The Class A Percentage for the first Distribution Date
is expected to be between 91.75% and 93.75%. The Class A Percentage will
decrease as a result of the allocation of certain unscheduled payments in
respect of principal according to the Class A Prepayment Percentage for a
specified period to the Class A CitiCertificates and will increase as a result
of the allocation of Realized Losses to the Class B CitiCertificates. The Class
A Percentage for each Distribution Date occurring on or after the Subordination
Depletion Date will be 100%.
The "Class A Prepayment Percentage" for any Distribution Date occurring
during the five years beginning on the first Distribution Date will, except as
provided below, equal 100%. Thereafter, the Class A Prepayment Percentage will
be subject to gradual reduction as described in the following paragraph. This
disproportionate allocation of certain unscheduled payments in respect of
principal will have the effect of accelerating the amortization of the Class A
CitiCertificates while, in the absence of Realized Losses, increasing the
respective interest in the Trust evidenced by the Class B CitiCertificates.
Increasing the respective interest of the Class B CitiCertificates relative to
that of the Class A CitiCertificates is intended to preserve the availability of
the subordination provided by the Class B CitiCertificates. See "--Subordination
of the Class B CitiCertificates" below.
The Class A Prepayment Percentage for any Distribution Date occurring on or
after the fifth anniversary of the first Distribution Date will be as follows:
for any Distribution Date subsequent to March 1999 to and including the
Distribution Date in March 2000, the Class A Percentage for such Distribution
Date plus 70% of the Subordinated CitiCertificate Percentage for such
Distribution Date; for any Distribution Date subsequent to March 2000 to and
including the Distribution Date in March 2001, the Class A Percentage for such
Distribution Date plus 60% of the Class B CitiCertificate Percentage for such
Distribution Date; for any Distribution Date subsequent to March 2001 to and
including the Distribution Date in March 2002, the Class A Percentage for such
Distribution Date plus 40% of the Class B CitiCertificate Percentage for such
Distribution Date; for any Distribution Date subsequent to March 2002 to and
including the Distribution Date in March 2003, the Class A
S-26
<PAGE>
Percentage for such Distribution Date plus 20% of the Class B CitiCertificate
Percentage for such Distribution Date; and for any Distribution Date thereafter,
the Class A Percentage for such Distribution Date (unless on any of the
foregoing Distribution Dates the Class A Percentage exceeds the initial Class A
Percentage, in which case the Class A Prepayment Percentage for such
Distribution Date will once again equal 100%). See "-- Prepayment and Yield
Considerations" herein and "PREPAYMENT AND YIELD CONSIDERATIONS" in the
Prospectus. Notwithstanding the foregoing, no reduction of the Class A
Prepayment Percentage will occur on a Distribution Date unless the following
tests are satisfied: (i) as of the first Distribution Date as to which any such
reduction applies, either (1) the Adjusted Balance of the Mortgage Loans
delinquent 60 days or more averaged over the last six months, as a percentage of
the Pool Adjusted Balance averaged over the last six months, does not exceed 2%
or (2) the percentage, averaged over any two consecutive months out of the last
three months, equal to the Adjusted Balance of all Mortgage Loans so delinquent,
divided by the Pool Adjusted Balance, does not exceed 2%, and (ii) cumulative
Realized Losses with respect to the Mortgage Loans are less than (a) with
respect to the Distribution Date in April 1999, 25% of the aggregate Initial
Stated Amount of the Class B CitiCertificates (the "Original Class B Stated
Amount"), (b) with respect to the Distribution Date in April 2000, 30% of the
Original Class B Stated Amount, (c) with respect to the Distribution Date in
April 2001, 35% of the Original Class B Stated Amount, (d) with respect to the
Distribution Date in April 2002, 40% of the Original Class B Stated Amount, and
(e) with respect to the Distribution Date in April 2003 and thereafter, 45% of
the Original Class B Stated Amount. If on any Distribution Date the allocation
to the Class A CitiCertificates of full and partial principal prepayments and
other amounts in the percentage required above would reduce the outstanding
Class A Stated Amount below zero, the Class A Prepayment Percentage for such
Distribution Date will be limited to the percentage necessary to reduce the
Class A Stated Amount to zero.
The "Class B CitiCertificate Percentage" for any Distribution Date will be
calculated as the difference between 100% and the Class A Percentage for such
date. The Class B CitiCertificate Percentage on the Closing Date is expected to
be between 6.25% and 8.25%.
The "Class B Prepayment Percentage" for any Distribution Date will be
calculated as the difference between 100% and the Class A Prepayment Percentage
for each date.
The "Offered Class B Percentage" shall be equal to (a) on any Distribution
Date on which the Unoffered Class B CitiCertificates are eligible to receive
distributions in reduction of Stated Amount, the percentage calculated by
multiplying (i) the Class B CitiCertificate Percentage by (ii) a fraction, the
numerator of which is the Offered Class B Stated Amount and the denominator of
which is the sum of the Offered Class B Stated Amount and the Unoffered Class B
Stated Amount, each as of the immediately preceding Distribution Date (after
taking into account distributions in reduction of Stated Amount and the
allocation of any losses on such date) or (b) on all other Distribution Dates,
the Class B CitiCertificate Percentage for such Distribution Date.
The "Offered Class B Prepayment Percentage" shall be equal to (a) on any
Distribution Date on which the Unoffered Class B CitiCertificates are eligible
to receive distributions in reduction of Stated Amount the percentage calculated
by multiplying (i) the Class B Prepayment Percentage by (ii) a fraction, the
numerator of which is the Offered Class B Stated Amount and the denominator of
which is the sum of the Offered Class B Stated Amount and the Unoffered Class B
Stated Amount, each as of the immediately preceding Distribution Date (after
taking into account distributions in reduction of Stated Amount and the
allocation of any losses on such date) or (b) on all other Distribution Dates,
the Class B CitiCertificate Prepayment Percentage for such Distribution Date.
In the event that on any Distribution Date, the Offered Class B
Subordination Percentage is less than the Offered Class B Subordination
Percentage on the Closing Date, then the Unoffered Class B CitiCertificates will
not be entitled to any distributions in reduction of Stated Amount on such
Distribution Date and all of such distributions will instead be allocated in
reduction of the Stated Amount of the Offered Class B CitiCertificates.
The "Offered Class B Subordination Percentage" is the percentage obtained by
dividing the Stated Amount of the Unoffered Class B CitiCertificates by the Pool
Adjusted Balance, both as of the immediately preceding Distribution Date (after
giving effect to any distributions in reduction of Stated Amount and the
allocation of any losses on such date). The Offered Class B Subordination
Percentage on the Closing Date is expected to be between 0.55% and 0.95%.
S-27
<PAGE>
On any Distribution Date on which the Stated Amounts of the Class B
CitiCertificates have been reduced to zero, funds available for distribution in
reduction of the Stated Amount of the Class A CitiCertificates will be
distributed pro rata to each Class A Subclass notwithstanding the priorities
described in the third paragraph under "SUMMARY OF THE PROSPECTUS AND PROSPECTUS
SUPPLEMENT--Distributions in Reduction of Stated Amount of the Offered
CitiCertificates." Under the circumstances described in this paragraph, the
amount allocated to each Class A Subclass will be distributed pro rata among
holders of CitiCertificates of such Class A Subclass.
DISTRIBUTIONS IN REDUCTION OF STATED AMOUNT OF THE TAC CERTIFICATES
On each Distribution Date, the Class A Principal Distribution Amount will be
allocated among the Class A Subclasses as described under "SUMMARY OF PROSPECTUS
SUPPLEMENT--Distributions in Reduction of Stated Amount of the Offered
CitiCertificates," in this Prospectus Supplement. To the extent that funds are
available to make distributions in reduction of Stated Amount of the TAC
Certificates on each Distribution Date, each Class A Subclass of TAC
Certificates will be entitled to receive its TAC Balance Amount, if any, for
such Distribution Date as determined by reference to the Targeted Balances set
forth in the table below.
The Targeted Balances for each Class A Subclass of TAC Certificates on each
Distribution Date were calculated assuming that: (i) the Mortgage Loans and the
CitiCertificates have the characteristics described below in the eighth
paragraph under "--Weighted Average Lives of the Offered CitiCertificates" as
used for the computation of weighted average lives, (ii) the Mortgage Loans are
prepaid at a constant rate equal to 350% of the Prepayment Model, (iii) the
Class A-7 CitiCertificates are not Accrual CitiCertificates, and (iv) the Class
A-6 CitiCertificates and the Class A-7 CitiCertificates received 75% and 25%,
respectively, of the Class A Principal Amount assuming prepayment at a constant
rate equal to 350% of the Prepayment Model.
It is extremely unlikely that the Mortgage Loans will prepay at a constant
percentage of the Prepayment Model. In addition, some or all of the other
assumptions stated above that are used in preparing the following table are
unlikely to reflect actual experience. Accordingly, there is no assurance that
the Stated Amount of any Class A Subclass of TAC Certificates will conform on
any Distribution Date to the applicable level set forth in such table. In
addition, if the Class A Principal Distribution Amount exceeds the amount
necessary to pay the TAC Balance Amounts for the TAC Certificates on any
Distribution Date, the excess will be allocated on such Distribution Date to
distributions in reduction of Stated Amount of the CitiCertificates in
accordance with the priorities described herein, and will not be retained for
distribution on subsequent Distribution Dates. See "SUMMARY OF PROSPECTUS AND
PROSPECTUS SUPPLEMENT--Distributions in Reduction of Stated Amount of the
Offered CitiCertificates". Accordingly, if principal prepayments on the Mortgage
Loans do not occur at a constant 350% of the Prepayment Model, the amounts
available on subsequent Distribution Dates for payment of the Class A Subclasses
of TAC Certificates may be less than their respective TAC Balance Amounts for
such Distribution Dates, even if on average prepayments on the Mortgage Loans do
occur at 350% of the Prepayment Model. Distributions in reduction of Stated
Amount of any Class A Subclass of TAC Certificates may reduce the Stated Amount
of such CitiCertificates to zero significantly earlier or later than the
Distribution Date specified herein. See "--Weighted Average Life of the Offered
CitiCertificates" below for a further discussion of the effect of prepayments on
the Mortgage Loans, on the rate of distributions in reduction of Stated Amount
and on the weighted average lives of the CitiCertificates.
S-28
<PAGE>
The following table sets forth the Targeted Balances for the TAC
Certificates for the indicated Distribution Dates.
TARGETED BALANCES
<TABLE>
<CAPTION>
CLASS A-1 CLASS A-2 CLASS A-3 CLASS A-4 CLASS A-5 CLASS A-6
CITICERTIFICATES CITICERTIFICATES CITICERTIFICATES CITICERTIFICATES CITICERTIFICATES CITICERTIFICATES
DISTRIBUTION DATE TARGETED BALANCE TARGETED BALANCE TARGETED BALANCE TARGETED BALANCE TARGETED BALANCE TARGETED BALANCE
- ----------------- ---------------- ---------------- ---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
April 25, 1994 $ 23,547,779.13 $ 62,370,715.42 $ 45,840,593.86 $ 49,650,549.93 $ 16,803,000.00 $ 18,431,000.00
May 25, 1994 22,911,237.11 60,684,714.34 45,153,788.15 49,434,151.75 16,803,000.00 18,431,000.00
June 25, 1994 22,249,297.78 58,931,443.72 44,439,579.68 49,209,119.52 16,803,000.00 18,431,000.00
July 25, 1994 21,562,930.91 57,113,472.15 43,699,014.76 48,975,782.93 16,803,000.00 18,431,000.00
August 25, 1994 20,853,149.87 55,233,483.76 42,933,186.82 48,734,486.48 16,803,000.00 18,431,000.00
September 25,
1994 20,121,009.24 53,294,271.81 42,143,233.69 48,485,588.69 16,803,000.00 18,431,000.00
October 25, 1994 19,367,602.21 51,298,731.80 41,330,334.89 48,229,461.20 16,803,000.00 18,431,000.00
November 25, 1994 18,594,057.87 49,249,854.34 40,495,708.66 47,966,487.85 16,803,000.00 18,431,000.00
December 25, 1994 17,801,538.40 47,150,717.67 39,640,608.94 47,697,063.72 16,803,000.00 18,431,000.00
January 25, 1995 16,991,236.09 45,004,479.82 38,766,322.20 47,421,594.17 16,803,000.00 18,431,000.00
February 25, 1995 16,164,370.35 42,814,370.62 37,874,164.12 47,140,493.73 16,803,000.00 18,431,000.00
March 25, 1995 15,322,184.53 40,583,683.32 36,965,476.23 46,854,185.08 16,803,000.00 18,431,000.00
April 25, 1995 14,465,942.74 38,315,766.12 36,041,622.46 46,563,097.99 16,803,000.00 18,431,000.00
May 25, 1995 13,626,961.32 36,093,566.27 35,136,392.00 46,277,878.71 16,803,000.00 18,431,000.00
June 25, 1995 12,804,898.11 33,916,177.48 34,249,415.67 45,998,410.93 16,803,000.00 18,431,000.00
July 25, 1995 11,999,417.71 31,782,711.37 33,380,331.60 45,724,580.63 16,803,000.00 18,431,000.00
August 25, 1995 11,210,191.34 29,692,297.09 32,528,785.02 45,456,276.03 16,803,000.00 18,431,000.00
September 25,
1995 10,436,896.69 27,644,080.99 31,694,428.20 45,193,387.56 16,803,000.00 18,431,000.00
October 25, 1995 9,679,217.84 25,637,226.25 30,876,920.25 44,935,807.82 16,803,000.00 18,431,000.00
November 25, 1995 8,936,845.08 23,670,912.58 30,075,927.03 44,683,431.53 16,803,000.00 18,431,000.00
December 25, 1995 8,209,474.84 21,744,335.88 29,291,120.97 44,436,155.47 16,803,000.00 18,431,000.00
January 25, 1996 7,496,809.52 19,856,707.96 28,522,181.00 44,193,878.49 16,803,000.00 18,431,000.00
February 25, 1996 6,798,557.43 18,007,256.15 27,768,792.36 43,956,501.41 16,803,000.00 18,431,000.00
March 25, 1996 6,114,432.60 16,195,223.06 27,030,646.54 43,723,927.03 16,803,000.00 18,431,000.00
April 25, 1996 5,444,154.74 14,419,866.27 26,307,441.09 43,496,060.04 16,803,000.00 18,431,000.00
May 25, 1996 4,787,449.09 12,680,458.02 25,598,879.56 43,272,807.05 16,803,000.00 18,431,000.00
June 25, 1996 4,144,046.31 10,976,284.93 24,904,671.34 43,054,076.49 16,803,000.00 18,431,000.00
July 25, 1996 3,513,682.39 9,306,647.70 24,224,531.58 42,839,778.61 16,803,000.00 18,431,000.00
August 25, 1996 2,896,098.53 7,670,860.87 23,558,181.04 42,629,825.42 16,803,000.00 18,431,000.00
September 25,
1996 2,291,041.06 6,068,252.52 22,905,346.02 42,424,130.69 16,803,000.00 18,431,000.00
October 25, 1996 1,698,261.31 4,498,164.02 22,265,758.21 42,222,609.89 16,803,000.00 18,431,000.00
November 25, 1996 1,117,515.52 2,959,949.74 21,639,154.62 42,025,180.14 16,803,000.00 18,431,000.00
December 25, 1996 548,564.77 1,452,976.83 21,025,277.44 41,831,760.21 16,803,000.00 18,431,000.00
January 25, 1997 0.00 0.00 20,418,675.46 41,615,268.81 16,803,000.00 18,431,000.00
February 25, 1997 0.00 0.00 19,507,838.39 39,758,893.29 16,803,000.00 18,431,000.00
March 25, 1997 0.00 0.00 18,615,526.73 37,940,274.37 16,803,000.00 18,431,000.00
April 25, 1997 0.00 0.00 17,741,372.54 36,158,662.15 16,803,000.00 18,431,000.00
May 25, 1997 0.00 0.00 16,885,015.16 34,413,321.58 16,803,000.00 18,431,000.00
June 25, 1997 0.00 0.00 16,046,101.07 32,703,532.15 16,803,000.00 18,431,000.00
July 25, 1997 0.00 0.00 15,224,283.74 31,028,587.60 16,803,000.00 18,431,000.00
August 25, 1997 0.00 0.00 14,419,223.50 29,387,795.66 16,803,000.00 18,431,000.00
September 25,
1997 0.00 0.00 13,630,587.41 27,780,477.74 16,803,000.00 18,431,000.00
October 25, 1997 0.00 0.00 12,858,049.11 26,205,968.70 16,803,000.00 18,431,000.00
November 25, 1997 0.00 0.00 12,101,288.71 24,663,616.58 16,803,000.00 18,431,000.00
December 25, 1997 0.00 0.00 11,359,992.65 23,152,782.30 16,803,000.00 18,431,000.00
January 25, 1998 0.00 0.00 10,633,853.58 21,672,839.45 16,803,000.00 18,431,000.00
February 25, 1998 0.00 0.00 9,922,570.23 20,223,174.05 16,803,000.00 18,431,000.00
March 25, 1998 0.00 0.00 9,225,847.33 18,803,184.24 16,803,000.00 18,431,000.00
April 25, 1998 0.00 0.00 8,543,395.41 17,412,280.11 16,803,000.00 18,431,000.00
May 25, 1998 0.00 0.00 7,874,930.78 16,049,883.44 16,803,000.00 18,431,000.00
June 25, 1998 0.00 0.00 7,220,175.34 14,715,427.46 16,803,000.00 18,431,000.00
July 25, 1998 0.00 0.00 6,578,856.52 13,408,356.64 16,803,000.00 18,431,000.00
August 25, 1998 0.00 0.00 5,950,707.15 12,128,126.45 16,803,000.00 18,431,000.00
September 25,
1998 0.00 0.00 5,335,465.36 10,874,203.17 16,803,000.00 18,431,000.00
October 25, 1998 0.00 0.00 4,732,874.47 9,646,063.66 16,803,000.00 18,431,000.00
</TABLE>
S-29
<PAGE>
<TABLE>
<CAPTION>
CLASS A-1 CLASS A-2 CLASS A-3 CLASS A-4 CLASS A-5 CLASS A-6
CITICERTIFICATES CITICERTIFICATES CITICERTIFICATES CITICERTIFICATES CITICERTIFICATES CITICERTIFICATES
DISTRIBUTION DATE TARGETED BALANCE TARGETED BALANCE TARGETED BALANCE TARGETED BALANCE TARGETED BALANCE TARGETED BALANCE
- ----------------- ---------------- ---------------- ---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
November 25, 1998 $ 0.00 $ 0.00 $ 4,142,682.88 $ 8,443,195.15 $ 16,803,000.00 $ 18,431,000.00
December 25, 1998 0.00 0.00 3,564,643.99 7,265,095.05 16,803,000.00 18,431,000.00
January 25, 1999 0.00 0.00 2,998,516.10 6,111,270.72 16,803,000.00 18,431,000.00
February 25, 1999 0.00 0.00 2,444,062.29 4,981,239.33 16,803,000.00 18,431,000.00
March 25, 1999 0.00 0.00 1,901,050.36 3,874,527.61 16,803,000.00 18,431,000.00
April 25, 1999 0.00 0.00 1,403,030.82 2,859,514.80 16,803,000.00 18,431,000.00
May 25, 1999 0.00 0.00 915,715.90 1,866,319.08 16,803,000.00 18,431,000.00
June 25, 1999 0.00 0.00 438,888.08 894,497.06 16,803,000.00 18,431,000.00
July 25, 1999 0.00 0.00 0.00 0.00 16,718,948.34 18,431,000.00
August 25, 1999 0.00 0.00 0.00 0.00 15,332,089.71 18,431,000.00
September 25,
1999 0.00 0.00 0.00 0.00 13,975,187.05 18,431,000.00
October 25, 1999 0.00 0.00 0.00 0.00 12,647,630.54 18,431,000.00
November 25, 1999 0.00 0.00 0.00 0.00 11,348,822.52 18,431,000.00
December 25, 1999 0.00 0.00 0.00 0.00 10,078,177.24 18,431,000.00
January 25, 2000 0.00 0.00 0.00 0.00 8,835,120.62 18,431,000.00
February 25, 2000 0.00 0.00 0.00 0.00 7,619,090.05 18,431,000.00
March 25, 2000 0.00 0.00 0.00 0.00 6,429,534.12 18,431,000.00
April 25, 2000 0.00 0.00 0.00 0.00 5,297,273.88 18,431,000.00
May 25, 2000 0.00 0.00 0.00 0.00 4,189,900.70 18,431,000.00
June 25, 2000 0.00 0.00 0.00 0.00 3,106,900.94 18,431,000.00
July 25, 2000 0.00 0.00 0.00 0.00 2,047,771.27 18,431,000.00
August 25, 2000 0.00 0.00 0.00 0.00 1,012,018.47 18,431,000.00
September 25,
2000 0.00 0.00 0.00 0.00 0.00 18,430,369.41
October 25, 2000 0.00 0.00 0.00 0.00 0.00 17,687,539.92
November 25, 2000 0.00 0.00 0.00 0.00 0.00 16,961,177.32
December 25, 2000 0.00 0.00 0.00 0.00 0.00 16,250,940.53
January 25, 2001 0.00 0.00 0.00 0.00 0.00 15,556,495.33
February 25, 2001 0.00 0.00 0.00 0.00 0.00 14,877,514.25
March 25, 2001 0.00 0.00 0.00 0.00 0.00 14,213,676.37
April 25, 2001 0.00 0.00 0.00 0.00 0.00 13,606,727.66
May 25, 2001 0.00 0.00 0.00 0.00 0.00 13,013,348.76
June 25, 2001 0.00 0.00 0.00 0.00 0.00 12,433,252.51
July 25, 2001 0.00 0.00 0.00 0.00 0.00 11,866,157.65
August 25, 2001 0.00 0.00 0.00 0.00 0.00 11,311,788.66
September 25,
2001 0.00 0.00 0.00 0.00 0.00 10,769,875.68
October 25, 2001 0.00 0.00 0.00 0.00 0.00 10,240,154.38
November 25, 2001 0.00 0.00 0.00 0.00 0.00 9,722,365.84
December 25, 2001 0.00 0.00 0.00 0.00 0.00 9,216,256.48
January 25, 2002 0.00 0.00 0.00 0.00 0.00 8,721,577.91
February 25, 2002 0.00 0.00 0.00 0.00 0.00 8,238,086.84
March 25, 2002 0.00 0.00 0.00 0.00 0.00 7,765,544.99
April 25, 2002 0.00 0.00 0.00 0.00 0.00 7,339,530.13
May 25, 2002 0.00 0.00 0.00 0.00 0.00 6,922,903.73
June 25, 2002 0.00 0.00 0.00 0.00 0.00 6,515,465.89
July 25, 2002 0.00 0.00 0.00 0.00 0.00 6,117,020.86
August 25, 2002 0.00 0.00 0.00 0.00 0.00 5,727,376.95
September 25,
2002 0.00 0.00 0.00 0.00 0.00 5,346,346.46
October 25, 2002 0.00 0.00 0.00 0.00 0.00 4,973,745.61
November 25, 2002 0.00 0.00 0.00 0.00 0.00 4,609,394.41
December 25, 2002 0.00 0.00 0.00 0.00 0.00 4,253,116.65
January 25, 2003 0.00 0.00 0.00 0.00 0.00 3,904,739.77
February 25, 2003 0.00 0.00 0.00 0.00 0.00 3,564,094.81
March 25, 2003 0.00 0.00 0.00 0.00 0.00 3,231,016.34
April 25, 2003 0.00 0.00 0.00 0.00 0.00 2,934,365.83
May 25, 2003 0.00 0.00 0.00 0.00 0.00 2,643,835.27
June 25, 2003 0.00 0.00 0.00 0.00 0.00 2,359,300.93
July 25, 2003 0.00 0.00 0.00 0.00 0.00 2,080,641.53
August 25, 2003 0.00 0.00 0.00 0.00 0.00 1,807,738.22
September 25,
2003 0.00 0.00 0.00 0.00 0.00 1,540,474.55
October 25, 2003 0.00 0.00 0.00 0.00 0.00 1,278,736.35
November 25, 2003 0.00 0.00 0.00 0.00 0.00 1,022,411.76
December 25, 2003 0.00 0.00 0.00 0.00 0.00 771,391.16
</TABLE>
S-30
<PAGE>
<TABLE>
<CAPTION>
CLASS A-1 CLASS A-2 CLASS A-3 CLASS A-4 CLASS A-5 CLASS A-6
CITICERTIFICATES CITICERTIFICATES CITICERTIFICATES CITICERTIFICATES CITICERTIFICATES CITICERTIFICATES
DISTRIBUTION DATE TARGETED BALANCE TARGETED BALANCE TARGETED BALANCE TARGETED BALANCE TARGETED BALANCE TARGETED BALANCE
- ----------------- ---------------- ---------------- ---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
January 25, 2004 $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 525,567.09
February 25, 2004 0.00 0.00 0.00 0.00 0.00 284,834.27
March 25, 2004 0.00 0.00 0.00 0.00 0.00 49,089.50
April 25, 2004
and thereafter 0.00 0.00 0.00 0.00 0.00 0.00
</TABLE>
SUBORDINATION OF THE CLASS B CITICERTIFICATES
The rights of the holders of the Class B CitiCertificates to receive
distributions with respect to the Mortgage Loans will be subordinated to such
rights of holders of Class A CitiCertificates to the extent described below and
the rights of the holders of the Unoffered Class B CitiCertificates to receive
distributions with respect to the Mortgage Loans will be subordinated to such
rights of holders of Offered Class B CitiCertificates to the extent described
below. This subordination is intended to enhance the likelihood of timely
receipt by holders of the Class A CitiCertificates (to the extent of the
subordination of the Class B CitiCertificates) and the Offered Class B
CitiCertificates (to the extent of the subordination of the Unoffered Class B
CitiCertificates) of the full amount of their scheduled monthly payments of
interest and principal and to afford holders of the Class A CitiCertificates (to
the extent of the subordination of the Class B CitiCertificates) and the Offered
Class B CitiCertificates (to the extent of the Subordination of the Unoffered
Class B CitiCertificates) protection against Realized Losses, as more fully
described below. If Realized Losses exceed the credit support provided through
subordination to the Class A CitiCertificates or the Offered Class B
CitiCertificates, as the case may be, or if Excess Special Hazard Losses, Excess
Fraud Losses or Excess Bankruptcy Losses occur, all or a portion of such losses
will be borne by the Class A CitiCertificates and/or the Offered Class B
CitiCertificates.
The protection afforded to holders of the Class A CitiCertificates by means
of the subordination feature will be accomplished by the preferential right of
such holders to receive, prior to any distribution being made on a Distribution
Date in respect of the Class B CitiCertificates, the amounts in reduction of
Stated Amount and of interest due the Class A CitiCertificateholders on each
Distribution Date out of the Pool Distribution Amount with respect to such date
and, if necessary, by the right of such holders to receive future distributions
on the Mortgage Loans that would otherwise have been payable to holders of Class
B CitiCertificates.
The protection afforded to holders of the Offered Class B CitiCertificates
by means of the subordination feature will be accomplished by the preferential
right of such holders to receive, prior to any distribution being made on a
Distribution Date in respect of the Unoffered Class B CitiCertificates, the
amounts in reduction of Stated Amount and of interest due the Offered Class B
CitiCertificateholders on each Distribution Date out of the Pool Distribution
Amount with respect to such date (after all required payments to Class A
CitiCertificates have been made) and, if necessary, by the right of such holders
to receive future distributions on the Mortgage Loans that would otherwise have
been payable to holders of the Unoffered Class B CitiCertificates.
The Unoffered Class B CitiCertificates will be entitled, on each
Distribution Date, to the remaining portion, if any, of the applicable Pool
Distribution Amount, after payment of the Class A Interest Amount, any
unreimbursed Class A Unpaid Interest Shortfall, the Class A Optimal Principal
Amount, the Offered Class B Interest Amount, any unreimbursed Offered Class B
Unpaid Interest Shortfall and the Offered Class B Optimal Principal Amount for
such date. Amounts so distributed to Unoffered Class B CitiCertificateholders
will not be available to cover delinquencies or Realized Losses in respect of
subsequent Distribution Dates.
ALLOCATION OF LOSSES
Realized Losses (other than Excess Special Hazard Losses, Excess Fraud
Losses or Excess Bankruptcy Losses) will not be allocated to holders of the
Class A CitiCertificates until the date on which the amount of principal
payments on the Mortgage Loans to which holders of the Class B CitiCertificates
are entitled has been reduced to zero (the "Subordination Depletion Date") as a
result of the allocation of losses first to the Unoffered Class B
CitiCertificates and second to the Offered Class B CitiCertificates.
The subordination of the Unoffered Class B CitiCertificates in favor of the
Class A CitiCertificates and the Offered Class B CitiCertificates, and that of
the Offered Class B CitiCertificates in favor of the Class A CitiCertificates,
is effected by the allocation of Realized Losses first to the Unoffered Class B
CitiCertificates
S-31
<PAGE>
and then to the Offered Class B CitiCertificates, until, in each case, the
respective Unoffered Class B Stated Amount and Offered Class B Stated Amount has
been reduced to zero. Realized Losses will be allocated to the Offered Class B
CitiCertificates only after the Stated Amount of the Unoffered Class B
CitiCertificates has been reduced to zero. The effect of such allocation of
Realized Losses (other than Excess Special Hazard Losses, Excess Fraud Losses or
Excess Bankruptcy Losses) to the Unoffered Class B CitiCertificates and then to
the Offered Class B CitiCertificates will be to reduce future distributions to
such Class B CitiCertificates, and in particular to the Unoffered Class B
CitiCertificates, and to increase the relative portion of distributions
allocable to the Class A CitiCertificates and the Offered Class B
CitiCertificates.
The allocation of the principal portion of a Realized Loss (other than a
Debt Service Reduction, Excess Special Hazard Loss, Excess Fraud Loss or Excess
Bankruptcy Loss) will be effected, as a result of the priority of distributions
described above, by the adjustment of the Stated Amount of the more subordinate
Class B Subclass then outstanding (that is, first the Unoffered Class B Stated
Amount and then the Offered Class B Stated Amount will be adjusted) in such
amounts as are necessary to cause the sum of the Class A Stated Amount, the
Offered Class B Stated Amount and the Unoffered Class B Stated Amount to equal
the Pool Adjusted Balance.
The principal portion of any Realized Loss occurring on or after the
Subordination Depletion Date will be allocated among the outstanding Class A
Subclasses pro rata in accordance with their then outstanding Class A Subclass
Stated Amounts or, in the case of the Class A-7 CitiCertificates, the Initial
Stated Amount, if lower, and the interest portion of any Realized Loss occurring
on or after the Subordination Depletion Date will be allocated among the
outstanding Class A Subclasses pro rata in accordance with their Class A
Subclass Interest Amounts. Any such losses will be allocated among the
outstanding Class A CitiCertificates within each Class A Subclass pro rata in
accordance with their respective Stated Amounts.
Allocations of (i) the principal portion of Debt Service Reductions, (ii)
the interest portion of Realized Losses (other than Excess Special Hazard
Losses, Excess Fraud Losses and Excess Bankruptcy Losses) and (iii) any interest
shortfalls resulting from delinquencies for which neither the Servicer nor the
Trustee advances will result from the priority of distribution of the Pool
Distribution Amount first to the Class A CitiCertificates, second, to the
Offered Class B CitiCertificates and finally to the Unoffered Class B
CitiCertificates.
The principal portion of any Excess Special Hazard Losses, Excess Fraud
Losses or Excess Bankruptcy Losses will be allocated on a pro rata basis between
the Class A CitiCertificates and Class B CitiCertificates based on the aggregate
Stated Amount of each such Class and the interest portion of such losses will be
allocated proportionately between the CitiCertificates and the Residual
Certificates based on (in the case of the CitiCertificates) accrued interest
thereon and (in the case of the Residual Certificates) the excess of interest
accrued on the Mortgage Loans over the sum of the Servicing Fee and interest
accrued on the CitiCertificates. Any interest losses so allocated to the
CitiCertificates will be allocated on a pro rata basis between the Class A and
Class B CitiCertificates based on accrued interest on such Class. Any losses so
allocated to the Class A CitiCertificates will be allocated among the
outstanding Class A Subclasses pro rata in accordance with their then
outstanding Class A Subclass Stated Amounts or, in the case of the Class A-7
CitiCertificates, the Initial Stated Amount, if lower, with respect to the
principal portion of such losses and their amounts of interest accrued with
respect to the interest portion of such losses, and among the outstanding
CitiCertificates within each Class A Subclass pro rata in accordance with their
respective Stated Amounts. Any losses so allocated to the Class B
CitiCertificates will be allocated between the outstanding Class B Subclasses
pro rata in accordance with their then outstanding Offered Class B Stated Amount
and Unoffered Class B Stated Amount, as the case may be, with respect to the
principal portion of such losses and the amounts of interest accrued with
respect to the interest portion of such losses, and among the outstanding
CitiCertificates within each Class B Subclass pro rata in accordance with their
respective Stated Amounts.
The interest portion of Excess Special Hazard Losses, Excess Fraud Losses
and Excess Bankruptcy Losses allocable to the CitiCertificates will be allocated
by reducing the applicable amount of accrued interest payable on the Class A and
Class B CitiCertificates.
As described above, the Pool Distribution Amount for any Distribution Date
will include current receipts (other than certain unscheduled payments and
recoveries in respect of principal) from the Mortgage Loans otherwise payable to
holders of the Class B CitiCertificates. In general, if the Pool Distribution
Amount is not sufficient to cover the amount of the Class A Optimal Principal
Amount on a particular Distribution Date, the
S-32
<PAGE>
percentage of principal payments on the Mortgage Loans to which holders of the
Class A CitiCertificates will be entitled (I.E., the Class A Percentage) on and
after the next Distribution Date will be proportionately increased, thereby
reducing, as a relative matter, the respective interest of the Class B
CitiCertificates in future payments of principal on the Mortgage Loans. Such a
shortfall could occur, for example, if a considerable number of Mortgage Loans
were to become Liquidated Loans in a particular month.
Special Hazard Losses will be allocated first to the Unoffered Class B
CitiCertificates and then to the Offered Class B CitiCertificates, but only
prior to the Special Hazard Termination Date. The "Special Hazard Termination
Date" will be the date on which Special Hazard Losses exceed the Special Hazard
Loss Amount (or, if earlier, the Subordination Depletion Date). On the Closing
Date, the "Special Hazard Loss Amount" with respect thereto will be equal to
approximately 1.00% of the Initial Mortgage Loan Balance. As of any Distribution
Date, the Special Hazard Loss Amount will equal the initial Special Hazard Loss
Amount less the sum of (A) any Special Hazard Losses allocated solely to the
Class B CitiCertificates and (B) the Adjustment Amount. The "Adjustment Amount"
on each anniversary of the Cut-Off Date will be equal to the amount, if any, by
which the Special Hazard Amount, without giving effect to the deduction of the
Adjustment Amount for such anniversary, exceeds the greater of (i) 1.00% (or, if
greater than 1.00%, the highest percentage of Mortgage Loans by principal
balance in any California ZIP code) times the Pool Adjusted Balance on such
anniversary and (ii) twice the Adjusted Balance of the single Mortgage Loan
having the largest Adjusted Balance. Special Hazard Losses in excess of the
Special Hazard Loss Amount are "Excess Special Hazard Losses."
Fraud Losses will be allocated first to the Unoffered Class B
CitiCertificates and then to the Offered Class B CitiCertificates, but only
prior to the Fraud Coverage Termination Date. The "Fraud Coverage Termination
Date" will be the date on which Fraud Losses exceed the Fraud Loss Amount (or,
if earlier, the Subordination Depletion Date). On the Closing Date, the "Fraud
Loss Amount" with respect thereto will be equal to approximately 2.00% of the
Initial Mortgage Loan Balance. On each Distribution Date thereafter, the Fraud
Loss Amount will equal (X) prior to the first anniversary of the Cut-Off Date an
amount equal to the initial Fraud Loss Amount minus the aggregate amount of
Fraud Losses allocated solely to the Class B CitiCertificates up to the related
Determination Date, and (Y) from the first through fifth anniversary of the
Cut-Off Date, an amount equal to (1) the lesser of (a) the Fraud Loss Amount as
of the most recent anniversary of the Cut-Off Date and (b) 1.00% of the Pool
Adjusted Balance as of the most recent anniversary of the Cut-Off Date minus (2)
the aggregate amounts allocated solely to the Class B CitiCertificates with
respect to Fraud Losses since the most recent anniversary of the Cut-Off Date up
to the related Determination Date. After the fifth anniversary of the Cut-Off
Date, the Fraud Loss Amount will be zero and thereafter any Fraud Losses will be
shared pro rata between the Class A and Class B CitiCertificates based on their
respective aggregate Stated Amounts. Fraud Losses in excess of the Fraud Loss
Amount are "Excess Fraud Losses."
Bankruptcy Losses will be allocated first to the Unoffered Class B
CitiCertificates and then to the Offered Class B CitiCertificates, but only
prior to the Bankruptcy Coverage Termination Date. The "Bankruptcy Coverage
Termination Date" will be the date on which Bankruptcy Losses exceed the
Bankruptcy Loss Amount (or, if earlier, the Subordination Depletion Date). On
the Closing Date, the "Bankruptcy Loss Amount" with respect thereto will be
equal to approximately 0.04% of the Initial Mortgage Loan Balance. As of any
Distribution Date prior to the first anniversary of the Cut-Off Date, the
Bankruptcy Loss Amount will equal the initial Bankruptcy Loss Amount minus the
aggregate amount of Bankruptcy Losses allocated solely to the Class B
CitiCertificates up to the related Determination Date. As of any Distribution
Date on or after the first anniversary of the Cut-Off Date, the Bankruptcy Loss
Amount will equal the excess, if any, of (1) the lesser of (a) the Bankruptcy
Loss Amount as of the business day next preceding the most recent anniversary of
the Cut-Off Date and (b) an amount calculated pursuant to the terms of the
Pooling Agreement, which amount as calculated will provide for a reduction in
the Bankruptcy Loss Amount, over (2) the aggregate amount of Bankruptcy Losses
allocated solely to the Class B CitiCertificates since such anniversary. The
Bankruptcy Loss Amount and the related coverage levels described above may be
reduced or modified upon written confirmation from Moody's and S&P that such
reduction or modification will not adversely affect the then-current ratings
assigned to the CitiCertificates by Moody's and S&P. Such a reduction or
modification may adversely affect the coverage provided by subordination with
respect to Bankruptcy Losses. Bankruptcy Losses in excess of the Bankruptcy Loss
Amount are "Excess Bankruptcy Losses."
The exact amounts of Special Hazard Losses, Fraud Losses and Bankruptcy
Losses to be allocated first to the Unoffered Class B CitiCertificates and then
to the Offered Class B CitiCertificates (but in each case only
S-33
<PAGE>
prior to the related termination date) will be those amounts required by the
rating agency (or rating agencies) rating the Offered CitiCertificates as a
condition of the ratings as set forth above under "SUMMARY OF PROSPECTUS AND
PROSPECTUS SUPPLEMENT--Certificate Ratings."
Notwithstanding the foregoing, the provisions relating to subordination will
not be applicable in connection with a Bankruptcy Loss so long as the Servicer
has notified the Trustee in writing that the Servicer is diligently pursuing any
remedies that may exist in connection with the representations and warranties
made regarding the related Mortgage Loan and when (A) the related Mortgage Loan
is not in default with regard to the payments due thereunder or (B) delinquent
payments of principal and interest under the related Mortgage Loan and any
premiums on any applicable standard hazard insurance policy and any related
escrow payments in respect of such Mortgage Loan are being advanced on a current
basis by the Servicer, in either case without giving effect to any Debt Service
Reduction.
The risk of Special Hazard Losses, Fraud Losses and Bankruptcy Losses will
be separately borne by the Class B CitiCertificates to a lesser extent (i.e.,
only up to the Special Hazard Loss Amount, Fraud Loss Amount and Bankruptcy Loss
Amount, respectively) than the risk of other Realized Losses, which they will
bear to the full extent of their Initial Stated Amount. See "APPENDIX A: THE
MORTGAGE LOANS AND CITIMORTGAGECERTIFICATES" in the Prospectus.
The benefits of the subordination described herein will not cover
delinquencies and losses resulting from certain extraordinary events, including
(i) hostile or warlike action in time of peace or war; (ii) the use of any
weapon of war employing atomic fission or radioactive force whether in time of
peace or war; and (iii) insurrection, rebellion, revolution, civil war or any
usurped power or action taken by any governmental authority in preventing such
occurrences (but not including looting or rioting occurring not in time of war).
Losses and delinquencies resulting from such extraordinary events will be
allocated between the Class A and Class B CitiCertificates pro rata based on
their respective aggregate Stated Amounts, and, among the Class A Subclasses and
Class B Subclasses, based on the respective then current Stated Amounts of such
Class A Subclasses or, in the case of the Class A-7 CitiCertificates, the
Initial Stated Amount, if lower, and Class B Subclasses.
WEIGHTED AVERAGE LIVES OF THE OFFERED CITICERTIFICATES
Weighted average life refers to the average amount of time from the date of
issuance of such CitiCertificate until each dollar of principal of such
CitiCertificate will be repaid to the investor. The weighted average lives of
the Offered CitiCertificates will be influenced by the rate at which principal
on the Mortgage Loans is paid. Principal payments on mortgage loans may be in
the form of scheduled amortization or prepayments (for this purpose, the term
"prepayment" includes prepayments and liquidations due to default or other
dispositions of mortgage loans). Prepayments on mortgage loans are commonly
measured by a prepayment standard or model. The model used in this Prospectus
Supplement (the "Prepayment Model") is based on an assumed rate of prepayment
each month of the then unpaid principal balance of a pool of new mortgage loans.
100% of the Prepayment Model assumes prepayment rates of 0.2% per annum of the
then unpaid principal balance of such mortgage loans in the first month of the
life of the mortgage loans and an additional 0.2% per annum in each month
thereafter (for example, 0.4% per annum in the second month) until the 30th
month. Beginning in the 30th month and in each month thereafter during the life
of the mortgage loans, 100% of the Prepayment Model assumes a constant
prepayment rate of 6.0% per annum.
As used in the following tables, "0% of the Prepayment Model" assumes no
prepayments on the Mortgage Loans; "150% of the Prepayment Model" assumes such
Mortgage Loans will prepay at rates equal to 150% of the Prepayment Model's
assumed prepayment rates and so forth.
There is no assurance, however, that prepayment of the Mortgage Loans will
conform to any level of the Prepayment Model. The rate of principal payments on
pools of mortgage loans is influenced by a variety of economic, geographic,
social and other factors, including the level of mortgage interest rates and the
rate at which homeowners sell their homes or default on their mortgage loans. In
general, if prevailing interest rates fall significantly below the interest
rates on the Mortgage Loans, the Mortgage Loans are likely to be subject to
higher prepayment rates than if prevailing rates remain at or above the interest
rates on such Mortgage Loans. Conversely, if interest rates rise above the
interest rates on such Mortgage Loans, the rate of prepayment would be expected
to decrease. Other factors affecting prepayment of mortgage loans include
changes in
S-34
<PAGE>
mortgagors' housing needs, job transfers, unemployment and mortgagors' net
equity in the mortgaged properties. In addition, as homeowners move or default
on their mortgage loans, the houses are generally sold and the mortgage loans
prepaid, although some of the mortgage loans may be assumed by a new buyer.
Because the amount of distributions in reduction of the Stated Amount of each
Class A Subclass and the Offered Class B CitiCertificates will depend on the
rate of repayment (including prepayments) of the Mortgage Loans, the date by
which the Stated Amount of any Class A Subclass and the Offered Class B
CitiCertificates is reduced to zero is likely to occur earlier than its
respective Last Scheduled Distribution Date.
THE WEIGHTED AVERAGE LIFE OF THE CLASS A-7 CITICERTIFICATES AS WELL AS THE
YIELD TO MATURITY OF THE CLASS A-7 CITICERTIFICATES, TO THE EXTENT THAT SUCH
CITICERTIFICATES ARE PURCHASED AT A DISCOUNT OR PREMIUM, WILL BE PARTICULARLY
SENSITIVE TO THE RATE OF PRINCIPAL PAYMENTS (INCLUDING PREPAYMENTS) ON THE
MORTGAGE LOANS. On each Distribution Date, the excess, if any, of the Class A
Principal Distribution Amount over the sum of the TAC Balance Amounts for such
Distribution Date will be allocated to the Class A-7 CitiCertificates. As a
result, the weighted average life of the Class A-7 CitiCertificates will be
relatively more sensitive to faster prepayment rates than those of the TAC
Certificates, and may be significantly more sensitive than would be the case if
the Class A CitiCertificates did not include Class A Subclasses of TAC
Certificates. Conversely, under certain relatively slow prepayment scenarios,
the TAC Balance Amounts for the Class A Subclasses of TAC Certificates may not
be paid in full on a given Distribution Date. In such case, the Class A
Principal Distribution Amount for each subsequent Distribution Date will be
applied first to the Class A Subclasses of TAC Certificates until the current
Stated Amount of each such Class A Subclass equals its scheduled Targeted
Balance and, as a result, the weighted average life of the Class A-7
CitiCertificates may be extended accordingly.
The weighted average lives of the Class A Subclasses of TAC Certificates
will depend upon the particular prepayment scenario. To the extent that
principal prepayments are made at rates that are continuously slower than 350%
of the Prepayment Model, the weighted average life of any subclass of TAC
Certificates may be extended (and may be extended significantly). To the extent
that such principal prepayments are made at rates that are continuously faster
than 350% of the Prepayment Model, the weighted average life of any Class A
Subclass of TAC Certificates may be reduced (and may be reduced significantly).
The sensitivity of the TAC Certificates to principal prepayments on the
Mortgage Loans will depend in part upon the period of time during which the
Companion Class remains outstanding. Under certain relatively fast prepayment
scenarios, one or more Class A Subclasses of TAC Certificates may continue to be
outstanding when the Companion Class is no longer outstanding. Under such
circumstances, the entire Class A Principal Distribution Amount will be applied
to the TAC Certificates as described herein, without regard to the TAC Balance
Amounts for such Class A Subclasses of TAC Certificates. Thus when the Stated
Amount of the Companion Class is reduced to zero, the rate of distributions in
reduction of Stated Amount of any outstanding Class A Subclass of TAC
Certificates will become more sensitive to prepayment rates on the Mortgage
Loans. Conversely, under certain relatively slow prepayment scenarios, the Class
A Principal Distribution Amount may not be sufficient to pay the TAC Balance
Amounts for all Class A Subclasses of TAC Certificates on a given Distribution
Date. In such cases, the Class A Principal Distribution Amount for each such
subsequent Distribution Date will be applied to the Class A Subclasses of TAC
Certificates in accordance with the priorities described herein until the
outstanding Stated Amount of each such Class A Subclass equals its scheduled
Targeted Balance, and the weighted average life of any Class A Subclass of TAC
Certificates that did not receive its TAC Balance Amount on a Distribution Date
may be extended accordingly.
As described above under "SUMMARY OF PROSPECTUS AND PROSPECTUS
SUPPLEMENT--Distributions in Reduction of Stated Amount of the Offered
CitiCertificates," on each Distribution Date holders of the Class A
CitiCertificates will be entitled to receive the Class A Percentage of all the
Scheduled Principal, and the Class A Prepayment Percentage of the net Adjusted
Balance or net proceeds (as applicable) of Liquidated Loans and of the
prepayment principal. This will have the effect of accelerating the amortization
of the Class A CitiCertificates while, in the absence of losses in respect of
Liquidated Loans, increasing the respective interest in the Trust evidenced by
the Class B CitiCertificates.
The following table has been prepared on the basis of the expected
characteristics of the Mortgage Loans as set forth under "DESCRIPTION OF THE
POOL AND THE MORTGAGED PROPERTIES" herein. The percentages and weighted average
lives in the following table were determined assuming that (i) scheduled
interest and principal payments on the Mortgage Loans will be received in a
timely manner and prepayments are made at
S-35
<PAGE>
the indicated percentages of the Prepayment Model set forth in the table; (ii)
each Mortgage Loan will have an original term to maturity of 360 months and each
Mortgage Loan will have a remaining term to stated maturity of 343 months and
will bear interest at the rate of 7.375% per annum; (iii) CMSI does not exercise
its right of optional termination; (iv) the Initial Mortgage Loan Balance is
approximately $258,891,390, the Initial Stated Amount of the Unoffered Class B
CitiCertificates is $1,941,686 and the Initial Stated Amount and the Stated Rate
of each Subclass of the Class A CitiCertificates and the Offered Class B
CitiCertificates are as set forth on the cover page hereof; (v) the Closing Date
is March 29, 1994; and (vi) distributions to holders of the CitiCertificates
will be made on the 25th day of each month commencing April 1994 (the foregoing
assumptions are referred to herein as the "Structuring Assumptions").
There are likely to be discrepancies between the characteristics of the
actual Mortgage Loans and the characteristics of the Mortgage Loans assumed in
preparing the following table. Any such discrepancy may have an effect upon the
percentages of the Initial Stated Amount outstanding (and the weighted average
lives) of the Class A Subclasses and the Offered Class B CitiCertificates set
forth in the table. In addition, to the extent that the actual Mortgage Loans
have characteristics that differ from those assumed in preparing the table set
forth below, the Stated Amount of each Class A Subclass and the Offered Class B
CitiCertificates may be reduced to zero earlier or later than indicated by such
table.
It is not likely that (i) all of the Mortgage Loans will have the remaining
terms to stated maturity assumed, (ii) the Mortgage Loans will prepay at the
indicated percentages of the Prepayment Model set forth in the table, or (iii)
all of the Mortgage Loans will have mortgage interest rates of 7.375% per annum.
In addition, the diverse remaining terms to maturity of the Mortgage Loans
(which may include recently originated Mortgage Loans) could produce slower
distributions in reduction of Stated Amounts than indicated in the table at the
various percentages of the Prepayment Model specified even if the weighted
average remaining terms to stated maturity of the Mortgage Loans is 343 months.
Based on the foregoing assumptions, the following table indicates the
projected weighted average life of each Class A Subclass and the Offered Class B
CitiCertificates and sets forth the percentage of the Initial Stated Amount of
each such Class A Subclass and the Offered Class B CitiCertificates that would
be outstanding after each of the dates shown at the indicated percentages of the
Prepayment Model.
S-36
<PAGE>
PERCENT OF INITIAL STATED AMOUNT OUTSTANDING FOR EACH CLASS A SUBCLASS OF CLASS
A CITICERTIFICATES AND THE OFFERED CLASS B CITICERTIFICATES AT THE RESPECTIVE
PERCENTAGES OF THE PREPAYMENT MODEL SET FORTH BELOW:
<TABLE>
<CAPTION>
CLASS A-1 CITICERTIFICATES
---------------------------------------------------
DISTRIBUTION DATE 0% 150% 300% 350% 450% 600%
- ---------------------------------------- ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Initial Percent......................... 100 100 100 100 100 100
March 25, 1995.......................... 98 83 68 63 63 55
March 25, 1996.......................... 96 64 34 25 24 *
March 25, 1997.......................... 93 46 7 0 0 0
March 25, 1998.......................... 91 30 0 0 0 0
March 25, 1999.......................... 88 16 0 0 0 0
March 25, 2000.......................... 85 3 0 0 0 0
March 25, 2001.......................... 82 0 0 0 0 0
March 25, 2002.......................... 78 0 0 0 0 0
March 25, 2003.......................... 74 0 0 0 0 0
March 25, 2004.......................... 70 0 0 0 0 0
March 25, 2005.......................... 66 0 0 0 0 0
March 25, 2006.......................... 61 0 0 0 0 0
March 25, 2007.......................... 56 0 0 0 0 0
March 25, 2008.......................... 51 0 0 0 0 0
March 25, 2009.......................... 45 0 0 0 0 0
March 25, 2010.......................... 39 0 0 0 0 0
March 25, 2011.......................... 32 0 0 0 0 0
March 25, 2012.......................... 25 0 0 0 0 0
March 25, 2013.......................... 17 0 0 0 0 0
March 25, 2014.......................... 8 0 0 0 0 0
March 25, 2015.......................... 0 0 0 0 0 0
March 25, 2016.......................... 0 0 0 0 0 0
March 25, 2017.......................... 0 0 0 0 0 0
March 25, 2018.......................... 0 0 0 0 0 0
March 25, 2019.......................... 0 0 0 0 0 0
March 25, 2020.......................... 0 0 0 0 0 0
March 25, 2021.......................... 0 0 0 0 0 0
March 25, 2022.......................... 0 0 0 0 0 0
March 25, 2023.......................... 0 0 0 0 0 0
Weighted Average
Life (years)(1)........................ 13.1 2.9 1.6 1.4 1.4 1.1
<CAPTION>
CLASS A-2 CITICERTIFICATES
---------------------------------------------------
DISTRIBUTION DATE 0% 150% 300% 350% 450% 600%
- ---------------------------------------- ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Initial Percent......................... 100 100 100 100 100 100
March 25, 1995.......................... 97 82 67 63 63 55
March 25, 1996.......................... 93 61 32 25 24 *
March 25, 1997.......................... 89 42 3 0 0 0
March 25, 1998.......................... 85 24 0 0 0 0
March 25, 1999.......................... 80 8 0 0 0 0
March 25, 2000.......................... 75 0 0 0 0 0
March 25, 2001.......................... 70 0 0 0 0 0
March 25, 2002.......................... 65 0 0 0 0 0
March 25, 2003.......................... 59 0 0 0 0 0
March 25, 2004.......................... 52 0 0 0 0 0
March 25, 2005.......................... 46 0 0 0 0 0
March 25, 2006.......................... 38 0 0 0 0 0
March 25, 2007.......................... 30 0 0 0 0 0
March 25, 2008.......................... 22 0 0 0 0 0
March 25, 2009.......................... 13 0 0 0 0 0
March 25, 2010.......................... 3 0 0 0 0 0
March 25, 2011.......................... 0 0 0 0 0 0
March 25, 2012.......................... 0 0 0 0 0 0
March 25, 2013.......................... 0 0 0 0 0 0
March 25, 2014.......................... 0 0 0 0 0 0
March 25, 2015.......................... 0 0 0 0 0 0
March 25, 2016.......................... 0 0 0 0 0 0
March 25, 2017.......................... 0 0 0 0 0 0
March 25, 2018.......................... 0 0 0 0 0 0
March 25, 2019.......................... 0 0 0 0 0 0
March 25, 2020.......................... 0 0 0 0 0 0
March 25, 2021.......................... 0 0 0 0 0 0
March 25, 2022.......................... 0 0 0 0 0 0
March 25, 2023.......................... 0 0 0 0 0 0
Weighted Average
Life (years)(1)........................ 9.7 2.7 1.5 1.4 1.4 1.1
<CAPTION>
CLASS A-3 CITICERTIFICATES
---------------------------------------------------
DISTRIBUTION DATE 0% 150% 300% 350% 450% 600%
- ---------------------------------------- ------ ------ ------ ------ ------ ------
Initial Percent......................... 100 100 100 100 100 100
March 25, 1995.......................... 98 90 82 79 79 75
March 25, 1996.......................... 96 78 62 58 58 44
March 25, 1997.......................... 94 67 45 40 37 14
March 25, 1998.......................... 91 58 27 20 16 0
March 25, 1999.......................... 89 49 10 4 1 0
March 25, 2000.......................... 86 40 0 0 0 0
March 25, 2001.......................... 83 29 0 0 0 0
March 25, 2002.......................... 80 19 0 0 0 0
March 25, 2003.......................... 77 10 0 0 0 0
March 25, 2004.......................... 73 2 0 0 0 0
March 25, 2005.......................... 69 0 0 0 0 0
March 25, 2006.......................... 65 0 0 0 0 0
March 25, 2007.......................... 61 0 0 0 0 0
March 25, 2008.......................... 56 0 0 0 0 0
March 25, 2009.......................... 51 0 0 0 0 0
March 25, 2010.......................... 46 0 0 0 0 0
March 25, 2011.......................... 39 0 0 0 0 0
March 25, 2012.......................... 31 0 0 0 0 0
March 25, 2013.......................... 23 0 0 0 0 0
March 25, 2014.......................... 14 0 0 0 0 0
March 25, 2015.......................... 4 0 0 0 0 0
March 25, 2016.......................... 0 0 0 0 0 0
March 25, 2017.......................... 0 0 0 0 0 0
March 25, 2018.......................... 0 0 0 0 0 0
March 25, 2019.......................... 0 0 0 0 0 0
March 25, 2020.......................... 0 0 0 0 0 0
March 25, 2021.......................... 0 0 0 0 0 0
March 25, 2022.......................... 0 0 0 0 0 0
March 25, 2023.......................... 0 0 0 0 0 0
Weighted Average
Life (years)(1)........................ 13.8 4.9 2.8 2.5 2.4 1.8
<FN>
- ------------------------
(1) The weighted average life of each Class A Subclass of the Class A
CitiCertificates and the Offered Class B CitiCertificates is determined by
(i) multiplying the amount of each distribution in reduction of Stated
Amount by the number of years from the date of issuance of the Class A
CitiCertificates and the Offered Class B CitiCertificates to the related
Distribution Date, (ii) adding the results and (iii) dividing the sum by
the Initial Stated Amount of the Class A Subclass of the Class A
CitiCertificates (or with respect to the Class A-7 CitiCertificates, the
highest Stated Amount thereof) or the Offered Class B CitiCertificates, as
the case may be.
* Indicates an amount above zero and less than 0.5% of Initial Stated Amount
is outstanding.
</TABLE>
S-37
<PAGE>
PERCENT OF INITIAL STATED AMOUNT OUTSTANDING FOR EACH CLASS A SUBCLASS OF CLASS
A CITICERTIFICATES AND THE OFFERED CLASS B CITICERTIFICATES AT THE RESPECTIVE
PERCENTAGES OF THE PREPAYMENT MODEL SET FORTH BELOW:
<TABLE>
<CAPTION>
CLASS A-4 CITICERTIFICATES
---------------------------------
DISTRIBUTION DATE 0% 150% 300% 350% 450% 600%
- ----------------- --- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Initial
Percent......... 100 100 100 100 100 100
March 25, 1995... 99 97 95 94 94 93
March 25, 1996... 99 94 89 88 88 84
March 25, 1997... 98 90 84 76 69 27
March 25, 1998... 97 88 50 38 30 0
March 25, 1999... 97 85 18 8 2 0
March 25, 2000... 96 75 0 0 0 0
March 25, 2001... 95 55 0 0 0 0
March 25, 2002... 94 36 0 0 0 0
March 25, 2003... 93 19 0 0 0 0
March 25, 2004... 92 3 0 0 0 0
March 25, 2005... 91 0 0 0 0 0
March 25, 2006... 90 0 0 0 0 0
March 25, 2007... 89 0 0 0 0 0
March 25, 2008... 87 0 0 0 0 0
March 25, 2009... 86 0 0 0 0 0
March 25, 2010... 84 0 0 0 0 0
March 25, 2011... 74 0 0 0 0 0
March 25, 2012... 59 0 0 0 0 0
March 25, 2013... 44 0 0 0 0 0
March 25, 2014... 27 0 0 0 0 0
March 25, 2015... 8 0 0 0 0 0
March 25, 2016... 0 0 0 0 0 0
March 25, 2017... 0 0 0 0 0 0
March 25, 2018... 0 0 0 0 0 0
March 25, 2019... 0 0 0 0 0 0
March 25, 2020... 0 0 0 0 0 0
March 25, 2021... 0 0 0 0 0 0
March 25, 2022... 0 0 0 0 0 0
March 25, 2023... 0 0 0 0 0 0
Weighted Average
Life
(years)(1)...... 17.5 7.0 3.9 3.6 3.4 2.5
<CAPTION>
CLASS A-5 CITICERTIFICATES
---------------------------------
DISTRIBUTION DATE 0% 150% 300% 350% 450% 600%
- ----------------- --- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Initial
Percent......... 100 100 100 100 100 100
March 25, 1995... 100 100 100 100 100 100
March 25, 1996... 100 100 100 100 100 100
March 25, 1997... 100 100 100 100 100 100
March 25, 1998... 100 100 100 100 100 60
March 25, 1999... 100 100 100 100 100 0
March 25, 2000... 100 100 69 38 29 0
March 25, 2001... 100 100 0 0 0 0
March 25, 2002... 100 100 0 0 0 0
March 25, 2003... 100 100 0 0 0 0
March 25, 2004... 100 100 0 0 0 0
March 25, 2005... 100 48 0 0 0 0
March 25, 2006... 100 0 0 0 0 0
March 25, 2007... 100 0 0 0 0 0
March 25, 2008... 100 0 0 0 0 0
March 25, 2009... 100 0 0 0 0 0
March 25, 2010... 100 0 0 0 0 0
March 25, 2011... 100 0 0 0 0 0
March 25, 2012... 100 0 0 0 0 0
March 25, 2013... 100 0 0 0 0 0
March 25, 2014... 100 0 0 0 0 0
March 25, 2015... 100 0 0 0 0 0
March 25, 2016... 37 0 0 0 0 0
March 25, 2017... 0 0 0 0 0 0
March 25, 2018... 0 0 0 0 0 0
March 25, 2019... 0 0 0 0 0 0
March 25, 2020... 0 0 0 0 0 0
March 25, 2021... 0 0 0 0 0 0
March 25, 2022... 0 0 0 0 0 0
March 25, 2023... 0 0 0 0 0 0
Weighted Average
Life
(years)(1)...... 21.9 11.0 6.2 5.9 5.8 4.1
<CAPTION>
CLASS A-6 CITICERTIFICATES
---------------------------------
DISTRIBUTION DATE 0% 150% 300% 350% 450% 600%
- ----------------- --- ---- ---- ---- ---- ----
Initial
Percent......... 100 100 100 100 100 100
March 25, 1995... 100 100 100 100 100 100
March 25, 1996... 100 100 100 100 100 100
March 25, 1997... 100 100 100 100 100 100
March 25, 1998... 100 100 100 100 100 100
March 25, 1999... 100 100 100 100 100 63
March 25, 2000... 100 100 100 100 100 17
March 25, 2001... 100 100 81 77 78 0
March 25, 2002... 100 100 42 42 48 0
March 25, 2003... 100 100 18 18 32 0
March 25, 2004... 100 100 * * 23 0
March 25, 2005... 100 100 0 0 16 0
March 25, 2006... 100 87 0 0 11 0
March 25, 2007... 100 34 0 0 8 0
March 25, 2008... 100 0 0 0 6 0
March 25, 2009... 100 0 0 0 4 0
March 25, 2010... 100 0 0 0 3 0
March 25, 2011... 100 0 0 0 2 0
March 25, 2012... 100 0 0 0 1 0
March 25, 2013... 100 0 0 0 1 0
March 25, 2014... 100 0 0 0 1 0
March 25, 2015... 100 0 0 0 * 0
March 25, 2016... 100 0 0 0 * 0
March 25, 2017... 36 0 0 0 * 0
March 25, 2018... 0 0 0 0 * 0
March 25, 2019... 0 0 0 0 * 0
March 25, 2020... 0 0 0 0 * 0
March 25, 2021... 0 0 0 0 * 0
March 25, 2022... 0 0 0 0 * 0
March 25, 2023... 0 0 0 0 0 0
Weighted Average
Life
(years)(1)...... 22.9 12.7 8.0 7.9 8.9 5.4
<FN>
- ------------------------------------------------
(1) The weighted average life of each Class A Subclass of the Class A
CitiCertificates and the Offered Class B CitiCertificates is determined by
(i) multiplying the amount of each distribution in reduction of Stated
Amount by the number of years from the date of issuance of the Class A
CitiCertificates and the Offered Class B CitiCertificates to the related
Distribution Date, (ii) adding the results and (iii) dividing the sum by
the Initial Stated Amount of the Class A Subclass of the Class A
CitiCertificates (or with respect to the Class A-7 CitiCertificates, the
highest Stated Amount thereof) or the Offered Class B CitiCertificates, as
the case may be.
* Indicates an amount above zero and less than 0.5% of Initial Stated Amount
is outstanding.
</TABLE>
S-38
<PAGE>
PERCENT OF INITIAL STATED AMOUNT OUTSTANDING FOR EACH CLASS A SUBCLASS OF CLASS
A CITICERTIFICATES AND THE OFFERED CLASS B CITICERTIFICATES AT THE RESPECTIVE
PERCENTAGES OF THE PREPAYMENT MODEL SET FORTH BELOW:
<TABLE>
<CAPTION>
CLASS A-7 CITICERTIFICATES
---------------------------------
DISTRIBUTION DATE 0% 150% 300% 350% 450% 600%
- ----------------- --- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Initial
Percent......... 100 100 100 100 100 100
March 25, 1995... 106 106 106 100 41 0
March 25, 1996... 113 113 113 100 0 0
March 25, 1997... 121 121 121 100 0 0
March 25, 1998... 128 128 128 100 0 0
March 25, 1999... 137 137 137 100 0 0
March 25, 2000... 145 145 145 100 0 0
March 25, 2001... 155 155 155 93 0 0
March 25, 2002... 165 165 140 83 0 0
March 25, 2003... 175 175 125 75 0 0
March 25, 2004... 187 187 113 70 0 0
March 25, 2005... 199 199 90 54 0 0
March 25, 2006... 211 211 72 41 0 0
March 25, 2007... 225 225 57 32 0 0
March 25, 2008... 239 224 45 24 0 0
March 25, 2009... 255 196 35 18 0 0
March 25, 2010... 271 170 28 14 0 0
March 25, 2011... 289 147 22 10 0 0
March 25, 2012... 307 126 17 8 0 0
March 25, 2013... 327 108 13 6 0 0
March 25, 2014... 348 91 10 4 0 0
March 25, 2015... 370 75 7 3 0 0
March 25, 2016... 394 62 5 2 0 0
March 25, 2017... 419 49 4 1 0 0
March 25, 2018... 384 38 3 1 0 0
March 25, 2019... 311 28 2 1 0 0
March 25, 2020... 232 19 1 * 0 0
March 25, 2021... 147 11 1 * 0 0
March 25, 2022... 56 4 * * 0 0
March 25, 2023... 0 0 0 0 0 0
Weighted Average
Life
(years)(1)...... 26.2 19.3 12.6 11.9 0.9 0.4
<CAPTION>
CLASS B-1 CITICERTIFICATES
---------------------------------
DISTRIBUTION DATE 0% 150% 300% 350% 450% 600%
- ----------------- --- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Initial
Percent......... 100 100 100 100 100 100
March 25, 1995... 99 99 99 99 99 99
March 25, 1996... 98 98 98 98 98 98
March 25, 1997... 97 97 97 97 97 97
March 25, 1998... 95 95 95 95 95 95
March 25, 1999... 94 94 94 94 94 94
March 25, 2000... 92 90 87 86 84 81
March 25, 2001... 91 85 79 77 73 62
March 25, 2002... 89 79 69 66 59 39
March 25, 2003... 87 71 57 53 45 24
March 25, 2004... 85 63 46 41 32 15
March 25, 2005... 83 56 37 32 23 9
March 25, 2006... 80 50 29 24 16 6
March 25, 2007... 78 44 23 18 11 4
March 25, 2008... 75 38 18 14 8 2
March 25, 2009... 72 34 14 11 6 1
March 25, 2010... 69 29 11 8 4 1
March 25, 2011... 65 25 9 6 3 1
March 25, 2012... 62 22 7 5 2 *
March 25, 2013... 58 18 5 3 1 *
March 25, 2014... 53 16 4 2 1 *
March 25, 2015... 49 13 3 2 1 *
March 25, 2016... 44 11 2 1 * *
March 25, 2017... 38 8 2 1 * *
March 25, 2018... 33 6 1 1 * *
March 25, 2019... 26 5 1 * * *
March 25, 2020... 20 3 * * * *
March 25, 2021... 13 2 * * * *
March 25, 2022... 5 1 * * * *
March 25, 2023... 0 0 0 0 0 0
Weighted Average
Life
(years)(1)...... 19.0 13.0 10.4 9.8 9.0 7.8
<FN>
- ------------------------------------------------
(1) The weighted average life of each Class A Subclass of the Class A
CitiCertificates and the Offered Class B CitiCertificates is determined by
(i) multiplying the amount of each distribution in reduction of Stated
Amount by the number of years from the date of issuance of the Class A
CitiCertificates and the Offered Class B CitiCertificates to the related
Distribution Date, (ii) adding the results and (iii) dividing the sum by
the Initial Stated Amount of the Class A Subclass of the Class A
CitiCertificates (or with respect to the Class A-7 CitiCertificates, the
highest Stated Amount thereof) or the Offered Class B CitiCertificates, as
the case may be.
* Indicates an amount above zero and less than 0.5% of Initial Stated Amount
is outstanding.
</TABLE>
S-39
<PAGE>
PREPAYMENT AND YIELD CONSIDERATIONS
The yield to maturity and weighted average lives of the Offered
CitiCertificates will be sensitive in varying degrees to, among other things,
the rate of prepayment of the Mortgage Loans, the allocation of such prepayments
to the Class A and the Offered Class B CitiCertificates and the timing and
extent of losses, if any, allocable to the Class A and the Offered Class B
CitiCertificates. No representation is made as to whether the Mortgage Loans
will prepay at any particular rate.
The yield to maturity on the Offered Class B CitiCertificates will be more
sensitive than the yield to maturity on the Class A CitiCertificates to losses
due to defaults on the Mortgage Loans (and the timing thereof), to the extent
not covered by the Unoffered Class B CitiCertificates, because the entire amount
of such losses will be allocable to the Offered Class B CitiCertificates prior
to the Class A CitiCertificates except as otherwise provided herein. To the
extent not covered by advances, delinquencies on Mortgage Loans may also have a
relatively greater effect on the yield to investors in the Offered Class B
CitiCertificates. Amounts otherwise distributable to holders of the Offered
Class B CitiCertificates will be made available to protect holders of the Class
A CitiCertificates against interruptions in distributions due to certain
mortgagor delinquencies. Such delinquencies, to the extent not covered by the
Unoffered Class B CitiCertificates, even if subsequently cured, may affect the
timing of the receipt of distributions by holders of the Offered Class B
CitiCertificates, because the entire amount of those delinquencies would be
borne by the Offered Class B CitiCertificates prior to the Class A
CitiCertificates.
If the purchaser of an Offered CitiCertificate offered at a discount from
its parity price (as described below) calculates the anticipated yield to
maturity of such Offered CitiCertificate based on an assumed rate of payment of
principal that is faster than that actually received on the Mortgage Loans,
assuming all other relevant circumstances are unchanged, the actual yield to
maturity will be lower than that so calculated. If the purchaser of an Offered
CitiCertificate which was instead offered at a premium over its parity price
calculates the anticipated yield to maturity of such Offered CitiCertificate on
an assumed rate of payment of principal that is slower than that actually
received on the Mortgage Loans, assuming all other relevant circumstances are
unchanged, the actual yield to maturity will be lower than that so calculated.
Parity price is the price at which an Offered CitiCertificate will yield its
coupon, after giving effect to any payment delay.
The timing of changes in the rate of prepayments on the Mortgage Loans may
significantly affect an investor's actual yield to maturity, even if the average
rate of principal payments is consistent with an investor's expectation. In
general, the earlier a prepayment of principal on 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 principal payments occurring at a rate higher (or lower)
than the rate anticipated by the investor during the period immediately
following the issuance of the Offered CitiCertificates will not be offset by a
subsequent like reduction (or increase) in the rate of principal payments.
YIELD CONSIDERATIONS WITH RESPECT TO THE OFFERED CLASS B CITICERTIFICATES
The following yield table with respect to the Offered Class B
CitiCertificates has been prepared using the Structuring Assumptions, except
that, in lieu of clause (i) of the Structuring Assumptions, it was assumed that
(i) scheduled interest and principal payments on the Mortgage Loans are received
timely, other than with respect to Mortgage Loans on which it is assumed that
liquidations occur monthly at the rates equal to the following percentages of
the Initial Mortgage Loan Balance for the number of months indicated (and none
thereafter):
<TABLE>
<CAPTION>
PRINCIPAL BALANCE OF MORTGAGE
LOANS LIQUIDATED AS A % OF THE NUMBER OF MONTHS COMMENCING IN
INITIAL MORTGAGE LOAN BALANCE MONTH 25
- ------------------------------------ -------------------------------
<S> <C>
0.20% 60
0.50% 60
2.00% 60
</TABLE>
For example, if 0.50% of the Mortgage Loans liquidate, one-sixtieth of
$1,294,457 (which is the product of $258,891,390 and 0.50%) would liquidate in
each month over a 60-month period, commencing in month 25.
In addition, it was assumed that (ii) realized losses on liquidations of 20%
of the outstanding principal balance of such liquidated Mortgage Loans, as
indicated in the table (referred to as the "Loss Severity
S-40
<PAGE>
Percentage"), will occur at the time of liquidation. Thus, in the above example,
assuming that 0.50% of the aggregate principal balance of the Mortgage Loans
were liquidated, an assumed Loss Severity Percentage of 20% would result in
realized losses of $258,891, or $4,315 per month; (iii) there are no Excess
Special Hazard Losses, Excess Fraud Losses or Excess Bankruptcy Losses; (iv)
reductions of the Class A Prepayment Percentage are taken only when permitted as
described under "DESCRIPTION OF THE OFFERED CITICERTIFICATES--Distributions in
Reduction of Stated Amount" in this Prospectus Supplement, and that there are no
delinquent loans other than Liquidated Loans; and (v) there are no Non-Supported
Interest Shortfalls.
The rate of distributions in reduction of Stated Amount on the Offered Class
B CitiCertificates will be directly related to the actual amortization schedule
of the Mortgage Loans; accordingly, the interest distributions and distributions
in reduction of Stated Amount received on the Offered Class B CitiCertificates
may result in pre-tax yields which differ from those reflected below. The
Mortgage Loans will not have the characteristics assumed, and it is unlikely
that they will prepay at any of the rates specified. The assumed percentages of
liquidations and loss severities on the Mortgage Loans shown in the table below
are for illustrative purposes only and the Issuer makes no representations with
respect to the reasonableness of such assumptions or that the actual liquidation
and loss severity experience of the Mortgage Loans will in any way correspond to
any of the assumptions made herein. Consequently, there can be no assurance that
the pre-tax yield to an investor in the Offered Class B CitiCertificates will
correspond to any of the pre-tax yields shown below.
The pre-tax yields set forth in the following table were calculated by
determining the monthly discount rates which, when applied to the respective
assumed streams of cash flows to be paid on the Offered Class B
CitiCertificates, would cause the discounted present value of such assumed
streams of cash flows as of March 29, 1994 to equal the respective assumed
purchase prices indicated plus accrued interest at the Stated Rate from (and
including) the Cut-Off Date to (but excluding) March 29, 1994, and converting
such monthly rates to corporate bond equivalent rates. Such calculation does not
take into account variations that may occur in the interest rates at which
investors may be able to reinvest funds received by them as reductions of Stated
Amount on the Offered Class B CitiCertificates and consequently does not purport
to reflect the return on any investment in the Offered Class B CitiCertificates
when such reinvestment rates are considered. The assumed purchase price is equal
to the percentage stated in the table.
PRE-TAX YIELD OF OFFERED CLASS B-1 CITICERTIFICATES AT AN
ASSUMED PURCHASE PRICE OF 88.50%
<TABLE>
<CAPTION>
DEFAULTED MORTGAGE LOANS
EXPRESSED AS A PERCENTAGE OF PREPAYMENT MODEL PERCENTAGE
THE INITIAL MORTGAGE LOAN ---------------------------------------------------------------------------- LOSS
BALANCE 0% 150% 300% 350% 450% 600% SEVERITY
- ------------------------------ ----------- ----------- ----------- ----------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
No Defaults................... 7.523% 7.816% 8.026% 8.082% 8.179% 8.371% None
0.20% over months 25-84....... 7.528% 7.816% 8.026% 8.083% 8.180% 8.375% 20%
0.50% over months 25-84....... 7.533% 7.817% 8.027% 8.083% 8.181% 8.380% 20%
2.00% over months 25-84....... 7.536% 7.825% 8.031% 8.088% 8.187% 8.411% 20%
</TABLE>
OPTIONAL TERMINATION
Holders of all outstanding CitiCertificates may receive a distribution
reducing the Stated Amount of such CitiCertificates to zero upon the repurchase
by CMSI of the underlying Mortgage Loans and any property acquired in respect
thereof in full, at CMSI's option, at any time after the Pool Adjusted Balance
is less than 5% of the Initial Mortgage Loan Balance, provided CMSI has received
an opinion of counsel or other evidence that such repurchase and the related
distribution will constitute a "qualified liquidation" within the meaning of
Code Section 860F(a)(4)(A), will not affect the REMIC status of the Trust and
will not otherwise subject the Trust to tax. See "THE POOLING
AGREEMENTS--Termination; Repurchase of Mortgage Loans and Mortgage Certificates"
in the Prospectus. Any such final distribution in reduction of Stated Amount
with respect to the CitiCertificates will be in an amount equal to the
outstanding Stated Amount of each Class thereof together with accrued interest
thereon.
TRUSTEE AND AGENTS
The trustee for the CitiCertificates will be State Street Bank and Trust
Company, which will also act as Paying Agent, Transfer Agent and Certificate
Registrar for the CitiCertificates.
S-41
<PAGE>
SERVICING COMPENSATION
CMSI will act as servicer of the Mortgage Loans as well as REMIC servicer
for the Pool (together, the "Servicer") and as such will be entitled to
Servicing Compensation equal to a monthly fee of .25% per annum of the aggregate
Adjusted Balance of the Mortgage Loans (the "Servicing Fee"), payable from
interest payments received in respect of the Mortgage Loans, as well as late
payment charges, assumption fees and other similar amounts set forth in the
Pooling Agreement. CMSI currently intends to subcontract its duties as Servicer
to CMI. The Servicer will pay the expenses of the Trust, including the Trustee's
fee, accounting fees and other related expenses. See "DESCRIPTION OF
CERTIFICATES--The Servicer" in the Prospectus.
BOOK-ENTRY REGISTRATION
The Class A CitiCertificates initially will be issued in book-entry form and
will each be represented by a single physical certificate registered in the name
of Cede, as nominee of DTC, which will be the "holder" or "Certificateholder" of
such Class A CitiCertificates as such terms are used herein. No Beneficial Owner
will be entitled to receive a certificate representing such person's interest in
the Book-Entry CitiCertificates or the Trust, except as set forth below under
"--Definitive Certificates." Unless and until Definitive Certificates (as
defined herein) are issued under the limited circumstances described herein, all
references to actions taken by Certificateholders or holders shall refer to
actions taken by DTC upon instructions from its Participants (as defined below),
and all references herein to distributions and notices of redemption to
Certificateholders or holders shall refer to distributions and notices of
redemption to DTC or Cede, as the registered holder of the Book-Entry
CitiCertificates for distribution to Participants in accordance with DTC
procedures.
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 Uniform Commercial Code as adopted in the State of New
York and a "clearing agency" registered pursuant to Section 17A of the
Securities Exchange Act of 1934, as amended. DTC was created to hold securities
for its participating organizations ("Participants") and to facilitate the
clearance and settlement of securities transactions between Participants through
electronic book-entries, thereby eliminating the need for physical movement of
certificates. Participants include securities brokers and dealers (including the
Underwriter), banks, trust companies and clearing corporations. Indirect access
to the DTC system also is available to others such as banks, brokers, dealers
and trust companies that clear through or maintain a custodial relationship with
a Participant, either directly or indirectly ("Indirect Participants").
Under the rules, regulations and procedures creating and affecting DTC and
its operations (the "Rules"), DTC is required to make book-entry transfers of
Book-Entry CitiCertificates among Participants on whose behalf it acts with
respect to the Book-Entry CitiCertificates and to receive and transmit
distributions of principal of and interest on the Book-Entry CitiCertificates.
Participants and Indirect Participants with which Beneficial Owners have
accounts with respect to the Book-Entry CitiCertificates similarly are required
to make book-entry transfers and receive and transmit such payments on behalf of
their respective Beneficial Owners.
Beneficial Owners that are not Participants or Indirect Participants but
desire to purchase, sell or otherwise transfer ownership of, or other interests
in, Book-Entry CitiCertificates may do so only through Participants and Indirect
Participants. In addition, Beneficial Owners will receive all distributions of
principal and interest from the Trustee, or a paying agent on behalf of the
Trustee, through DTC Participants. DTC will forward such distributions to its
Participants, which thereafter will forward them to Indirect Participants or
Beneficial Owners. Beneficial Owners will not be recognized by the Trustee, the
Servicer or any paying agent as Certificateholders, as such term is used in the
Pooling Agreement, and Beneficial Owners will be permitted to exercise the
rights of Certificateholders only indirectly through DTC and its Participants.
Because DTC can only act on behalf of Participants, who in turn act on
behalf of Indirect Participants and certain banks, the ability of a Beneficial
Owner to pledge Book-Entry CitiCertificates to persons or entities that do not
participate in the DTC system, or to otherwise act with respect to such
Book-Entry CitiCertificates, may be limited due to the lack of a physical
certificate for such Book-Entry CitiCertificates. In addition, under a
book-entry format, Beneficial Owners may experience delays in receipt of their
payments, since distributions will be made by the Servicer, or a paying agent on
behalf of the Servicer, to Cede, as nominee for DTC.
DTC has advised the Issuer that it will take any action permitted to be
taken by a Certificateholder under the Pooling Agreement only at the direction
of one or more Participants to whose accounts with DTC the Book-
S-42
<PAGE>
Entry CitiCertificates are credited. Additionally, DTC has advised the Issuer
that it will take such actions only at the direction of and on behalf of
Participants whose holdings of Book-Entry CitiCertificates evidence the
corresponding percentage of ownership interests. DTC may take conflicting
actions to the extent that Participants whose holdings of Book-Entry
CitiCertificates evidence such percentage of ownership interests authorize
divergent action.
Neither the Issuer, the Servicer nor the Trustee will have any
responsibility for any aspect of the records relating to or payments made on
account of beneficial ownership interests of Book-Entry CitiCertificates held by
Cede, as nominee for DTC, or for maintaining, supervising or reviewing any
records relating to such beneficial ownership interests.
DEFINITIVE CERTIFICATES
The Offered Class B CitiCertificates will be issued in fully registered,
certificated form ("Definitive Certificates"). The Book-Entry CitiCertificates
will be issued as Definitive Certificates to Beneficial Owners or their
nominees, rather than to DTC or its nominee, only if (i) the Servicer advises
the Trustee in writing that DTC is no longer willing or able to discharge
properly its responsibilities as depository with respect to the Book-Entry
CitiCertificates and the Servicer is unable to locate a qualified successor,
(ii) the Servicer, at its option, elects to terminate the book-entry system
through DTC or (iii) after the occurrence of a dismissal or resignation of the
Servicer under the Pooling Agreement, Beneficial Owners representing not less
than 51% of the ownership interests of each outstanding Subclass of Book-Entry
CitiCertificates advise the Trustee through DTC in writing that the continuation
of a book-entry system through DTC (or a successor thereto) is no longer in the
Beneficial Owners' best interest.
Upon the occurrence of any event described in the preceding paragraph, the
Trustee will be required to notify all Beneficial Owners through Participants of
the availability of Definitive Certificates.
Upon surrender by DTC of the definitive certificates representing the
Book-Entry CitiCertificates and receipt of instructions for re-registration, the
Trustee will reissue the Book-Entry CitiCertificates as Definitive Certificates
to Beneficial Owners. Distributions of principal of, and interest on, the
Book-Entry CitiCertificates will thereafter be made by the Trustee, or a paying
agent on behalf of the Trustee, directly to holders of Definitive Certificates
in accordance with the procedures set forth in the Pooling Agreement.
Definitive Certificates will be transferable and exchangeable at the offices
of the Trustee. No service charge will be imposed for any registration of
transfer or exchange, but the Trustee may require payment of a sum sufficient to
cover any tax or other governmental charge imposed in connection therewith.
REPORTS TO CERTIFICATEHOLDERS
Unless and until Definitive Certificates are issued in respect of the
Book-Entry CitiCertificates, monthly and annual reports containing information
concerning the Trust and prepared by the Servicer pursuant to the Pooling
Agreement will be sent to Cede as nominee of DTC and registered holder of the
Book-Entry CitiCertificates, as well as to holders of the Offered Class B
CitiCertificates. The Pooling Agreement does not require the sending of any
financial reports to the Beneficial Owners. Beneficial Owners may obtain copies
of any Distribution Date statement free of charge upon request from the Servicer
at (314) 230-2861.
ERISA CONSIDERATIONS
The Department of Labor has granted to the Underwriter an administrative
exemption (the "Exemption") from certain of the prohibited transaction rules of
ERISA and certain of the excise taxes imposed by the Code with respect to the
initial purchase, the holding, and the subsequent resale by ERISA Plans of
certificates in pass-through trusts that meet the conditions and requirements of
the Exemption. The Exemption should apply to the acquisition, holding, and
resale of the Class A CitiCertificates by an ERISA Plan, provided that specified
conditions (certain of which are described below) are met.
Among the conditions which must be satisfied for the Exemption to apply to
the acquisition by an ERISA Plan of the Class A CitiCertificates are the
following: (1) the acquisition of the Class A CitiCertificates by an ERISA Plan
is on terms (including the price for such CitiCertificates) that are at least as
favorable to the ERISA 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
CitiCertificates acquired by the ERISA Plan are not subordinated to the rights
and
S-43
<PAGE>
interests evidenced by other certificates of the Trust; (3) the Class A
CitiCertificates acquired by the ERISA Plan have received a rating at the time
of such acquisition that is in one of the three highest generic rating
categories from any of S&P, Moody's, Duff & Phelps Credit Rating Co. or Fitch
Investors Service, Inc.; (4) the sum of all payments made to the Underwriter in
connection with the distribution of the Class A CitiCertificates represents not
more than reasonable compensation for underwriting such CitiCertificates; and
(5) the sum of all payments made to and retained by the Servicer represents not
more than reasonable compensation for the Servicer's services under the Pooling
Agreement and reimbursement of the Servicer's reasonable expenses in connection
therewith.
In addition, it is a condition that the ERISA Plan investing in the Class A
CitiCertificates be an "accredited investor" as defined in Rule 501(a)(1) of
Regulation D of the Commission under the Securities Act of 1933, as amended (the
"Securities Act").
The Exemption does not apply to the acquisition and holding of Class A
CitiCertificates by ERISA Plans sponsored by the Issuer, the Underwriter, the
Trustee, the Servicer, or any affiliate of such parties. Moreover, the Exemption
provides relief from certain self-dealing/conflict of interest prohibited
transactions, only if, among other requirements (i) an ERISA Plan's investment
in each Class A Subclass does not exceed 25% of all of that Class A Subclass
outstanding at the time of the acquisition and (ii) immediately after the
acquisition, no more than 25% of the assets of an ERISA Plan with respect to
which the person who has discretionary authority or renders advice are invested
in certificates representing an interest in a trust containing assets sold or
serviced by the same person.
Neither the Exemption nor PTE 83-1 (discussed under "ERISA CONSIDERATIONS"
in the Prospectus) applies to the acquisition or holding of the Offered Class B
CitiCertificates because such CitiCertificates are subordinated to the Class A
CitiCertificates. Accordingly, no transfer of an Offered Class B CitiCertificate
to a Plan will be registered unless the transferee (i) executes a representation
letter in form and substance satisfactory to the Trustee stating that it is not,
and is not acting on behalf of, any such Plan or using the assets of any such
Plan to effect such purchase or (ii) upon the delivery of an opinion of counsel
in form and substance satisfactory to the Trustee that the purchase or holding
of the Offered Class B CitiCertificates by or on behalf of such Plan will not
result in the assets of the Trust being deemed to be "plan assets" and subject
to the prohibited transaction provisions of ERISA and the Code or Similar Law
and will not subject the Servicer (or its designee), the Issuer or the Trustee
to any obligation in addition to those undertaken in the Pooling Agreement.
Fiduciaries of Plans should consult their legal advisors, and refer to the
discussion under "ERISA CONSIDERATIONS" in the Prospectus.
LEGAL INVESTMENT
The Class A CitiCertificates will constitute "mortgage related securities"
for purposes of SMMEA, so long as they are rated in one of the two highest
rating categories by at least one nationally recognized statistical rating
organization. As "mortgage related securities" such CitiCertificates will
constitute legal investments for certain entities to the extent provided in
SMMEA. However, there are regulatory requirements and considerations applicable
to regulated financial institutions and restrictions on the ability of such
institutions to invest in certain types of mortgage related securities.
THE OFFERED CLASS B CITICERTIFICATES WILL NOT CONSTITUTE "MORTGAGE RELATED
SECURITIES" FOR PURPOSES OF SMMEA.
Prospective purchasers of the Offered CitiCertificates should consult their
own legal, tax and accounting advisors in determining the suitability of and
consequences to them of the purchase, ownership and disposition of the Offered
CitiCertificates. See "LEGAL INVESTMENT" in the Prospectus.
PLAN OF DISTRIBUTION
Subject to the terms and conditions of the Underwriting Agreement among
Citicorp, the Issuer and the Underwriter (the "Underwriting Agreement"), the
Offered CitiCertificates are being purchased from the Issuer by the Underwriter
upon issuance. The Underwriter is committed to purchase all of the Offered
CitiCertificates offered hereby if any CitiCertificates are purchased.
Distribution of such CitiCertificates is being made by the
S-44
<PAGE>
Underwriter from time to time in negotiated transactions or otherwise at varying
prices to be determined at the time of sale. Proceeds to the Issuer will be
97.531101% of the aggregate Initial Stated Amount of the Class A
CitiCertificates and 90.166666667% of the aggregate Initial Stated Amount of the
Offered Class B CitiCertificates, plus accrued interest in each case at the rate
of 6.25% per annum from the Cut-Off Date but before deducting expenses payable
by the Issuer, provided that if the aggregate Initial Stated Amount of the Class
A CitiCertificates is less than $241,150,000, the aggregate proceeds to the
Issuer (stated as a percentage of the aggregate Initial Stated Amount of the
Class A CitiCertificates) will be adjusted upwards by not more than .003%, and
if the aggregate Initial Stated Amount of the Class A CitiCertificates is
greater than $241,150,000, the aggregate proceeds to the Issuer (stated as a
percentage of the aggregate Initial Stated Amount of the Class A
CitiCertificates) will be adjusted downwards by not more than .003%. In
connection with the purchase and sale of the Offered CitiCertificates, the
Underwriter may be deemed to have received compensation from the Issuer in the
form of underwriting discounts.
Subject to the terms and conditions of the purchase agreement among
Citicorp, the Issuer and Prudential Securities Incorporated (the "Purchase
Agreement"), the Unoffered Class B CitiCertificates (not offered hereby) are
being purchased by Prudential Securities Incorporated upon issuance. Prudential
Securities Incorporated is committed to purchase all of the Unoffered Class B
CitiCertificates if any Unoffered Class B CitiCertificates are purchased. The
Unoffered Class B CitiCertificates will be offered through Prudential Securities
Incorporated in one or more negotiated transactions, as a private placement to a
limited number of institutional investors. The closing of the sale of the
Unoffered Class B CitiCertificates under the Purchase Agreement is a condition
to the closing of the sale of the Offered CitiCertificates to the Underwriter.
The Underwriting Agreement provides that the Issuer and Citicorp will
indemnify the Underwriter against certain civil liabilities under the Securities
Act or contribute to payments the Underwriter may be required to make in respect
thereof.
LEGAL MATTERS
Certain legal matters will be passed upon for the Issuer and Citicorp by
Stephen E. Dietz, as an Associate General Counsel of Citibank, N.A., and for the
Underwriter by Cadwalader, Wickersham & Taft, New York, New York. Certain
federal income tax matters will be passed upon for the Issuer by Rona Daniels,
Vice President and Tax Counsel for Asset Securitization of Citibank, N.A. Each
of Mr. Dietz and Ms. Daniels owns or has the right to acquire a number of shares
of common stock of Citicorp equal to less than .01% of the outstanding common
stock of Citicorp. Certain ERISA matters will be passed upon for the Issuer by
Cadwalader, Wickersham & Taft, New York, New York.
S-45
<PAGE>
INDEX OF PRINCIPAL DEFINITIONS IN PROSPECTUS SUPPLEMENT
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Accretion Amount............................................................................................... S-9
Accretion Directed CitiCertificates............................................................................ S-2
Accretion Distribution Amount.................................................................................. S-24
Accrual CitiCertificates....................................................................................... S-2
Adjusted Balance............................................................................................... S-18
Adjustment Amount.............................................................................................. S-33
Bankruptcy Coverage Termination Date........................................................................... S-33
Bankruptcy Loss................................................................................................ S-26
Bankruptcy Loss Amount......................................................................................... S-33
Beneficial Owner............................................................................................... S-5
Book-Entry CitiCertificates.................................................................................... S-2
Cede........................................................................................................... S-2
Certificate Account............................................................................................ S-14
Certificateholder.............................................................................................. S-2
CFSB........................................................................................................... S-2
Citibank....................................................................................................... S-2
CitiCertificates............................................................................................... S-1
Class A CitiCertificates....................................................................................... S-1
Class A Interest Amount........................................................................................ S-8
Class A Optimal Principal Amount............................................................................... S-25
Class A Percentage............................................................................................. S-26
Class A Prepayment Percentage.................................................................................. S-26
Class A Principal Amount....................................................................................... S-24
Class A Principal Distribution Amount.......................................................................... S-24
Class A Stated Amount.......................................................................................... S-4
Class A Subclass............................................................................................... S-1
Class A Subclass Interest Amount............................................................................... S-22
Class A Subclass Interest Shortfall Amount..................................................................... S-9
Class A Subclass Stated Amount................................................................................. S-4
Class A Unpaid Interest Shortfall.............................................................................. S-9
Class A-7 Accretion Termination Date........................................................................... S-8
Class B CitiCertificates....................................................................................... S-1
Class B CitiCertificate Percentage............................................................................. S-27
Class B Interest Amount........................................................................................ S-22
Class B Prepayment Percentage.................................................................................. S-27
Class B Stated Amount.......................................................................................... S-4
Class B Subclass............................................................................................... S-1
Closing Date................................................................................................... S-5
CMI............................................................................................................ S-2
CMSI........................................................................................................... S-1
Code........................................................................................................... S-2
Commission..................................................................................................... S-16
Companion Class................................................................................................ S-1
Cut-Off Date................................................................................................... S-1
Debt Service Reduction......................................................................................... S-26
Deficient Valuation............................................................................................ S-26
Definitive Certificates........................................................................................ S-43
Depository Agreement........................................................................................... S-14
Detailed Description........................................................................................... S-18
Distribution Date.............................................................................................. S-2
DTC............................................................................................................ S-1
</TABLE>
S-46
<PAGE>
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
ERISA.......................................................................................................... S-2
ERISA Plan..................................................................................................... S-16
Excess Bankruptcy Losses....................................................................................... S-33
Excess Fraud Losses............................................................................................ S-33
Excess Special Hazard Losses................................................................................... S-33
Exemption...................................................................................................... S-17
Fraud Coverage Termination Date................................................................................ S-33
Fraud Loss..................................................................................................... S-26
Fraud Loss Amount.............................................................................................. S-33
Indirect Participants.......................................................................................... S-42
Initial Mortgage Loan Balance.................................................................................. S-2
Initial Stated Amount.......................................................................................... S-4
Interest Accrual Period........................................................................................ S-8
Issuer......................................................................................................... S-1
Last Scheduled Distribution Date............................................................................... S-13
Liquidated Loan................................................................................................ S-25
Liquidated Loan Loss........................................................................................... S-25
Liquidation Proceeds........................................................................................... S-26
Loss Severity Percentage....................................................................................... S-40
Moody's........................................................................................................ S-17
Mortgage Loans................................................................................................. S-2
Non-Supported Interest Shortfall............................................................................... S-9
Offered CitiCertificates....................................................................................... S-2
Offered Class B CitiCertificates............................................................................... S-1
Offered Class B Interest Amount................................................................................ S-8
Offered Class B Optimal Principal Amount....................................................................... S-25
Offered Class B Optimal Principal Distribution Amount.......................................................... S-25
Offered Class B Percentage..................................................................................... S-27
Offered Class B Prepayment Percentage.......................................................................... S-27
Offered Class B Principal Distribution Amount.................................................................. S-11
Offered Class B Stated Amount.................................................................................. S-4
Offered Class B Subordination Percentage....................................................................... S-11
Offered Class B Unpaid Interest Shortfall...................................................................... S-10
Original Class B Stated Amount................................................................................. S-27
Originators.................................................................................................... S-2
Participants................................................................................................... S-42
Plan........................................................................................................... S-16
Pool........................................................................................................... S-2
Pool Adjusted Balance.......................................................................................... S-23
Pool Distribution Amount....................................................................................... S-12
Pooling Agreement.............................................................................................. S-3
Prepayment Interest Shortfalls................................................................................. S-9
Prepayment Model............................................................................................... S-34
Purchase Agreement............................................................................................. S-45
Realized Losses................................................................................................ S-26
REMIC.......................................................................................................... S-1
Residual Certificates.......................................................................................... S-1
Rules.......................................................................................................... S-42
Securities Act................................................................................................. S-44
Servicer....................................................................................................... S-42
Servicing Fee.................................................................................................. S-42
Similar Law.................................................................................................... S-16
SMMEA.......................................................................................................... S-3
</TABLE>
S-47
<PAGE>
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Special Hazard Loss............................................................................................ S-26
Special Hazard Loss Amount..................................................................................... S-33
Special Hazard Termination Date................................................................................ S-33
Special Hazards................................................................................................ S-26
Stated Amount.................................................................................................. S-4
Structuring Assumptions........................................................................................ S-36
Subordination Depletion Date................................................................................... S-6
S&P............................................................................................................ S-17
TAC Balance Amount............................................................................................. S-11
TAC Certificates............................................................................................... S-1
Targeted Balance............................................................................................... S-11
Trust.......................................................................................................... S-1
Trustee........................................................................................................ S-3
Underwriter.................................................................................................... S-1
Underwriting Agreement......................................................................................... S-44
Unoffered Class B CitiCertificates............................................................................. S-1
Unoffered Class B Interest Amount.............................................................................. S-22
Unoffered Class B Stated Amount................................................................................ S-4
</TABLE>
S-48
<PAGE>
- ------------------------------------------------
- ------------------------------------------------
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THE PROSPECTUS OR THIS PROSPECTUS
SUPPLEMENT AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON. NEITHER THE PROSPECTUS NOR THIS PROSPECTUS SUPPLEMENT
CONSTITUTES AN OFFER TO SELL OR A SOLICITATION OF ANY OFFER TO BUY ANY
SECURITIES OTHER THAN THE OFFERED CITICERTIFICATES DESCRIBED IN THIS PROSPECTUS
SUPPLEMENT OR AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY THE
OFFERED CITICERTIFICATES TO ANY PERSON IN ANY STATE OR OTHER JURISDICTION IN
WHICH SUCH OFFER OR SOLICITATION WOULD BE UNLAWFUL. NEITHER THE DELIVERY OF THE
PROSPECTUS NOR THIS PROSPECTUS SUPPLEMENT NOR ANY SALE MADE THEREUNDER OR
HEREUNDER AT ANY TIME IMPLIES THAT INFORMATION HEREIN IS CORRECT AS OF ANY TIME
SUBSEQUENT TO THE DATE HEREOF.
-------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PROSPECTUS SUPPLEMENT
PAGE
---------
<S> <C>
Summary of Prospectus and Prospectus Supplement..... S-3
Description of the Pool and the Mortgaged
Properties......................................... S-18
Certain Investment Considerations for Purchasers of
Offered Class B CitiCertificates................... S-19
Description of the Offered CitiCertificates......... S-21
ERISA Considerations................................ S-43
Legal Investment.................................... S-44
Plan of Distribution................................ S-44
Legal Matters....................................... S-45
Index of Principal Definitions in Prospectus
Supplement......................................... S-46
PROSPECTUS
Reports to Certificateholders....................... 2
Additional Information.............................. 2
Available Information............................... 2
Incorporation of Certain Documents by Reference..... 2
Description of Certificates......................... 3
The Pools........................................... 13
Citicorp Mortgage Securities, Inc................... 18
The Originators..................................... 19
Loan Underwriting Policies and Loss and Delinquency
Considerations..................................... 21
Delinquency and Foreclosure Experience.............. 24
Citicorp............................................ 26
Use of Proceeds..................................... 26
The Pooling Agreements.............................. 26
ERISA Considerations................................ 32
Legal Investment.................................... 34
Certain Federal Income Tax Consequences............. 35
Plans of Distribution............................... 53
Experts............................................. 54
Appendix A: The Mortgage Loans and
CitiMortgageCertificates
Appendix B: The Agency Certificates
Index of Principal Definitions
</TABLE>
$256,949,704
(Approximate)
CITICORP MORTGAGE
SECURITIES, INC.
(PACKAGER AND SERVICER)
REMIC Pass-Through Certificates
Series 1994-5
$24,158,000 (Approximate) 6.25%
Senior Class A-1 CitiCertificates
$63,987,000 (Approximate) 6.25%
Senior Class A-2 CitiCertificates
$46,499,000 (Approximate) 6.25%
Senior Class A-3 CitiCertificates
$49,858,000 (Approximate) 6.25%
Senior Class A-4 CitiCertificates
$16,803,000 (Approximate) 6.25%
Senior Class A-5 CitiCertificates
$18,431,000 (Approximate) 6.25%
Senior Class A-6 CitiCertificates
$20,385,000 (Approximate) 6.25%
Senior Class A-7 CitiCertificates
$16,828,704 (Approximate) 6.25%
Subordinated Class B-1 CitiCertificates
-----------------
PROSPECTUS SUPPLEMENT
-----------------
PRUDENTIAL SECURITIES INCORPORATED
Dated March 24, 1994
- ------------------------------------------------
- ------------------------------------------------
<PAGE>
P_R_O_S_P_E_C_T_U_S
CITICORP MORTGAGE SECURITIES, INC.
REMIC PASS-THROUGH CERTIFICATES
Citicorp Mortgage Securities, Inc. (the "Issuer") may sell from time to
time, on terms to be determined at the time of sale, one or more series (each, a
"Series") of certificates (the "Certificates") consisting of one or more classes
(each, a "Class") evidencing ownership interests in a trust (the "Trust"), to be
created by the Issuer, with respect to which one or more elections will be made
to treat such Trust, or one or more segregated pools of assets within such Trust
as one or more real estate mortgage investment conduits (each, a "REMIC") under
the Internal Revenue Code of 1986, as it may be amended from time to time (the
"Code"). The property of each such REMIC will consist of a pool of assets (for
each Series, a "Pool") comprised primarily of mortgage loans or mortgage-backed
certificates conveyed to such Trust by the Issuer. Any Class of Certificates may
be divided into two or more subclasses (each, a "Subclass"). The Certificates
will consist of one or more Classes or Subclasses of regular interests
(collectively, the "CitiCertificates"), and of one Class or one Subclass of
residual interests with respect to each Pool (the "Residual Certificates"). Each
Class or Subclass of Certificates 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 Loans or Mortgage Certificates in the related Pool. One
or more Classes or Subclasses of CitiCertificates may be subject to deferred
distribution of interest ("Accrual CitiCertificates"). If specified in the
applicable Prospectus Supplement, a Series (a "Senior/Subordinated Series") may
consist of one or more Classes or Subclasses of Certificates subordinate in
right of distributions (the "Subordinated Certificates") to one or more other
Classes or Subclasses (the "Senior Certificates"). If so specified in the
applicable Prospectus Supplement, in addition to or in lieu of subordination,
credit support may be provided for any Class of Certificates in the form of a
guaranty issued by Citicorp or another guarantor (a "Guaranty"), letter of
credit, mortgage pool insurance policy or other form of credit support as
described herein and in the applicable Prospectus Supplement.
The applicable Prospectus Supplement will set forth the specific terms of
each Class and/or Subclass of Certificates offered thereby, including (if
applicable) the aggregate Initial Stated Amount, the Stated Rate and the Last
Scheduled Distribution Date for each such Class or Subclass; the terms of
distribution of accrued interest on any Class or Subclass of Accrual
CitiCertificates; the method used to calculate the aggregate amount of
distributions in reduction of Stated Amount of any Class or Subclass of
Certificates required to be made on each Distribution Date and the method of
allocation thereof; the Distribution Dates; the characteristics of the Mortgage
Loans or Mortgage Certificates comprising the Pool; whether more than one REMIC
election will be made; the terms of any special distributions or early
termination applicable to the Class or Subclass; the terms of any credit support
provided for a Class or Subclass; the terms of any subordination provided in a
Senior/Subordinated Series; the terms of any distributions on Residual
Certificates; and any other terms of a Class or Subclass.
Each Pool will consist of fixed or adjustable interest rate mortgage loans
("Mortgage Loans") acquired by the Issuer from Citicorp Mortgage, Inc. ("CMI"),
Citibank, N.A. ("Citibank") or another affiliate of the Issuer (collectively,
the "Originators") and/or of certificates backed by Mortgage Loans
("CitiMortgageCertificates"), GNMA Certificates, FNMA Certificates and/or FHLMC
Certificates (each as defined herein, and collectively, together with
CitiMortgageCertificates, the "Mortgage Certificates"), together with certain
other assets described herein or as otherwise described in the Prospectus
Supplement. The Mortgage Certificates may be guaranteed as to payment of
principal and interest to the extent indicated herein and in the related
Prospectus Supplement. The CitiMortgageCertificates may have the benefit of
credit support to the extent provided herein and in the related Prospectus
Supplement.
----------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
----------------
The Certificates may be sold by the Issuer through dealers or agents
designated from time to time, through underwriting syndicates led by one or more
managing underwriters or through one or more underwriters acting alone. See
"Plans of Distribution." Affiliates of the Issuer may from time to time act as
agents or underwriters in connection with the sale of the Certificates. Specific
information with respect to the terms of offering of the Certificates offered
thereby is set forth in the Prospectus Supplement.
THIS PROSPECTUS MAY NOT BE USED TO CONSUMMATE SALES OF CERTIFICATES UNLESS
ACCOMPANIED BY A PROSPECTUS SUPPLEMENT.
THE DATE OF THIS PROSPECTUS IS MARCH 23, 1994.
<PAGE>
REPORTS TO CERTIFICATEHOLDERS
The Issuer will provide or cause to be provided to holders of the
Certificates (the "Certificateholders") of each Series periodic reports
concerning the Pool underlying their respective Certificates.
ADDITIONAL INFORMATION
Copies of FHLMC's most recent Offering Circular for FHLMC Certificates,
FHLMC's Information Statement and most recent Supplement to such Information
Statement and any quarterly report made available by FHLMC can be obtained by
writing or calling the Investor Inquiry Department at 8200 Jones Branch Drive,
McLean, Virginia 22102 ((703) 759-8160 or (800) 336-FMPC). Copies of FNMA's most
recent Prospectus for FNMA Certificates and FNMA's annual and quarterly reports
as well as other financial information are available from the Vice President for
Investor Relations of FNMA, 3900 Wisconsin Avenue, N.W., Washington, D.C. 20016
((202) 752-7115). The Issuer does not, and will not, participate in the
preparation of FHLMC's Offering Circulars, Information Statements or any
Supplements thereto or any of its quarterly reports, FNMA's Prospectuses or any
of its reports, financial statements or other information or GNMA's annual
report.
AVAILABLE INFORMATION
The following information is provided if a Guaranty is issued by Citicorp
and is part of a Pool. Citicorp is subject to the informational requirements of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith Citicorp currently files reports and other information with
the Securities and Exchange Commission (the "Commission"). Information as of
particular dates, concerning directors and officers, their remuneration, options
granted to them, the principal holders of securities of Citicorp and any
material interest of such persons in transactions with Citicorp, is disclosed in
proxy statements distributed to stockholders of Citicorp and filed with the
Commission. Such reports, proxy statements and other information can be
inspected and copied at the public reference facilities of the Commission at 450
Fifth Street, N.W., Washington, D.C. 20549; Northwestern Atrium Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661; and Seven World Trade
Center, 13th Floor, New York, New York 10048. Copies of such material can be
obtained from the Public Reference Section of the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549 at prescribed rates. Such reports, proxy
statements and other information concerning Citicorp also may be inspected at
the offices of the New York Stock Exchange, the American Stock Exchange, the
Midwest Stock Exchange and the Pacific Stock Exchange.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
If a Guaranty is issued by Citicorp and is part of a Pool, the following
documents filed with the Commission by Citicorp are incorporated as of their
respective filing dates in this Prospectus by reference:
(1) Annual Report and Form 10-K for the fiscal year ended December 31,
1993, filed pursuant to Section 13 of the Exchange Act; and
(2) Current Report on Form 8-K dated January 18, 1994, filed pursuant to
Section 13 of the Exchange Act.
If such a Guaranty is part of a Pool, all reports subsequently filed by
Citicorp pursuant to Sections 13(a) and (c) of the Exchange Act, any definitive
proxy or information statements filed pursuant to Section 14 of the Exchange Act
in connection with any stockholders' meeting and any reports filed pursuant to
Section 15(d) of the Exchange Act prior to the termination of the offering of
the Certificates offered hereby shall be deemed to be incorporated by reference
into this Prospectus and to be a part hereof.
Citicorp will provide without charge to each person, including any
beneficial owner of Certificates, to whom this Prospectus is delivered, on the
request of any such person, a copy of any or all of the foregoing documents
incorporated herein by reference (other than exhibits to such documents).
Written or telephone requests should be directed to Citicorp, 850 Third Avenue,
13th Floor, New York, NY 10043, Attention: Corporate Affairs Distribution, (212)
559-0233.
2
<PAGE>
EACH SERIES OF CERTIFICATES WILL BE ISSUED UNDER A SEPARATE POOLING AND
SERVICING AGREEMENT (EACH A "POOLING AGREEMENT"), BETWEEN THE ISSUER AND THE
TRUSTEE FOR SUCH SERIES (THE "TRUSTEE"), SUBSTANTIALLY IN ONE OF THE FORMS
(EACH, A "FORM OF POOLING AGREEMENT") FILED AS AN EXHIBIT TO THE REGISTRATION
STATEMENT OF WHICH THIS PROSPECTUS IS A PART (THE "REGISTRATION STATEMENT"). THE
SUMMARIES OF CERTAIN PROVISIONS OF THE CERTIFICATES AND SUCH FORM OF POOLING
AGREEMENT INCLUDED IN THIS PROSPECTUS DO NOT PURPORT TO BE COMPLETE AND ARE
SUBJECT TO, AND QUALIFIED IN THEIR ENTIRETY BY REFERENCE TO, ALL OF THE
PROVISIONS OF THE FORM OF POOLING AGREEMENT, AND THE FINAL POOLING AGREEMENT
EXECUTED IN CONNECTION WITH THE ISSUANCE OF A SERIES. SECTION REFERENCES HEREIN
ARE REFERENCES TO THE FORM OF POOLING AGREEMENT. WHEN USED IN THIS PROSPECTUS
(AS MODIFIED BY THE DESCRIPTION IN THE RELATED PROSPECTUS SUPPLEMENT), THE
SUMMARIES OF CERTAIN PROVISIONS OF THE FORM OF POOLING AGREEMENT ALSO APPLY TO
THE FORM OF POOLING AGREEMENT APPLICABLE TO A POOL OF MORTGAGE LOANS UNDERLYING
A CITIMORTGAGECERTIFICATE. TERMS USED BUT NOT DEFINED HEREIN HAVE THE MEANINGS
ASSIGNED TO THEM IN THE FORM OF POOLING AGREEMENT. REFERENCES HEREIN TO THE
TRUSTEE OR THE ISSUER INCLUDE, UNLESS OTHERWISE SPECIFIED, ANY AGENTS ACTING ON
BEHALF OF THE TRUSTEE OR ANY SUBCONTRACTOR OF THE ISSUER, ANY OF WHICH AGENTS OR
SUBCONTRACTORS MAY BE THE ISSUER OR ONE OF ITS AFFILIATES.
THE SUMMARIES INCLUDED IN THIS PROSPECTUS GENERALLY DESCRIBE THE
CERTIFICATES AND RELATED MATTERS. SUCH SUMMARIES ARE SUBJECT TO, AND QUALIFIED
IN THEIR ENTIRETY BY REFERENCE TO, THE PROSPECTUS SUPPLEMENT DESCRIBING A
PARTICULAR SERIES. SEE "INDEX OF PRINCIPAL DEFINITIONS" FOR A LISTING OF
PRINCIPAL TERMS USED HEREIN AND THE PAGE HEREIN ON WHICH EACH SUCH TERM IS
DEFINED.
DESCRIPTION OF CERTIFICATES
GENERAL
The Certificates are issuable in one or more Series. The Certificates of
each Series will evidence the entire beneficial ownership interest in the Trust
as to which one or more elections will be made to treat all or a specified
portion thereof (as specified in the related Prospectus Supplement) as one or
more REMICs as defined in Code Section 860D. The Trust will consist of (i) such
Mortgage Loans or Mortgage Certificates as from time to time are subject to the
Pooling Agreement; (ii) such funds or assets as from time to time are deposited
in the Certificate Account as described herein under Appendix A "THE MORTGAGE
LOANS AND CITIMORTGAGECERTIFICATES--Payments on Mortgage Loans in Pools"; (iii)
property acquired by foreclosure or deed in lieu of foreclosure of Mortgage
Loans as from time to time are subject to the Pooling Agreement; (iv) any
combination of Guaranty, letter of credit, mortgage pool insurance policy, one
or more reserve funds and other form of credit support provided for such Series;
and (v) any title insurance policy and hazard insurance policy maintained with
respect to the Mortgaged Properties.
Each Series will consist of one or more Classes or Subclasses of
CitiCertificates representing "regular interests" in one or more REMICs within
the meaning of Code Section 860G(a)(1) and one Class or one Subclass of Residual
Certificates representing the "residual interest" with respect to each REMIC
within the meaning of Code Section 860G(a)(2).
Each Series of Certificates will consist of Residual Certificates and of
either (i) a single Class of CitiCertificates, (ii) two or more Classes of
CitiCertificates, one or more Classes or Subclasses (the "Senior Certificates")
of which will be senior in right of distributions to one or more of the other
Classes or Subclasses (the "Subordinated Certificates") to the extent described
in the related Prospectus Supplement (any such Series, a "Senior/Subordinated
Series"); (iii) two or more Classes or Subclasses of CitiCertificates which
differ as to the timing, sequential order, rate or amount of distributions of
principal or interest or both, or as to which distribution of principal or
interest or both on any Class or Subclass may be made upon the occurrence of
specified events, in accordance with a formula or schedule, or on the basis of
certain types of collections or from designated portions of the Pool, which
CitiCertificates may be Accrual CitiCertificates; or (iv) other types of Classes
or Subclasses of CitiCertificates as described in the related Prospectus
Supplement. Credit support for a Series of CitiCertificates may be provided by a
Guaranty, letter of credit, mortgage pool insurance policy, special hazard
insurance policy, bankruptcy bond, or a Reserve Fund as described herein and in
the related Prospectus Supplement, or by the subordination of one or more
Classes
3
<PAGE>
or Subclasses of CitiCertificates or Residual Certificates as described herein
and in the related Prospectus Supplement, or by any combination of the
foregoing. See "DESCRIPTION OF CERTIFICATES--Credit Support."
The Issuer may sell certain Classes or Subclasses of Certificates of a
Series, including one or more Classes or Subclasses of Subordinated Certificates
or the Residual Certificates, by means of this Prospectus and such Prospectus
Supplement if, at the time of sale, at least one nationally recognized
statistical rating organization has rated the Classes or Subclasses of
Certificates of such Series in one of its generic rating categories which
signifies investment grade. Typically, the four highest categories (within which
there may be subcategories or gradations indicating relative standing) signify
investment grade.
The Issuer may sell certain Classes or Subclasses of Certificates of a
Series, including one or more Classes or Subclasses of Subordinated Certificates
or the one Class or one Subclass of Residual Certificates, in privately
negotiated transactions exempt from registration under the Securities Act of
1933, as amended.
Unless otherwise specified in the related Prospectus Supplement, the
CitiCertificates of specified Classes or Subclasses of a Series will be issued
in the form of book entries on the records of The Depository Trust Company
("DTC") and participating members thereof.
Interest distributions and distributions in reduction of the Stated Amount
with respect to Certificates of any Series will be made on the Distribution
Dates for such Series (i) by check mailed to holders of such Certificates
registered as such on the applicable Record Date at their addresses appearing on
the Certificate Register, (ii) upon written request of a Certificateholder to
the Trustee (or the paying agent), by wire transfer in immediately available
funds to the account of such Certificateholder provided that such
Certificateholder holds at least the minimum denomination specified in the
applicable Prospectus Supplement and Pooling Agreement, or (iii) by such other
means as are agreed upon by the paying agent and a Certificateholder; PROVIDED,
HOWEVER, that distributions in reduction of Stated Amount which reduce the
Stated Amount of a Certificate to zero will be made only upon presentation and
surrender of such Certificate at the office or agency of any paying agent for
such Series, unless otherwise specified in the related Prospectus Supplement.
Notice will be mailed before the Distribution Date on which the final
distribution in reduction of Stated Amount on any Certificate is expected to be
made to the holder of such Certificate.
The Trustee will include with each distribution on a CitiCertificate a
statement showing, among other things, the allocation of such distribution to
interest and reductions of Stated Amount and the remaining Stated Amount of a
CitiCertificate of each Class or Subclass of that Series in the minimum
denomination (or minimum permitted increment above such denomination, if less)
specified in the related Prospectus Supplement (a "Single Certificate"). On each
Distribution Date before a distribution is first made on a particular Class of
Accrual CitiCertificates, the Trustee will also furnish to each holder of an
Accrual CitiCertificate of such Class a statement showing (i) the interest
accrued during the Interest Accrual Period applicable to such Distribution Date,
(ii) the amount of accrued interest to be added to the Stated Amount thereof and
(iii) the Stated Amount of such an Accrual CitiCertificate after giving effect
to such addition to the Stated Amount thereof, in each case for an Accrual
CitiCertificate which is a Single Certificate.
DISTRIBUTIONS TO CERTIFICATEHOLDERS
GENERAL
Beginning with the month next succeeding the month in which Certificates of
a Series are originally issued, distributions of principal and interest thereon
at the Stated Rate will be made by or on behalf of the Issuer on the 25th day of
each month, or if such day is not a business day, the immediately following
business day (each, a "Distribution Date"), or on such other date as may be
specified in the related Prospectus Supplement, to the persons in whose names
the Certificates are registered at the close of business on the last business
day of the preceding month (the "Record Date"). Alternatively, if the related
Prospectus Supplement so provides, distributions will be made at quarterly,
semi-annual or other intervals, but at least annually. The amount of each
distribution will be determined on the 18th day of the month of the related
Distribution Date or, if such 18th day is not a business day, the immediately
preceding business day (each, a "Determination Date") or such other date as may
be specified in the related Prospectus Supplement.
4
<PAGE>
Unless otherwise specified in the related Prospectus Supplement,
distributions to Certificateholders of a Class or Subclass will be made pro rata
among Certificateholders of such Class or Subclass. The manner in which any
available credit support will be allocated among the Classes or Subclasses of
Certificates in a Series will be specified in the related Prospectus Supplement.
Distributions in reduction of Stated Amount of and in respect of interest
on, the Certificates will be made by or on behalf of the Issuer out of, and only
to the extent of, funds available for such purpose (the "Pool Distribution
Amount") in the Certificate Account of the related Series. All distributions on
the Certificates of each Series will be made on each Distribution Date for such
Series from the Pool Distribution Amount in accordance with the terms described
herein and in the related Prospectus Supplement, and as specified in the related
Pooling Agreement.
Unless otherwise specified in the related Prospectus Supplement, for each
Pool consisting of Mortgage Loans, the Pool Distribution Amount for a
Distribution Date will be equal to the aggregate of all previously undistributed
proceeds of payments on account of principal, including amounts received in
respect of credit support, if any, and any payments or other recovery of
principal on a Mortgage Loan which is received in advance of its scheduled due
date and is not accompanied by an amount as to interest representing scheduled
interest for any month subsequent to the month of prepayment (each, a "Principal
Prepayment"), and interest, including any payments made from any related buydown
subsidy account, in respect of the Mortgage Loans received and posted after the
Cut-Off Date and before the related Determination Date, except in each case:
(i) payments which were due on or before the Cut-Off Date;
(ii) any Principal Prepayment received during the month of distribution
and any related payments of interest representing interest for the month of
distribution or any portion thereof (which will be distributed the next
month);
(iii) payments which represent early receipt of scheduled payments of
principal and interest due on a date or dates subsequent to the first day of
the month of distribution;
(iv) that portion of payments on account of interest (including payments
made from a buydown subsidy account established with respect to such
Mortgage Loans) on the Mortgage Loans in the Pool in excess of interest at
the Pass-Through Rate;
(v) that portion of the proceeds of the liquidation of defaulted
Mortgage Loans which represents servicing compensation to the Issuer and is
to be paid to the Issuer from the related Certificate Account to the extent
described in APPENDIX A under "THE MORTGAGE LOANS AND
CITIMORTGAGECERTIFICATES--Realization Upon Defaulted Mortgage Loans" below;
and
(vi) any other amount not to be included in the Pool Distribution Amount
pursuant to the related Pooling Agreement.
Unless otherwise specified in the related Prospectus Supplement for each
Pool consisting of Mortgage Certificates, the Pool Distribution Amount will
equal all previously undistributed amounts received as principal and interest on
such Mortgage Certificates in accordance with their terms on or prior to the
related Determination Date (or, for CitiMortgageCertificates, the Distribution
Date).
DISTRIBUTIONS OF INTEREST
Unless otherwise specified in the related Prospectus Supplement, each Class
or Subclass of Certificates entitled to a distribution of interest will be
entitled to such interest at a per annum rate (the "Stated Rate") which may be
fixed or, subject to federal income tax requirements, may vary over the life of
the Certificates.
Unless otherwise specified in the related Prospectus Supplement, each Class
or Subclass of Certificates of a Series, other than Accrual CitiCertificates, if
any, will be entitled to receive distributions in respect of interest on each
Distribution Date and will accrue interest on the outstanding Stated Amount of
each such Class or Subclass of Certificates at the Stated Rate (calculated on
the basis of a 360-day year of twelve 30-day
5
<PAGE>
months) and for the periods (each an "Interest Accrual Period") specified in the
Prospectus Supplement. Accrual CitiCertificates will accrue interest as
described above but such accrued interest will not be distributed until the
occurrence of the events specified in the related Prospectus Supplement. Prior
to such time, the interest accrued but not distributed on the Accrual
CitiCertificates will be added to the Stated Amount thereof on each Distribution
Date.
DISTRIBUTIONS IN REDUCTION OF STATED AMOUNT
Each Certificate entitled to distributions representing principal payments
on the Mortgage Loans or Mortgage Certificates included in the Pool underlying
such Series will have a "Stated Amount" which, at any time will equal the
maximum amount in respect of principal which the holder of such Certificate will
be entitled to receive out of the future cash flow on the Mortgage Loans or the
Mortgage Certificates, and other assets, if any, included in the Trust. The
Prospectus Supplement will specify the method by which the amount of
distributions in reduction of Stated Amount to be distributed to the
Certificateholders on each Distribution Date (the "Certificate Distribution
Amount") will be calculated and the manner in which the Certificate Distribution
Amount will be allocated among the Classes or Subclasses entitled to
distributions thereof. Distributions in reduction of the Stated Amount of
Certificates will be made on each Distribution Date to the holders of the
Certificates then entitled to receive such distributions until the aggregate
amount of distributions have reduced the Stated Amount of each Certificate of a
Class or Subclass to zero. The initial aggregate Stated Amount of all Classes or
Subclasses of a Series may equal the aggregate outstanding principal amount of
the related Mortgage Loans or Mortgage Certificates as of the applicable Cut-Off
Date and, for each Class or Subclass, will be specified in the related
Prospectus Supplement. Alternatively, the initial aggregate Stated Amount of all
Classes or Subclasses of a Series of Certificates may equal the initial
aggregate Pool Value of the related Mortgage Loans or Mortgage Certificates as
of the applicable Cut-Off Date.
The aggregate Pool Value of the related Mortgage Loans or Mortgage
Certificates will be the Stated Amount of the Certificates of that Series that,
based on certain assumptions and regardless of any prepayments on such Mortgage
Loans or Mortgage Certificates, can be supported by either the future scheduled
payments on the Mortgage Loans included in the Pool or the mortgage loans
underlying the Mortgage Certificates included in the Pool (with interest
adjusted to the applicable Pass-Through Rate), or the proceeds of the Principal
Prepayment of such Mortgage Loans or mortgage loans underlying the Mortgage
Certificates, together with reinvestment income, if any, thereon at the rate and
for the period specified in the related Prospectus Supplement and, if
applicable, amounts available to be withdrawn from any Reserve Fund for such
Series, as further or otherwise specified in the related Prospectus Supplement.
In calculating Pool Values of Mortgage Certificates and Mortgage Loans included
in the Pool, future distributions on a Mortgage Loan will be determined based on
future scheduled payments (after giving effect to any Principal Prepayments
previously received and posted) on such Mortgage Loan, and future distributions
on a Mortgage Certificate will be determined either as if the underlying
mortgage loans constituted a single mortgage loan having the highest mortgage
rate and longest maturity of any mortgage loan underlying such Mortgage
Certificate or separately for each mortgage loan underlying such Mortgage
Certificate. Any similar Mortgage Loans or mortgage loans underlying Mortgage
Certificates or any Mortgage Certificates that are backed by the same pool of
mortgage loans, or similar pools of mortgage loans, may be aggregated into one
or more groups (each, a "Pool Value Group"), each of which will be assigned an
aggregate Pool Value calculated as if all such Mortgage Loans or mortgage loans
in, or all mortgage loans underlying all the Mortgage Certificates in, the Pool
Value Group constituted a single mortgage loan having the highest mortgage rate
and longest maturity of any such mortgage loan for such Pool Value Group. There
are a number of alternative means of determining the Pool Values of a Mortgage
Certificate, Mortgage Loan or Pool Value Group, including determinations based
on the discounted present value of the remaining scheduled distributions thereon
and determinations based on the relationship between the Pass-Through Rates
borne thereby and the Stated Rates of the related Series of Certificates.
With respect to any Series as to which the initial Stated Amount of the
Certificates is calculated on the basis of the Pool Values of the Mortgage Loans
or the Mortgage Certificates, the Prospectus Supplement for
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each such Series will describe the method or methods (and related assumptions)
used to determine the Pool Value of the Mortgage Certificates and Mortgage Loans
or the Pool Value Groups securing such Series. In any event, the aggregate of
the Pool Values of all the Mortgage Certificates and Mortgage Loans and all the
Pool Value Groups included in the Pool for a Series of Certificates will always
be at least equal to the aggregate Stated Amount of the Certificates of such
Series. The Certificate Distribution Amount with respect to a Series as to which
the initial Stated Amount of the Certificates is calculated on the basis of the
Pool Values of the Mortgage Loans or the Mortgage Certificates will generally be
calculated on the basis of the decline in the aggregate Pool Values of the
Mortgage Loans or Mortgage Certificates included in the Pool during the related
Due Period, or as otherwise described in the related Prospectus Supplement.
The Stated Amount of a Certificate will decline as a result of distributions
attributable to principal that are made to the holders of the Certificates and,
to the extent described herein and in the related Prospectus Supplement, as a
result of losses on the Mortgage Loans or Mortgage Certificates in the related
Pool, to the extent that the credit support (including the amount of
subordination provided to Senior Certificates in a Senior/Subordinated Series)
provided for such Class or Subclass of Certificate is inadequate to cover such
losses. The Stated Amount of a Certificate may increase in the case of Accrual
CitiCertificates by interest accrued but not then distributable on such Accrual
CitiCertificates, or, to the extent that a Pool consists of adjustable rate
mortgages which provide for limitations on the amount by which monthly payments
by a Mortgagor may be increased and changes in the interest rate on the Mortgage
Loan are made more frequently than changes in the payment, if an increase in the
interest rate on the Mortgage Loan is not covered by the amount of the related
scheduled monthly payment.
The aggregate amount which will be distributed in reduction of Stated Amount
to holders of CitiCertificates of each Series then entitled thereto on any
Distribution Date for such Series will equal, to the extent funds are available,
the sum of (i) the aggregate Certificate Distribution Amount, (ii) the amount of
interest, if any, accrued on any Accrual CitiCertificates of such Series during
the related Interest Accrual Period but not then required to be distributed,
such amount being added to the Stated Amount thereof, (iii) the applicable
percentage of the Spread, if any, specified in the Prospectus Supplement and
(iv) any amounts in reduction of Stated Amount previously distributable but not
yet distributed.
Unless otherwise specified in the related Prospectus Supplement, in the case
of CitiCertificates consisting of more than one Class, if the Amount Available
under the credit support (including the amount of any subordination provided to
Senior Certificates in a Senior/Subordinated Series) provided for such Series is
inadequate to cover any loss on the Mortgage Loans with the result that there
are insufficient funds on deposit in the Certificate Account on the next
succeeding Distribution Date to pay the amount then distributable to the Class
of CitiCertificates then entitled to receive distributions in reduction of
Stated Amount (a "Loss Allocation Event"), the amount then available for
distribution will be distributed pro rata to the holders of CitiCertificates of
a Class then outstanding notwithstanding any priorities among Subclasses of such
Class of CitiCertificates set forth in the related Prospectus Supplement.
Thereafter funds on deposit in the Certificate Account available for
distributions in reduction of Stated Amount on a Distribution Date will be
distributed on such Distribution Date pro rata based on the outstanding Stated
Amount to all Classes of CitiCertificates then outstanding. Any shortfalls of
interest will be allocated on a pro rata basis based on the amount of interest
then distributable (or allocable, in the case of each Class of Accrual
CitiCertificates) to each Class. On or after the Distribution Date on which a
Loss Allocation Event occurs, the Stated Amount of all Classes then outstanding
will be reduced on a pro rata basis by the amount of any losses actually
incurred with respect to the Mortgage Loans.
Funds available for distribution from the Certificate Account on a
Distribution Date will include distributions on Mortgage Certificates in the
Pool received in the related Due Period and payments received with respect to
Mortgage Loans in the Pool in the related Due Period, as described herein. See
"APPENDIX A: THE MORTGAGE LOANS AND CITIMORTGAGECERTIFICATES--Payments on
Mortgage Loans in Pools." Amounts remaining in the Certificate Account which are
available for distribution, as so described, after payment of all amounts due to
holders of CitiCertificates, and after payment of certain expenses therefrom,
will be distributed to holders of Residual Certificates on a pro rata basis.
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The "Spread" with respect to a Distribution Date for a Series will be the
excess of (a) the sum of (i) all distributions received on the Mortgage
Certificates or Mortgage Loans (net of (1) any Servicing Compensation, and (2)
in the case of Mortgage Loans, any distributions on such Mortgage Loans
representing the receipt of (A) scheduled payments of principal and interest due
on a date subsequent to the period (a "Due Period") beginning at the close of
business on the last day of the preceding Due Period (or, in the case of the
first Due Period, beginning at the close of business on the Cut-Off Date) and
ending at the close of business on the business day preceding the Determination
Date in respect of such Distribution Date, and (B) Principal Prepayments
received during the month of the applicable Determination Date) included in the
Pool for such Series in the Due Period preceding such Distribution Date, and, in
the case of the first Due Period, any amount deposited in the Certificate
Account on the Closing Date, (ii) income from reinvestment, if any, of such net
distributions and any initial deposit into the Reserve Fund and (iii) to the
extent specified in the related Prospectus Supplement, the amount of cash
withdrawn from any Reserve Fund or buydown subsidy account since the preceding
Distribution Date for such Series (or since the Closing Date in the case of the
first Distribution Date for such Series) and required to be deposited in the
Certificate Account for such Series, over (b) the sum of (i) all interest
distributed on the CitiCertificates of such Series or added to the Stated Amount
of the Accrual CitiCertificates of such Series on such Distribution Date, (ii)
the aggregate Certificate Distribution Amount for such Series with respect to
such Distribution Date, (iii) if applicable to such Series, any Special
Distributions in respect of such Series made since the preceding Distribution
Date for such Series (or since the Closing Date in the case of the first
Distribution Date for such Series), (iv) any reimbursements of payments under
any credit support for such Series or Voluntary Advances with respect to such
Distribution Date, (v) any amounts paid to the issuer of credit support and (vi)
any REMIC Servicing Fee payable during the Due Period preceding such
Distribution Date.
Series of CitiCertificates having other than monthly Distribution Dates may
receive special distributions ("Special Distributions") with respect to any
period for which distributions are received on the related Mortgage Loans or
Mortgage Certificates, other than such periods which include Distribution Dates,
if, as a result of principal prepayments on the mortgage loans underlying the
Mortgage Certificates or on the Mortgage Loans in the Pool for such Certificates
or low reinvestment yields, or both, the Trustee determines, based on
assumptions as to timing of receipt of distributions, reinvestment income and
prepayment rates, among others, specified in the Pooling Agreement, that the
amount of cash anticipated to be on deposit in the Certificate Account for such
Series on the earlier of the next Distribution Date or the second succeeding
Special Distribution Date for such Series may be less than the sum of interest
distributions and distributions in reduction of Stated Amount that would be made
on such date if it were a Distribution Date. Special Distributions on the
CitiCertificates of a Series will be allocated in the same manner as would
distributions on the next Distribution Date for such Series.
CREDIT SUPPORT
GENERAL
Credit support may be provided with respect to one or more Classes or
Subclasses of CitiCertificates or with respect to the assets in the related
Trust. Credit support may be in the form of the subordination of one or more
Classes or Subclasses of CitiCertificates of such Series to one or more other
Classes or Subclasses of CitiCertificates, a limited guaranty issued by Citicorp
or another guarantor, a letter of credit, a mortgage pool insurance policy, a
special hazard insurance policy, a bankruptcy bond, the establishment of one or
more reserve funds or any other form of credit support described in the
applicable Prospectus Supplement, or any combination of the foregoing. Unless
otherwise specified in the Prospectus Supplement, credit support will not
provide protection against all risks of loss and will not guarantee repayment of
the entire Stated Amount of the CitiCertificates and interest thereon. If losses
occur which exceed the amount covered by credit support or which are not covered
by the credit support, holders of the CitiCertificates will bear their allocable
share of such deficiencies as described in the related Prospectus Supplement.
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SUBORDINATION
If so specified in the Prospectus Supplement, credit support for one or more
Classes or Subclasses of Senior Certificates in a Senior/Subordinated Series may
include one or more Classes or Subclasses of Subordinated Certificates, such
that distributions in respect of Scheduled Principal, Principal Prepayments,
interest or any combination thereof that otherwise would have been payable to
one or more Classes or Subclasses of Subordinated Certificates will instead be
payable to holders of one or more Classes or Subclasses of Senior Certificates
under the circumstances and to the extent specified in the related Prospectus
Supplement. Such subordination provisions will have the effect of accelerating
the amortization of the Senior Certificates and increasing the respective
percentage ownership interest evidenced by the Subordinated Certificates in the
related Trust, as well as preserving the availability of the subordination
provided by the Subordinated Certificates.
If specified in the related Prospectus Supplement, delays in receipt of
Scheduled Principal and losses on defaulted Mortgage Loans or mortgage loans
underlying the Mortgage Certificates will be borne first by the various Classes
or Subclasses of Subordinated Certificates under the circumstances and subject
to the limitations specified in the related Prospectus Supplement, which will
have the effect of increasing the respective percentage ownership interest of
the Senior Certificates in the Trust. The aggregate distributions in respect of
delinquent Scheduled Principal and the aggregate losses in respect of defaulted
Mortgage Loans or mortgage loans underlying Mortgage Certificates which must be
borne by each Class or Subclass of Subordinated Certificates at any one time or
over the lives of the Certificates by virtue of the subordination and the amount
of the distributions otherwise distributable to the Subordinated
Certificateholders that will be distributable to the Senior Certificateholders
on any Distribution Date may be limited as specified in the Prospectus
Supplement (the "Subordination Amount"). If the aggregate distributions in
respect of delinquent Scheduled Principal and/or the aggregate losses in respect
of defaulted Mortgage Loans or mortgage loans underlying Mortgage Certificates
were to exceed the total amounts payable and available for distribution to the
Subordinated Certificateholders or, if applicable, were to exceed the specified
maximum Subordination Amount, holders of the Senior Certificates could
experience losses.
The protection afforded to the Senior Certificateholders by the preferential
right of the Senior Certificateholders to receive current distributions from the
Pool may be enhanced to the extent specified in the related Prospectus
Supplement by the establishment and maintenance of one or more reserve accounts
(each a "Subordination Reserve Fund") funded by the retention of all or any
portion of distributions otherwise distributable to the holders of the
Subordinated Certificates on any Distribution Date, by all or a portion of the
Spread and/or by an initial deposit of the Issuer. Unless otherwise specified in
the related Prospectus Supplement, the Subordination Reserve Fund will be
included in the Trust. If specified in the Prospectus Supplement relating to a
Series of Certificates, the Subordination Reserve Fund may be funded in any
other manner acceptable to the rating agencies rating the Series of Certificates
and consistent with an election to treat the Trust (or one or more segregated
pools of assets therein) for such Series as one or more REMICs (as the case may
be).
Eligible Investments for monies deposited in the Subordination Reserve Fund
will be specified in the applicable Pooling Agreement and, unless otherwise
provided in the related Prospectus Supplement, will mature no later than the
next Distribution Date.
Holders of Subordinated Certificates of a Series will not be required to
refund any amounts which have been properly distributed to them, regardless of
whether there are sufficient funds to distribute to Senior Certificateholders
the amounts to which they are later entitled.
LIMITED GUARANTY
If so specified in the Prospectus Supplement relating to a Series of
Certificates credit support may be provided by a Guaranty of Citicorp or another
guarantor specified in such Prospectus Supplement. The coverage, amount and
frequency of any reduction in coverage provided by a Guaranty will be set forth
in the Prospectus Supplement relating to such Series.
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LETTER OF CREDIT
If so specified in the Prospectus Supplement relating to a Series of
Certificates, credit support may be provided by the issuance of a letter of
credit by the bank or financial institution specified in the applicable
Prospectus Supplement. The coverage, amount and frequency of any reduction in
coverage provided by a letter of credit issued with respect to a Series of
Certificates will be set forth in the Prospectus Supplement relating to such
Series.
RESERVE FUND
If so specified in the Prospectus Supplement relating to a Series of
Certificates, a reserve fund (the "Reserve Fund") may be established with the
Trustee by the Issuer. The manner of the funding of the Reserve Fund and the
amount required from time to time to be on deposit therein will be set forth in
the Prospectus Supplement.
POOL INSURANCE POLICIES
If so specified in the Prospectus Supplement relating to a Series of
Certificates, the Issuer will obtain a pool insurance policy for the Mortgage
Loans in the related Pool. The pool insurance policy will cover any loss
(subject to the limitations described in a related Prospectus Supplement) by
reason of default to the extent a related Mortgage Loan is not covered by any
primary mortgage insurance policy. The amount and principal terms of any such
coverage will be set forth in the Prospectus Supplement.
SPECIAL HAZARD INSURANCE POLICIES
If so specified in the related Prospectus Supplement, for each Series of
Certificates as to which a pool insurance policy is provided, the Issuer will
also obtain a special hazard insurance policy for the related Pool in the amount
set forth in such Prospectus Supplement. The special hazard insurance policy
will, subject to the limitations described in the applicable Prospectus
Supplement, protect against loss by reason of damage to Mortgaged Properties
caused by certain hazards not insured against under the standard form of hazard
insurance policy for the respective states in which the Mortgaged Properties are
located. The amount and principal terms of any such coverage will be set forth
in the Prospectus Supplement.
MORTGAGOR BANKRUPTCY BOND
If so specified in the applicable Prospectus Supplement, losses resulting
from a bankruptcy proceeding relating to a mortgage affecting the Mortgage Loans
in a Pool with respect to a Series of Certificates will be covered under a
mortgagor bankruptcy bond (or any other instrument that will not result in a
downgrading of the rating of the Certificates of a Series by the rating agency
or rating agencies that rated such Series). Any mortgagor bankruptcy bond or
such other instrument will provide for coverage in an amount meeting the
criteria of the rating agency or rating agencies rating the Certificates of the
related Series, which amount will be set forth in the related Prospectus
Supplement. The amount and principal terms of any such coverage will be set
forth in the Prospectus Supplement.
DRAWS UNDER CREDIT SUPPORT OTHER THAN SUBORDINATION
The obligation of the issuer of credit support to make payments under such
credit support for the benefit of holders of Certificates shall be limited at
any time to the amount available (the "Amount Available") at such time. The
initial Amount Available shall be equal to the percentage specified in the
Prospectus Supplement of the aggregate Adjusted Balance (as defined in APPENDIX
A) of the related Mortgage Loans as of the applicable Cut-Off Date (the "Credit
Support Percentage"). The Amount Available to be paid under any credit support
may be subject to reduction commencing at the times and in the amounts described
in the applicable Prospectus Supplement and Pooling Agreement. In addition, the
Amount Available to be paid under any credit support for losses or delinquencies
arising from certain causes may be limited to the extent set forth in the
related Prospectus Supplement. To the extent set forth in the Prospectus
Supplement and in the event that more than one series of
CitiMortgageCertificates underlies a Series of Certificates, credit support may
cover two or more of the series of such CitiMortgageCertificates. This may be
accomplished by the credit support on the individual series of
CitiMortgageCertificates being
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consolidated or by credit support which relates to more than one of the Series
of CitiMortgageCertificates and provides coverage for all such series of
CitiMortgageCertificates up to the Credit Support Percentage specified in the
Prospectus Supplement of the aggregate Adjusted Balance of the Mortgage Loans
underlying such CitiMortgageCertificates.
The Issuer or the Servicer will be required to determine as of each
Determination Date whether a payment under any credit support will be necessary
on the next Distribution Date. The Issuer or the Servicer will advise the
Trustee of such determination and make a demand for payment under the credit
support to the issuer of credit support in accordance with the provisions of the
credit support and the applicable Pooling Agreement, as described in the related
Prospectus Supplement. The proceeds of such payments under the credit support
will be deposited into the Certificate Account. Unless otherwise specified in
the related Prospectus Supplement, payments received under the credit support
will be applied first to reimburse Voluntary Advances.
Payments made by an issuer of credit support pursuant to its obligations
under the credit support to cover delinquencies will be allocated on a
loan-by-loan basis to specific Mortgage Loans, and the payments will be
reimbursed as the specific Mortgagors make their delinquent payments, by monthly
withdrawals from the Certificate Account as such delinquent installments are
received. Remaining obligations under the credit support will be increased as
such payments are reimbursed. In addition, payments made under the credit
support to cover amounts in respect of interest distributed (but not received)
with respect to Principal Prepayments will be reimbursed to the issuer of credit
support from Servicing Compensation otherwise payable to the Issuer or the
Servicer. The credit support will be increased to the extent of such
reimbursement.
If any Mortgage Loans become Liquidating Loans, the issuer of credit support
may, if so specified in the related Prospectus Supplement, be obligated to
purchase from the Trustee such Liquidating Loans up to the amount of the
remaining obligation under the credit support. The Servicer may make an advance
of a payment (a "Purchase Amount Advance") in respect of a Liquidating Loan on
behalf of the issuer of credit support in order to avoid demands or draws under
such credit support. If at any time the issuer of credit support makes a payment
or the Servicer makes a payment on its behalf in the amount of the full
outstanding principal balance of and accrued interest on a Liquidating Loan
(less any unreimbursed payments previously made under the credit support in
respect of such Liquidating Loan), the issuer of credit support (or its
designee) will be entitled to receive an assignment of such Liquidating Loan,
and the issuer of credit support (or such designee) will thereafter own such
Liquidating Loan free of any further obligation with respect thereto. Payments
made with respect to such a Liquidating Loan will be reimbursed only from the
proceeds (net of liquidation costs) of such Liquidating Loan. The remaining
obligations under the credit support will be increased to the extent such
payments are so reimbursed. To the extent the proceeds of liquidation of any
Liquidating Loan acquired by the issuer of credit support in the manner
described in this paragraph exceed the amount of payments made with respect
thereto, in the case of a Guaranty issued by Citicorp, Citicorp will be entitled
to retain such proceeds as compensation for issuance of the Guaranty and in the
case of other credit support, the Servicer will be entitled to such proceeds
unless otherwise specified in the related Prospectus Supplement.
The term "Liquidating Loan" means: (a) each Mortgage Loan with respect to
which foreclosure proceedings have been commenced (and the Mortgagor's right of
reinstatement or redemption has expired), (b) each Mortgage Loan with respect to
which the Issuer or the Servicer has agreed to accept a Transfer Instrument in
lieu of foreclosure and in whole or partial satisfaction of the Mortgage Loan,
and, if the Pool contains Cooperative Loans, Liquidating Loan will mean not only
each Cooperative Loan as to which (a) and (b) are applicable but also (c) each
Cooperative Loan with respect to which none of the interest or principal
installments which became due and payable during the previous six months have
been paid and (d) each Cooperative Loan with respect to which a court of
competent jurisdiction has entered a final judgment reducing the scheduled
monthly principal or interest installment payable on such Cooperative Loan. See
"APPENDIX A: THE MORTGAGE LOANS AND CITIMORTGAGECERTIFICATES--Realization Upon
Defaulted Mortgage Loans."
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Prospective purchasers of Certificates must, in the event of default by
Mortgagors, look to the credit of the issuer of credit support, to the extent of
its obligations under the credit support. If the Amount Available under a credit
support is exhausted, the Certificateholders of the related Series will bear all
risks of delinquency and loss resulting from defaults by Mortgagors (including
losses not covered by primary mortgage insurance) and from hazard losses not
covered by the standard hazard insurance policies required to be maintained by
the Mortgagors, and the Certificateholders must look primarily to the value of
the properties securing defaulted Mortgage Loans for recovery of the outstanding
principal and unpaid interest. See "APPENDIX A: THE MORTGAGE LOANS AND
CITIMORTGAGECERTIFICATES--Certain Legal Aspects of the Mortgage Loans." None of
the issuer of any credit support, the Issuer nor the Servicer intend to advance
its own funds with respect to any Series of Certificates or series of
CitiMortgageCertificates, except (i) in the case of the issuer of credit
support, to the limited extent of its obligations under such credit support and
(ii) in the case of the Issuer or the Servicer, in certain circumstances
involving recoverable costs of restoration of damaged property, as described
under "APPENDIX A: THE MORTGAGE LOANS AND CITIMORTGAGECERTIFICATES--Realization
Upon Defaulted Mortgage Loans," and certain other costs as described therein
under "--Servicing and Other Compensation and Payment of Expenses," and to make
Voluntary Advances to the extent set forth in the related Prospectus Supplement.
LAST SCHEDULED DISTRIBUTION DATE
The "Last Scheduled Distribution Date" for each Class of CitiCertificates of
a Series is the latest date on which (based on the assumptions set forth in the
related Prospectus Supplement) the Stated Amount of such Class is expected to be
reduced to zero. Since the rate of distributions in reduction of Stated Amount
for each Series will depend on, among other things, the rate of payment
(including prepayments) of the principal of the mortgage loans (which include,
for purposes of this subsection, Mortgage Loans included directly in the Pool
and mortgage loans underlying Mortgage Certificates) in the Pool for such
Series, the actual last Distribution Date for any Class of CitiCertificates
could occur significantly earlier than its Last Scheduled Distribution Date. The
rate of payments on the Mortgage Loans in the Pool for any Series will depend on
their particular characteristics, as well as on the prevailing level of interest
rates from time to time and other economic factors, and no assurance can be
given as to the actual prepayment experience of such mortgage loans. See
"Prepayment Considerations and Weighted Average Life."
PREPAYMENT CONSIDERATIONS AND WEIGHTED AVERAGE LIFE
Weighted average life refers to the average amount of time that will elapse
from the date of issuance of a Certificate until the Stated Amount of such
Certificate has been reduced to zero. The weighted average life of the
Certificates of a Series will be influenced by, among other things, the rate at
which principal on the mortgage loans (which include, for purposes of this
subsection, Mortgage Loans included directly in the Pool and mortgage loans
underlying Mortgage Certificates) underlying or included in the Pool for such
Certificates is paid, which may be in the form of scheduled amortization or
prepayments (including prepayments and liquidations due to default, casualty,
receipt of insurance proceeds, condemnation and the like).
Prepayments on mortgage loans are commonly measured relative to a prepayment
standard or model. Each Prospectus Supplement for CitiCertificates of any Series
consisting of more than one Class of CitiCertificates will describe the payment
standard or model used for the related Series and will contain tables setting
forth the projected weighted average life of each Class of CitiCertificates of
such Series and, to the extent distributions are not made pro rata among all
Classes of CitiCertificates of such Series, the percentage of the Initial Stated
Amount of each Class of CitiCertificates of such Series that would be
outstanding on specified Distribution Dates for such Series based on the
assumptions stated in such Prospectus Supplement, including assumptions that
prepayments on the mortgage loans underlying or included in the Pool are made at
rates corresponding to various percentages of the prepayment standard or model
specified in such Prospectus Supplement.
There is, however, no assurance that prepayment of mortgage loans underlying
or included in the Pool for any Series of Certificates will conform to any
prepayment standard or model. The rate of principal prepayments on pools of
mortgage loans is influenced by a variety of economic, geographic, social and
other
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factors. In general, however, if prevailing interest rates fall significantly
below the interest rates on the mortgage loans underlying or included in the
Pool for a Series of Certificates, such mortgage loans are likely to be the
subject of higher principal prepayments than if prevailing rates remain at or
above the rates borne by such mortgage loans. It should be noted that certain
Mortgage Certificates included in a Pool for a Series of Certificates may be
backed by mortgage loans with different interest rates. Accordingly, the
prepayment experience of these Mortgage Certificates will to some extent be a
function of the mix of interest rates of the mortgage loans underlying such
Mortgage Certificates. Furthermore, the stated pass-through rate of certain
Mortgage Certificates may be two or more percentage points less than the Note
Rates of the underlying mortgage loans. Other factors affecting prepayment of
mortgage loans include changes in mortgagors' housing needs, job transfers,
unemployment, mortgagors' net equity in the properties securing the mortgage
loans and servicing decisions.
RESIDUAL CERTIFICATES
The Residual Certificates will represent "residual interests" in a REMIC
within the meaning of Code Section 860G(a)(2). See "CERTAIN FEDERAL INCOME TAX
CONSEQUENCES." A Class of Residual Certificates with respect to a Pool will be
issued simultaneously with the Certificates of a Series. Such Residual
Certificates may be sold together with or separately from such Certificates or
may be retained by the Issuer or the related Originator and will represent the
right to receive distributions as specified in the related Prospectus
Supplement. In addition, at such time as the Stated Amount of each Class of
Certificates of such Series has been reduced to zero, the holders of the
Residual Certificates will be the sole owners of each Pool and will have sole
rights with respect to the Mortgage Certificates, Mortgage Loans and other
assets included in such Pool, including the right to liquidate such Pool.
THE SERVICER
For each Series of Certificates, the Issuer will act as servicer (in such
capacity, the "Servicer" or "servicer"), and will perform such functions as are
described in the Pooling Agreement. The Issuer may delegate any of its duties
under the Pooling Agreement to any corporation, including a corporation more
than 50% of the stock of which is owned, directly or indirectly, by Citicorp.
Unless otherwise disclosed in the related Prospectus Supplement, if the Mortgage
Loans are included directly in the Pool, the Issuer intends to subcontract its
duties as servicer to CMI (or its designated subservicer). Such delegation does
not relieve the Issuer of its responsibility with respect to such duties. The
Trustee may remove the servicer for failure to perform any of its duties under
the Pooling Agreement if such failure continues unremedied for 60 days after
written notice from the Trustee. The Issuer may not resign from its obligations
and duties as servicer under the Pooling Agreement except upon the
determination, evidenced by an opinion of counsel, that its performance of such
duties is no longer permissible under applicable law, or with the consent of the
Trustee and of the holders of 66 2/3% of outstanding Certificates. The servicer
will be entitled to servicing compensation for each Series as specified in the
related Prospectus Supplement, which may include (i) a fee payable from the
Certificate Account (a "REMIC Servicing Fee") and (ii) if Mortgage Loans are
included directly in the Pool, a specified servicing rate equal to the
difference between the Note Rate for each such Mortgage Loan and its
Pass-Through Rate, as well as late payment charges, assumption fees,
reinvestment income, if any, and other similar amounts set forth in the related
Pooling Agreement ("Servicing Compensation"). To the extent specified with
respect to a Series in the related Prospectus Supplement, Servicing Compensation
may be divided between "normal servicing compensation" and "additional servicing
compensation." The Pooling Agreement generally provides that the servicer shall
not be subject to any liability to holders of Certificates other than by reason
of its willful misfeasance, bad faith or gross negligence in the performance of
its duties set forth in the Pooling Agreement. See "The Pooling Agreements."
THE POOLS
GENERAL
Each Pool will consist of (i) Mortgage Loans and/or Mortgage Certificates or
other "regular interests" in another Pool to the extent specified in the related
Prospectus Supplement, (ii) the amount of cash, if any, initially deposited in
the Certificate Account, (iii) amounts deposited in any Reserve Fund described
in the
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Prospectus Supplement, (iv) distributions on such Mortgage Certificates and/or
Mortgage Loans (net of any servicing compensation) and (v) reinvestment
earnings, if any, on such net distributions and deposits. Any Pool including
Mortgage Loans among its assets will also include the interest of the
Certificateholders in certain credit support and any insurance policies with
respect to such Mortgage Loans. Pools for Series having monthly distributions
are generally expected not to receive reinvestment earnings on distributions
that are held in the Certificate Account. The Mortgage Certificates will be held
by the Trustee or its nominee, and any Mortgage Loans included in any Pool will
be held for the Trustee by a custodian, solely for the benefit of the related
Series of Certificates.
THE FOLLOWING SUMMARIES OF CHARACTERISTICS OF THE MORTGAGE LOANS AND THE
CITIMORTGAGECERTIFICATES ARE SUBJECT TO AND QUALIFIED BY REFERENCE TO "APPENDIX
A: THE MORTGAGE LOANS AND CITI-
MORTGAGECERTIFICATES."
MORTGAGE LOANS
The Mortgage Loans included directly in a Pool or underlying
CitiMortgageCertificates in a Pool will be mortgage loans secured by first liens
on one-to four-family residential properties, and may be fixed rate or
adjustable rate loans which may provide for full amortization of principal,
deferral of a portion of interest, balloon payments of principal or have such
other characteristics as set forth in the related Prospectus Supplement. The
Mortgage Loans may also contain cooperative apartment loans evidenced by
promissory notes secured by security interests in shares issued by private,
non-profit, cooperative housing corporations and in the related proprietary
leases or occupancy agreements granting exclusive rights to occupy specified
dwelling units in such cooperatives' buildings. Each Mortgage Loan will be
selected and purchased by the Issuer for inclusion in the related Pool or will
be selected by the Originator in connection with the issuance of a
CitiMortgageCertificate from among those originated or acquired by an Originator
in the ordinary course of business activities of the Originator or acquired from
an affiliate of an Originator. Mortgage Loans in a Pool will be covered by a
guaranty or certain other credit support, as described in the related Prospectus
Supplement.
The Mortgage Loans will have original individual principal balances of from
$10,000 to $2,500,000 and, except as otherwise set forth in the related
Prospectus Supplement, original maturities of from 10 to 30 years. Fixed rate
Mortgage Loans will be any of the following types:
(i) fully amortizing Mortgage Loans providing for level monthly payments
of principal and interest;
(ii) growing equity Mortgage Loans providing for scheduled annual
payment increases at rates of not less than 3% or more than 8.25% of the
scheduled monthly payments during the preceding year, with the full amount
of such increases being applied to principal;
(iii) tiered payment Mortgage Loans initially providing only for full
payment of interest and payment of little or no principal for up to three
years, with further provisions for annual Mortgagor payment increases,
beginning in the second year, unless otherwise specified in the applicable
Prospectus Supplement, of up to 7.5% of the monthly Mortgagor payments
during the preceding year and continuing annually until monthly Mortgagor
payments are adequate to amortize fully such Mortgage Loans over the
remainder of the original terms;
(iv) Mortgage Loans amortized over a fixed number of years but which
have shorter terms to maturity that causes the outstanding principal balance
of the related Mortgage Loan to be due and payable at the end of a certain
specified period; or
(v) such other fixed rate Mortgage Loans having the characteristics set
forth in the related Prospectus Supplement.
Adjustable rate Mortgage Loans will bear interest at a rate which will be
adjusted from time to time to equal (to the nearest eighth of a percent) a
certain number of basis points over an index interest rate, as specified in
APPENDIX A or the related Prospectus Supplement. Adjustments will be subject to
limits on the magnitude
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of any one adjustment and on the magnitude of aggregate upward adjustments
during the life of the Mortgage Loan. Adjustable rate Mortgage Loans may provide
for deferral of a certain portion of interest and increases to the principal
balances in order to limit the amount by which the scheduled monthly payments
will increase following an increase in the rate of interest. The impact of any
such negative amortization on Certificateholders will be set forth in the
Prospectus Supplement.
If provided for in the applicable Prospectus Supplement, the Mortgage Loans
in a Pool or the Mortgage Loans underlying CitiMortgageCertificates included in
a Pool may be subject to temporary buydown plans ("Buydown Mortgage Loans")
pursuant to which the monthly payments made by the Mortgagor during the early
years of the Buydown Mortgage Loan will be less than the scheduled monthly
payments on the Buydown Mortgage Loan, the resulting difference to be made up
from buydown funds contributed by the Mortgagor, the Mortgagor's employer, the
seller or the builder of the related Mortgaged Property or another source (i) at
the time of origination of the Buydown Mortgage Loan or (ii) in some cases when
buydown funds are contributed by an employer, on an annual basis. Unless
otherwise specified in the applicable Prospectus Supplement and except for
Buydown Mortgage Loans funded in accordance with clause (ii) above, the buydown
funds will be placed on the Closing Date (as defined in the related Prospectus
Supplement) in an account established and maintained with a depository by the
Issuer or the Originator, and amounts will be withdrawn monthly from such
account promptly following receipt of the Mortgagor's monthly payment and
deposited in the related Certificate Account. See "DESCRIPTION OF CERTIFICATES--
Distributions to Certificateholders." Buydown funds with respect to any Series
may be held in the same deposit account as buydown funds for all buydown
mortgage loans serviced by the Issuer, the Originator or any subservicer. In the
case of buydown funds contributed on an annual basis by the Mortgagor's
employer, such buydown loans will generally have a buydown period of three years
but may have a buydown period of up to five years. The employer may or may not
be required to guarantee the payment of buydown funds even if the Mortgagor were
no longer employed by such employer.
Unless otherwise specified in the related Prospectus Supplement, the
original principal amount of each Mortgage Loan will be not more than 90% of the
Original Value of the property securing such Mortgage Loan. Each Mortgage Loan
having an original principal amount exceeding 90% of the Original Value of the
Mortgaged Property will be covered by primary mortgage insurance against losses
from default on such Mortgage Loan in an amount ranging from 12% to 30% of the
principal amount of the Mortgage Loan outstanding from time to time. Such
insurance will be in effect at least until the principal amount of the Mortgage
Loan is reduced to 80% of its Original Value.
The properties securing Mortgage Loans may consist of detached houses,
attached houses, condominiums or planned unit developments or other types of
one-to four-family residences or interests in cooperatives (as defined in
APPENDIX A). Although it is anticipated that such properties will be
predominantly primary residences, they may include investment properties and
vacation and second homes as well. Such properties will be located in one of the
fifty United States or the District of Columbia.
When the related Series of Certificates is issued the Issuer will assign the
Mortgage Loans without recourse to the Trustee for the benefit of the
Certificateholders. The Issuer will, however, be required to repurchase any
Mortgage Loans or Mortgage Certificates that do not conform in one or more
material respects to the representations and warranties in the Pooling Agreement
("Non-Conforming Loans") within 180 days after notice from the Trustee that they
are Non-Conforming Loans. The Issuer may substitute conforming Mortgage Loans or
Mortgage Certificates for Non-Conforming Loans on or before the day that is 180
days following the Startup Day of the REMIC with respect to such Series. If,
however, any Non-Conforming Loan would affect the status of the REMIC or subject
the REMIC to tax, the Issuer must repurchase such Non-Conforming Loan or
substitute a conforming Mortgage Loan therefor within the earlier of 90 days
after notice from the Trustee that the Mortgage Loan is a Non-Conforming Loan or
180 days following the Startup Day. See "Substitution of Mortgage Loans." The
Startup Day generally will be the Closing Date (as defined in the related
Prospectus Supplement). As servicer, the Issuer is responsible for administering
and servicing the Mortgage Loans and Mortgage Certificates.
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In connection with assignment of the Mortgage Loans to the Trustee, the
Issuer will deliver to the Trustee (or a custodian acting on its behalf, which
may be an affiliate of the Issuer) the Mortgage Note, the Mortgage with evidence
of recording thereon, and assignments of the Mortgage by the Originator to the
Trustee. Such assignments will generally be recorded. See " APPENDIX A: THE
MORTGAGE LOANS AND CITIMORTGAGECERTIFICATES--Assignment of Mortgage Loans."
MORTGAGE CERTIFICATES
CITIMORTGAGECERTIFICATES
THIS SUMMARY OF CITIMORTGAGECERTIFICATES IS SUBJECT TO AND QUALIFIED BY
REFERENCE TO "APPENDIX A: THE MORTGAGE LOANS AND CITIMORTGAGECERTIFICATES."
Certificates evidencing fractional undivided interests in trusts will be
created by each of the Originators with respect to which an election may be made
to treat such trusts as REMICs under the Code. The property of such REMICs will
consist of pools of Mortgage Loans originated or acquired by one of the
Originators. Such certificates will consist of one or more classes of regular
interests and one class of residual interests. It is expected that the issuer of
any CitiMortgageCertificate will be the packager of the Mortgage Loans
underlying such CitiMortgageCertificate and will act as the servicer (in such
capacity, the "Servicer" or "servicer") of such Mortgage Loans (or will
subcontract with an affiliate to act as subservicer). The Mortgage Loans will be
covered by certain credit support described in the Prospectus Supplement.
The form of pooling and servicing agreement pursuant to which the
CitiMortgageCertificates will be issued will be substantially the same as the
Pooling Agreement with respect to a Pool in which the Mortgage Loans were
originated or acquired by the related Originator. The terms and provisions of
the relevant Pooling Agreement described in this Prospectus (including the
descriptions of distributions) would be applicable to any
CitiMortgageCertificate except that references to the Issuer will be deemed
references to the relevant Originator and references to the Pool will be deemed
references to the Citibank Pool, the CMI Pool or the CFSB Pool, as the case may
be.
The pool underlying a CitiMortgageCertificate will consist of the Mortgage
Loans, such funds as from time to time are deposited in the Certificate Account
for such CitiMortgageCertificate, property acquired by foreclosure or deed in
lieu of foreclosure of a Mortgage Loan or Transfer Instrument (as defined below)
as from time to time may be subject to the related Pooling Agreement, any credit
support and any insurance policies with respect to the Mortgage Loans. For
purposes of this Prospectus, a Transfer Instrument is defined as a deed
transferring an interest in property subject to a Mortgage or any assignment or
other instrument of transfer transferring an interest in collateral (including
shares of a cooperative and the related occupancy agreement or proprietary
lease) securing a Mortgage Loan. Any default by any insurer under any such
policy, any loss in excess of policy limits or any uninsured loss may adversely
affect distributions on the CitiMortgageCertificates to the Trustee for the
related Series of Certificates, and may thus adversely affect distributions on
such Certificates to the Certificateholders. Each Pooling Agreement with respect
to the same Originator will contain substantially the same terms and conditions,
except for the Pass-Through Rate or Stated Rate (as defined therein), the date
of issuance of such series, the aggregate initial Adjusted Balance of Mortgage
Loans evidenced by such series, the minimum fractional undivided interest
represented by each CitiMortgageCertificate, the identity and address of the
Trustee, the amount of the credit support and other minor variations. Pursuant
to each Pooling Agreement, the Servicer will be responsible for servicing and
administering the related Mortgage Loans, but may at any time subcontract its
duties as servicer under any Pooling Agreement to any entity, including an
entity more than 50% of the stock of which is owned, directly or indirectly, by
Citicorp. Each of Citibank and CFSB intends to subcontract its duties as
servicer under each Pooling Agreement under which it acts as servicer to CMI.
The Issuer will provide to any Certificateholder, without charge, on written
request, a copy (without exhibits) of the Pooling Agreement for any series of
CitiMortgageCertificates included in a Pool. Requests should be addressed to:
Citicorp Mortgage Securities, Inc., 909 Third Avenue, New York, New York 10043.
Distributions of principal and interest on each series of
CitiMortgageCertificates will be made by the Trustee or a paying agent on the
25th day (or if such 25th day is not a business day, no later than the business
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day immediately following the 25th day) of each calendar month to the Trustee as
the person in whose name such CitiMortgageCertificates are registered at the
close of business on the last business day of the preceding month. The first
such distribution date for each series of CitiMortgageCertificates will be
specified in the applicable Prospectus Supplement. The Pool may also contain a
certificate evidencing an undivided interest in a trust comprised of Mortgage
Loans as to which trust an election has not been made to treat the trust
property as a REMIC. The terms and provisions of such certificate and any
Pooling Agreement pursuant to which any such certificate is issued will be set
forth in the related Prospectus Supplement.
AGENCY CERTIFICATES
THIS SUMMARY OF AGENCY CERTIFICATES IS SUBJECT TO AND QUALIFIED BY REFERENCE
TO "APPENDIX B: THE AGENCY CERTIFICATES."
The Issuer may acquire for any Pool "fully-modified pass-through"
mortgage-backed certificates ("GNMA Certificates") issued by private issuers and
guaranteed by the Government National Mortgage Association ("GNMA"), Mortgage
Participation Certificates ("FHLMC Certificates") guaranteed by the Federal Home
Loan Mortgage Corporation ("FHLMC") and Mortgage Pass-Through Certificates
("FNMA Certificates") guaranteed by the Federal National Mortgage Association
("FNMA").
GNMA is a wholly-owned corporate instrumentality within the United States
Department of Housing and Urban Development. GNMA is authorized to guarantee the
timely payment of the principal of and interest on GNMA Certificates, which
guarantee is backed by the full faith and credit of the United States. Any
issuer which is unable to make payments on such GNMA Certificates as they become
due is required to promptly notify GNMA and request payment by GNMA, whereupon
GNMA will make such payment directly to the holders of such GNMA Certificates.
FNMA is a federally chartered and privately owned corporation organized
under the Federal National Mortgage Association Charter Act. FNMA purchases home
mortgage loans with funds acquired in part from the sale of its Guaranteed
Mortgage Pass-Through Certificates. FNMA guarantees that it will distribute to
holders of FNMA Certificates their proportionate interests in passed-through
payments of principal of and interest on the underlying loans (including
principal prepayments).
FHLMC is a corporate instrumentality of the United States created pursuant
to Title III of the Emergency Home Finance Act of 1970, as amended. FHLMC
purchases mortgage loans and participation interests in mortgage loans that meet
certain statutory standards, and resells them in the form of FHLMC Certificates.
FHLMC guarantees that it will distribute to holders of FHLMC Certificates their
proportionate interests in passed-through payments of principal of and interest
on the underlying loans.
The guaranties of FNMA and FHLMC are backed only by the credit of FNMA and
FHLMC, respectively. The full faith and credit of the United States is not
pledged to payments that may be required under such guaranties. Neither the
United States nor any agency thereof is required to finance FNMA's or FHLMC's
operations or to assist FNMA or FHLMC in any manner.
CERTIFICATE ACCOUNT
The Trustee will, as to each Series of Certificates, establish and maintain
a separate account or accounts, including any such account maintained by a
paying agent (collectively, the "Certificate Account"), for the benefit of the
Certificateholders. The Certificate Account will not bear interest, except to
the extent represented by returns on Eligible Investments. All payments (net of
servicing fees) on the Mortgage Loans or Mortgage Certificates will be deposited
directly into the Certificate Account as soon as practicable after receipt
thereof. The Pooling Agreement for each Series may authorize the Trustee to
invest at the Issuer's discretion distributions received on the assets in a Pool
(including Voluntary Advances and payments under the credit support) in certain
investments ("Eligible Investments") that will qualify as "permitted
investments" under Code Section 860G(a)(5). Eligible Investments may be made by
the Trustee upon instructions from the Issuer and, if made, will generally
mature not later than the day preceding the next Distribution Date for such
Series (or on such Distribution Date in the case of Eligible Investments which
are the obligations of the Trustee). Eligible Investments include, among other
investments, obligations of the United
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States or of any agency thereof backed by the full faith and credit of the
United States, certificates of deposit, time deposits and bankers' acceptances
sold by eligible commercial banks (including affiliates of the Issuer such as
Citibank, N.A.), any other demand or time deposit or certificate of deposit
fully insured by the Federal Deposit Insurance Corporation (the "FDIC") either
through the Bank Insurance Fund (the "BIF") or the Savings Association Insurance
Fund (the "SAIF"), certain repurchase agreements of United States government
securities with eligible commercial banks and certain guaranteed investment
contracts.
Unless otherwise set forth in the related Prospectus Supplement, all
payments on Mortgage Loans and Mortgage Certificates, together with any
reinvestment income thereon and any amounts withdrawn from any Reserve Fund for
such Series and deposited into the Certificate Account for such Series, will be
available to make distributions on the Certificates of such Series on the next
succeeding Distribution Date or Special Distribution Date for such Series. Any
funds remaining in the Certificate Account immediately following a Distribution
Date (other than amounts representing early payments of installments of
principal and interest on Mortgage Loans directly held in the Pool which are due
on future Due Dates or Principal Prepayments) will be promptly distributed to
the holders of the Residual Certificates.
COLLECTION OF PAYMENTS
The Mortgage Certificates included in a Pool for a Series of Certificates
will be registered in the name of the Trustee or its nominee or, in the case of
Mortgage Certificates issued only in book-entry form, with a member of the
Federal Reserve System, so that in each case all distributions thereon will be
made directly to such Trustee. The Mortgage Loans included in a Pool will be
assigned to the Trustee and the related Mortgage Notes, endorsed to the Trustee
or in blank, will be delivered to the Trustee or its custodian. The obligation
of such Trustee to make distributions on the Certificates is limited to the
amount of payments (net of servicing compensation) on the Mortgage Certificates
and Mortgage Loans that were actually received by it. The Trustee may not
assign, transfer, pledge or dispose of any assets in the Certificate Account for
such Series, except to a successor Trustee with respect to such Series, the
holders of the Residual Certificates or the holders of CitiCertificates for such
Series as set forth in the Pooling Agreement. See "Substitution of Mortgage
Loans."
SUBSTITUTION OF MORTGAGE LOANS
Subject to the limitations set forth in the Pooling Agreement, the Issuer
may, on any day prior to 180 days after the settlement date of the related
Series of Certificates (the "Startup Day") (or, if such day is not a Business
Day, on the next previous Business Day) (or 90 days after discovery, if earlier,
if the defect affects the status of the Mortgage Loan as a "qualified mortgage"
for REMIC purposes), but solely in lieu of any obligation it may have to
repurchase a Non-Conforming Loan, deliver to the Trustee other Mortgage Loans in
substitution for any one or more Mortgage Loans included in the Pool. Any such
substitute Mortgage Loan will be fully paid up on the substitution day and will
have a principal balance on the substitution day that is at least equal to the
principal balance on the substitution day of the Non-Conforming Loans for which
it is substituted, an interest rate equal to or greater than that of such
Non-Conforming Loans, an original term to maturity equal to that of such
Non-Conforming Loans and a maturity date not earlier than one year prior to, and
in no event later than, that of such Non-Conforming Loans.
CITICORP MORTGAGE SECURITIES, INC.
The Issuer was incorporated in the State of Delaware on March 17, 1987 and
is an indirect wholly-owned subsidiary of Citicorp. It is not expected that the
Issuer will have any business operations other than offering Certificates and
related activities.
The principal executive offices of the Issuer are located at 909 Third
Avenue, New York, New York 10043. Its telephone number is (212) 559-6727.
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THE ORIGINATORS
CITICORP MORTGAGE, INC.
CMI is an indirect wholly-owned mortgage banking subsidiary of Citicorp.
CMI, with headquarters in St. Louis, Missouri, was incorporated under the laws
of the State of Delaware on September 24, 1979. Since its formation, CMI has
engaged in mortgage banking and other housing-related financing activities, and
in July 1980, CMI commenced making mortgage loans. CMI derives income primarily
from interest on mortgages which it owns, secondary mortgage market sales and
mortgage loan servicing fees and mortgage origination fees and charges.
CMI has been approved as a mortgagee and seller/servicer by several agencies
and instrumentalities, including the FHA, the Veterans Administration ("VA"),
FNMA, GNMA and FHLMC. CMI's origination operations are subject to the
operational guidelines and regulations of, as well as audits by, certain of
these agencies.
The principal executive offices of CMI are located at 12855 North Outer
Forty Drive, St. Louis, Missouri 63141. Its telephone number is (314) 851-1400.
CITIBANK, FEDERAL SAVINGS BANK
CFSB is a federal savings bank with its executive offices in Oakland,
California. It was formed in 1982 in connection with the acquisition of Fidelity
Savings & Loan Association. As of December 31, 1990, Citibank, Federal Savings
Bank (formerly Citicorp Savings of Illinois, A Federal Savings and Loan
Association) and Citibank, Federal Savings Bank (formerly Citicorp Savings of
Washington, D.C., A Federal Savings and Loan Association), both wholly-owned
indirect subsidiaries of Citicorp, were merged into CFSB. As of March 31, 1993,
Citibank, Federal Savings Bank (formerly Citicorp Savings of Florida, A Federal
Savings and Loan Association), a wholly-owned indirect subsidiary of Citicorp,
was merged into CFSB. Subsequent to such mergers, CFSB operated 232 offices in
California, Florida, Illinois, Maryland, Virginia and Washington, D.C. and
employed approximately 5,400 persons.
The deposits of CFSB are insured by the FDIC to the extent provided by law.
Since 1982, CFSB has been an indirect wholly-owned subsidiary of Citicorp. CFSB
has been an active one-to four-family residential mortgage lender since 1983. It
originates both fixed and adjustable rate mortgage loans throughout California,
Florida, Illinois, Maryland, Virginia and Washington, D.C. Since November 1992
CFSB has originated mortgage loans through agency offices in Connecticut,
Colorado, Florida, Georgia, Massachusetts, Michigan, Minnesota, Missouri, New
Jersey, Ohio, Oklahoma, Pennsylvania, Texas and Washington.
Citibank Service Corporation, an affiliate of CFSB, acts as trustee with
respect to substantially all deeds of trust relating to mortgaged property
located in California securing mortgage loans originated or acquired by CFSB.
Under California law, the functions of a trustee under a deed of trust are to
foreclose upon the mortgaged property upon notification by the beneficiary of a
delinquency and to execute full and partial reconveyances of such mortgaged
property upon direction of the beneficiary.
The principal executive offices of CFSB are located at 180 Grand Avenue,
Oakland, California 94612. Its telephone number is (510) 891-8905.
CITIBANK, N.A.
Citibank is a commercial bank offering a wide range of banking services to
its customers in the New York City metropolitan area, throughout the nation and
around the world. As of March 31, 1993, Citibank had approximately 280 branches
in New York State and 320 branches and representative offices in 69 countries
outside the United States.
Citibank's deposits are insured by the FDIC to the extent provided by law.
Since 1968, Citibank has been a wholly-owned subsidiary of Citicorp. Citibank
has been an active one-to four-family residential real estate mortgage lender
since 1960. During the past decade Citibank has been an active cooperative
apartment lender. Citibank conducts such lending activities through its New York
Banking Unit (the "NYBU").
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Except in connection with mortgage pass-through certificates issued by it from
time to time, Citibank has not engaged in any significant servicing activities
on behalf of unaffiliated persons with respect to conventional residential
mortgage or cooperative loans.
The NYBU is responsible for Citibank's consumer banking business within that
portion of the New York Metropolitan Area which includes the nine counties
(Westchester, Nassau, Suffolk, Kings, Richmond, New York, Bronx, Rockland and
Queens) within and surrounding New York City. Citibank offers a wide range of
consumer banking products and services, including mortgage and cooperative
apartment loans.
The principal executive offices of Citibank are located at 399 Park Avenue,
New York, New York 10043. Its telephone number is (212) 559-1000.
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LOAN UNDERWRITING POLICIES
AND LOSS AND DELINQUENCY CONSIDERATIONS
LOAN UNDERWRITING POLICIES OF THE ORIGINATORS
Except as specifically noted below and except as may be specified in the
applicable Prospectus Supplement, residential real estate mortgage loans
originated or acquired from affiliated or unaffiliated third parties by the
Originators are subject to the same underwriting process. For certain
residential mortgage loans the Originators have contracted with unaffiliated
third parties to perform the underwriting process. The underwriting process,
which is described below, assesses the prospective borrower's ability to repay
and the adequacy of the property as collateral for the loan requested. The loan
underwriting policies of each Originator require such Originator's loan
underwriters to be satisfied that the value of the property being financed
currently supports, and will likely support in the future, the outstanding loan
balance with sufficient excess value to protect against adverse shifts in real
estate values. In general, it is the policy of each Originator not to make
conventional one-to four-family real estate loans with more than 90%
loan-to-value ratios. Unless otherwise specified in the related Prospectus
Supplement, a Pool will not contain any Real Estate Loans with more than a 90%
loan-to-value ratio. Since February 1993, it has been the policy of each
Originator not to make one-to four-family real estate loans with loan-to-value
ratios above 80% without obtaining primary mortgage insurance.
Each Originator's real estate lending process for one-to four-family
residential mortgage loans follows a standard procedure, established to comply
with applicable federal and state laws and regulations. Initially, a prospective
borrower is required to fill out an application designed to provide pertinent
information about the prospective borrower, the property to be financed and the
type of loan desired. As part of the description of the prospective borrower's
financial condition, each Originator requires a current balance sheet describing
assets and liabilities and a statement of income and expenses, proof of income
such as a paycheck stub or W-2 form (except for certain self-employed
prospective borrowers), proof of liquid assets (required as of April 1991),
telephone verification of employment (required as of April 1991), and a credit
report which summarizes the prospective borrower's credit history with local
merchants and lenders and any record of bankruptcy. Since February 1991, it has
been the policy of each Originator to obtain at least two credit reports (which
may be in the form of an expanded credit bureau report) with respect to a
prospective borrower. Self-employed prospective borrowers are required to submit
their federal income tax returns for the most recent two years and a separate
statement of income and expenses. In the case of mortgage loans originated or
acquired after July 1993 by the Originators (other than Citibank), facsimile
copies of certain verification documents (such as bank statements and
verification of employment) may be accepted in lieu of originals.
If the proposed mortgage loan does not exceed 65% (prior to December 1992,
such percentage could be up to 80%) of the value of the underlying property
based on the lesser of the appraised value determined in an appraisal obtained
by the Originator at the origination of such mortgage loan or the sale price for
such property (the "Original Value"), prospective borrowers may be exempt from
some or all of the requirements that they provide financial statements, current
federal income tax returns and proof of income. However, each Originator during
1990 and 1991 implemented as part of its underwriting policy that telephone
verification of employment is required and, beginning in April 1991, proof of
liquid assets, as described below. Certain high net worth prospective borrowers
with ongoing banking relationships with Citicorp's Private Banking Group may be
exempt from the employment verification process.
Once the employment verification and the credit report are received, a
determination is made as to whether the prospective borrower has sufficient
monthly income available to meet the borrower's monthly obligations on the
proposed loan and other expenses related to the residence as well as to meet
other financial obligations and monthly living expenses. Each Originator has
established as lending guidelines that the mortgage payments plus applicable
real property taxes and any condominium or homeowner association common charges
and hazard insurance, should not exceed 33% (34% in the case of ARMs) of the
borrower's gross income, or that all monthly payments, including those mentioned
above and other fixed obligations, such as car payments, should not exceed 38%
of gross income. Where there are two individuals co-signing the mortgage note or
documents, the income and debt of both are included in the computation. In the
case
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of mortgage loans originated by the California branches of CFSB prior to June
1991, the actual mortgage payments may be higher due to a higher mortgage rate
at the time the loan documents are prepared, but such mortgage rate generally
will not exceed the anticipated rate used in such analysis by more than one
percent. Often, however, other credit considerations may cause a loan
underwriter to depart from these guidelines, and a loan underwriter may require
additional information or further verification of information provided so as to
assure satisfaction of the Originator's lending guidelines.
Since April 1991, each Originator's underwriting policies have required it
to make a determination as to whether the prospective borrower has sufficient
liquid assets to acquire the property to be financed, taking into account, among
other things, proceeds from the sale of any prior residence and cash on deposit
in banks. This determination may be made from such evidence as the existence of
a contract for sale of any prior residence and bank statements supplied by the
prospective borrower.
Each Originator requires an appraisal to be made of each property to be
financed, which may be a master appraisal in the case of bulk commitments. The
appraisal is conducted by either an independent fee appraiser, a specially
trained employee of the Originator or an employee of an affiliate. The person
conducting the appraisal personally visits the property and estimates its market
value on the basis of comparable properties. Neither the independent appraisers
nor employees receive any compensation dependent upon either the amount of the
loan or its consummation. In normal practice, the Originator's judgment of the
appraisal determines the maximum amount which will be lent on the property. In
connection with the refinancing of an existing mortgage originated or acquired
by certain Originators, such Originators may not cause a current appraisal of
the underlying property to be prepared unless the then outstanding principal
amount of the mortgage loan is increased by an amount in excess of the
mortgagor's out-of-pocket costs associated with the refinanced transaction. In
connection with the modification of an existing mortgage pursuant to a
Modification Agreement, a current appraisal of the underlying property may not
be prepared.
Each Originator obtains or causes to be obtained a search of the liens of
record to which the property being financed is subject at the time of
origination. Title insurance or, in lieu thereof, an attorney's opinion of title
in those jurisdictions in which such practice is acceptable, is required in the
case of all mortgage loans, except that with respect to Cooperative Loans, the
Originator does not require a borrower or the cooperative to obtain title
insurance of any type or to obtain a title search of the property on which the
cooperative apartment building is located.
An Originator may originate loans on residential leasehold properties
("Leasehold Loans"). Leasehold Loans are approved in accordance with such
Originator's standard underwriting criteria. An ALTA leasehold title insurance
policy is required, which contains no exceptions for any adjustable features of
the lease. The title insurance policy must assure that the Originator's first
mortgage is not subordinate to any lien or encumbrance other than the land
lease. Additionally, when deemed necessary, the California branches of CFSB
require that a consent to assignment of lease and/or subordination agreement be
obtained and recorded. Furthermore, each Originator requires that the leasehold
estate be assignable or transferable if it is subjected to the mortgage lien.
The land lease should guarantee such Originator's right to receive any notice of
default by the borrower and the right to cure the default. Payments due pursuant
to the land lease are taken into account in both debt ratio calculations in
connection with the underwriting of such mortgage loans. Finally, each
Originator requires that the term of the lease must extend at least ten years
longer than the scheduled maturity on the mortgage loan.
Prior to 1986, the Originators did not generally make one-to four-family
real estate loans with loan-to-value ratios above 80% unless such Originator had
obtained primary mortgage insurance coverage. From 1986 through January 1993,
each Originator originated mortgage loans with loan-to-value ratios in excess of
80% but not more than 90% without obtaining primary mortgage insurance. Since
February 1993, it has been the policy of each Originator not to make one-to
four-family real estate loans with loan-to-value ratios above 80% without
obtaining primary mortgage insurance.
Each Originator's underwriting standards are designed to evaluate a
borrower's credit standing and repayment ability and the value and adequacy of
the mortgaged property as collateral. In the case of a Converted Mortgage Loan
(as defined in APPENDIX A), the borrower's repayment ability will have been
22
<PAGE>
determined only at origination on the basis of such borrower's then-current
income and obligations and interest rates for adjustable interest rate mortgage
loans which, traditionally, have been lower than the interest rates charged by
mortgage lenders on fixed interest rate mortgage loans. The borrowers at their
exclusive options may elect to convert their mortgage loans into fixed interest
rate loans or to continue with the adjustable interest rate features. A
borrower's conversion option is conditional only upon a review by the applicable
Originator of the loan payment history and payment of a conversion fee. It is
possible that the fixed interest rate payable by the borrower upon conversion
will be higher than the adjustable interest rate otherwise payable. In that
event, the borrower's capacity to repay the loan may be reduced. Unless
otherwise specified in the Prospectus Supplement, no ARM Pool will contain ARMs
which provide for conversion options.
Each Originator originates Buydown Mortgage Loans as defined in "THE
POOLS--Mortgage Loans." Unless otherwise specified in the applicable Prospectus
Supplement, (i) during the buydown period, each of the Buydown Mortgage Loans
will provide for payments payable by the Mortgagor based on a hypothetical
reduced interest rate (the "buydown mortgage rate") that will not have been more
than 5% below the mortgage rate at origination, (ii) the annual increase in the
buydown mortgage rate during the buydown period will not exceed 1% or in the
case of tiered payment Mortgage Loans the annual increase in the mortgagors'
monthly payment will increase as described in the "THE POOLS--Mortgage Loans"
and (iii) the buydown period will not exceed three years in the case of Citibank
Pools and Buydown Mortgage Loans originated by the Florida branches of CFSB,
five years in the case of CMI Pools, and six years in the case of CFSB Pools
(other than those Buydown Mortgage Loans originated by its Florida branches).
For all Pools, with respect to Mortgage Loans originated prior to October 1,
1991, the maximum amount of the buydown funds that may be contributed by the
seller or builder of the related Mortgaged Property is limited to 9% of the
Original Value of the Mortgaged Property; with respect to Mortgage Loans
originated on or after October 1, 1991, the maximum amount of buydown funds that
may be contributed by the seller or builder of the related Mortgaged Property is
limited to 6% of the Original Value of the Mortgaged Property. These limitations
do not apply to contributions from the Mortgagor or immediate relatives or the
employer of the mortgagor. Except as may be otherwise indicated in the
applicable Prospectus Supplement, the Mortgagor under each Buydown Mortgage Loan
will have been qualified at an interest rate which is not more than 5% per annum
below the current mortgage rate at origination. Accordingly, the repayment of a
Buydown Mortgage Loan is dependent on the ability of the Mortgagor to make
larger monthly payments after the buydown funds have been depleted and, for
certain Buydown Mortgage Loans, while such funds are being depleted.
All the above described Originators (other than Citibank) purchase mortgage
loans originated by other parties. Mortgage loans acquired from other parties
are reviewed by such Originators or by unaffiliated third parties under
contracts with such Originators for compliance with the above described
underwriting criteria, and such Originators have the right to reject loans which
fail to conform to such criteria.
The Mortgaged Properties (as defined in APPENDIX A) may be located in states
where, in general, a lender providing credit on a one-to four-family property
may not seek a deficiency judgment against the Mortgagor but rather must look
solely to the property for repayment in the event of foreclosure. Each
Originator's underwriting standards in all states (including such
anti-deficiency states) require loan underwriters to be satisfied that the value
of the property being financed, as indicated by the appraisal, currently
supports and is anticipated to support in the future the outstanding loan
balance. See "APPENDIX A: THE MORTGAGE LOANS AND
CITIMORTGAGECERTIFICATES--Certain Legal Aspects of the Mortgage Loans--
Anti-Deficiency Legislation and Other Limitations on Lenders."
There can be no assurance that the foreclosure and delinquency experience on
the Mortgage Loans underlying the CitiMortgageCertificates or the Certificates
will be comparable to that set forth below under "DELINQUENCY AND FORECLOSURE
EXPERIENCE." In particular, delinquencies, defaults and foreclosures generally
occur with greater frequency in the second through fifth years of the life of a
mortgage loan which has a 30-year scheduled maturity. The Mortgage Loans
underlying the CitiMortgageCertificates or the Certificates may have a different
range of remaining maturities from those represented by the tables below.
23
<PAGE>
Furthermore, general economic conditions generally affect levels of
delinquencies, defaults and foreclosures. Historically, delinquencies, defaults
and foreclosures do not reach their peak until sometime after the lowest point
in an economic cycle. Finally, the residential real estate market in a
particular area could experience an overall decline in property values such that
the amounts owing on the Mortgage Loans underlying all or part of the
CitiMortgageCertificates or the Certificates and any secondary financing on the
related mortgaged properties become equal to or greater than the value of such
mortgaged properties. In that event, the actual rate of delinquencies and the
number of foreclosures could be higher than those previously experienced.
DELINQUENCY, FORECLOSURE AND LOSS EXPERIENCE
DELINQUENCY AND FORECLOSURE EXPERIENCE OF SERVICED PORTFOLIO
The delinquency and foreclosure experience on the portfolio of one-to
four-family conventional residential first mortgage loans originated or acquired
by the Originators and certain other affiliates of CMI and serviced by CMI for
the periods indicated is set forth in the following table. During the period
covered in the table, this portfolio decreased from $55.9 billion on December
31, 1991 to $39.0 billion on December 31, 1993. CMI's total serviced portfolio
includes both fixed and adjustable interest rate mortgage loans, including
Buydown Mortgage Loans, tiered-payment mortgage loans, loans with stated
maturities of 15 to 30 years and other types of mortgage loans having a variety
of payment characteristics, and includes mortgage loans secured by mortgaged
properties in geographic locations that may not be representative of the
geographic distribution or concentration of the Mortgaged Properties securing
the Mortgage Loans. There can be no assurance that the delinquency and
foreclosure experience set forth below with respect to CMI's total serviced
portfolio will be similar to the results that may be experienced with respect to
the Mortgage Loans underlying the CitiMortgageCertificates or the Certificates.
DELINQUENCY AND FORECLOSURE EXPERIENCE OF SERVICED PORTFOLIO
OF ONE-TO FOUR-FAMILY RESIDENTIAL MORTGAGE LOANS (1)
<TABLE>
<CAPTION>
AS OF
---------------------------------------------------------------------------
DECEMBER 31, 1991 DECEMBER 31, 1992 DECEMBER 31, 1993
----------------------- ----------------------- -----------------------
BY DOLLAR BY DOLLAR BY DOLLAR
AMOUNT OF AMOUNT OF AMOUNT OF
BY NO. LOANS BY NO. LOANS BY NO. LOANS
OF LOANS (MILLIONS) OF LOANS (MILLIONS) OF LOANS (MILLIONS)
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Total Portfolio................... 541,396 $ 55,937.4 469,106 $ 48,018.3 388,748 $ 39,000.7
Period of Delinquency(2)
30-59 Days...................... 19,781 2,047.4 16,244 1,701.4 13,973 1,406.1
60-89 Days...................... 5,317 617.6 4,525 507.9 4,224 450.5
90 Days or more................. 5,458 735.8 6,761 885.0 6,870 902.5
Total Loans Delinquent............ 30,556 3,400.8 27,530 3,094.3 25,067 2,759.1
Delinquency Ratio................. 5.64% 6.08% 5.87% 6.44% 6.45% 7.07%
Foreclosures(3)................... 11,000 1,551.1 10,834 1,577.5 9,920 1,399.8
Foreclosure Ratio................. 2.03% 2.77% 2.31% 3.29% 2.55% 3.59%
<FN>
- ------------------------
(1) The table includes mortgage loans serviced by CMI and held by an
Originator, in its own portfolio, and certain affiliates' portfolios. The
table also includes mortgage loans serviced by CMI which have been packaged
and sold to FNMA and FHLMC, in transactions pursuant to registration
statements under the 1933 Act and in transactions exempt from the
registration requirements of the 1933 Act. The table does not include loans
purchased strictly for servicing revenue or, in the case of the Florida
branches of CFSB, loans originated prior to the acquisition by Citicorp of
the Florida branches of CFSB in January 1984. The portfolio includes
cooperative loans.
(2) The Period of Delinquency is based upon the number of days past due on a
contractual basis. No mortgage loan is considered delinquent for purposes
of this table until 30 days past due on a contractual basis.
(3) The table shows mortgage loans for which foreclosure proceedings had been
instituted at the dates indicated.
</TABLE>
----------------
24
<PAGE>
Unless otherwise specified in the Prospectus Supplement, CMI will act as
subservicer of the Mortgage Loans in the CMI Pools, CFSB Pools and Citibank
Pools (each as defined in APPENDIX A).
DELINQUENCY, FORECLOSURE AND LOSS EXPERIENCE OF SECURITIZED PORTFOLIO
The delinquency, foreclosure and loss experience on the one-to four-family
conventional residential first mortgage loans that were originated or acquired
and subsequently sold by the Originators, CMSI and certain other affiliates of
CMI pursuant to registration statements under the 1933 Act and serviced by CMI
is set forth in the following tables for the periods indicated. During the
period covered in the tables, this group of securitized mortgage loans decreased
from $11.8 billion on December 31, 1991 to $7.7 billion on December 31, 1993.
CMI's total securitized portfolio includes both fixed and adjustable interest
rate mortgage loans, including Buydown Mortgage Loans, tiered-payment mortgage
loans, loans with stated maturities of 15 to 30 years and other types of
mortgage loans having a variety of payment characteristics, and includes
mortgage loans secured by mortgaged properties in geographic locations that may
not be representative of the geographic distribution or concentration of the
Mortgaged Properties securing the Mortgage Loans.
DELINQUENCY AND FORECLOSURE EXPERIENCE OF SECURITIZED
ONE-TO FOUR-FAMILY RESIDENTIAL MORTGAGE LOANS
<TABLE>
<CAPTION>
AS OF
----------------------------------------------------------------------
DECEMBER 31, 1991 DECEMBER 31, 1992 DECEMBER 31, 1993
---------------------- ---------------------- ----------------------
BY DOLLAR BY DOLLAR BY DOLLAR
AMOUNT OF AMOUNT OF AMOUNT OF
BY NO. LOANS BY NO. LOANS BY NO. LOANS
OF LOANS (MILLIONS) OF LOANS (MILLIONS) OF LOANS (MILLIONS)
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Total Portfolio................... 79,652 $ 11,845.2 73,561 $ 10,209.3 58,312 $ 7,700.9
Period of Delinquency(1)
30-59 Days...................... 3,042 422.0 2,618 371.2 2,193 281.2
60-89 Days...................... 860 135.5 715 106.7 667 89.1
90 Days or more................. 825 151.2 1,112 200.7 1,135 210.4
Total Loans Delinquent............ 4,727 708.7 4,445 678.6 3,995 580.7
Delinquency Ratio................. 5.93% 5.98% 6.04% 6.65% 6.85% 7.54%
Foreclosures(2)................... 1,756 320.2 2,034 379.7 1,944 350.6
Foreclosure Ratio................. 2.20% 2.70% 2.77% 3.72% 3.33% 4.55%
<FN>
- ------------------------
(1) The Period of Delinquency is based upon the number of days past due on a
contractual basis. No mortgage loan is considered delinquent for purposes
of this table until 30 days past due on a contractual basis.
(2) The table shows mortgage loans for which foreclosure proceedings had been
instituted at the dates indicated.
</TABLE>
The following table indicates the level of cumulative draws for net losses
with respect to securities sold pursuant to the Registration Statements. The
amount of net losses was computed by aggregating the amount of draws for net
losses against applicable credit enhancement as indicated in the reports to
Certificateholders for the securities sold under the Registration Statements.
LOSS EXPERIENCE OF SECURITIES ISSUED
PURSUANT TO THE REGISTRATION STATEMENTS
<TABLE>
<CAPTION>
CUMULATIVE DRAWS FOR AGGREGATE STATED AMOUNT OF
NET LOSSES SECURITIES ISSUED LOSS
(MILLIONS)(1) (MILLIONS)(1),(2) RATIO(3)
----------------------- ----------------------------- ------------
<S> <C> <C> <C>
As of December 31, 1991......................... $ 17.0 $ 17,898.6 .09 %
As of December 31, 1992......................... 39.1 21,379.3 .18 %
As of December 31, 1993......................... 108.6 23,560.1 .46 %
<FN>
- ------------------------
(1) Rounded to the nearest hundred thousand.
</TABLE>
h-TM-
25
<PAGE>
<TABLE>
<S> <C>
(2) The Aggregate Stated Amount of securities issued represents securities
issued which have had at least one Distribution Date.
(3) Loss Ratio represents cumulative draws for net losses as a percentage of
the aggregate Stated Amount of securities issued under the Registration
Statements.
</TABLE>
There can be no assurance that the delinquency, foreclosure or historical
loss experience indicated in the preceding tables with respect to CMI's total
securitized portfolio will be similar to the results that may be experienced
with respect to the Mortgage Loans underlying the CitiMortgageCertificates or
the Certificates.
CITICORP
Citicorp is a holding company incorporated under the laws of Delaware on
December 4, 1967 whose principal subsidiary is Citibank, N.A. The principal
office of Citicorp is located at 399 Park Avenue, New York, New York 10043; its
telephone number is (212) 559-1000.
Through its subsidiaries and affiliates, including the Issuer, CMI, CFSB,
CBNA and Citibank, Citicorp is a multinational financial services organization
serving the financial needs of businesses, governments, financial institutions
and individuals in the United States and throughout the world.
USE OF PROCEEDS
The net proceeds to be received by the Issuer from the sale of the
Certificates are intended to be used for the purpose of originating or
purchasing new residential mortgage loans from the Originators and for other
general corporate purposes, which may include the repayment of indebtedness to
Citicorp, its affiliates or unaffiliated parties. Certificates will be sold in
Series from time to time. The timing and amount of such sales will be dependent
upon a number of factors, including the volume of mortgage loans acquired by the
Issuer, prevailing interest rates, availability of funds and general market
conditions.
THE POOLING AGREEMENTS
REPORTS TO CERTIFICATEHOLDERS
For each Series, the Trustee will include with each distribution to holders
of CitiCertificates, and will send to holders of Residual Certificates, a
statement prepared by the Issuer setting forth the following information (per
Single Certificate, as to (i) through (iii) below):
(i) to each Certificateholder of a Class of CitiCertificates on which
distributions in reduction of the Stated Amount are then being made, the
amount of such payment which represents a reduction in the Stated Amount and
the amount which represents interest, the amount, if any, which represents
losses and the Stated Amount of a Single Certificate of each Class after
giving effect to the reduction of Stated Amount on such Distribution Date;
(ii) to each Certificateholder of a Class of CitiCertificates on which
a distribution of interest only is then being made, the amount of such
interest payment and the aggregate Stated Amount of Certificates outstanding
of each Class after giving effect to reductions of Stated Amount, if any,
made on such Distribution Date and on any Special Distribution Date
occurring subsequent to the last such report and after including in the
aggregate Stated Amount of Accrual CitiCertificates outstanding the amount
of any accrued interest added to the Stated Amount thereof on such
Distribution Date.
(iii) to each holder of an Accrual CitiCertificate (but only if such
holder shall not have received on such Distribution Date a distribution of
interest equal to the entire amount of interest accrued on such
CitiCertificate during the Interest Accrual Period with respect to such
Distribution Date)
(A) the information contained in the report delivered pursuant to
clause (ii) above,
(B) the interest accrued on a Single Certificate of such Class of
Accrual CitiCertificates during the Interest Accrual Period with respect
to such Distribution Date and added to the Stated Amount of such Accrual
CitiCertificate, and
26
<PAGE>
(C) the Stated Amount of a Single Certificate of such Class of
Accrual CitiCertificate after giving effect to the addition thereto of
all interest accrued thereon during such Interest Accrual Period;
(iv) the amount of servicing compensation received by the Issuer during
the preceding Reporting Period and such other customary information as the
Issuer deems necessary or desirable to enable Certificateholders to prepare
their tax returns;
(v) the book value of any real estate acquired by the Pool through
foreclosure or otherwise;
(vi) the number and aggregate principal amount of Mortgage Loans
delinquent 30 days and 60 or more days;
(vii) the amount remaining under any form of credit support after giving
effect to the declining Amount Available and any payments thereunder and
other amounts charged thereto on the applicable Distribution Date;
(viii) the aggregate amount received in respect of Mortgage Loans and
Mortgage Certificates during the related Due Period; and
(ix) the aggregate Adjusted Balance of the Mortgage Loans as of the
last day of the month next preceding the month of such distribution after
giving effect to payments on the Mortgage Loans due on the related Due Date
and Principal Prepayments distributed on the Distribution Date.
For each Series, the Trustee will send to holders of Residual Certificates a
statement setting forth the information in paragraphs (i) through (ix).
The Issuer will provide Certificateholders that are federally insured
savings and loan associations with certain reports and with access to
information and documentation regarding the Mortgage Loans evidenced by such
Series sufficient to permit such associations to comply with applicable
regulations of the Office of Thrift Supervision (the "OTS"), the successor to
the Federal Home Loan Bank Board. (Section 3.04)
In addition to the foregoing, the Trustee shall file with the Internal
Revenue Service and applicable state and local taxing authority and furnish or
make available to Certificateholders such statements or information at the times
and in the manner as may be required by the Code or other tax laws in accordance
with the Pooling Agreement.
EVIDENCE AS TO COMPLIANCE
The Pooling Agreement for each Series will provide that a firm of
independent public accountants will furnish to the Trustee and to holders of a
certain percentage of Certificates outstanding on or before March 31, of each
year, beginning with March 31 in the year which begins not less than three
months after the date of the initial issuance of Certificates of that Series, a
statement as to compliance with the Pooling Agreement relating to the servicing
of the Mortgage Loans. (Section 3.08)
The Pooling Agreement will also provide for delivery to the Trustee and to
holders of a certain percentage of Certificates outstanding on or before March
31 of each year, beginning with March 31 in the year which begins not less than
three months after the date of the initial issuance of Certificates of that
Series, a statement signed by an officer of the Issuer to the effect that the
Issuer has fulfilled its obligations under such Pooling Agreement throughout the
preceding year or, if there has been a default in the fulfillment of any such
obligation, describing each such default. (Section 12.01)
Certificateholders may obtain copies of such statements by request in
writing addressed to the Trustee.
CERTAIN MATTERS REGARDING THE ISSUER AND CITICORP
The Pooling Agreement for each Series will provide that the Issuer may not
resign from its obligations and duties as servicer thereunder, except upon a
determination evidenced by an opinion of counsel that the Issuer's performance
of such duties is no longer permissible under applicable law or upon the consent
of the Trustee and holders of more than 66 2/3% of the Stated Amount of
CitiCertificates and of more than 66 2/3% of
27
<PAGE>
the Percentage Interests of Residual Certificates then outstanding. No such
resignation will become effective until the Trustee or a successor servicer has
assumed the Issuer's obligations and duties under such Pooling Agreement.
Citicorp's obligations under the Guaranty for any Series for which a Guaranty is
provided for in the related Prospectus Supplement will, upon issuance thereof,
be irrevocable; PROVIDED, HOWEVER, that the Issuer may substitute in whole or in
part another form of credit support for Citicorp's Guaranty, as described
herein. See "THE POOLING AGREEMENTS--Amendment." (Section 6.04)
The Pooling Agreement will further provide that neither the Issuer nor
Citicorp, if Citicorp has issued a Guaranty, nor any of their respective
directors, officers, employees and agents, shall be under any liability to the
Pool or the Certificateholders for taking any action or for refraining from
taking any action pursuant to the Pooling Agreement, or for errors in judgment;
PROVIDED, HOWEVER, that neither the Issuer nor Citicorp, if Citicorp has issued
a Guaranty, nor any such person will be protected against any liability which
would otherwise be imposed by reason of willful misfeasance, bad faith or gross
negligence in the performance of duties or by reason of reckless disregard of
obligations and duties thereunder. In addition, the Pooling Agreement will
provide that neither the Issuer nor Citicorp, if Citicorp has issued a Guaranty,
is under any obligation to appear in, prosecute or defend any legal action which
is not incidental to the Issuer's servicing responsibilities under the Pooling
Agreement and which in its opinion may involve it in any expense or liability.
The Issuer may, however, in its discretion undertake any such action which it
may deem necessary or desirable in respect of the Pooling 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 Pool and the Issuer and Citicorp will be entitled to be
reimbursed therefor out of the Certificate Account. (Section 6.03)
The Issuer or Citicorp, if Citicorp has issued a Guaranty, and any of its
directors, officers, employees or agents will be indemnified and held harmless
by the Pool against any loss, liability or expense incurred in connection with
any suit in equity, action at law or other proceedings, other than any loss,
liability or expense incurred by reason of willful misfeasance, bad faith or
gross negligence in the performance of duties or reckless disregard of
obligations and duties under the Pooling Agreement. (Section 6.03)
Any corporation into which the Issuer may be merged or consolidated, or any
corporation resulting from any merger, conversion or consolidation to which the
Issuer is a party, or any corporation succeeding to the business of the Issuer,
or any entity, more than 50% of which is owned, directly or indirectly, by
Citicorp, which assumes the obligations of the Issuer, will be the successor of
the Issuer under the Pooling Agreement; provided that, in the event any such
assumption is made, the Issuer will not be released from any of its obligations
thereunder. (Section 6.02) The Issuer may at any time subcontract any duties
under the Pooling Agreement to any entity, including an entity more than 50% of
which is owned, directly or indirectly, by Citicorp. In the event of any such
subcontract, the Issuer will remain responsible for the subcontractor's
performance in accordance with the Pooling Agreement. (Section 6.06)
EVENTS OF DEFAULT
Events of Default under the Pooling Agreement for each Series will consist
of (i) any failure by the Issuer (a) to distribute to Certificateholders of that
Series any required payment (assuming the Issuer is the paying agent) or (b) to
pay over to the paying agent for distribution to Certificateholders of that
Series any required payment (assuming the Issuer is not the paying agent),
provided that any such failure in (a) or (b) may be remedied by making the
required distribution to Certificateholders (A) within ten business days of
receiving notice of any such failure if the Issuer distributed to
Certificateholders or paid over to the paying agent less than the amount of such
required payment due to an error in calculating the amount of such required
payment and (B) within three business days of receiving notice if the Issuer did
not distribute to Certificateholders or pay over to the paying agent the full
amount in respect of such required payment for any reason other than that set
forth in clause (A) above; (ii) any failure by the Issuer to repurchase any
Mortgage Loan or Mortgage Certificate as required under the Pooling Agreement
which continues unremedied for 60 business days after the giving of written
notice of such failure to the Issuer by the Trustee, or the issuer of any form
of credit support or to the Issuer and the Trustee by the holders of
Certificates evidencing ownership interests aggregating not less than 25% of
each Class affected, and of the Residual
28
<PAGE>
Certificates, if affected, by such failure (each such Class and (if applicable)
the Residual Certificates, an "Affected Class"); (iii) any failure by the Issuer
duly to observe or perform in any material respect any of its other covenants or
agreements in such Pooling Agreement, if such failure materially affects the
rights of Certificateholders and continues unremedied for 60 days after the
giving of written notice of such failure to the Issuer by the Trustee, or the
issuer of any form of credit support or to the Issuer and the Trustee by the
holders of Certificates evidencing ownership interests aggregating not less than
25% of each Affected Class; and (iv) certain events of insolvency, readjustment
of debt, marshalling of assets and liabilities or similar proceedings and
certain actions by the Issuer indicating its insolvency, reorganization or
inability to pay its obligations. (Section 7.01)
RIGHTS UPON EVENT OF DEFAULT
As long as an Event of Default under the Pooling Agreement for any Series
remains unremedied, the Trustee or holders of Certificates evidencing ownership
interests aggregating not less than 25% of any Affected Class may terminate all
of the rights and obligations of the Issuer under such Pooling Agreement
whereupon the Trustee will succeed to all the responsibilities, duties and
liabilities of the Issuer under such Pooling Agreement and will be entitled to
similar compensation arrangements. The Issuer shall be entitled to payment of
certain amounts payable to it under the Pooling Agreement in respect of services
rendered notwithstanding the termination of its activities as servicer. No such
termination will affect in any manner the issuer's obligations under any credit
support. In the event that the Trustee is unwilling or unable to act as
servicer, it may appoint, or petition a court of competent jurisdiction for the
appointment of, a housing and home finance institution with a net worth of at
least $5,000,000 to act as successor servicer under such Pooling Agreement. The
Trustee and such successor may agree upon the servicing compensation to be paid,
which in no event may be greater than the Servicing Compensation to the Issuer
under such Pooling Agreement. (Sections 7.01 and 7.02)
No Certificateholder of any Series will have the right under the applicable
Pooling Agreement to institute any proceeding with respect to such Pooling
Agreement, unless such holder previously has given to the Trustee written notice
of default and unless the holders of Certificates evidencing ownership interests
aggregating not less than 25% of each Affected Class 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 proceedings. (Section
10.03) However, the Trustee is under no obligation to exercise any of the trusts
or powers vested in it by the Pooling Agreement for any Series or to make any
investigation of matters arising thereunder or to institute, conduct or defend
any litigation thereunder or in relation thereto at the request, order or
direction of any of the Certificateholders, unless such Certificateholders have
offered to the Trustee reasonable security or indemnity against the costs,
expenses and liabilities which may be incurred therein or thereby. (Section
8.02)
AMENDMENT
The Pooling Agreement and any form of credit support for each Series may be
amended by the Issuer, the issuer of credit support and the Trustee, without
Certificateholder consent, (i) to cure any ambiguity, (ii) to correct or
supplement any provision therein which may be inconsistent with any other
provision therein, (iii) to make any other provisions with respect to matters or
questions arising under such Pooling Agreement or credit support which are not
inconsistent with the provisions of such Pooling Agreement or credit support, as
the case may be, including replacing such credit support (other than any Class
or Classes of subordinated Certificates) in whole or in part by other forms of
credit support as described herein or in the related Prospectus Supplement, (iv)
to comply with any requirements imposed by the Code or any regulations
thereunder, including any requirement relating to maintaining the status of the
Trust (as defined in the related Prospectus Supplement) or applicable portion or
portions of the property thereof as one or more REMICs, as the case may be, or
(v) to establish a "qualified reserve fund" within the meaning of Code Section
860G(a)(7)(B). The Pooling Agreement and any form of credit support for each
Series may also be amended by the Issuer, the issuer of the credit support and
the Trustee, without Certificateholder consent, if the Issuer delivers an
opinion of counsel acceptable to the Trustee to the effect that such amendment
will not
29
<PAGE>
materially adversely affect the interests of the Certificateholders. The Pooling
Agreement and any form of credit support for each Series may also be amended by
the Issuer, the issuer of credit support and the Trustee with the consent of the
holders of Certificates evidencing ownership interests aggregating not less than
66 2/3% of each Affected Class for the purpose of adding any provisions to or
changing in any manner or eliminating any of the provisions of such Pooling
Agreement or form of credit support or modifying in any manner the rights of
Certificateholders of that Series; PROVIDED, HOWEVER, that no such amendment may
(i) decrease in any manner the amount of, or delay the timing of, payments or
distributions received on Mortgage Loans or Mortgage Certificates which are
required to be distributed in respect of any such Certificate without the
consent of the holder of such Certificate or (ii) reduce the aforesaid
percentage of Certificates, the holders of which are required to consent to any
such amendment, without the consent of the holders of all Certificates of each
Affected Class then outstanding. (Section 10.01)
LIST OF CERTIFICATEHOLDERS
If the Trustee is not then the Certificate Registrar, the Issuer will
provide or cause to be provided to the Trustee within 15 days after receipt of
its written request a list of the names and addresses of all Certificateholders
of record of a particular Series as of the most recent record date for payment
of distributions to Certificateholders of that Series. Upon written request of
three or more Certificateholders of record of a Series of Certificates, for
purposes of communicating with other Certificateholders with respect to their
rights under the Pooling Agreement for such Series, the Trustee will afford such
Certificateholders access during business hours to the most recent list of
Certificateholders of that Series held by the Trustee. If such list is as of a
date more than 90 days prior to the date of receipt of such Certificateholders'
request, the Trustee shall promptly request from the Issuer a current list and
will afford such requesting Certificateholders access to such list promptly upon
receipt. (Section 5.05)
No Pooling Agreement will provide for the holding of any annual or other
meeting of Certificateholders.
TERMINATION; REPURCHASE OF MORTGAGE LOANS AND MORTGAGE CERTIFICATES
The obligations of the Issuer and the Trustee created by the Pooling
Agreement for each Series will terminate upon the earlier of (a) a complete
liquidation of the Pool as described in the Pooling Agreement and (b) the later
of (i) the maturity or other liquidation of the last Mortgage Loan or Mortgage
Certificate subject thereto and the disposition of all property acquired upon
foreclosure or by deed in lieu of foreclosure of any such Mortgage Loan or
Mortgage Certificate and (ii) the payment to Certificateholders of that Series
of all amounts in the Certificate Account required to be paid to them pursuant
to such Pooling Agreement. In no event, however, will the trust created by any
Pooling Agreement continue beyond the expiration of 21 years from the death of
the last survivor of the descendants of a certain person specified in such
Pooling Agreement living at the date of such Pooling Agreement. For each series
the Issuer will give or cause to be given written notice of termination of the
Pooling Agreement to each Certificateholder, and the final distribution will be
made only upon surrender and the cancellation of the Certificates at an office
or agency of the Trustee specified in the notice of termination. (Section 9.01)
Interest shall not accrue for the period of any delay in the payment of a
Certificate resulting from the failure of a holder to surrender the Certificate
in accordance herewith.
The Pooling Agreement for each Series may permit, but not require, the
Issuer or the holders of Residual Certificates to repurchase from the Pool for
such Series, as part of a plan to complete liquidation of the Pool, all
remaining Mortgage Loans and Mortgage Certificates and all property acquired in
respect of such Mortgage Loans and Mortgage Certificates at a price equal to the
sum of (i) 100% of the unpaid principal balance of such Mortgage Loans or
Mortgage Certificates on the first day of the month of repurchase (after giving
effect to payments of principal due on such first day), together with accrued
interest thereon at the then applicable Pass-Through Rate to but not including
the Due Date in the month in which the related distribution is made to
Certificateholders, in the case of a repurchase by the Issuer after subtracting
any unreimbursed payments under the credit support for such Series and any
unreimbursed Voluntary Advances with respect to such Mortgage Loans (other than
such payments or advances with
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respect to Liquidating Loans and interest in excess of the applicable
Pass-Through Rate) and (ii) the current appraised value of acquired property.
The exercise of such right and the related liquidation will effect early
retirement of the Certificates of that Series, but such right so to repurchase
is subject to (i) the aggregate Adjusted Balance of the Mortgage Loans or
Mortgage Certificates for such Series at the time of repurchase being equal to
or less than the percentage (not to exceed 5%), specified in the applicable
Prospectus Supplement and Pooling Agreement, of the aggregate Adjusted Balance
of such Mortgage Loans or Mortgage Certificates as of the Cut-Off Date for that
Series and (ii) such repurchase and related distributions (A) constituting a
"qualified liquidation" within the meaning of Section Code 860F(a)(4)(A), (B)
not adversely affecting the REMIC status of each Pool and (C) not otherwise
causing each such Pool to be subject to tax for the taxable year in which the
repurchase occurs or any prior taxable year. (Section 9.01)
DUTIES OF THE TRUSTEE
The Trustee makes no representations as to the validity or sufficiency of
the Pooling Agreement, the Certificates or of any Mortgage Loan or Mortgage
Certificate or related document, and is not accountable for the use or
application by the Issuer of any funds paid to it in respect of the
Certificates, the Mortgage Loans or the Mortgage Certificates, or deposited into
or withdrawn from the Certificate Account or the Servicing Account by the
Issuer. The Trustee shall have no liability for any losses incurred as a result
of (i) any failure of each Pool to qualify as a REMIC under the Code, (ii) any
termination, inadvertent or otherwise, of each Pool's status as a REMIC or (iii)
any "prohibited transaction" as defined in Code Section 860F(a). (Section 8.03)
If no Event of Default has occurred, the Trustee is required to perform only
those duties specifically required of it under the Pooling Agreement. However,
upon receipt of the various certificates, reports or other instruments required
to be furnished to it, the Trustee is required to examine them to determine
whether they conform to the requirements of the Pooling Agreement. (Section
8.01)
THE TRUSTEE
The identity of the commercial bank, savings and loan association or trust
company named as the Trustee for each Series of Certificates will be set forth
in the applicable Prospectus Supplement. The commercial bank, savings and loan
association or trust company serving as Trustee may have normal banking
relationships with the Issuer or the Originator. In addition, for the purpose of
meeting the legal requirements of certain local jurisdictions, the Issuer and
the Trustee acting jointly shall have the power to appoint co-trustees or
separate trustees of all or any part of the Pool relating to a particular Series
of Certificates. In the event of such appointment, all rights, powers, duties
and obligations conferred or imposed upon the Trustee by the Pooling Agreement
relating to such Series shall be conferred or imposed upon the Trustee and each
such separate trustee or co-trustee jointly, or, in any jurisdiction in which
the Trustee shall be incompetent or unqualified to perform certain acts, singly
upon such separate trustee or co-trustee who shall exercise and perform such
rights, powers, duties and obligations solely at the direction of the Trustee.
(Section 8.10) The Trustee may also appoint agents (which may include the Issuer
and its affiliates) to perform any of the responsibilities of the Trustee, which
agents shall have any or all of the rights, powers, duties and obligations of
the Trustee conferred on them by such appointment, PROVIDED that the Trustee
shall continue to be responsible for its duties and obligations under the
Pooling Agreement.
The Trustee may resign at any time, in which event the Issuer will be
obligated to appoint a successor Trustee. The Trustee may also be removed at any
time (i) by the Issuer, (a) if the Trustee ceases to be eligible to continue as
such under the Pooling Agreement or if the Trustee becomes insolvent, (b) if the
Trustee breaches any of its duties under the Pooling Agreement which materially
adversely affects the Certificateholders, (c) if through the performance or
non-performance of certain actions by the Trustee, the rating assigned to the
CitiCertificates would be lowered or (d) if the credit rating of the Trustee is
downgraded to a level which would result in the rating assigned to the
CitiCertificates to be lowered or (ii) by the holders of Certificates evidencing
at least 50% of the current Stated Amount of CitiCertificates then outstanding
and 50% of the Percentage Interests of the Residual Certificates. Upon becoming
aware of such circumstances, the Issuer will be obligated to appoint a successor
Trustee. 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. (Section 8.07)
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ERISA CONSIDERATIONS
The Employee Retirement Income Security Act of 1974, as amended ("ERISA"),
imposes certain requirements on those employee benefit plans to which it applies
("Plans") and on those persons who are fiduciaries with respect to such Plans.
In accordance with ERISA's general fiduciary standards, before investing in a
Certificate a Plan fiduciary should determine whether such an investment is
permitted under the governing Plan instruments and is appropriate for the Plan
in view of its overall investment policy and the composition and diversification
of its portfolio. Other provisions of ERISA and the Code prohibit certain
transactions involving the assets of a Plan and persons who have certain
specified relationships to the Plan ("parties in interest" within the meaning of
ERISA or "disqualified persons" within the meaning of the Code). Thus, a Plan
fiduciary considering an investment in Certificates should also consider whether
such an investment might constitute or give rise to a prohibited transaction
under ERISA or the Code. For purposes of the discussion, a person investing on
behalf of an individual retirement account established under Code Section 408
(an "IRA") would be regarded as a fiduciary and the IRA as a Plan.
An investment in Certificates by a Plan might result in the assets of the
related Pool being deemed to constitute in whole or in part Plan assets, which
in turn might mean that the Plan fiduciary who decided to invest in the
Certificates had delegated asset management responsibility, and that certain
underlying aspects of such investment, including the operation of such Pool,
might be deemed prohibited transactions under ERISA and the Code. Neither ERISA
nor the Code defines "plan assets." The U.S. Department of Labor has published
regulations (the "Regulations") concerning whether or not a Plan's assets would
be deemed to include an interest in the underlying assets of an entity (such as
a Pool) for purposes of certain reporting, disclosure and fiduciary
responsibility requirements, including the prohibited transaction provisions
found in ERISA and the Code, if the Plan acquires an "equity interest" in such
entity (such as by acquiring Certificates). The Issuer cannot predict in advance
whether under the rules set forth in the Regulations an investing Plan's assets
would be deemed to include an interest in the assets of a Pool or be deemed
merely to include its interest in the Certificates, because of the factual
nature of certain of these rules. For example, the Regulations state that the
underlying assets of an entity will not be considered "plan assets" if,
immediately after the most recent acquisition of any equity interest in the
entity, whether or not from the issuer or an underwriter, less than 25% of the
value of each class of equity interest is held by "benefit plan investors,"
which are defined as Plans, IRAs, and employee benefit plans not subject to
ERISA (for example, governmental plans).
The Regulations provide that if a Plan acquires a "guaranteed governmental
mortgage pool certificate," the Plan's assets include such certificate but do
not include any of the mortgages underlying such certificate. The Regulations
include in the definition of a "guaranteed governmental mortgage pool
certificate" the types of FHLMC Certificates, GNMA Certificates and FNMA
Certificates which may be included in a Pool underlying a Series of
Certificates. Accordingly, even if such Mortgage Certificates included in a Pool
were deemed to be in whole or in part assets of Plan investors, the mortgages
underlying such Mortgage Certificates would not be treated as assets of such
Plans and the operation of the pools containing such underlying mortgages would
not give rise to prohibited transactions.
U.S. Department of Labor Prohibited Transaction Class Exemption 83-1 for
Certain Transactions Involving Mortgage Pool Investment Trusts ("PTE 83-1")
exempts certain transactions involving the creation, maintenance and termination
of certain residential mortgage pools and the direct or indirect acquisition and
holding of certain residential mortgage pool pass-through certificates by Plans,
from treatment as potential prohibited transactions, whether or not the Plan's
assets would be deemed to include an ownership interest in the mortgages in the
mortgage pool, and whether or not such transactions would otherwise be
prohibited under ERISA. PTE 83-1 sets forth certain "general conditions" and
"specific conditions" to its applicability. The Issuer believes that such
"general conditions" set forth in Section II of PTE 83-1 would be met with
respect to the purchase and holding of Senior Certificates evidencing ownership
interests in a Pool consisting of Real Estate Loans (as defined in APPENDIX A).
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It appears that PTE 83-1 might not apply to the purchase and holding of
Senior Certificates evidencing ownership interests in a Pool consisting of
Cooperative Loans (as defined in APPENDIX A) as well as Real Estate Loans, of
Certificates which constitute Residual Certificates, or of Senior Certificates
which do not pass through both principal and interest.
It is not clear whether PTE 83-1 applies to Senior Certificates evidencing
an interest in a Pool of Mortgage Certificates as opposed to Real Estate Loans;
when offering a Series of such Certificates, if it appears no other ERISA
prohibited transaction exemption is applicable, the Issuer intends to only
include in a Pool Mortgage Certificates which are "guaranteed governmental
mortgage pool certificates," or Mortgage Certificates which themselves would
meet the general conditions of PTE 83-1 if purchased directly by a Plan.
Further, in such circumstances, the Issuer intends to structure the offering of
any such Series of Certificates and the operations of the Pool and to take such
other actions as are both reasonable and appropriate so as to reduce the risk of
the occurrence of ERISA prohibited transactions should PTE 83-1 be held
inapplicable to the acquisition and holding of such Certificates.
Several underwriters of mortgage-backed securities have applied for and
obtained ERISA prohibited transaction exemptions which are in some respects
broader than PTE 83-1. Such exemptions can only apply to mortgage-backed
securities which, among other conditions, are sold in an offering with respect
to which such underwriter serves as the sole or a managing underwriter, or as a
selling or placement agent. Several other underwriters have applied for similar
exemptions. If such an exemption might be applicable to a Series of
Certificates, the related Prospectus Supplement will refer to such possibility.
In view of the foregoing, before purchasing any Certificates, a Plan
fiduciary should consult with its counsel and determine whether PTE 83-1 applies
to the creation, maintenance and termination of the Pool and the acquisition and
holding of the Certificates, including whether the appropriate "specific
conditions" set forth in Section I of PTE 83-1 as well as the "general
conditions" of Section II would be met, and should consult the applicable
Prospectus Supplement relating to such Series of Certificates, especially, but
not only, the ERISA discussion, if any. If it is unclear to a Plan fiduciary and
its counsel that PTE 83-1 would apply to the purchase and holding of the
Certificates, because, for example, the Pool includes Mortgage Certificates,
such fiduciary and its counsel should consider whether such Mortgage
Certificates are "guaranteed governmental mortgage pool certificates," whether
in such case PTE 83-1 would be applicable to the indirect acquisition and
holding of the Mortgage Certificates, and whether any other ERISA prohibited
transaction exemption is applicable or necessary.
Certain affiliates of the Issuer, such as Citicorp, might be considered
"parties in interest" or "disqualified persons" with respect to a Plan. If so,
special caution ought to be exercised before a Plan purchases a Certificate in
such circumstances. Certificates may not be purchased with the assets of a Plan
if an affiliate of the Issuer or of the Trustee of a Pool either: (a) has
investment discretion with respect to the investment of such assets; (b) has
authority or responsibility to give, or regularly gives, investment advice with
respect to such assets for a fee and pursuant to an agreement or understanding
that such advice will serve as a primary basis for investment decisions with
respect to such assets and that such advice will be based on the particular
investment needs of the Plan; or (c) is an employer maintaining or contributing
to such Plan. By agreeing to acquire a Certificate for a Plan, the fiduciary of
any such Plan is representing and warranting to the Underwriter and the Issuer
that the assets of the Plan to be used in connection with such purchase do not
come within (a), (b) or (c) above.
A governmental plan as defined in Section 3(32) of ERISA is not subject to
ERISA, or Code Section 4975. However, such a governmental plan may be subject to
a federal, state, or local law, which is, to a material extent, similar to the
provisions of ERISA of Code Section 4975 ("Similar Law"). A fiduciary of a
governmental plan should make its own determination as to the need for and the
availability of any exemptive relief under Similar Law.
The purchase of a Residual Certificate by most varieties of ERISA Plans,
governmental plans, and certain church plans (as defined in section 3(33) of
ERISA) may give rise to "unrelated business taxable income" as described in Code
Sections 511-515 and 860E. Further, prior to the purchase of Residual
Certificates, a prospective purchaser may be required to provide an affidavit to
a transferor that it is not a
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"disqualified organization," which term as defined herein includes certain
tax-exempt entities not subject to Code Section 511, including certain
governmental plans, as discussed herein under the caption "CERTAIN FEDERAL
INCOME TAX CONSEQUENCES--Taxation of Residual Certificates--Tax-Related
Restrictions on Transfer of Residual Certificates--Disqualified Organizations."
Due to the complexity of the foregoing rules and the penalties imposed upon
persons involved in prohibited transactions, it is particularly important that
potential Plan investors consult with their counsel regarding the consequences
under ERISA of their acquisition and ownership of Certificates. Unless otherwise
specified in the related Prospectus Supplement, no assets of a Plan which is
subject to ERISA may be invested in Subordinated Certificates.
LEGAL INVESTMENT
The Senior Certificates, and if so specified in the related Prospectus
Supplement, the Subordinated Certificates and the Residual Certificates will
constitute "mortgage related securities" for purposes of the Secondary Mortgage
Market Enhancement Act of 1984, as amended (the "Enhancement Act"), so long as
they are rated in one of the two highest rating categories by at least one
nationally recognized statistical rating organization. As "mortgage related
securities," they will be legal investments for persons, trusts, corporations,
partnerships, associations, business trusts and business entities (including,
but not limited to, state-chartered savings banks, commercial banks, savings and
loan associations and insurance companies, as well as trustees and state
government employee retirement systems) created pursuant to or existing under
the laws of the United States or of any state (including the District of
Columbia and Puerto Rico) whose authorized investments are subject to state
regulation to the same extent that, under applicable law, obligations issued by
or guaranteed as to principal and interest by the United States or any agency or
instrumentality thereof constitute legal investments for such entities. Pursuant
to the Enhancement Act, a number of States enacted legislation on or before the
October 3, 1991 cutoff for such enactments, limiting to varying extents the
ability of certain entities (in particular, insurance companies) to invest in
"mortgage related securities," in most cases by requiring the affected investors
to rely solely upon existing state law, and not the Enhancement Act.
Accordingly, the investors affected by such legislation will be authorized to
invest in the Senior Certificates, and if so specified in the related Prospectus
Supplement, the Subordinated Certificates and the Residual Certificates, only to
the extent provided in such legislation.
The Enhancement Act 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
with mortgage related securities without limitation as to the percentage of
their assets represented thereby, federal credit unions may invest in mortgage
related securities, and national banks may purchase mortgage related securities
for their own account without regard to the limitations generally applicable to
investment securities set forth in 12 U.S.C. Section24 (Seventh), subject in
each case to such regulations as the applicable federal regulatory authority may
prescribe. In this connection, federal credit unions should review National
Credit Union Administration (the "NCUA") Letter to Credit Unions No. 96, as
modified by Letter to Credit Unions No. 108, which includes guidelines to assist
federal credit unions in making investment decisions for mortgage related
securities. The NCUA has adopted rules, codified as 12 C.F.R.
Section703.5(f)-(k), which prohibit federal credit unions from investing in
certain mortgage related securities (including securities such as certain
Series, Classes or Subclasses of Certificates), except under limited
circumstances.
All depository institutions considering an investment in the Certificates
should review the Federal Financial Institutions Examination Council's
"Supervisory Policy Statement on Securities Activities" dated January 28, 1992
(the "Policy Statement"). The Policy Statement, which has been adopted by the
Board of Governors of the Federal Reserve System, the FDIC, the Comptroller of
the Currency and the OTS, effective February 10, 1992, and by the NCUA (with
certain modifications), effective June 26, 1992, prohibits depository
institutions from investing in certain "high-risk mortgage securities"
(including securities such as certain Series, Classes or Subclasses of
Certificates), except under limited circumstances, and sets forth certain
investment practices deemed to be unsuitable for regulated institutions.
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Institutions whose investment activities are subject to regulation by
federal or state authorities should review rules, policies and guidelines
adopted from time to time by such authorities before purchasing any of the
Certificates, as certain Series, Classes or Subclasses may be deemed unsuitable
investments, or may otherwise be restricted, under such rules, policies or
guidelines (in certain instances irrespective of the Enhancement Act).
The foregoing does not take into consideration the applicability of
statutes, rules, regulations, orders, guidelines or agreements generally
governing investments made by a particular investor, including, but not limited
to, "prudent investor" provisions, percentage-of-assets limits, provisions which
may restrict or prohibit investment in securities which are not
"interest-bearing" or "income-paying," and, with regard to any Certificates
issued in book-entry form, provisions which may restrict or prohibit investments
in securities which are issued in book-entry form.
INVESTORS SHOULD CONSULT WITH THEIR OWN LEGAL ADVISORS IN DETERMINING
WHETHER AND TO WHAT EXTENT THE CERTIFICATES CONSTITUTE LEGAL INVESTMENTS FOR
SUCH INVESTORS.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
GENERAL
The following is a general discussion of the anticipated material federal
income tax consequences of the purchase, ownership and disposition of
CitiCertificates and Residual Certificates. The discussion below does not
purport to address all federal income tax consequences that may be applicable to
particular categories of investors, some of which may be subject to special
rules. The authorities on which this discussion is based are subject to change
or differing interpretations, and any such change or interpretation could apply
retroactively. The discussion reflects the applicable provisions of the Code, as
well as regulations (the "REMIC Regulations") promulgated by the U.S. Department
of the Treasury on December 23, 1992, and generally effective for REMICs with
Startup Days on or after November 12, 1991. Investors should consult their own
tax advisors in determining the federal, state, local, and any other tax
consequences to them of the purchase, ownership and disposition of
CitiCertificates and Residual Certificates. For purposes of this tax discussion,
references to "Certificateholder" or "holder" generally mean the beneficial
owner of a CitiCertificate or Residual Certificate.
With respect to each Series of CitiCertificates and Residual Certificates,
an election will be made to treat the related Trust or one or more segregated
pools of assets therein as one or more REMICs within the meaning of Code Section
860D. If an election is made to treat one or more segregated pools of assets
within the Trust property as a REMIC, references to the "Trust" or the "REMIC"
herein shall be deemed to refer to such portion or portions of the Trust
property. An election may also be made to treat the trust in which
CitiMortgageCertificates with respect to a Series represent an undivided
interest as a REMIC. Qualification as a REMIC requires ongoing compliance with
certain conditions. With respect to each Series of CitiCertificates and Residual
Certificates (and, if applicable, CitiMortgageCertificates), Rona Daniels, Vice
President and Tax Counsel for Asset Securitization of Citibank, N.A., has
advised the Issuer that in her opinion, assuming (i) the making of an
appropriate election, (ii) compliance with the Pooling Agreement, and (iii)
compliance with any changes in the law, including any amendments to the Code or
applicable Treasury regulations thereunder, the Trust (and, if applicable, the
trust relating to the CitiMortgageCertificates) will qualify as a REMIC. In such
case, the CitiCertificates will be considered to be "regular interests" in the
REMIC and generally will be taxed as if they were newly originated debt
instruments, and the Residual Certificates will be considered to be "residual
interests" in the REMIC. The Prospectus Supplement for each Series of
Certificates will indicate whether more than one REMIC election with respect to
the property included in the related Trust will be made.
STATUS OF CITICERTIFICATES AND RESIDUAL CERTIFICATES
Certificates held by a mutual savings bank or a domestic building and loan
association will constitute "qualifying real property loans" within the meaning
of Code Section 593(d)(1) in the same proportion that the assets of the REMIC
would be so treated. Certificates held by a domestic building and loan
association
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will constitute "a regular or residual interest in a REMIC" within the meaning
of Code Section 7701(a)(19)(C)(xi) in the same proportion that the assets of the
REMIC would be treated as "loans . . . secured by an interest in real property"
within the meaning of Code Section 7701(a)(19)(C)(v) or as other assets
described in Code Section 7701(a)(19)(C). Certificates held by a real estate
investment trust will constitute "real estate assets" within the meaning of Code
Section 856(c)(5)(A), and interest on the CitiCertificates and income with
respect to Residual Certificates will be considered "interest on obligations
secured by mortgages on real property or on interests in real property" within
the meaning of Code Section 856(c)(3)(B) in the same proportion that, for both
purposes, the assets and income of the REMIC would be so treated. If at all
times 95% or more of the assets of the REMIC qualify for any of the foregoing
treatments, the Certificates will qualify for the corresponding status in their
entirety. It is anticipated that the Certificates will qualify for the foregoing
treatments in their entirety. For purposes of Code Sections 593(d)(1) and
856(c)(5)(A), payments of principal and interest on the Mortgage Loans that are
reinvested pending distribution to holders of Certificates qualify for such
treatment. Where two REMICs are a part of a tiered structure they will be
treated as one REMIC for purposes of the tests described above respecting asset
ownership of more or less than 95%. In addition, if the assets of the REMIC
include Buydown Mortgage Loans, it is possible that the percentage of such
assets constituting "qualifying real property loans" or "loans . . . secured by
an interest in real property" for purposes of Code Sections 593(d)(1) and
7701(a)(19)(C)(v), respectively, may be required to be reduced by the amount of
the related buydown subsidy accounts. Certificates held by a regulated
investment company will not constitute "Government securities" within the
meaning of Code Section 851(b)(4)(A)(i). Certificates held by certain financial
institutions will constitute "evidence of indebtedness" within the meaning of
Code Section 582(c)(1).
QUALIFICATION AS A REMIC
In order for the Trust to qualify as a REMIC, there must be ongoing
compliance on the part of the Trust with the requirements set forth in the Code.
First, the Trust must fulfill an asset test, which requires that no more than a
DE MINIMIS portion of the assets of the Trust (as of the close of the third
calendar month beginning after the Startup Day and at all times thereafter) may
consist of assets other than "qualified mortgages" and "permitted investments."
The REMIC Regulations provide a safe harbor pursuant to which the DE MINIMIS
requirement will be met if, at all times, the aggregate adjusted basis of the
nonqualified assets is less than 1% of the aggregate adjusted basis of all the
Trust's assets. An entity that fails to meet the safe harbor may nevertheless
demonstrate that it holds no more than a DE MINIMIS amount of nonqualified
assets. A REMIC must also adopt "reasonable arrangements" to prevent its
residual interests from being held by "disqualified organizations" and must
furnish applicable tax information to transferors that violate this requirement.
See "Taxation of Residual Certificates--Tax-Related Restrictions on Transfer of
Residual Certificates--Disqualified Organizations."
A qualified mortgage is any obligation that is principally secured by an
interest in real property and that is either transferred to the REMIC on the
Startup Day or is purchased by the REMIC within a three-month period thereafter
pursuant to a fixed price contract in effect on the Startup Day. Qualified
mortgages include whole mortgage loans or stripped portions thereof,
certificates of beneficial ownership in a grantor trust that holds mortgage
loans, such as the Mortgage Certificates, and regular interests in another
REMIC, such as Mortgage Certificates in a trust as to which a REMIC election has
been made. The REMIC Regulations specify that loans secured by timeshare
interests and shares held by a tenant stockholder in a cooperative housing
corporation can be qualified mortgages. A qualified mortgage includes a
qualified replacement mortgage, which is any property that would have been
treated as a qualified mortgage if it were transferred to the REMIC on the
Startup Day and that is received either (i) in exchange for any qualified
mortgage within a three-month period thereafter, or (ii) in exchange for a
"defective obligation" within a two-year period thereafter. A "defective
obligation" includes (i) a mortgage in default or as to which default is
reasonably foreseeable, (ii) a mortgage as to which a customary representation
or warranty made at the time of transfer to the REMIC has been breached, (iii) a
mortgage that was fraudulently procured by the mortgagor, and (iv) a mortgage
that was not in fact principally secured by real property (but only if such
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mortgage is disposed of within 90 days of discovery). A Mortgage Loan that is
"defective" as described in clause (iv) that is not sold or, if within two years
of the Startup Day, exchanged within 90 days of discovery, ceases to be a
qualified mortgage after such 90 day period.
Permitted investments include cash flow investments, qualified reserve
assets, and foreclosure property. A cash flow investment is an investment,
earning a return in the nature of interest, of amounts received on or with
respect to qualified mortgages for a temporary period, not exceeding thirteen
months, until the next scheduled distribution to holders of interests in the
REMIC. A qualified reserve asset is any intangible property held for investment
that is part of any reasonably required reserve maintained by the REMIC to
provide for payments of expenses of the REMIC or to provide additional security
for payments due on the regular or residual interests that otherwise may be
delayed or defaulted upon because of a default or delinquency on the qualified
mortgages, lower than expected reinvestment returns, prepayment interest
shortfalls and certain other contingencies. The reserve fund will be
disqualified if more than 30% of the gross income from the assets in such fund
for the year is derived from the sale or other disposition of property held for
less than three months, unless required to prevent a default on the regular
interests caused by a default on one or more qualified mortgages. A reserve fund
must be reduced "promptly and appropriately" as payments on the Mortgage Loans
are received. Foreclosure property is real property acquired by the REMIC in
connection with the default or imminent default of a qualified mortgage and
generally held for not more than two years, with extensions granted by the
Internal Revenue Service.
In addition to the foregoing requirements, the various interests in a REMIC
also must meet certain requirements. All of the interests in a REMIC must be
either of the following: (i) one or more classes of regular interests or (ii) a
single class of residual interests on which distributions, if any, are made pro
rata. A regular interest is an interest in a REMIC that is issued on the Startup
Day with fixed terms, is designated as a regular interest, and unconditionally
entitles the holder to receive a specified principal amount (or other similar
amount), and provides that interest payments (or other similar amounts), if any,
at or before maturity either are payable based on a fixed rate or a qualified
variable rate, or consist of a specified, nonvarying portion of the interest
payments on qualified mortgages. Such a specified portion may consist of a fixed
number of basis points, a fixed percentage of the total interest or a qualified
variable or inverse variable rate on some or all of the qualified mortgages. The
specified principal amount of a regular interest that provides for interest
payments consisting of a specified, nonvarying portion of interest payments on
qualified mortgages may be zero. A residual interest is an interest in a REMIC
other than a regular interest that is issued on the Startup Day and is
designated as a residual interest. An interest in a REMIC may be treated as a
regular interest even if payments of principal with respect to such interest are
subordinated to payments on other regular interests or the residual interest in
the REMIC, and are dependent on the absence of defaults or delinquencies on
qualified mortgages or permitted investments, lower than reasonably expected
returns on permitted investments, expenses incurred by the REMIC or prepayment
interest shortfalls. Accordingly, the CitiCertificates of a Series will
constitute one or more classes of regular interests, and the Residual
Certificates of that Series will constitute a single class of residual interests
on which distributions are made pro rata.
If an entity, such as the Trust, fails to comply with one or more of the
ongoing requirements of the Code for REMIC status during any taxable year, the
Code provides that the entity will not be treated as a REMIC for such year and
thereafter. In this event, an entity with multiple classes of ownership
interests may be treated as a separate association taxable as a corporation
under Treasury regulations, and the CitiCertificates may be treated as equity
interests therein. The Code authorizes the Treasury Department to issue
regulations that address situations where failure to meet one or more of the
requirements for REMIC status occurs inadvertently and in good faith, and
disqualification of the REMIC would occur absent regulatory relief. Investors
should be aware, however, that the Conference Committee Report to the Tax Reform
Act of 1986 (the "1986 Act") indicates that the regulatory relief may be
accompanied by sanctions, such as the imposition of a corporate tax on all or a
portion of the REMIC's income for the period of time in which the requirements
for REMIC status are not satisfied.
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TAXATION OF CITICERTIFICATES
GENERAL
In general, interest, original issue discount, and market discount on a
CitiCertificate will be treated as ordinary income to a Certificateholder, and
distributions in reduction of Stated Amount of a CitiCertificate will be treated
as a return of capital to the extent of the Certificateholder's basis in the
CitiCertificate. Each Certificateholder must use the accrual method of
accounting with regard to CitiCertificates, regardless of the method of
accounting otherwise used by such Certificateholder.
ORIGINAL ISSUE DISCOUNT
All Accrual CitiCertificates will be, and certain of the CitiCertificates of
other Classes of a Series may be, issued with "original issue discount" within
the meaning of Code Section 1273(a). Holders of any Class of CitiCertificates
having original issue discount generally must include original issue discount in
ordinary income for federal income tax purposes as it accrues, in accordance
with a level yield method that takes into account the compounding of interest,
in advance of receipt of the cash attributable to such income. The following
discussion is based in part on temporary and final Treasury regulations issued
on February 2, 1994 under Code Sections 1271 through 1273 and 1275 (the "OID
Regulations") and in part on the provisions of the 1986 Act. The OID Regulations
generally are effective for debt instruments issued on or after April 4, 1994,
but may be relied upon as authority with respect to the CitiCertificates.
Alternatively, proposed Treasury regulations issued December 21, 1992 may be
relied upon for debt instruments issued prior to April 4, 1994. Holders of
CitiCertificates should be aware, however, that neither the OID Regulations nor
the proposed regulations adequately address certain issues relevant to
prepayable securities, such as the CitiCertificates. To the extent such issues
are not addressed in the OID Regulations, the Issuer intends to apply the
principles of such regulations and the methodology described in the Conference
Committee Report to the 1986 Act. Moreover, the OID Regulations include an
anti-abuse rule allowing the Internal Revenue Service to apply or depart from
the OID Regulations where necessary or appropriate to ensure a reasonable tax
result in light of the applicable statutory provisions. A tax result will not be
considered unreasonable under the anti-abuse rule in the absence of a
substantial effect on the present value of a taxpayer's tax liability. Investors
are advised to consult their own tax advisors as to the discussion herein and
the appropriate method for reporting interest and original issue discount with
respect to the CitiCertificates.
Each CitiCertificate (except to the extent described below with respect to a
CitiCertificate on which distributions in reduction of Stated Amount are made in
a single installment by lots of a specified Stated Amount upon the request of a
Certificateholder or by random lot (a "Retail Class CitiCertificate")) will be
treated as a single installment obligation for purposes of determining the
original issue discount includable in a Certificateholder's income. The total
amount of original issue discount on a CitiCertificate is the excess of the
"stated redemption price at maturity" of the CitiCertificate over its "issue
price." The issue price of a Class of CitiCertificates generally is the first
price at which a substantial amount of CitiCertificates of such Class is sold to
the public (excluding bond houses, brokers and underwriters). Althought unclear
under the OID Regulations, the Issuer intends to treat the issue price of a
Class as to which there is no substantial sale as of the issue date or that is
retained by the Issuer as the fair market value of that Class as of the issue
date. Under the OID Regulations, pre-issuance accrued interest need not be
included in the issue price (or the stated redemption price at maturity) of an
obligation, such as a CitiCertificate, on which interest distributed on the
first Distribution Date exceeds the amount of such pre-issuance accrued
interest. In this case, the pre-issuance accrued interest is deemed to be
recovered on the first Distribution Date. However, the Issuer intends to include
such pre-issuance accrued interest, if any, in the issue price and stated
redemption price of a CitiCertificate. The stated redemption price at maturity
of a CitiCertificate always includes its Initial Stated Amount. The stated
redemption price at maturity generally will not include distributions of
interest if such interest distributions constitute "qualified stated interest."
Under the OID Regulations, qualified stated interest generally means interest
payable at a single fixed rate or a qualified variable rate (as described
below), provided that such interest distributions are unconditionally
distributable at intervals of one year or less during the entire term of the
CitiCertificates. No distributions on an Accrual CitiCertificate, or on other
CitiCertificates with respect to which interest distributions may be deferred
and added to the Stated
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Amount, will constitute qualified stated interest and, accordingly, the stated
redemption price at maturity of such CitiCertificates includes not only their
Initial Stated Amount but also all other distributions (whether denominated as
accrued interest or current interest) to be received thereon. Likewise, the
Issuer intends to treat an "interest only" class or a class on which interest is
substantially disproportionate to its principal amount (a so-called
"super-premium" class) as having no qualified stated interest. As described
below, the Issuer intends to use an accrual period for purposes of computing
original issue discount that corresponds to the calendar month, other than in
the case of a variable rate CitiCertificate on which interest accrues based on a
non-calendar month accrual period. Investors should consult their own tax
advisors to determine the issue price and the stated redemption price at
maturity of a CitiCertificate.
Under a DE MINIMIS rule, original issue discount on a CitiCertificate will
be considered to be zero if such original issue discount is less than 0.25% of
the stated redemption price at maturity of the CitiCertificate multiplied by the
weighted average maturity of the CitiCertificate. For this purpose, the weighted
average maturity of the CitiCertificate is computed as the sum of the amounts
determined by multiplying the number of full years (I.E., rounding down partial
years) from the issue date until each return of stated redemption price at
maturity is scheduled to be made by a fraction, the numerator of which is the
amount of each return of stated redemption price at maturity and the denominator
of which is the stated redemption price at maturity of the CitiCertificate. The
Conference Committee Report to the 1986 Act provides that the schedule of such
distributions should be determined in accordance with the assumed rate of
prepayment of the Mortgage Loans and Mortgage Certificates included in the Trust
and the anticipated reinvestment rate, if any, used in pricing the
CitiCertificates (the "Prepayment Assumption"). The Prepayment Assumption with
respect to a Series of CitiCertificates will be set forth in the related
Prospectus Supplement. Holders of CitiCertificates generally must report DE
MINIMIS original issue discount pro rata as distributions of stated redemption
price at maturity are received, and such income will be capital gain if the
CitiCertificate is held as a capital asset. However, holders of CitiCertificates
may elect to accrue all DE MINIMIS original issue discount, as well as market
discount and market premium, under the constant yield method. See "Election to
Treat All Interest Under the Constant Yield Method."
A holder of a CitiCertificate generally must include in gross income for any
taxable year the sum of the "daily portions," as defined below, of the original
issue discount on the CitiCertificate accrued during an accrual period for each
day on which it holds the CitiCertificate, including the date of purchase but
excluding the date of disposition. With respect to each CitiCertificate, a
calculation will be made of the original issue discount that accrues during each
successive full accrual period (or shorter period from the date of original
issue) that ends on the day in the calendar year corresponding to the last day
of the related interest accrual period on the CitiCertificate. The Conference
Committee Report to the 1986 Act states that the rate of accrual of original
issue discount is intended to be based on the Prepayment Assumption. The
original issue discount accruing in a full accrual period on a CitiCertificate
would be the excess, if any, of (i) the sum of (a) the present value of all of
the remaining distributions to be made on the CitiCertificate as of the end of
that accrual period and (b) the distributions made on the CitiCertificate during
the accrual period that are included in the CitiCertificate's stated redemption
price at maturity, over (ii) the adjusted issue price of the CitiCertificate at
the beginning of the accrual period. The present value of the remaining
distributions referred to in the preceding sentence is calculated based on (i)
the yield to maturity of the CitiCertificate as of the Startup Day, (ii) events
(including actual prepayments) that have occurred prior to the end of the
accrual period and (iii) the Prepayment Assumption. For these purposes, the
adjusted issue price of a CitiCertificate at the beginning of any accrual period
equals the issue price of the CitiCertificate, increased by the aggregate amount
of original issue discount with respect to the CitiCertificate that accrued in
all prior accrual periods and reduced by the amount of distributions included in
the CitiCertificate's stated redemption price at maturity that were made on the
CitiCertificate attributable to such prior periods. The original issue discount
accruing during any accrual period (as determined in this paragraph) will then
be divided by the number of days in the period to determine the daily portion of
original issue discount for each day in the period. With respect to an initial
accrual period that is shorter than a full accrual period, the daily portions of
original issue discount must be determined according to an appropriate
allocation under any reasonable method.
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Under the method described above, the daily portions of original issue
discount required to be included in income by a holder of a CitiCertificate
generally will increase to take into account prepayments on the CitiCertificates
as a result of prepayments on the Mortgage Loans underlying the Mortgage
Certificates or Mortgage Loans that exceed the Prepayment Assumption, and
generally will decrease (but not below zero for any period) if the prepayments
on the Mortgage Loans underlying the Mortgage Certificates or Mortgage Loans are
slower than the Prepayment Assumption. An increase in prepayments on the
Mortgage Loans with respect to a Series can result in both a change in the
priority of principal payments with respect to certain Classes of
CitiCertificates and either an increase or decrease in the daily portions of
original issue discount with respect to such CitiCertificates.
In the case of a Retail Class CitiCertificate, the Issuer intends to
determine the yield to maturity of such CitiCertificate based upon the
anticipated payment characteristics of the Class as a whole under the Prepayment
Assumption. In general, the original issue discount accruing on each Retail
Class CitiCertificate in a full accrual period would be its allocable share of
the original issue discount with respect to the entire Class, as determined in
accordance with the preceding paragraph. However, in the case of a distribution
in reduction of the entire Stated Amount of any Retail Class CitiCertificate (or
portion of such Stated Amount), (a) the remaining unaccrued original issue
discount allocable to such CitiCertificate (or to such portion) will accrue at
the time of such distribution, and (b) the accrual of original issue discount
allocable to each remaining CitiCertificate of such Class (or the remaining
Stated Amount of a Retail Class CitiCertificate after a distribution in
reduction of Stated Amount has been received) will be adjusted by reducing the
present value of the remaining payments on such Class and the adjusted issue
price of such Class to the extent attributable to the portion of the Stated
Amount that was distributed. The Issuer believes that the foregoing treatment is
consistent with the "pro rata prepayment" rules of the OID Regulations, but with
the rate of accrual of original issue discount determined based on the
Prepayment Assumption for the Class as a whole. Investors are advised to consult
their tax advisors as to this treatment.
ACQUISITION PREMIUM
A purchaser of a CitiCertificate at a price greater than its adjusted issue
price but less than its stated redemption price at maturity will be required to
include in gross income the daily portions of the original issue discount on the
CitiCertificate pro rata by a fraction, the numerator of which is the excess of
its purchase price over such adjusted issue price and the denominator of which
is the excess of the remaining stated redemption price at maturity over the
adjusted issue price. Alternatively, such a subsequent purchaser may elect to
treat all such acquisition premium under the constant yield method, as described
below under the heading "Election to Treat All Interest Under the Constant Yield
Method."
VARIABLE RATE CITICERTIFICATES
CitiCertificates may provide for interest based on a variable rate. Under
the OID Regulations, interest is treated as payable at a variable rate if,
generally, (i) the issue price does not exceed the original principal balance by
more than a specified amount and (ii) the interest compounds or is payable at
least annually at current values of (a) one or more, "qualified floating rates,"
(b) a single fixed rate and one or more qualified floating rates, (c) a single
"objective rate," or (d) a single fixed rate and a single objective rate that is
a "qualified inverse floating rate." A floating rate is a qualified floating
rate if variations in the rate can reasonably be expected to measure
contemporaneous variations in the cost of newly borrowed funds, where such rate
is subject to a multiple of not less than zero nor more than 1.35. Such rate may
also be increased or decreased by a fixed spread or subject to a fixed cap or
floor, or a cap or floor that is not reasonably expected as of the issue date to
affect the yield of the instrument significantly. An objective rate includes a
rate determined using a single fixed formula and that is based on one or more
qualified floating rates or the yield or changes in the price of actively traded
personal property. A qualified inverse floating rate is a rate equal to a fixed
rate minus a qualified floating rate that inversely reflects contemporaneous
variations in the cost of newly borrowed funds. A Class of CitiCertificates may
be issued under this Prospectus that does not have a variable rate under the
foregoing rules, for example, a Class that bears an interest-only or
super-premium floating rate, or a fixed rate for one year or more followed by
the inverse of an index multiplied by more than 1.35. It is possible that such a
Class may be considered to bear "contingent interest," within the meaning of
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proposed Treasury regulations issued on April 8, 1986. These proposed
regulations under certain circumstances could result in a deferral of the timing
of reporting of such interest income when compared to the original issue
discount rules. However, the proposed regulations regarding contingent interest
have not been adopted in final form and may not currently be relied upon.
Moreover, under the REMIC Regulations, a CitiCertificate (i) bearing a rate that
qualifies as a variable rate under the OID Regulations that is tied to current
values of a variable rate (or the highest, lowest or average of two or more
variable rates, including a rate based on the average cost of funds of one or
more financial institutions or that represents a weighted average of rates on
some or all of the Mortgage Loans that bear either a fixed rate or a variable
rate, including such a rate that is subject to one or more caps or floors, or
(ii) bearing one or more such variable rates for one or more periods, and a
different variable rate or fixed rate for other periods, qualifies as a regular
interest in a REMIC. Accordingly, unless otherwise indicated in the applicable
Prospectus Supplement, the Issuer intends to treat CitiCertificates that qualify
as regular interest under this rule as bearing a variable rate for original
issue discount reporting purposes.
The amount of original issue discount with respect to a CitiCertificate
bearing a variable rate of interest will accrue in the manner described above
under "Original Issue Discount," with the yield to maturity and future
distributions on such CitiCertificate generally to be determined by assuming
that interest will be payable for the life of the CitiCertificate based on the
initial rate (or, if different, the value of the applicable variable rate as of
the pricing date). Unless otherwise specified in the applicable Prospectus
Supplement, the Issuer intends to treat such variable interest as qualified
stated interest, other than variable interest on an interest-only or
super-premium Class, which will be treated as non-qualified stated interest
includible in the stated redemption price at maturity. Ordinary income
reportable for any period will be adjusted based on subsequent changes in the
applicable interest rate index.
Although unclear under the OID Regulations, the Issuer intends to treat
CitiCertificates bearing an interest rate that is a weighted average of the net
interest rates on Mortgage Loans having fixed or adjustable rates as having
non-qualified stated interest. In the case of adjustable rate Mortgage Loans,
the applicable index used to compute interest on the Mortgage Loans in effect on
the pricing date (or possibly the issue date) will be deemed to be in effect
beginning with the period in which the first weighted average adjustment date
occurring after the issue date occurs. Adjustments will be made in each accrual
period either increasing or decreasing the amount of ordinary income reportable
to reflect the actual Stated Rate on the CitiCertificates.
DEFERRED INTEREST
Any Deferred Interest (as defined in the Prospectus Supplement with respect
to a Series) that accrues with respect to a Class of CitiCertificates will
constitute income to the holders of such CitiCertificates prior to the time
distributions of cash with respect to such Deferred Interest are made. Under the
OID Regulations, all interest payments on CitiCertificates that may have
Deferred Interest must be treated as non-qualified stated interest payments and
included in the stated redemption price at maturity of the CitiCertificates in
computing original issue discount thereon.
MARKET DISCOUNT
A purchaser of a CitiCertificate also may be subject to the market discount
rules of Code Sections 1276 through 1278. Under these Code sections and the
principles applied by the OID Regulations in the context of original issue
discount, "market discount" is the amount by which the purchaser's original
basis in the CitiCertificate (i) is exceeded by the then-current principal
amount of the CitiCertificate, or (ii) in the case of a CitiCertificate having
original issue discount, is exceeded by the adjusted issue price of such
CitiCertificate at the time of purchase, as described above. Ordinary income to
the extent of accrued market discount on such CitiCertificate as distributions
includible in the stated redemption price at maturity thereof are received, in
an amount not exceeding any such distribution. Such market discount would accrue
in a manner to be provided in Treasury regulations and should take into account
the Prepayment Assumption. The Conference Committee Report of the 1986 Act
provides that until such regulations are issued, such market discount would
accrue either (i) on the basis of a constant interest rate, or (ii) in the ratio
of stated interest
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distributable in the relevant period to the sum of the interest for such period
plus the remaining interest as of the end of such period, or in the case of a
CitiCertificate issued with original issue discount, in the ratio of original
issue discount accrued for the relevant period to the sum of the original issue
discount accrued for such period plus the remaining original issue discount as
of the end of such period. Such purchaser also generally will be required to
treat a portion of any gain on a sale or exchange of the CitiCertificate as
ordinary income to the extent of the market discount accrued to the date of
disposition under one of the foregoing methods, less any accrued market discount
previously reported as ordinary income as partial distributions in reduction of
the stated redemption price at maturity were received. Such purchaser also will
be required to defer deduction of a portion of the interest expense attributable
to any indebtedness incurred or continued to purchase or carry the
CitiCertificate. The deferred portion of the interest expense would not exceed
the accrued market discount on the CitiCertificate for the taxable year. Any
such deferred interest expense is, in general, allowed as a deduction not later
than the year in which the related market discount income is recognized or the
CitiCertificate is disposed of. As an alternative to the inclusion of market
discount in income on the foregoing basis, the holder may elect to include
market discount in income currently as it accrues on all market discount
instruments acquired by such holder in that taxable year or thereafter, in which
case the interest deferral rule will not apply. See "Election to Treat All
Interest Under the Constant Yield Method" below regarding an alternative manner
in which the Code Section 171 election may be deemed to be made.
By analogy to the OID Regulations, market discount with respect to a
CitiCertificate will be considered to be zero if such market discount is less
than 0.25% of the remaining stated redemption price at maturity of such
CitiCertificate multiplied by the weighted average maturity of the
CitiCertificate (determined as described above in the third paragraph under
"Original Issue Discount") remaining after the date of purchase. Treasury
regulations implementing the market discount rules have not yet been issued, and
therefore investors should consult their own tax advisors regarding the
application of these rules. Investors should also consult Revenue Procedure
92-67 concerning the elections to include market discount in income currently
and to accrue market discount on the basis of the constant yield method.
PREMIUM
A CitiCertificate purchased at a cost greater than its remaining stated
redemption price at maturity generally is considered to be purchased at a
premium. If a holder holds such CitiCertificate as a "capital asset" within the
meaning of Code Section 1221, the holder may elect under Code Section 171 to
amortize such premium under the constant yield method. The Conference Committee
Report to the 1986 Act indicates a Congressional intent that the same rules that
will apply to the accrual of market discount on installment obligations will
also apply in amortizing bond premium under Code Section 171 on installment
obligations such as the CitiCertificates, although it is unclear whether the
alternatives to the constant yield method described above under "Market
Discount" are available. Amortizable bond premium will be treated as an offset
to interest income on a CitiCertificate, rather than a separate deduction item.
See "Election to Treat All Interest Under the Constant Yield Method" below
regarding an alternative manner in which the Code Section 171 election may be
deemed to be made.
TREATMENT OF LOSSES
Holders of CitiCertificates will be required to report income with respect
to the CitiCertificates on the accrual method of accounting, without giving
effect to delays or reductions in distributions attributable to defaults or
delinquencies on the Mortgage Loans, except to the extent it can be established
that such losses are uncollectible. Accordingly, the holder of a
CitiCertificate, particularly a Subordinated Certificate, may have income or may
incur a diminution in cash flow as a result of a default or delinquency, but may
not be able to take a deduction (subject to the discussion below) for the
corresponding loss until a subsequent taxable year. To the extent the rules of
Code Section 166 regarding bad debts are applicable, it appears that holders of
CitiCertificates that are corporations should in general be allowed to deduct as
an ordinary loss such loss with respect to principal sustained during the
taxable year on account of any such CitiCertificates becoming wholly or
partially worthless, and that, in general, holders of CitiCertificates that are
not corporations will be allowed to deduct as a short term capital loss any loss
sustained during the taxable year on
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account of a portion of any such CitiCertificates becoming wholly worthless.
Although the matter is not free from doubt, non-corporate holders of
CitiCertificates should be allowed a bad debt deduction at such time as a loss
is allocated to such class of CitiCertificates to reflect losses resulting from
any liquidated Mortgage Loans. The Internal Revenue Service, however, could take
the position that non-corporate holders will be allowed a bad debt deduction to
reflect such losses only after all the Mortgage Loans remaining in the Trust
have been liquidated or the applicable class of CitiCertificates has been
otherwise retired. The Internal Revenue Service could also assert that losses on
the CitiCertificates are deductible on some other method that may defer such
deductions for all holders, such as reducing future cash flow for purposes of
computing original issue discount. This may have the effect of creating
"negative" original issue discount which would be deductible only against future
positive original issue discount or otherwise upon termination of the Class.
Holders of CitiCertificates are urged to consult their own tax advisors
regarding the appropriate timing, amount and character of any loss sustained
with respect to such CitiCertificates. Losses attributable to interest
previously reported as income should be deductible as ordinary losses by both
corporate and non-corporate holders. Special loss rules are applicable to banks
and thrift institutions, including rules regarding reserves for bad debts. Such
taxpayers are advised to consult their tax advisors regarding the treatment of
losses on CitiCertificates.
ELECTION TO TREAT ALL INTEREST UNDER THE CONSTANT YIELD METHOD
A holder of a debt instrument such as a CitiCertificate may elect to treat
all interest that accrues on the instrument using the constant yield method,
with none of the interest being treated as qualified stated interest. For
purposes of applying the constant yield method to a debt instrument subject to
such an election, (i) "interest" includes stated interest, original issue
discount, DE MINIMIS original issue discount, market discount and DE MINIMIS
market discount, as adjusted by any amortizable bond premium or acquisition
premium and (ii) the debt instrument is treated as if the instrument were issued
on the holder's acquisition date in the amount of the holder's adjusted basis
immediately after acquisition. A holder generally may make such an election on
an instrument by instrument basis or for a class or group of debt instruments.
However, if the holder makes such an election with respect to a debt instrument
with amortizable bond premium or with market discount, the holder is deemed to
have made elections to amortize bond premium or to report market discount income
currently as it accrues under the constant yield method, respectively, for all
debt instruments acquired by the holder in the same taxable year or thereafter.
The election is made on the holder's federal income tax return for the year in
which the debt instrument is acquired and is irrevocable except with the
approval of the Internal Revenue Service. Investors should consult their own tax
advisors regarding the advisability of making such an election.
SALE OR EXCHANGE OF CITICERTIFICATES
If a holder sells or exchanges a CitiCertificate, the holder will recognize
gain or loss equal to the difference, if any, between the amount received and
its adjusted basis in the CitiCertificate. The adjusted basis of a
CitiCertificate generally will equal the cost of the CitiCertificate to the
seller, increased by any original issue discount or market discount previously
included in the seller's gross income with respect to the CitiCertificate, and
reduced by the distributions in reduction of the Stated Amount of the
CitiCertificate that were previously received by the seller and by any amortized
premium.
Except as described above with respect to market discount, and except as
provided in this paragraph, any gain or loss on the sale or exchange of a
CitiCertificate realized by an investor who holds the CitiCertificate as a
capital asset (within the meaning of Code Section 1221) will be capital gain or
loss and will be long-term or short-term depending on whether the
CitiCertificate has been held for the long-term capital gain holding period
(currently more than one year). Such gain will be treated as ordinary income (i)
if a CitiCertificate is held as part of a "conversion transaction" as defined in
Code Section 1258(c), up to the amount of interest that would have accrued on
the holder's net investment in the conversion transaction at 120% of the
appropriate applicable Federal rate in effect at the time the holder entered
into the transaction minus any amount previously treated as ordinary income with
respect to any prior disposition of property that was held as a part of such
transaction, (ii) in the case of a non-corporate taxpayer, to the extent such
taxpayer has made an election under Code Section 163(d)(4) to have net capital
gains taxed as investment income at ordinary income rates, or (iii) to the
extent that such gain does not exceed the excess, if any, of
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(a) the amount that would have been includible in the gross income of the holder
if its yield on such CitiCertificate were 110% of the applicable Federal rate
under Code Section 1274(d) as of the date of purchase, over (b) the amount of
income actually includible in the gross income of such holder with respect to
such CitiCertificate. In addition, gain or loss recognized from the sale of a
CitiCertificate by certain banks or thrift institutions will be treated as
ordinary income or loss pursuant to Code Section 582(c). Pursuant to the Revenue
Reconciliation Act of 1993, capital gains of certain non-corporate taxpayers are
subject to a lower maximum tax rate than ordinary income of such taxpayers. The
maximum tax rate for corporations is the same with respect to both ordinary
income and capital gains.
TAXATION OF RESIDUAL CERTIFICATES
TAXATION OF REMIC INCOME
Generally, the "daily portions" of REMIC taxable income or net loss will be
includible directly on the federal income tax return of holders of Residual
Certificates ("Residual Holders") as ordinary income or loss, and will not be
taxed separately to the REMIC. The daily portions of REMIC taxable income or net
loss for a Residual Holder are determined by allocating the REMIC's taxable
income or net loss for each calendar quarter ratably to each day in such quarter
and by allocating such daily portion among the Residual Holders in proportion to
their respective holdings of Residual Certificates in the REMIC on such day.
REMIC taxable income is generally determined in the same manner as the taxable
income of an individual using the accrual method of accounting, except that (i)
the limitation on deductibility of investment interest expense and expenses for
the production of income do not apply, (ii) all bad loans will be deductible as
business bad debts, and (iii) the limitation on deductibility of interest and
expenses related to tax-exempt income will apply. The REMIC's gross income
includes interest, original issue discount income, and market discount income,
if any, on the Mortgage Loans or the mortgage loans underlying the Mortgage
Certificates owned by the REMIC, reduced by amortization of any premium on the
Mortgage Loans or the mortgage loans underlying the Mortgage Certificates, plus
income on reinvestment of cash flows and reserve assets, plus any cancellation
of indebtedness income upon allocation of realized losses to the
CitiCertificates. The REMIC's deductions include interest and original issue
discount expense on the CitiCertificates, servicing fees on the Mortgage Loans
or the mortgage loans underlying the Mortgage Certificates, other administrative
expenses and realized losses on the Mortgage Loans or Mortgage Certificates. The
requirement that Residual Holders report their pro rata share of taxable income
or net loss of the REMIC will continue until there are no Certificates of any
Class of the related Series outstanding.
The taxable income recognized by a Residual Holder in any taxable year will
be affected by, among other factors, the relationship between the timing of
recognition of interest and original issue discount or market discount income or
amortization of premium with respect to Mortgage Loans or the mortgage loans
underlying the Mortgage Certificates, on the one hand, and the timing of
deductions for interest (including original issue discount) on the
CitiCertificates, on the other hand. In the event that an interest in the
Mortgage Loans or in the mortgage loans underlying a Mortgage Certificate is
acquired by the REMIC at a discount, and one or more of such loans is prepaid,
the Residual Holder may recognize taxable income without being entitled to
receive a corresponding amount of cash because (i) the prepayment may be used in
whole or in part to make distributions in reduction of Stated Amount of
CitiCertificates, and (ii) the discount on the Mortgage Loans or underlying
mortgage loans which is includible in income may exceed the deduction allowed
upon such distributions on those CitiCertificates on account of any unaccrued
original issue discount relating to those CitiCertificates. When there is more
than one Class of CitiCertificates on which distributions in reduction of Stated
Amount are made sequentially, this mismatching of income and deductions is
particularly likely to occur in the early years following issuance of the
CitiCertificates when distributions in reduction of Stated Amount are being made
in respect of the earlier Classes of CitiCertificates to the extent such Classes
are not issued with substantial discount. If taxable income attributable to such
a mismatching is realized, in general, corresponding losses would be allowed in
later years as distributions on the later Classes of CitiCertificates are made.
Taxable income may also be greater in earlier years than in later years as a
result of the fact that interest expense deductions, expressed as a percentage
of the outstanding Stated Amount of the CitiCertificates, may increase over time
as distributions in reduction of Stated Amount are made on the lower yielding
Classes of CitiCertificates, whereas interest income with
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respect to any given Mortgage Loan or mortgage loans underlying a Mortgage
Certificate will remain constant over time as a percentage of the outstanding
principal amount of that loan. Consequently, Residual Holders must have
sufficient other sources of cash to pay any federal, state, or local income
taxes due as a result of such mismatching or unrelated deductions against which
to offset such income, subject to the rules on "excess inclusions" discussed
below. The timing of such mismatching of income and deductions described in this
paragraph, if present with respect to a Series of CitiCertificates, may have a
significant adverse effect upon a Residual Holder's after-tax rate of return. In
addition, a Residual Holder's taxable income during certain periods may exceed
the income reflected by such Residual Holder for such periods in accordance with
generally accepted accounting principles. Investors should consult their own
accountants concerning the accounting treatment of their investment in such
Certificates.
BASIS AND LOSSES
The amount of any net loss of the REMIC that may be taken into account by
the Residual Holder is limited to the adjusted basis of the Residual Certificate
as of the close of the quarter (or time of disposition of the Residual
Certificate, if earlier), determined without taking into account the net loss
for the quarter. The initial adjusted basis of a purchaser of a Residual
Certificate is the amount paid for such Residual Certificate. Such adjusted
basis will be increased by the amount of taxable income of the REMIC reportable
by the Residual Holder and will be decreased (but not below zero), first, by a
cash distribution from the REMIC and, second, by the amount of loss of the REMIC
reportable by the Residual Holder. Any loss that is disallowed on account of
this limitation may be carried over indefinitely by the Residual Holder for whom
such loss was disallowed and may be used by such Residual Holder only to offset
any income generated by the same REMIC.
A Residual Holder will not be permitted to amortize directly the cost of its
Residual Certificate as an offset to its share of the taxable income of the
related REMIC. However, that taxable income will not include cash received by
the REMIC that represents a recovery of the REMIC's basis in its assets. Such
recovery of basis by the REMIC will have the effect of amortization of the issue
price of the Residual Certificates over their life. However, in view of the
possible acceleration of the income of Residual Holders described above under
"Taxation of REMIC Income," the period of time over which such issue price is
effectively amortized may be longer than the economic life of the Residual
Certificates.
A Residual Certificate may have a negative value if the net present value of
anticipated tax liability exceeds the present value of anticipated cash flows.
The REMIC Regulations appear to treat the issue price of such a residual
interest as zero rather than such negative amount for purposes of determining
the REMIC's basis in its assets. The preamble to the REMIC Regulations states
that the Internal Revenue Service may provide future guidance on the proper tax
treatment of payments made by the transferor of such a residual interest to
induce the transferee to acquire the interest, and Residual Holders should
consult their own tax advisors in this regard.
To the extent that the initial adjusted basis of a Residual Holder (other
than the original holder) in the Residual Certificate is greater than the
corresponding portion of the REMIC's basis in the Mortgage Loans or Mortgage
Certificates, the Residual Holder will not recover a portion of such basis until
termination of the REMIC unless otherwise provided in subsequent legislation or
future Treasury regulations. The REMIC Regulations currently in effect do not so
provide. See "Treatment of Certain Items of REMIC Income and Expense--Market
Discount" below regarding the basis of Mortgage Loans or Mortgage Certificates
to the REMIC and "Sale or Exchange of a Residual Certificate" below regarding
possible treatment of a loss upon termination of the REMIC as a capital loss.
TREATMENT OF CERTAIN ITEMS OF REMIC INCOME AND EXPENSE
Although the Issuer intends to compute REMIC income and expense in
accordance with the Code and applicable regulations, the authorities regarding
the determination of specific items of income and expense are subject to
differing interpretations. The Issuer makes no representation as to the specific
method that it
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will use for reporting income with respect to the Mortgage Loans and expenses
with respect to the CitiCertificates and different methods could result in
different timing of reporting of taxable income or net loss to Residual Holders
or differences in capital gain versus ordinary income.
ORIGINAL ISSUE DISCOUNT. Generally, the REMIC's deductions for original
issue discount will be determined in the same manner as original issue discount
income on CitiCertificates as described above under "Taxation of
CitiCertificates--Original Issue Discount," "--Variable Rate CitiCertificates"
and "--Deferred Interest," without regard to the DE MINIMIS rule described
therein.
MARKET DISCOUNT. The REMIC will have market discount income in respect of
mortgage loans directly held by the REMIC or underlying a Mortgage Certificate
if, in general, the basis of the REMIC allocable to such mortgage loans is
exceeded by their unpaid principal balances. The REMIC's basis in such mortgage
loans is their fair market value immediately after their transfer to the REMIC.
The REMIC Regulations provide that such basis is equal in the aggregate to the
issue prices of all regular and residual interests in the REMIC (or the fair
market value thereof at the Closing Date in the case of a retained class). In
respect of mortgage loans described above which have market discount to which
Code Section 1276 applies, the accrued portion of such market discount would be
recognized currently as an item of REMIC ordinary income. Market discount income
generally should accrue in the manner described above under "Taxation of
CitiCertificates--Market Discount."
PREMIUM. Generally, if the basis of the REMIC in mortgage loans held
directly by the REMIC or underlying a Mortgage Certificate exceeds the unpaid
principal balances of the mortgage loans, the REMIC will be considered to have
acquired such mortgage loans at a premium equal to the amount of such excess. As
stated above, the REMIC's basis in such mortgage loans is their fair market
value immediately after their transfer to the REMIC, based on the aggregate of
the issue prices (or the fair market values of retained classes) of the regular
and residual interests in the REMIC. As described above under "Taxation of
CitiCertificates--Premium," a person who holds mortgage loans as capital assets
under Code Section 1221 may elect under Code Section 171 to amortize premium on
the mortgage loans described above that were originated after September 27, 1985
under a level yield method. Amortizable bond premium will be treated as an
offset to interest income on the mortgage loans, rather than as a separate
deduction item. Because substantially all of the mortgagors on the mortgage
loans described above are expected to be individuals, Code Section 171 will not
be available for premium on mortgage loans originated on or prior to September
27, 1985. Premium with respect to such mortgage loans may be deductible in
accordance with a reasonable method regularly employed by the holder of such
mortgage loans. The allocation of such premium pro rata among principal payments
should be considered a reasonable method; however, the Internal Revenue Service
may argue that such premium should be allocated in a different manner, such as
allocating such premium entirely to the final payment of principal.
LIMITATIONS ON OFFSET OR EXEMPTION OF REMIC INCOME
The Code provides that, to the extent provided in regulations, if the
aggregate value of the Residual Certificates relative to the aggregate value of
the CitiCertificates and Residual Certificates is considered to be "significant
as described below," then a portion (but not all) of the REMIC taxable income
includible in determining the federal income tax liability of a Residual Holder
will be subject to special treatment. That portion, referred to as the "excess
inclusion," is equal to the excess of REMIC taxable income for the calendar
quarter allocable to a Residual Certificate over the daily accruals for such
quarterly period of (i) 120% of the long term applicable Federal rate that would
have applied to the Residual Certificate (if it were a debt instrument) on the
Startup Day under Code Section 1274(d), multiplied by (ii) the adjusted issue
price of such Residual Certificate at the beginning of such quarterly period.
For this purpose, the adjusted issue price of a Residual Certificate at the
beginning of a quarter is the issue price of the Residual Certificate, plus the
amount of the daily accruals of REMIC income for all prior quarters, decreased
by any distributions made with respect to such Residual Certificate prior to the
beginning of such quarterly period. Although the Conference Committee Report to
the 1986 Act indicates that the value of all Residual Certificates would be
considered significant in cases where such value is at least 2% of the aggregate
value of the CitiCertificates and Residual Certificates, the REMIC Regulations
have not adopted such a general rule. Accordingly, the
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portion of the REMIC's taxable income that will be treated as excess inclusions
will be determined by the preceding formula, with the effect that such excess
inclusions will be a larger portion of such income as the relative value of the
Residual Certificates diminishes.
The portion of a Residual Holder's REMIC taxable income consisting of the
excess inclusions generally may not be offset by other deductions, including net
operating loss carryforwards, on such Residual Holder's return. Further, if the
Residual Holder is an organization subject to the tax on unrelated business
income imposed by Code Section 511, the Residual Holder's excess inclusions will
be treated as unrelated business taxable income of such Residual Holder for
purposes of Code Section 511. In addition, REMIC taxable income is subject to
30% withholding tax with respect to certain persons who are not U.S. Persons (as
defined below under "Tax-Related Restrictions on Transfer of Residual
Certificates--Foreign Investors"), and the portion thereof attributable to
excess inclusions is not eligible for any reduction in the rate of withholding
tax (by treaty or otherwise). See "Taxation of Certain Foreign
Investors--Residual Certificates" below. Finally, if a real estate investment
trust or regulated investment company owns a Residual Certificate, a portion
(allocated under Treasury regulations yet to be issued) of dividends paid by the
real estate investment trust or regulated investment company could not be offset
by net operating losses of its shareholders, would constitute unrelated business
taxable income for tax exempt shareholders, and would be ineligible for
reduction of withholding to certain persons who are not U.S. Persons.
An exception to the inability of a Residual Holder to offset excess
inclusions with unrelated deductions and net operating losses applies to Code
Section 593 institutions ("thrift institutions"). For purposes of applying this
rule, all members of an affiliated group filing a consolidated return are
treated as one taxpayer, except that thrift institutions to which Code Section
593 applies, together with their subsidiaries formed to issue REMICs, are
treated as separate corporations. Furthermore, the Code provides that
regulations may disallow the ability of a thrift institution to use deductions
to offset excess inclusions if necessary or appropriate to prevent the avoidance
of tax. A thrift institution may not so offset its excess inclusions unless the
Residual Certificates have "significant value," which requires that (i) the
Residual Certificates have an issue price that is at least equal to 2% of the
aggregate of the issue prices of all Residual Certificates and CitiCertificates
with respect to the REMIC, and (ii) the anticipated weighted average life of the
Residual Certificates is at least 20% of the anticipated weighted average life
of the REMIC. The anticipated weighted average life of the Residual Certificates
is based on all anticipated distributions thereon using the Prepayment
Assumption. The anticipated weighted average life of the REMIC is the aggregate
weighted average life of all classes of interests therein (computed using all
anticipated distributions on a regular interest with nominal or no principal).
Finally, an ordering rule under the REMIC Regulations provides that a thrift
institution may only offset its excess inclusion income with deductions after it
has first applied its deductions against income that is not excess inclusion
income. If applicable, the Prospectus Supplement with respect to a Series will
set forth whether the Residual Certificates are expected to have "significant
value" within the meaning of the REMIC Regulations.
TAX-RELATED RESTRICTIONS ON TRANSFER OF RESIDUAL CERTIFICATES
DISQUALIFIED ORGANIZATIONS. If any legal or beneficial interest in a
Residual Certificate is transferred to a Disqualified Organization (as defined
below), a tax would be imposed in an amount equal to the product of (i) the
present value of the total anticipated excess inclusions with respect to such
Residual Certificate for periods after the transfer and (ii) the highest
marginal federal income tax rate applicable to corporations. The REMIC
Regulations provide that the anticipated excess inclusions are based on actual
prepayment experience to the date of the transfer and projected payments based
on the Prepayment Assumption. The present value rate equals the applicable
Federal rate under Code Section 1274(d) as of the date of the transfer for a
term ending with the last calendar quarter in which excess inclusions are
expected to accrue. Such rate is applied to the anticipated excess inclusions
from the end of the remaining calendar quarters in which they arise to the date
of the transfer. Such a tax generally would be imposed on the transferor of the
Residual Certificate, except that where such transfer is through an agent
(including a broker, nominee, or other middleman) for a Disqualified
Organization, the tax would instead be imposed on such agent. However, a
transferor of a Residual Certificate would in no event be liable for such tax
with respect to a
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transfer if the transferee furnishes to the transferor an affidavit, under
penalties of perjury, that the transferee is not a Disqualified Organization
and, as of the time of the transfer, the transferor does not have actual
knowledge that such affidavit is false. The tax also may be waived by the
Internal Revenue Service if the Disqualified Organization promptly disposes of
the residual interest and the transferor pays income tax at the highest
corporate rate on the excess inclusions for the period the Residual Certificate
is actually held by the Disqualified Organization.
In addition, if a "Pass-Through Entity" (as defined below) has excess
inclusion income with respect to a Residual Certificate during a taxable year
and a Disqualified Organization is the record holder of an equity interest in
such entity, then a tax will be imposed on such entity equal to the product of
(i) the amount of excess inclusions that are allocable to the interest in the
Pass-Through Entity during the period such interest is held by such Disqualified
Organization and (ii) the federal corporate income tax rate. Such tax would be
deductible from the ordinary gross income of the Pass-Through Entity for the
taxable year. The Pass-Through Entity would not be liable for such tax if it has
received an affidavit from such record holder that it is not a Disqualified
Organization or stating such holder's taxpayer identification number and, during
the period such person is the record holder of the Residual Certificate, the
Pass-Through Entity does not have actual knowledge that such affidavit is false.
For these purposes, (i) "Disqualified Organization" means the United States,
any state or political subdivision thereof, any foreign government, any
international organization, any agency or instrumentality of any of the
foregoing (provided, that such term does not include an instrumentality if all
of its activities are subject to tax and a majority of its board of directors is
not selected by any such government entity), any cooperative organization
furnishing electric energy or providing telephone service to persons in rural
areas as described in Code Section 1381(a)(2)(C), and any organization (other
than a farmers' cooperative described in Code Section 521) that is exempt from
taxation under the Code unless such organization is subject to the tax on
unrelated business income imposed by Code Section 511, and (ii) "Pass-Through
Entity" means any regulated investment company, real estate investment trust,
common trust fund, partnership, trust or estate and certain corporations
operating on a cooperative basis. Except as may be provided in Treasury
regulations, any person holding an interest in a Pass-Through Entity as a
nominee for another will, with respect to such interest, be treated as a
Pass-Through Entity.
The Pooling Agreement with respect to a Series will provide that no legal or
beneficial interest in a Residual Certificate may be transferred or registered
unless (i) the proposed transferee provides to CMSI and the Trustee an affidavit
providing its taxpayer identification number and stating that such transferee is
the beneficial owner of the Residual Certificate and is not a Disqualified
Organization and that it is not purchasing such Residual Certificate on behalf
of a Disqualified Organization (I.E., as a broker, nominee or middleman
thereof), and (ii) the transferor provides a statement in writing to CMSI and
the Trustee that it has no actual knowledge that such affidavit is false.
Moreover, the Pooling Agreement will provide that any attempted or purported
transfer in violation of these transfer restrictions will be null and void and
will vest no rights in any purported transferee. Each Residual Certificate with
respect to a Series will bear a legend referring to such restrictions on
transfer, and each holder of a Residual Certificate will be deemed to have
agreed, as a condition of ownership thereof, to any amendments to the related
Pooling Agreement required under the Code or applicable Treasury regulations to
effectuate the foregoing restrictions. Information necessary to compute an
applicable excise tax must be furnished to the Internal Revenue Service and to
the requesting party within 60 days of the request, and CMSI or the Trustee may
charge a fee for computing and providing such information.
NONECONOMIC RESIDUAL INTERESTS. The REMIC Regulations permit the Internal
Revenue Service to disregard certain transfers of Residual Certificates, in
which case the transferor would continue to be treated as the owner of the
Residual Certificates and thus would continue to be subject to tax on its
allocable portion of the net income of the REMIC. Under the REMIC Regulations, a
transfer of a "noneconomic residual interest" (defined below) to a Residual
Holder (other than a Residual Holder who is not a U.S. Person, as defined below
under "Foreign Investors") is disregarded for all federal income tax purposes if
a significant purpose of the transferor is to impede the assessment or
collection of tax. A residual interest in a REMIC (including a residual interest
with a positive value at issuance) is a "noneconomic residual interest" unless,
at
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the time of the transfer, (i) the present value of the expected future
distributions on the residual interest at least equals the product of the
present value of the anticipated excess inclusions and the highest corporate
income tax rate in effect for the year in which the transfer occurs, and (ii)
the transferor reasonably expects that the transferee will receive distributions
from the REMIC at or after the time at which taxes accrue on the anticipated
excess inclusions in an amount sufficient to satisfy the accrued taxes on each
excess inclusion. The anticipated excess inclusions and the present value rate
are determined in the same manner as set forth above under "Disqualified
Organizations." The REMIC Regulations explain that a significant purpose to
impede the assessment or collection of tax exists if the transferor, at the time
of the transfer, either knew or should have known that the transferee would be
unwilling or unable to pay taxes due on its share of the taxable income of the
REMIC. A safe harbor is provided if (i) the transferor conducted, at the time of
the transfer, a reasonable investigation of the financial condition of the
transferee and found that the transferee historically had paid its debts as they
came due and found no significant evidence to indicate that the transferee would
not continue to pay its debts as they came due in the future, and (ii) the
transferee represents to the transferor that it understands that, as the holder
of a noneconomic residual interest, the transferee may incur tax liabilities in
excess of cash flows generated by the interest and that the transferee intends
to pay taxes associated with holding the residual interest as they become due.
The Pooling Agreement with respect to each Series of Certificates will require
the transferee of a Residual Certificate to certify to the matters in the
preceding sentence as part of the affidavit described above under the heading
"Disqualified Organizations."
FOREIGN INVESTORS. The REMIC Regulations provide that the transfer of a
Residual Certificate that has "tax avoidance potential" to a "foreign person"
will be disregarded for all federal tax purposes. This rule appears intended to
apply to a transferee who is not a "U.S. Person" (as defined below), unless such
transferee's income is effectively connected with the conduct of a trade or
business within the United States. A Residual Certificate is deemed to have tax
avoidance potential unless at the time of the transfer, (i) the future value of
expected distributions equals at least 30% of the anticipated excess inclusions
after the transfer, and (ii) the transferor reasonably expects that the
transferee will receive sufficient distributions from the REMIC at or after the
time at which the excess inclusions accrue (and prior to the end of the
succeeding taxable year) for the accumulated withholding tax liability to be
paid. If the non-U.S. Person transfers the Residual Certificate back to a U.S.
Person, the transfer will be disregarded and the foreign transferor will
continue to be treated as the owner unless arrangements are made so that the
transfer does not have the effect of allowing the transferor to avoid tax on
accrued excess inclusions.
The Pooling Agreement and, if applicable, the Prospectus Supplement relating
to a Series, may provide that a Residual Certificate may not be purchased by or
transferred to any person that is not a U.S. Person or may describe the
circumstances and restrictions pursuant to which such a transfer may be made.
The term "U.S. Person" means a citizen or resident of the United States, a
corporation, partnership or other entity created or organized in or under the
laws of the United States or any political subdivision thereof, or an estate or
trust that is subject to U.S. federal income tax regardless of the source of its
income.
SALE OR EXCHANGE OF A RESIDUAL CERTIFICATE
Upon the sale or exchange of a Residual Certificate, the Residual Holder
will recognize gain or loss equal to the excess, if any, of the amount realized
over the adjusted basis (as described above under "Taxation of Residual
Certificates--Basis and Losses") of such Residual Holder in such Residual
Certificate at the time of the sale or exchange. In addition to reporting the
taxable income of the REMIC, a Residual Holder will have taxable income to the
extent that any cash distribution to it from the REMIC exceeds such adjusted
basis on that Distribution Date. Such income will be treated as gain from the
sale or exchange of its Residual Certificate. It is possible that the
termination of the REMIC may be treated as a sale or exchange of a Residual
Holder's Residual Certificate, in which case, if the Residual Holder has an
adjusted basis in its Residual Certificate remaining when its interest in the
REMIC terminates, and if it holds such Residual Certificate as a capital asset
under Code Section 1221, then it will recognize a capital loss at that time in
the amount of such remaining adjusted basis.
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Any gain on the sale of a Residual Certificate will be treated as ordinary
income (i) if a Residual Certificate is held as part of a "conversion
transaction" as defined in Code Section 1258(c), up to the amount of interest
that would have accrued on the Residual Holder's net investment in the
conversion transaction at 120% of the appropriate applicable Federal rate in
effect at the time the Residual Holder entered into the transaction minus any
amount previously treated as ordinary income with respect to any prior
disposition of property that was held as a part of such transaction or (ii) in
the case of a non-corporate taxpayer, to the extent such taxpayer has made an
election under Code Section 163(d)(4) to have net capital gains taxed as
investment income at ordinary income rates. In addition, gain or loss recognized
from the sale of a Residual Certificate by certain banks or thrift institutions
will be treated as ordinary income or loss pursuant to Code Section 582(c).
The Conference Committee Report to the 1986 Act provides that, except as
provided in Treasury regulations yet to be issued, the wash sale rules of Code
Section 1091 will apply to dispositions of Residual Certificates where the
seller of the Residual Certificate, during the period beginning six months
before the sale or disposition of the residual interest and ending six months
after such sale or disposition, acquires (or enters into any other transaction
that results in the application of Code Section 1091) any residual interest in
any REMIC or any interest in a "taxable mortgage pool" (such as a non-REMIC
owner trust) that is economically comparable to a Residual Certificate.
TAXES THAT MAY BE IMPOSED ON THE REMIC
PROHIBITED TRANSACTIONS. Income from certain transactions by the REMIC,
called prohibited transactions, will not be part of the calculation of income or
loss includible in the federal income tax returns of Residual Holders, but
rather will be taxed directly to the REMIC at a 100% rate. Prohibited
transactions generally include (i) the disposition of qualified mortgages other
than for (a) substitution within two years of the Startup Day for a defective
(including a defaulted) obligation (or the repurchase in lieu of substitution of
a defective (including a defaulted) obligation at any time), or for any
qualified mortgage within three months of the Startup Day, (b) foreclosure,
default, or reasonably foreseeable default of a qualified mortgage, (c)
bankruptcy or insolvency of the REMIC, or (d) a qualified (complete)
liquidation, (ii) the receipt of income from assets that are not the type of
mortgage loan or investments that the REMIC is permitted to hold, (iii) the
receipt of compensation for services, or (iv) the receipt of gain from
disposition of cash flow investments other than pursuant to a qualified
liquidation. Notwithstanding (i) and (iv), it is not a prohibited transaction to
sell REMIC property to prevent a default on a regular interest as a result of a
default on qualified mortgages or to facilitate a clean-up call (generally, an
optional termination made to save administrative costs when no more than a small
percentage of the Certificates is outstanding). The REMIC Regulations indicate
that a substantial modification of a Mortgage Loan generally will not be treated
as a disposition if it is occasioned by a default or reasonably foreseeable
default, an assumption of the Mortgage Loan, the waiver of a due-on-sale clause
or due-on-encumbrance clause, or the conversion of an interest rate by a
mortgagor pursuant to the terms of a convertible adjustable rate Mortgage Loan.
CONTRIBUTIONS TO THE REMIC AFTER THE STARTUP DAY. In general, the REMIC
will be subject to tax at a 100% rate on the value of any property contributed
to the REMIC after the Startup Day. Exceptions are provided for cash
contributions to the REMIC (i) during the three months following the Startup
Day, (ii) made to a qualified reserve fund by a Residual Holder, (iii) in the
nature of a guarantee, (iv) made to facilitate a qualified liquidation or
clean-up call, and (v) as otherwise permitted in Treasury regulations yet to be
issued.
NET INCOME FROM FORECLOSURE PROPERTY. A REMIC will be subject to federal
income tax at the highest corporate rate on "net income from foreclosure
property," determined by reference to the rules applicable to real estate
investment trusts. Generally, property acquired by deed in lieu of foreclosure
would be treated as "foreclosure property" for a period of two years, with
possible extensions. Net income from foreclosure property generally means gain
from the sale of foreclosure property that is inventory property and gross
income from foreclosure property other than qualifying rents and other
qualifying income for a real estate investment trust.
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LIQUIDATION OF THE REMIC
If a REMIC adopts a plan of complete liquidation within the meaning of Code
Section 860F(a)(4)(A)(i), which may be accomplished by designating in the
REMIC's final tax return a date on which such adoption is deemed to occur, and
sells all of its assets (other than cash) within the 90-day period beginning on
such date, the REMIC will recognize no gain or loss on the sale of its assets,
provided that the REMIC credits or distributes in liquidation all of the sale
proceeds plus its cash (other than amounts retained to meet claims) to holders
of all Certificates within the 90-day period. An early termination of the Trust
effected by a repurchase by the Issuer of all remaining Mortgage Loans or
Mortgage Certificates when the adjusted balances thereof have declined to the
percentage specified for a particular Series, and the distribution to holders of
Certificates of the proceeds of such sale and any remaining assets of the REMIC,
is contingent upon receipt of an opinion of counsel or other evidence that such
repurchase and distribution will constitute a "qualified liquidation" within the
meaning of Code Section 860F(a)(4)(A) and will not adversely affect the REMIC
status of the Trust.
ADMINISTRATIVE MATTERS
As a REMIC, the Trust must maintain its books on a calendar year basis and
must file federal income tax returns in a manner similar to a partnership for
federal income tax purposes. The form for such returns is Form 1066, U.S. Real
Estate Mortgage Investment Conduit Income Tax Return. The Trustee with respect
to a Series will be required to sign the REMIC's annual returns. Treasury
regulations provide that, except where there is a single Residual Holder for an
entire taxable year, the REMIC will be subject to the procedural and
administrative rules of the Code applicable to partnerships, including the
determination of any adjustments to, among other things, items of REMIC income,
gain, loss, deduction, or credit by the Internal Revenue Service in a unified
administrative proceeding. As long as the Issuer remains a Residual Holder with
respect to any portion of a Class of Residual Certificates, the Issuer will be
obligated to act as "tax matters person," as defined in applicable Treasury
regulations, with respect to the related Series. The tax matters person with
respect to a Series will be, in order of priority, (i) the Issuer or an
affiliate thereof, in its capacity as a holder of a Residual Certificate or as
the agent of the holders of the Residual Certificates, and (ii) if the Issuer or
an affiliate thereof is not a Residual Holder and is not permitted to act as tax
matters person or as agent of the holders of Residual Certificates under
applicable Treasury regulations, a Residual Holder or such other person as may
be specified pursuant to Treasury regulations.
LIMITATIONS ON DEDUCTION OF CERTAIN EXPENSES
An investor who is an individual, estate, or trust will be subject to
limitation with respect to certain itemized deductions described in Code Section
67, to the extent that such deductions, in the aggregate, do not exceed two
percent of the investor's adjusted gross income. In addition, Code Section 68
provides that itemized deductions otherwise allowable for a taxable year of an
individual taxpayer will be reduced by the lesser of (i) 3% of the excess, if
any, of adjusted gross income over $100,000 ($50,000 in the case of a married
individual filing a separate return) (in each case, as adjusted for inflation),
or (ii) 80% of the amount of itemized deductions otherwise allowable for such
year. In the case of a REMIC, such deductions may include Servicing Compensation
(exclusive of Additional Servicing Compensation, if any) for the related Series,
servicing fees paid to the Servicer, to the servicer of the Mortgage Loans, or
to the issuer or guarantor of the Mortgage Certificates, or any similar expenses
allocated to the REMIC with respect to a regular interest it holds in another
REMIC. Such investors who hold Certificates either directly or indirectly
through certain pass-through entities may have their pro rata share of such
expenses allocated to them as additional gross income, but may be subject to
such limitations on deductions. In addition, such expenses are not deductible at
all for purposes of computing the alternative minimum tax, and may cause such
investors to be subject to significant additional tax liability. Temporary
Treasury regulations provide that such expenses and a corresponding additional
amount of gross income generally are to be allocated entirely to holders of the
Residual Certificates in the case of a REMIC that would not qualify as a fixed
investment trust in the absence of a REMIC election. However, such additional
income and limitations on deductions will apply to the allocable portion of such
expenses to holders of CitiCertificates, as well as to holders of Residual
Certificates, where such CitiCertificates are issued in a manner that is similar
to pass-through certificates in a fixed
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investment trust. In general, such allocable portion will be determined based on
the ratio that a holder's income from the CitiCertificate, determined on a daily
basis, bears to the income of all holders of CitiCertificates and Residual
Certificates with respect to a REMIC. As a result, individuals, estates, or
trusts holding CitiCertificates (either directly or indirectly through a grantor
trust, partnership, S corporation, REMIC, or certain other pass-through entities
described in the foregoing temporary Treasury regulations) may have taxable
income in excess of the interest income at the Stated Rate on such
CitiCertificates that are issued in a single class or otherwise consistently
with fixed investment trust status or in excess of the amount of cash received
for the related period on Residual Certificates.
TAXATION OF CERTAIN FOREIGN INVESTORS
CITICERTIFICATES
Interest, including original issue discount, distributable to holders of
CitiCertificates who are non-resident aliens, foreign corporations or other
Non-U.S. Persons (I.E., any person who is not a U.S. Person), will be considered
"portfolio interest" and, therefore, generally will not be subject to 30% United
States withholding tax provided that such Non-U.S. Person (i) is not a
"10-percent shareholder" within the meaning of Code Section 871(h)(3)(B) or a
controlled foreign corporation described in Code Section 881(c)(3)(C) and (ii)
provides the Trustee, or the person who would otherwise be required to withhold
tax from such distributions under Code Section 1441 or 1442, with an appropriate
statement, signed under penalties of perjury, identifying the beneficial owner
and stating, among other things, that the beneficial owner of the
CitiCertificate is a Non-U.S. Person. If such statement, or any other required
statement, is not provided, 30% withholding will apply unless reduced or
eliminated pursuant to an applicable tax treaty or unless the interest is
effectively connected with the conduct of a trade or business within the United
States by such Non-U.S. Person. In the latter case, such Non-U.S. Person will be
subject to United States federal income tax at regular rates. Investors who are
Non-U.S. Persons should consult their own tax advisors regarding the specific
tax consequences to them of owning a CitiCertificate.
RESIDUAL CERTIFICATES
The Conference Committee Report to the 1986 Act indicates that amounts paid
to Residual Holders who are Non-U.S. Persons are treated as interest for
purposes of the 30% (or lower treaty rate) United States withholding tax.
Treasury regulations provide that amounts distributed to Residual Holders may
qualify as "portfolio interest," subject to the conditions described in
"CitiCertificates" above, but only to the extent that (i) the Mortgage Loans or
the mortgage loans underlying the Mortgage Certificates were issued after July
18, 1984 and (ii) the Trust or the segregated pool of assets therein (as to
which a separate REMIC election will be made), to which the Residual
Certificates relate, consists of obligations issued in "registered form" within
the meaning of Code Section 163(f)(1). Generally, Mortgage Loans will not be,
but Mortgage Certificates or CitiCertificates representing either regular
interests in another Trust or a segregated pool of assets within the Trust will
be, considered obligations issued in registered form. Furthermore, a Residual
Holder will not be entitled to any exemption from the 30% withholding tax (or
lower treaty rate) to the extent of that portion of REMIC taxable income that
constitutes an "excess inclusion." See "Taxation of Residual
Certificates--Limitations on Offset or Exemption of REMIC Income." If the
amounts distributed to Residual Holders who are Non-U.S. Persons are effectively
connected with the conduct of a trade or business within the United States by
such Non-U.S. Persons, 30% (or lower treaty rate) withholding will not apply.
Instead, the amounts paid to such Non-U.S. Persons will be subject to United
States federal income tax at regular rates. If 30% (or lower treaty rate)
withholding is applicable, such amounts generally will be taken into account for
purposes of withholding only when paid or otherwise distributed (or when the
Residual Certificate is disposed of under rules similar to withholding upon
disposition of debt instruments that have original issue discount). See
"Taxation of Residual Certificates--Tax-Related Restrictions on Transfer of
Residual Certificates--Foreign Investors," above concerning the disregard of
certain transfers having "tax avoidance potential." Investors who are Non-U.S.
Persons should consult their own tax advisors regarding the specific tax
consequences to them of owning a Residual Certificate.
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BACKUP WITHHOLDING
Distributions made on the CitiCertificates and proceeds from the sale of the
CitiCertificates to or through certain brokers may be subject to a "backup"
withholding tax under Code Section 3406 of 31% of "reportable payments"
(including interest distributions, original issue discount, and, under certain
circumstances, distributions in reduction of Stated Amount) unless, in general,
the holder of the CitiCertificate complies with certain reporting and/or
certification procedures, including the provision of its taxpayer identification
number to the Trustee, its agent or the broker who effected the sale of the
CitiCertificate, or such Certificateholder is otherwise an exempt recipient
under applicable provisions of the Code. Any amounts so withheld from
distributions on the CitiCertificates would be refunded by the Internal Revenue
Service or allowed as a credit against the holder's federal income tax
liability.
REPORTING REQUIREMENTS
Reports of accrued interest, original issue discount and information
necessary to compute the accrual of market discount will be made annually to the
Internal Revenue Service and to individuals, estates, non-exempt and
non-charitable trusts, and partnerships who are either holders of record of
CitiCertificates or beneficial owners who own CitiCertificates through a broker
or middleman as nominee. All brokers, nominees and all other non-tax-exempt
holders of record of CitiCertificates (including corporations, non-calendar year
taxpayers, securities or commodities dealers, real estate investment trusts,
investment companies, common trust funds, thrift institutions and charitable
trusts) may request such information for any calendar quarter by telephone or in
writing by contacting the person designated in Internal Revenue Service
Publication 938 with respect to a particular Series of Certificates. Holders
through nominees must request such information from the nominee.
The Internal Revenue Service's Form 1066, U.S. Real Estate Mortgage
Investment Conduit Income Tax Return, has an accompanying Schedule Q, Quarterly
Notice to Residual Interest Holders of REMIC Taxable Income or Net Loss
Allocation. Treasury regulations require that Schedule Q be furnished by the
REMIC to each Residual Holder by the last day of the month following each
calendar quarter (41 days after the end of a quarter under proposed Treasury
regulations) in which the REMIC is in existence.
Treasury regulations require that, in addition to the foregoing
requirements, information must be furnished quarterly to Residual Holders and,
if applicable, furnished annually to holders of CitiCertificates and filed
annually with the Internal Revenue Service concerning Code Section 67 expenses
(see "Limitations on Deduction of Certain Expenses" above) allocable to such
holders. Furthermore, under such regulations, information must be furnished
quarterly to Residual Holders, furnished annually to holders of
CitiCertificates, and filed annually with the Internal Revenue Service
concerning the percentage of the REMIC's assets meeting the qualified asset
tests described above under "Status of CitiCertificates and Residual
Certificates."
PLANS OF DISTRIBUTION
Certificates are being offered hereby in Series (each Series evidencing a
separate Pool) through one or more of the methods described below. The
Prospectus Supplement prepared for each Series will describe the method of
offering being utilized for that Series and will state the public offering or
purchase price of such Series, or the method by which such price is to be
determined, and the net proceeds from such sale.
The Issuer intends that Certificates will be offered through the following
methods from time to time and that offerings may be made concurrently through
more than one of these methods or that an offering of a particular series of
Certificates may be made through one or more of these methods:
1. By negotiated firm commitment underwriting and public re-offering by
underwriters;
2. By placements by the Issuer with investors through dealers or
agents; and
3. By secondary offerings by an affiliate thereof in any of the manners
set forth above.
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If underwriters are used in a sale of any Certificates, such Certificates
will be acquired by the underwriters for their own account and may be resold
from time to time in one or more transactions, including negotiated
transactions, at a fixed public offering price or at varying prices to be
determined at the time of sale or at the time of commitment therefor. Firm
commitment underwriting and public re-offering by underwriters may be done
through underwriting syndicates led by one or more managing underwriters or
through one or more firms acting alone. The specific managing underwriter or
underwriters, if any, with respect to the offer and sale of a particular series
of Certificates will be set forth on the cover of the Prospectus Supplement
relating to such Series and the members of the underwriting syndicate, if any,
will be named in such Prospectus Supplement. The Prospectus Supplement will
describe any discounts and commissions to be allowed or paid by the Issuer to
the underwriters, any other items constituting underwriting compensation and any
discounts and commissions to be allowed or paid to the dealers or agents. The
obligations of the underwriters will be subject to certain conditions precedent.
The underwriters with respect to a sale of Certificates will be obligated to
purchase all such Certificates if any are purchased. The Issuer and Citicorp
will indemnify the several underwriters against certain civil liabilities,
including liabilities under the Securities Act of 1933.
The Prospectus Supplement with respect to any Series of Certificates offered
other than through underwriters will contain information regarding the nature of
such offering and any agreements to be entered into between the Issuer and
dealers for the Certificates of such Series.
Affiliates of the Issuer may act as agents or underwriters in connection
with the sale of a Series of Certificates. Any affiliate of the Issuer so acting
will be named, and its affiliation with the Issuer and Citicorp described, in
the Prospectus Supplement with respect to such Series.
The Issuer anticipates that the Certificates will be sold primarily to
institutional investors. Purchasers of Certificates, including dealers, may,
depending on the facts and circumstances of such purchases, be deemed to be
"underwriters" within the meaning of the Securities Act of 1933 in connection
with re-offers and sales by them of Certificates. Certificateholders should
consult with their legal advisors in this regard prior to any such re-offer or
sale.
EXPERTS
Consolidated financial statements of Citicorp and subsidiaries included in
Citicorp's Annual Report and Form 10-K for 1992 have been incorporated herein by
reference in reliance upon the report set forth therein of KPMG Peat Marwick,
independent certified public accountants, and upon the authority of said firm as
experts in accounting and auditing. The report of KPMG Peat Marwick covering the
December 31, 1992 financial statements refers to a change in 1991 in Citicorp's
accounting practice for investments of venture capital subsidiaries and to a
change in 1990 in Citicorp's accounting practice for certain derivative
products.
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APPENDIX A
MORTGAGE LOANS AND CITIMORTGAGECERTIFICATES
This Appendix describes the Mortgage Loans contained in a Pool (including a
pool underlying a CitiMortgageCertificate), certain pooling and servicing
arrangements with respect to a Pool, the insurance arrangements in respect of
such Mortgage Loans and additional material in connection therewith.
CERTAIN STATEMENTS CONTAINED IN THIS APPENDIX MAY BE WHOLLY OR PARTLY
INAPPLICABLE TO A PARTICULAR SERIES OF CERTIFICATES. ANY MATERIAL DIVERGENCE
FROM THE FOLLOWING DESCRIPTIONS OF THE MORTGAGE LOANS WILL BE DISCUSSED IN THE
APPLICABLE PROSPECTUS SUPPLEMENT. SECTION REFERENCES HEREIN PRECEDED BY "PA"
REFER TO POOLING AGREEMENT SECTIONS.
THE MORTGAGE LOANS
GENERAL
When used in this APPENDIX A, the term "Pool" refers to either a Pool
consisting of Mortgage Loans or a pool of Mortgage Loans underlying a
CitiMortgageCertificate. A Pool consisting in whole or in part of Mortgage Loans
originated by Citibank as well as a pool of Mortgage Loans originated by
Citibank and which underlie a CitiMortgageCertificate are each herein referred
to as a "Citibank Pool," a Pool consisting in whole or in part of Mortgage Loans
originated or acquired by CMI as well as a pool of Mortgage Loans originated or
acquired by CMI and which underlie a CitiMortgageCertificate is herein referred
to as a "CMI Pool," a Pool consisting in whole or in part of Mortgage Loans
acquired by CMSI from other affiliates as well as a pool of Mortgage Loans
acquired by CMSI from other affiliates and which underlie a
CitiMortgageCertificate is herein referred to as a "CMSI Pool," and a Pool
consisting in whole or in part of Mortgage Loans originated or acquired by CFSB
as well as a pool of Mortgage Loans originated or acquired by CFSB and which
underlie a CitiMortgageCertificate is herein referred to as a "CFSB Pool." Each
Pool may include either fixed interest rate Mortgage Loans (each such Pool, a
"Fixed Rate Pool") or adjustable interest rate Mortgage Loans (each such Pool,
an "ARM Pool"). The information contained herein in respect of CMI Pools applies
generally to Mortgage Loans originated by other affiliates and contained in CMSI
Pools. Each Pool will include loans (the "Real Estate Loans") evidenced by
promissory notes secured by first mortgages or deeds of trust on one-to
four-family residences. A Pool may also contain, in addition to Real Estate
Loans, cooperative apartment loans (the "Cooperative Loans") evidenced by
promissory notes (the "Cooperative Notes") secured by security interests in
shares issued by private, non-profit, cooperative housing corporations (the
"cooperatives") and in the related proprietary leases or occupancy agreements
granting exclusive rights to occupy specific dwelling units in such
cooperatives' buildings (the one-to four-family residences and the shares issued
by cooperatives are hereinafter referred to as the "Mortgaged Properties"). The
buildings owned by such cooperatives will be located in the New York
Metropolitan Area in the States of New York and New Jersey. The Mortgaged
Properties may consist of (i) detached homes, (ii) attached homes (one-to
four-family units having a common wall), (iii) units located in condominiums or
planned unit developments and (iv) such other types of homes or units as are set
forth in the Prospectus Supplement. The Mortgaged Properties may include
investment properties and vacation and second homes, and may include leasehold
interests. The Mortgaged Properties will be located in states as set forth in
the Prospectus Supplement. Each Mortgage Loan will be selected by the Issuer
from among those originated or acquired by the relevant Originator in the
ordinary course of its business activities or acquired by the relevant
Originator from another Originator.
All Mortgage Loans will (i) have individual principal balances at
origination of not less than $10,000 or more than $2,500,000, (ii) have monthly
payments due on the first day of each month, (iii) be secured by Mortgaged
Properties located in one of the fifty states of the United States or the
District of Columbia, (iv) be fixed rate or adjustable rate loans which may
provide for full amortization of principal, deferral of a
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portion of interest, balloon payments of principal or have such other
characteristics as set forth in the related Prospectus Supplement and (v) have
original maturities as specified in the related Prospectus Supplement. Unless
otherwise specified in the applicable Prospectus Supplement, the original
principal amount of each Mortgage Loan will not be more than 90% of the Original
Value of the related Mortgaged Property. The principal amount of the "loan," for
purposes of computation of loan-to-value ratios, includes the amount of any part
of an origination fee that is financed. The financed portion of the origination
fee will be less than 5% of the loan amount in each case.
Unless otherwise stated in the applicable Prospectus Supplement, a Pool may
contain Real Estate Loans, the original terms of which were modified prior to
their inclusion in such Pool pursuant to modification agreements (the
"Modification Agreements") or pursuant to modification, consolidation and
extension agreements (the "Consolidation Agreements"). A Modification Agreement
generally alters only the stated annual interest rate and (as a result) the
monthly payment amount for a Mortgage Loan. The terms of a Consolidation
Agreement may alter any of the following: the type of Mortgage Loan, the
identity of a borrower or borrowers, the stated annual interest rate or manner
of determining such rate, the maturity date, the monthly payment amount or the
principal amount of the obligation secured by the mortgage. The Consolidation
Agreement amends the existing mortgage and the obligation secured thereby. If
additional principal was advanced at the time of amendment, the Consolidation
Agreement consolidates the new mortgage relating to the additional principal
with the existing mortgage. With respect to Real Estate Loans, the terms of
which were modified pursuant to Modification Agreements or Consolidation
Agreements, whenever the terms "original," "originated" or "origination" are
used in this Prospectus or any Prospectus Supplement to describe certain
characteristics of the Mortgage Loans on a particular date, generally such terms
shall refer to such characteristics (a) in the case of Modification Agreements,
at the original date of the extension of credit under such Mortgage Loan except
for the stated annual interest rate and monthly payment as stated above and (b)
in the case of Consolidation Agreements, at the date of the applicable
Consolidation Agreement and as modified thereby.
It is anticipated that each Pool will consist predominantly of Mortgage
Loans determined by the Issuer to be secured by the primary residence of the
borrower (the "Mortgagor"). The sole basis for such determination will be either
(i) the making of a representation by the Mortgagor at origination of the
Mortgage Loan either that the underlying property will be used by the Mortgagor
for a period of at least six months every year or that the Mortgagor intends to
use the underlying property as a primary residence, or (ii) a finding that the
address of the underlying Mortgaged Property is the Mortgagor's mailing address
as reflected in the Originator's records. The aggregate Adjusted Balance (as
defined below) of Mortgage Loans for which such determination shall have been
made will be disclosed in the applicable Prospectus Supplement or, if not known
at the time a Series is offered, set forth in a report on Form 8-K which will be
filed with the Securities and Exchange Commission and made available to the
CitiCertificateholders within 15 days of the initial issuance of a Series. In
the case of Mortgage Loans which were assumed by a new borrower after
origination, the representation made or the information given by the original
Mortgagor at origination in respect of (i) and (ii) above is used to determine
such disclosure in the related Prospectus Supplement and as set forth in a
report on Form 8-K.
The Issuer will represent that no Mortgage Loan in a Pool will be 30 days or
more past due as of the first day of the month during which the related Series
is issued. For other representations to be made by the Issuer concerning the
Mortgage Loans, see "Assignment of Mortgage Loans." In addition, at the date of
initial issuance of any Series, the aggregate Adjusted Balance of the Mortgage
Loans included in the related Pools will not be less than $20,000,000. As used
herein, references to aggregate principal balances to be used for determining
weighted averages, percentages for termination of the Pools, or credit support
amounts (but not repurchase prices) shall mean the scheduled principal balances
thereof as of the close of business on the first day of the applicable month
(whether or not any scheduled payments have been received) less Principal
Prepayments thereon or in respect thereof received or posted prior to the close
of business on the business day preceding such first day (or, in the case of the
Cut-Off Date, any Principal Prepayments thereon or in respect thereof received
or posted prior to the close of business on the Cut-Off Date) (the "Adjusted
Balance").
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Property securing a Mortgage Loan may be encumbered by a subordinated
mortgage loan. Any such subordinated mortgage loan may have been originated by
an affiliate of Citicorp. The Prospectus Supplement will not include the amount
of the subordinated loan in the loan-to-value calculation included therein. The
proprietary lease or occupancy agreement securing a Cooperative Loan is
generally subordinate to any blanket mortgage on the related cooperative
apartment building and/or underlying land. Additionally, in the case of a
Cooperative Loan, the proprietary lease or occupancy agreement is subject to
termination and the cooperative shares are subject to cancellation by the
cooperative if the tenant-stockholder fails to pay maintenance or other
obligations or charges owed by such tenant-stockholder. See "Certain Legal
Aspects of the Mortgage Loans--Cooperatives."
Mortgage Loans having original principal amounts exceeding 90% of Original
Value will be covered, and Mortgage Loans having original principal balances
exceeding 80% but not more than 90% of Original Value may be covered, by primary
mortgage insurance against default until the outstanding principal amount is
reduced to at least 80% of Original Value through principal payments made by the
Mortgagor or, in the case of CFSB Pools containing Mortgage Loans originated or
acquired by the California and Florida branches of CFSB, until the outstanding
principal amount thereof is less than or equal to 80% of either the Original
Value through principal payments made by the Mortgagor or the value thereof as
determined by a new appraisal delivered subsequent to origination. So long as it
is in effect, such primary mortgage insurance will cover losses arising from a
default up to an amount ranging from 12% to 30% of the principal amount of the
Mortgage Loan outstanding from time to time. Prior to 1986, the Originators did
not generally make one-to four-family real estate loans with loan-to-value
ratios above 80% unless such Originator had obtained primary mortgage insurance
coverage. From 1986 through January 1993, each Originator originated mortgage
loans with loan-to-value ratios in excess of 80% but not more than 90% without
obtaining primary mortgage insurance. Since February 1993, it has been the
policy of each Originator not to make one-to four-family real estate loans with
loan-to-value ratios above 80% without obtaining primary mortgage insurance.
Each Prospectus Supplement will include, among other things, information, as
of the date of such Prospectus Supplement and to the extent then known to the
Issuer, as to (i) the aggregate Adjusted Balance of the Mortgage Loans to be
delivered into the related Pool and the years of origination thereof, (ii) if
Converted Mortgage Loans (as defined herein) with an aggregate Adjusted Balance
exceeding 10% of the aggregate Adjusted Balance of all Mortgage Loans in the
related Pool are to be delivered, the aggregate Adjusted Balance of any such
Converted Mortgage Loans, (iii) the original loan-to-value ratios of the
Mortgage Loans (which will not include the amount of any subordinated loan in
such loan-to-value calculation), (iv) the types of Mortgaged Properties securing
the Mortgage Loans, (v) the geographic distribution of the Mortgaged Properties,
prepared on a state-by-state basis for states where Mortgage Loans having an
aggregate Adjusted Balance exceeding 10% of the aggregate Adjusted Balance of
Mortgage Loans in the related Pool are located, (vi) if Buydown Mortgage Loans
with an aggregate Adjusted Balance exceeding 10% of the aggregate Adjusted
Balance of all Mortgage Loans in the related Pool are to be delivered, the
aggregate Adjusted Balance of Buydown Mortgage Loans in the related Pool, (vii)
if Leasehold Loans with an aggregate Adjusted Balance exceeding 10% of the
aggregate Adjusted Balance of all Mortgage Loans in the related Pool are to be
delivered, the aggregate Adjusted Balance of Leasehold Loans in the related Pool
and (viii) if 15-year, fixed-rate tiered-payment Mortgage Loans originated by
CFSB's California branches and providing for a prepayment penalty during the
first 12 months following origination with an aggregate Adjusted Balance
exceeding 10% of the aggregate Adjusted Balance of all Mortgage Loans in the
related Pool are to be delivered, the aggregate Adjusted Balance of such
Mortgage Loans in the related Pool. In the event specific information with
respect to the Pool is not known at the time a Series is offered, more general
information of the nature described above will be provided in such Prospectus
Supplement and the specific information described above will be set forth in a
report on Form 8-K which will be filed with the Securities and Exchange
Commission and made available to Certificateholders of the Series within 15 days
of the initial issuance of such Series.
The Issuer will be responsible for administering and servicing the Mortgage
Loans in a Pool pursuant to the related Pooling Agreement. The Issuer may at any
time delegate or subcontract any duties as servicer under any Pooling Agreement
to any corporation, including a corporation more than 50% of the stock of
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which is owned, directly or indirectly, by Citicorp. In the event of any such
delegation or subcontract, the Issuer will remain responsible for the delegee's
or subcontractor's performance in accordance with the Pooling Agreement. Unless
otherwise specified in the applicable Prospectus Supplement, the Issuer will
subcontract its duties as servicer under the related Pooling Agreement to CMI. A
servicing fee will be paid to the servicer with respect to each payment of
interest received with respect to each Mortgage Loan. Such servicing fee paid to
the servicer may be in an amount equal to a fixed annual percentage as specified
in the related Prospectus Supplement for all Mortgage Loans in such Pool of the
outstanding principal balance of such Mortgage Loan on which interest is
payable. In such event, the remainder of such interest, constituting interest at
the mortgage rate for such Mortgage Loan (the "Note Rate") less such rate of
servicing compensation (the "Pass-Through Rate" for such Mortgage Loan), is
available for distributions of interest at the Stated Rate and distributions of
principal to holders of the related CitiMortgageCertificates, CitiCertificates
and Residual Certificates, as applicable, and to pay any REMIC Servicing Fee or
fee to the issuer of credit support. Alternatively, if so specified in the
related Prospectus Supplement, the Pass-Through Rate may be the same (or
calculated in the same manner) for each Mortgage Loan in the Pool, and the rate
of servicing compensation with respect to each Mortgage Loan (equal to the
difference between the Note Rate for such Mortgage Loan and such Pass-Through
Rate) may differ among different Mortgage Loans. The servicer will be entitled
to retain all late payment charges, assumption fees and similar charges, and all
income or gain on funds held in the related Certificate Account referred to
below, as additional servicing compensation. The servicer will pay all expenses
incurred in connection with the servicing of the Mortgage Loans, including the
fees of any subcontractor. See "Servicing and Other Compensation and Payment of
Expenses."
There can be no assurance that the foreclosure and delinquency experience on
the Mortgage Loans underlying the CitiCertificates or the Certificates will be
comparable to that set forth under "DELINQUENCY AND FORECLOSURE EXPERIENCE." If
the residential real estate market should experience an overall decline in
property values such that the outstanding balances of the Mortgage Loans and any
secondary financing on the Mortgaged Properties or interests in cooperatives in
a particular Pool become equal to or greater than the value of the Mortgaged
Properties or interests in cooperatives subject to the Mortgage Loans included
in such Pool, the actual rates of delinquencies, foreclosures and losses could
be significantly higher than those now generally experienced in the mortgage
lending industry. To the extent that such delinquencies, foreclosures and losses
are not covered by obligations under any form of credit support, they will be
borne by the holders of the related CitiCertificates.
Because the principal amounts of Mortgage Loans (other than ARMs (as defined
below) which provide for a portion of interest to be deferred and added to the
principal balance of such ARMs) will decline monthly as principal payments,
including prepayments, are received, the principal balance of each
CitiMortgageCertificate in a series will decline correspondingly. The Stated
Amount of each CitiCertificate will decline as described under "DESCRIPTION OF
CERTIFICATES" in the body of this Prospectus or in the related Prospectus
Supplement.
FIXED RATE POOLS
A Fixed Rate Pool may contain any of the following types of fixed interest
rate Mortgage Loans:
(i) fully amortizing Mortgage Loans providing for level monthly payments
of principal and interest;
(ii) growing equity Mortgage Loans providing for initial monthly
payments based on a 10 to 30 year amortization schedule, with further
provisions for scheduled annual payment increases at rates, unless otherwise
specified in the applicable Prospectus Supplement, of not less than 3% or
more than 8.25% of the scheduled monthly payments during the preceding year,
with the full amount of such increases being applied to principal;
(iii) tiered payment Mortgage Loans initially providing only for full
payment of interest and payment of little or no principal for up to three
years, with further provisions for annual Mortgagor payment increases,
beginning in the second year, unless otherwise specified in the applicable
Prospectus
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Supplement, of up to 7.5% of the monthly Mortgagor payments during the
preceding year and continuing annually until monthly Mortgagor payments are
adequate to amortize fully such Mortgage Loans over the remainder of the
original terms;
(iv) Mortgage Loans amortized over a fixed number of years but which
have a shorter term to maturity that causes the outstanding principal
balance of the related Mortgage Loan to be due and payable at the end of a
certain specified period; or
(v) such other fixed rate Mortgage Loans having the characteristics set
forth in the related Prospectus Supplement.
A Fixed Rate Pool may contain one or more Mortgage Loans each of which was
originated as an adjustable interest rate Mortgage Loan but has been converted,
at the sole option of the Mortgagor, into a fixed interest rate, fully
amortizing Mortgage Loan providing for level monthly payments over a term not
exceeding its remaining term to maturity (a "Converted Mortgage Loan"). Except
as otherwise provided in this Prospectus and in the applicable Prospectus
Supplement, a Converted Mortgage Loan at origination is subject to the same
origination and underwriting guidelines as a comparable adjustable rate mortgage
and such a Converted Mortgage Loan is not underwritten again at the time of its
conversion. The Note Rate (and, accordingly, the scheduled monthly payments) on
such a Converted Mortgage Loan may be higher or lower than the mortgage note
rate at the time of origination of such Converted Mortgage Loan.
No Fixed Rate Pool will contain Mortgage Loans which provide for negative
amortization.
ARM POOLS
ARM Pools will include only adjustable interest rate Mortgage Loans
("ARMs"), each bearing interest at a Note Rate which adjusts periodically to a
rate equal to the applicable Index (as defined below) plus the number of basis
points specified in the Pooling Agreement or in the related mortgage note (the
"Mortgage Margin" for such ARM), subject to any periodic rate ceiling ("Periodic
Ceiling") and periodic rate floor ("Periodic Floor") and any lifetime maximum
note rate ("Maximum Note Rate") or a Maximum Note Rate and a lifetime minimum
note rate ("Minimum Note Rate"), if applicable, as described below. Each
adjusted Note Rate is generally rounded to the nearest 0.125%, subject to the
applicability of a Minimum Note Rate and a Maximum Note Rate. A Periodic Ceiling
limits the amount of any single periodic increase in the Note Rate and a
Periodic Floor limits the amount of any single periodic decrease in the Note
Rate. A Maximum Note Rate limits the amount of increases in the Note Rate over
the life of an ARM and a Minimum Note Rate limits the amount of decreases in the
Note Rate over the life of an ARM. Except with respect to ARMs with Minimum Note
Rates, there is no minimum Note Rate to which the Note Rate in an ARM may
adjust. The Note Rates of the ARMs in a given ARM Pool will adjust as described
in the applicable Prospectus Supplement and an ARM Pool may contain ARMs with
different adjustment dates. Certain ARMs may provide for periodic adjustments of
scheduled monthly payments in order to amortize fully the Mortgage Loan by its
stated maturity while other ARMs may permit that maturity to be extended or
shortened in accordance with the portion of each payment that is applied to
interest in accordance with the periodic Note Rate adjustments.
Where an ARM provides for limitations on the amount by which monthly
payments may be increased or changes to the Note Rate of the ARM are made more
frequently than payment changes, it is possible that an increase in the Note
Rate will not be covered by the amount of the scheduled monthly payment. In that
case, the uncollected portion of interest will be deferred and added to the
principal balance of the ARM.
Prior to the first adjustment of the Note Rate on an ARM, the scheduled
monthly payment by the Mortgagor is the amount which will fully amortize the
principal balance of the ARM in equal installments over its remaining term and
pay interest at the initial Note Rate. In the case of ARMs which provide for
periodic adjustments of scheduled monthly payments, on the first day of the
month following the month in which a Note Rate adjusts, the Mortgagor is
required to begin making scheduled monthly payments in amounts which will fully
amortize the principal balance of the ARM in equal installments over its
remaining term and pay interest at the adjusted Note Rate except in the case of
certain ARMs which provide for a
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deferral of a portion of interest, as described in the preceding paragraph. The
Mortgagor under an ARM may have been qualified at an interest rate which is
lower than the current interest rate at origination. Accordingly, the repayment
of such ARM is dependent on the ability of the Mortgagor to make larger monthly
payments after the initial Note Rate adjustment date.
The applicable Prospectus Supplement will contain information respecting the
index (the "Index") utilized to adjust the Note Rates of ARMs, the Mortgage
Margin, the frequency of interest rate and payment adjustments, the Periodic
Ceiling, the Periodic Floor, the Maximum Note Rate, the Minimum Note Rate, if
applicable, and provisions for deferred interest, if any.
The ARMs included in a particular ARM Pool will be more fully described in
the related Prospectus Supplement.
YIELD CONSIDERATIONS
A description of yield considerations with respect to any Series of
CitiCertificates, to the extent such considerations differ from those described
below, will be set forth in the related Prospectus Supplement.
The yield on any CitiCertificate or CitiMortgageCertificate will depend on
the price paid, the effective interest rate of the CitiCertificate or
CitiMortgageCertificate and the prepayment experience with respect to the
Mortgage Loans underlying the related Series.
PRICE
Subject to the effect of the amount of interest payable in connection with
prepayments as described below, prepayments of principal on the Mortgage Loans
in a Pool will increase the yield on a related CitiCertificate or
CitiMortgageCertificate purchased at a price less than the aggregate Adjusted
Balance of the Mortgage Loans in a Pool represented by such CitiCertificate or
CitiMortgageCertificate and will decrease the yield on a related CitiCertificate
or CitiMortgageCertificate purchased at a price greater than the aggregate
Adjusted Balance of the Mortgage Loans represented by such CitiCertificate or
CitiMortgageCertificate.
EFFECTIVE INTEREST RATE
Interest on each Mortgage Loan is payable in arrears and will always exceed
the interest passed through to the holders of the related
CitiMortgageCertificate or CitiCertificate. Each monthly interest payment on a
Mortgage Loan is calculated as 1/12 of the applicable Note Rate multiplied by
the unpaid principal balance of such Mortgage Loan outstanding as of the first
day of the month. The amount of such payments distributed monthly with respect
to each Mortgage Loan will be similarly calculated on the basis of the
Pass-Through Rate for such Mortgage Loan. The difference between the Note Rate
and the Pass-Through Rate for a Mortgage Loan will be retained by the servicer
as servicing compensation. See "Servicing and Other Compensation and Payment of
Expenses."
The yield on a CitiCertificate or CitiMortgageCertificate will be slightly
lower than the yield otherwise produced by the applicable fixed Stated Rate
because, while interest will accrue on each Mortgage Loan from the first day of
each month, the distribution of such interest at the applicable fixed Stated
Rate will not be made until the applicable Distribution Date in the month
following the end of the related period during which interest has accrued. Full
or partial prepayments received and posted during any calendar month are passed
through to holders of CitiCertificates or CitiMortgageCertificates on the
applicable Distribution Date immediately following such calendar month. Interest
on such a full or partial prepayment will be paid at the Stated Rate for such
entire calendar month (regardless of when during such month such prepayment is
received) to the extent of Servicing Compensation (exclusive of any amount
designated as "additional servicing compensation" in the related Prospectus
Supplement) for such calendar month. Therefore, to the extent such Servicing
Compensation equals or exceeds any shortfall in collections of interest on
account of full or partial prepayments, principal prepayments will not affect
the yield to holders of CitiCertificates or CitiMortgageCertificates, except as
provided in the preceding sentence and under the heading "Price" above.
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To the extent the loan servicing and collection practices of any
subcontractor or the timing and accruals of interest on principal prepayments
vary from those disclosed in this paragraph, the applicable Prospectus
Supplement will describe such differences.
OTHER YIELD CONSIDERATIONS
The Note Rates on ARMs adjust periodically in response to movements in the
Index. In connection with ARM Pools which provide for periodic adjustments to
scheduled monthly payments, the first distribution on the related
CitiMortgageCertificates reflecting a periodic adjustment to scheduled monthly
payments on the underlying ARMs will be passed through to holders on the
Distribution Date in the month following the month in which the Note Rate on an
ARM is adjusted. Furthermore, unless otherwise described in the related
Prospectus Supplement, adjustments in the Note Rates are based on the relevant
Index most recently available as of the date 45 days prior to the date of the
Note Rate adjustment. Accordingly, the yield to certificateholders of ARM pools
will be adjusted on a delayed basis relative to movements in the Index.
Furthermore, adjustments to the Note Rate on an ARM may be limited by a Minimum
Note Rate, Maximum Note Rate, Periodic Floor and Periodic Ceiling. The following
table illustrates the timing of the adjustments and receipt by
certificateholders of related distributions for a hypothetical ARM Pool
containing ARMs having an adjustment date of July 1. All dates are assumed to be
business days.
<TABLE>
<S> <C> <C>
May 15 -- Index is published.
July 1 -- Note Rates are adjusted based on the May 15 Index.
August 1 -- Mortgagors make the first adjusted monthly payments at
the adjusted Note Rates.
August 18 -- Determination Date.
August 25 -- First payment to certificateholders including interest
at the adjusted Pass-Through Rate which payment
reflects the adjusted scheduled monthly payments on the
underlying ARMs.
</TABLE>
PREPAYMENT EXPERIENCE
The Mortgage Loans may be prepaid in full or in part at any time. The
prepayment experience of the Mortgage Loans will affect the weighted average
life of a series of CitiMortgageCertificates. Based on the Originators'
experience with their own conventional fixed interest rate mortgage loan
portfolios and public information with respect to the mortgage lending industry,
the Issuer anticipates that a significant number of Mortgage Loans will be paid
in full prior to their scheduled maturities. A number of factors, including
homeowner mobility, economic conditions, enforceability of due-on-sale clauses,
any prepayment penalty contained in the Mortgage Loans, mortgage market interest
rates and the availability of mortgage funds, may influence prepayments. In
general, due-on-sale clauses for Mortgage Loans will be enforced in a manner
consistent with applicable law whenever such due-on-sale clauses are contained
in the mortgage documents and such enforcement would not violate the contractual
arrangements with the Mortgagors. See "Certain Legal Aspects of the Mortgage
Loans--Enforceability of Certain Provisions, Prepayment Charges and
Prepayments."
The general experience of the Federal Housing Administration ("FHA")
relating to FHA insured fixed-rate level payment mortgage loans at various
interest rates with original maturities of 15 to 30 years and permitting
assumption by a buyer if a home is sold is that a substantial number of such
mortgage loans are prepaid, and that only a significantly smaller number of such
mortgage loans remain outstanding until their scheduled maturities. Data
relating to such mortgage loans for the period 1970 to 1983, as compiled by the
Department of Housing and Urban Development ("HUD"), indicates, for example,
that for a pool of such 30-year mortgage loans having mortgage rates of 12% per
annum, the aggregate principal balance of such mortgage loans outstanding 12
years after origination is expected to be approximately 46% of the aggregate
original principal balance of such mortgage loans. By comparison, 90.87% of the
aggregate original principal balance of such mortgage loans would have been
outstanding if such mortgage loans had amortized in
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accordance with the applicable repayment schedules, without any prepayments. It
is customary in the mortgage industry in quoting yields on a pool of 30-year
mortgages to compute the yield as if the pool were a single loan that is
amortized according to a 30-year schedule and then is prepaid in full at the end
of the 12th year.
The HUD data also indicates that for a pool of 15-year mortgage loans having
mortgage rates of 12% per annum, the aggregate principal balance of such
mortgage loans outstanding 7 years after origination is expected to be
approximately 40% of the aggregate original principal balance of such mortgage
loans. By comparison, 73.84% of the aggregate original principal balance of such
mortgage loans would have been outstanding if such mortgage loans had amortized
in accordance with the applicable repayment schedules, without any prepayments.
There can be no assurance that the rate of prepayment of the Mortgage Loans
will conform to FHA experience. There are substantial differences between the
composition of the mortgage loan portfolios on which the prepayment information
compiled by HUD was based and the anticipated composition of the Pools and the
Mortgage Pools. The HUD data also did not include cooperative loans. The rate of
prepayment for cooperative loans may be higher or lower than the rate of
prepayment for conventional real estate mortgage loans. The HUD data is based
entirely on fixed-rate, level-payment mortgage loans insured by the FHA, while
none of the Mortgage Loans will be so insured. Additionally, the Mortgage Loans
will be conventional mortgage loans which have historically prepaid at higher
rates than government insured mortgage loans, in part because, unlike government
insured mortgage loans, such mortgage loans may include due-on-sale clauses
which allow the holders of such mortgage loans to demand payment in full of the
remaining principal balances of the mortgage loans upon sale or certain
transfers of the property securing such mortgage loans. Moreover, published
information indicates that the rate of prepayment with respect to conventional
mortgage loans has fluctuated significantly in recent years. Economic and other
conditions existing during the periods for which the HUD data was compiled have
changed significantly and may not be applicable now or in the future. For
instance, published information indicates that the prepayment rate for
conventional mortgage loans was substantially lower during the high interest
rate climate prevailing during 1980, 1981 and early 1982 than the prepayment
rate indicated by the overall HUD data. In contrast, during 1986 and early 1987
there was a sharp decline in long-term interest rates, and the prepayment rate
for conventional mortgage loans increased substantially. If interest rates fall
below the Note Rates on the Mortgage Loans, the rate of prepayment may be
expected to increase. For the foregoing and other reasons, the Issuer believes
that no existing statistics of which it is aware provide a reliable basis for
CitiCertificateholders to predict the amounts or the timing of receipt of
prepayments on the Mortgage Loans.
Unless the Prospectus Supplement indicates otherwise, Mortgage Loans
representing at least 90% of the aggregate Adjusted Balance of the Mortgage
Loans in a Fixed Rate Pool will contain a due-on-sale clause permitting the
mortgagee to accelerate the maturity of the Mortgage Loan upon conveyance by the
Mortgagor of the Mortgaged Property. Generally, ARMs in an ARM Pool will contain
a due-on-sale clause permitting the mortgagee to accelerate only in situations
where its security may be impaired.
Servicing institutions for loan pools are sometimes asked to refinance
existing loans by accepting prepayments of loans and making new loans secured by
the same property or assigning existing loans to new lenders, or by otherwise
modifying the terms of existing mortgage loans. A mortgagor may be legally
entitled to require a lender to grant such an assignment of a real estate loan.
See "Certain Legal Aspects of the Mortgage Loans--Enforceability of Certain
Provisions, Prepayment Charges and Prepayments." The Issuer reserves the right
to offer incentives such as favorable loan terms or reduced fees to encourage
borrowers to refinance existing Mortgage Loans. The Issuer reserves the right to
accept prepayments of Mortgage Loans in any Pool and to make new loans to the
same borrowers or to refinance Real Estate Loans in any Pool pursuant to a
Consolidation Agreement. Upon such refinancing, either pursuant to a
Consolidation Agreement or through the extension of a new loan to the borrower,
the refinanced Mortgage Loan will be treated as fully prepaid and removed from
the Pool. The principal balance of any such refinanced Mortgage Loan together
with interest accrued thereon at the applicable Pass-Through Rate through the
last day of the month in which such refinancing occurred will be distributed to
CitiCertificateholders or holders of the CitiMortgageCertificate, as the case
may be, in the month following the refinancing.
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See also "THE POOLING AGREEMENTS--Termination; Repurchase of Mortgage Loans
and Mortgage Certificates" in the body of this Prospectus for a description of
the option to repurchase the Mortgage Loans or Mortgage Certificates in any Pool
when the aggregate principal balance thereof is less than the percentage (not to
exceed 5%) specified in the applicable Prospectus Supplement of the aggregate
principal balance thereof as of the Cut-Off Date for the related Series.
ASSIGNMENT OF MORTGAGE LOANS
At the time of issuance of each Series, the affiliate of the Issuer
originating or acquiring the Mortgage Loans in a Pool will assign the Mortgage
Loans to the Trustee, together with all principal and interest received on or
with respect to such Mortgage Loans after the first day of the month of issuance
of such CitiCertificates (the "Cut-Off Date") other than principal and interest
due and payable on or before the Cut-Off Date. The Trustee or its agent will,
concurrently with such assignment, authenticate and deliver the CitiCertificates
evidencing such Series in exchange for the Mortgage Loans. Each Mortgage Loan
will be identified in a schedule appearing as an exhibit to the Pooling
Agreement. Such schedule will include information as to the Adjusted Balance of
each Mortgage Loan as of the close of business on the Cut-Off Date, as well as
information with respect to the Note Rate, the scheduled monthly payment of
principal and interest, the maturity date or term and, if such Pool contains
Cooperative Loans, the number of Mortgage Loans which are Cooperative Loans. (PA
Section 2.01)
In addition, the Issuer or the affiliate of the Issuer originating or
acquiring the Real Estate Loans, in a Pool will, as to each Real Estate Loan in
the Pool deliver to the Trustee (or to the custodian hereinafter referred to)
the Mortgage Note endorsed either manually or by facsimile signature, any
assumption, modification, buydown or conversion to fixed interest rate
agreement, any certificate of primary mortgage insurance, a mortgage assignment
in recordable form (except as provided below) and the original recorded Mortgage
or, in the case of Cooperative Loans, the related Cooperative Note, the original
security agreement, the proprietary lease or occupancy agreement, the
recognition agreement, an executed financing statement (if required at
origination under applicable law) and the relevant stock certificate and related
blank stock powers; provided that, in instances where recorded documents cannot
be delivered due to delays in connection with recording, the originator may
deliver copies thereof and deliver the original recorded documents promptly upon
receipt. In addition, in lieu of delivering a mortgage assignment in recordable
form, the originator may instead deliver a blanket assignment which will not be
in recordable form, together with a power of attorney appointing the Trustee its
attorney-in-fact to act for and on behalf of such originator in preparing,
executing, delivering and recording in the name of the Trustee any and all
instruments of assignment with respect to the Mortgages.
The Originators expect to record or file assignments of the Mortgage Loans
to the Trustee subsequent to the issuance of CitiMortgageCertificates or
CitiCertificates, as the case may be. Such recordation or filing is not
necessary to make the assignment of the Mortgage Loans to the related Trustee
effective between such Trustee and the applicable Originator. However, if any of
the Originators were to make a sale, assignment, satisfaction or discharge of
any Mortgage Loans prior to recording or filing the assignment to such Trustee,
the other parties to such sales, assignments, satisfactions or discharges might
have rights superior to those of such Trustee. If any of the Originators were to
do so without authority under the Pooling Agreement, it would be liable to the
Pool or the holders of the related CitiCertificates or CitiMortgageCertificates.
Moreover, if insolvency or receivership proceedings, as the case may be,
relating to any of the Originators were commenced prior to such recording or
filing, creditors of such Originator may be able to assert rights in the
affected Mortgage Loans superior to those of any such Trustee.
The Trustee will review the above-mentioned documents (including any
Mortgage Certificates) within 90 days of the delivery of such documents and
shall promptly notify the Issuer if any document is not delivered or is found to
be defective in any material respect. If the Issuer cannot deliver such document
or cure such defect within 180 days (90 days if the defect affects the status of
the Mortgage Loan as a "qualified mortgage" for REMIC purposes) after notice
thereof, the Issuer will repurchase the related Mortgage Loan (or Mortgage
Certificate) from the Trustee within 180 days (90 days if the defect affects the
status of the Mortgage Loan as a "qualified mortgage" for REMIC purposes) after
such notice at a price equal to the
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principal balance owed by the Mortgagor, plus accrued and unpaid interest
thereon at the applicable Pass-Through Rate to the first day of the month
following the month of repurchase, less any unreimbursed payments under the
related Guaranty or other credit support and unreimbursed Voluntary Advances (as
described below). Such repurchase will not diminish the amount available under
the related Guaranty or other credit support and is deemed to be a
reimbursement. Except as provided in the next sentence, this repurchase
obligation constitutes the sole remedy available to the CitiCertificateholders
or the Trustee against the Issuer for a material defect in a document relating
to a Mortgage Loan. The Issuer will have certain rights to substitute Mortgage
Loans or Mortgage Certificates in respect of a Pool. See "THE POOLS--
Substitution of Mortgage Loans" in the body of this Prospectus. In respect of a
Pool, the related Originator will be required to cure any defect in a document
relating to, or repurchase, any Mortgage Loan which it originated or acquired
and which is found defective or repurchased by the Issuer.
In the Pooling Agreement the Issuer will represent and warrant to the
related Trustee, among other things, that (i) the information set forth in the
schedule of Mortgage Loans attached thereto is correct in all material respects,
(ii) a lender's title and insurance policy or binder for each Real Estate Loan
was issued on the date of origination thereof and each such policy or binder is
valid and remains in full force and effect, (iii) at the date of initial
issuance of the CitiCertificates, it has good title to the Mortgage Loans and
the Mortgage Certificates and such Mortgage Loans or Mortgage Certificates are
free of offsets, defenses or counterclaims and, in the case of Mortgage
Certificates, free of liens, security interests and other encumbrances, (iv) at
the date of initial issuance of the CitiCertificates, each Mortgage subject to
such Pooling Agreement is a valid first lien on the property securing the
related Mortgage Note (subject only to (a) the lien of current real property
taxes and assessments, (b) covenants, conditions and restrictions, rights of
way, easements and other matters of public record as of the date of the
recording of such Mortgage, such exceptions appearing of record being acceptable
to mortgage lending institutions generally or specifically reflected in the
related appraisal, and (c) other matters to which like properties are commonly
subject which do not materially interfere with the benefits of the security
intended to be provided by the Mortgage) and such property is free of material
damage and is in good repair, (v) if the Pool includes Cooperative Loans, at the
date of the initial issuance of the CitiCertificates, each security interest
created by the cooperative security agreement is a valid first lien (subject
only to the right of the related cooperative to cancel the shares and terminate
the proprietary lease for unpaid assessments representing the borrower's pro
rata share of the cooperative's payments for its blanket mortgage, current and
future real property taxes, maintenance charges and other capital and ordinary
expenses to which like collateral is commonly subject and for unpaid special
assessments owed by the Mortgagor to the cooperative (as defined herein)) on the
collateral securing the related Cooperative Note, and the dwelling unit to which
the Cooperative Loan relates is free of material damage and is in good repair
(it being recognized by the parties to the Pooling Agreement that, while the
Issuer warrants that each such security interest is a valid first lien on the
collateral securing the related Cooperative Note, subject to the exceptions
noted, the related proprietary lease and occupancy agreement may be subordinated
or otherwise subject to the lien of any mortgage on the related cooperative
building), (vi) at the applicable Cut-Off Date, no subject Mortgage Loan is 30
days or more past due or has been 30 days or more past due more than once for
the twelve months preceding the Cut-Off Date and there are not delinquent tax or
assessment liens against the property covered by the related Mortgage, (vii) at
the date of initial issuance of the CitiCertificates, the portion of each
Mortgage Loan, if any, which in the circumstances set forth under "General"
above and in the applicable Prospectus Supplement should be insured by a private
mortgage insurer is so insured, and (viii) each Mortgage Loan at the time it was
made complied in all material respects with applicable state and federal laws,
including, without limitation, usury, equal credit opportunity and disclosure
laws. In addition, the Issuer will warrant in respect of a Mortgage Loan in a
Pool that (a) at the date of the initial issuance of the CitiCertificates, there
is no mechanics' lien or claim for work, labor or material affecting the
premises which is or may be prior to or equal with the lien of such Mortgage
(except those insured by the related title insurance policy), (b) the original
principal amount of each Mortgage Loan was not more than 95% of the Original
Value of such Mortgage Loan and (c) the Mortgage Loans and Mortgage Certificates
conform in all material respects with the descriptions thereof in this
Prospectus and the Prospectus Supplement. Within 180 days of the discovery by
the Issuer of a breach of any representation or warranty which materially and
adversely affects the interests of the CitiCertificateholders,
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or its receipt of notice thereof from the Trustee (or within 90 days of
discovery by the Issuer of a failure to conform to the representations and
warranties in the Pooling Agreement that affects the status of a Mortgage Loan
as a "qualified mortgage" for REMIC purposes), the Issuer will cure the breach
or repurchase the Mortgage Loan (or Mortgage Certificate) or substitute a
Mortgage Loan or Mortgage Certificate on the terms set forth in the preceding
paragraph. Such repurchase will not diminish the amount available under any
related Guaranty or other form of credit support. In addition, the Issuer will
indemnify the Pool for any losses to such Pool not reimbursed by such
repurchase. Such repurchase obligation and limited indemnity constitute the sole
remedies available to the CitiCertificateholders or the Trustee for any such
breach. (PA Section 2.03)
If Standard & Poor's Corporation ("S&P") initially assigns a rating to the
CitiCertificates, then at any time that S&P's rating of Citicorp's long-term
senior debt is below the rating S&P has assigned to the highest rated
outstanding Class (or Subclass) of a particular Series of CitiCertificates, each
related Trustee will be required either to maintain possession of the related
Mortgage Notes or to appoint a custodian (which could be itself), which may not
be an affiliate of the Issuer, to maintain possession of the related Mortgage
Notes.
Each Trustee also will be authorized to appoint a custodian, which may be an
affiliate of the Issuer, except in the circumstances described in the preceding
paragraph, to maintain possession of the documents relating to the Mortgage
Loans. Any custodian will keep such documents as such Trustee's agent under a
custodial agreement.
PAYMENTS ON MORTGAGE LOANS IN POOLS
The Pooling Agreements will provide that the Issuer will establish and
maintain with one or more depository banks, savings and loan associations or
trust companies, any of which may be an affiliate of the Issuer (each, a
"Depository"), the Certificate Account in the name of the Trustee for the
benefit of CitiCertificateholders. Amounts with respect to any Series may, at
the option of the Issuer, be held in the same deposit account as amounts with
respect to any other Series, provided that the rating by each nationally
recognized statistical rating organization of each such Series is the same. The
only initial Depository will be Citibank (New York State), unless otherwise
specified in the applicable Prospectus Supplement. Upon two weeks' prior written
notice to the Trustee, CMSI may at any time and from time to time in its
discretion transfer or direct the Trustee in writing to transfer the Certificate
Account to any Depository which meets any of the requirements as stated below.
In the event that the long-term debt obligations of any Depository of the
Certificate Account shall be rated at less than A2 by Moody's Investors Service,
Inc. ("Moody's"), or the short-term debt obligations of such Depository shall be
rated by S&P at less than A-1 or by Moody's at less than P-1, then within five
Business Days of such reduction, CMSI shall (A) transfer or direct the Trustee
in writing to transfer the Certificate Account to a Depository the long-term
debt obligations of which are not rated by Moody's at less than A2 and the
short-term debt obligations of which are not rated at less than A-1 by S&P and
P-1 by Moody's (the "Rating Requirements"), (B) establish another account in the
corporate trust department of the Trustee or, if such Trustee has a long-term
and short-term debt rating at least equal to the Rating Requirements, in any
department of the Trustee (the "Alternative Certificate Account") and direct the
Servicer to remit on a daily basis any funds deposited into the Certificate
Account to the Alternative Certificate Account, (C) (i) cause such Depository to
pledge securities in the manner provided by applicable law or (ii) pledge or
cause to be pledged securities, which shall be held by the Trustee or its agent
free and clear of the lien of any third party, in a manner conferring on the
Trustee a perfected first lien and otherwise reasonably satisfactory to the
Trustee; such pledge in either case to secure such Depository's performance of
its obligations in respect of the Certificate Account to the extent, if any,
that such obligation is not fully insured by the FDIC; PROVIDED, HOWEVER, that
prior to the day the Depository or CMSI, as the case may be, pledges the
securities, CMSI and the Trustee shall have received the written assurance of
each rating agency which assigned a rating to the CitiCertificates that the
pledging of such securities and any arrangements or agreements relating thereto
will not result in a reduction or withdrawal of the then-current rating of the
CitiCertificates, (D) establish an account or accounts or enter into an
agreement so that the existing Certificate Account is supported by a letter of
credit or some other form of credit support which issuer of such letter of
credit or other form of credit support has a long-term and short-term debt
rating at least equal
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to the Rating Requirements; PROVIDED, HOWEVER, that prior to the establishment
of such an account or the entering into of such an agreement, CMSI and the
Trustee shall have received written assurance from each rating agency which
assigned a rating to the CitiCertificates that the establishment of such an
account or the entering into of such an agreement so that the existing
Certificate Account is supported by a letter of credit or some other form of
credit support will not result in a reduction or withdrawal of the then-current
rating on the CitiCertificates or (E) make such other arrangements as to which
CMSI and the Trustee have received prior written assurance from each rating
agency which assigned a rating to the CitiCertificates that such arrangement
will not result in a reduction or withdrawal of the then-current rating on the
CitiCertificates. In the event that the rating on the CitiCertificates has been
downgraded as a result of a rating downgrade of the Depository, for purposes of
this paragraph, the then-current rating on the CitiCertificates shall be the
rating assigned to the CitiCertificates prior to any such downgrade.
Payments, or proceeds of payments, of the types listed below are to be
deposited in the related Certificate Account for the related Series (other than
payments in respect of principal and interest on the related Mortgage Loans due
on or before the applicable Cut-Off Date):
(i) all scheduled payments of principal ("Scheduled Principal") and
Principal Prepayments (defined to mean any payment or other recovery of
principal on a Mortgage Loan which is received in advance of its scheduled
due date and is not accompanied by any interest scheduled for payment in any
month subsequent to the month of prepayment), on such Mortgage Loans;
(ii) all payments on account of interest (including payments made from a
buydown subsidy account established with respect to such Mortgage Loans) on
such Mortgage Loans, adjusted to the Pass-Through Rates for such Mortgage
Loans;
(iii) all payments under the credit support (unless such payments are
made directly to a different account to be used for distributions to
CitiCertificateholders by the paying agent for the CitiCertificates);
(iv) all Voluntary Advances made as described below ("Voluntary
Advances") or other payments made by the Servicer in respect of Liquidating
Loans;
(v) all amounts received, by foreclosure or otherwise, in connection
with the liquidation of defaulted Mortgage Loans which have not been
assigned to the issuer of credit support in consideration of payments under
any such credit support, respectively, net of expenses incurred in
connection with such liquidation;
(vi) all proceeds received under any title, hazard or other insurance
policy covering any Mortgage Loan (including any deductible paid by the
Issuer in lieu thereof as permitted by the Pooling Agreement), other than
proceeds to be applied to the restoration or repair of the related property,
or released to the Mortgagor in accordance with normal servicing procedures;
(vii) all proceeds of any repurchase by the Issuer of Mortgage Loans as
described under "Assignment of Mortgage Loans" or under "THE POOLING
AGREEMENTS--Termination; Repurchase of Mortgage Loans and Mortgage
Certificates" in the body of this Prospectus (PA Section 3.10); and
(viii) in connection with any Principal Prepayment, the amount required to
be deposited by the Issuer as a reduction of servicing compensation pursuant
to the Pooling Agreement, being the difference between 30 days of interest
at the Pass-Through Rate on the amount of such Principal Prepayment and the
amount of interest (adjusted to the Pass-Through Rate) actually due thereon
for the month in which such Principal Prepayment was posted.
Voluntary Advances, payments by the servicer in respect of Liquidating Loans and
payments under any related Guaranty or other form of credit support will be
deposited in the Certificate Account not later than on the relevant Distribution
Date. All other amounts will be deposited in the Certificate Account on the
business day next following the day of receipt and posting.
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Distributions on CitiCertificates will be made as provided in the body of
this Prospectus and in the Prospectus Supplement. See "Description of
Certificates." In addition, the Trustee (or such other paying agent as may be
specified in the applicable Prospectus Supplement) will, to the extent of the
obligations under credit support, include with any distributions to holders (i)
an amount sufficient to cover delinquencies in scheduled payments of principal
and interest, first from a Certificate Account Advance (as defined below),
second from a Voluntary Advance and third, if necessary, from payments under the
credit support, (ii) an amount sufficient to repurchase Liquidating Loans
(either as a result of a demand or draw under the credit support or as a result
of a payment by the Servicer) and (iii) certain amounts in respect of Principal
Prepayments to the extent not paid by the Issuer, all as described in the
Prospectus Supplement. (PA Section 3.03)
Provision is made for Voluntary Advances, Certificate Account Advances and
other payments by the servicer in respect of Liquidating Loans on behalf of the
issuer of credit support in order to avoid drawings on the credit support for
relatively insignificant amounts. In the event the amount of delinquencies
cannot be covered by an advance out of cash in the Certificate Account being
held for future distribution or withdrawal (a "Certificate Account Advance"),
the Issuer may, but is not obligated to, make Voluntary Advances to the extent
that payments under credit support would otherwise be required. The Issuer
intends to make Voluntary Advances to the extent that, were it not to do so, the
issuer of the credit support would be liable for payments under such credit
support. Any such advances will be reimbursable to the extent and in the manner
payments under credit support would be reimbursed, all as described in the
Prospectus Supplement.
Not later than three business days before each Distribution Date, the Issuer
will furnish or cause to be furnished a separate statement to the Trustee (and
to any paying agent) (the information in such statement to be made available to
the Trustee at other times by the Issuer on request) setting forth, among other
things, the aggregate amount to be distributed on such Distribution Date on
account of principal and interest, stated separately, the sources of such amount
and information relating to the amount available under the credit support. (PA
Section 3.19)
The following chart sets forth an example of the application of the
foregoing provisions to a hypothetical CitiCertificate which represents an
interest in a Pool consisting primarily of Mortgage Loans which is issued during
January. The example would be applicable to any such CitiCertificate issued
during any other month or any CitiMortgageCertificate. (All dates referred to
are assumed to be business days).
<TABLE>
<S> <C>
January 1............... CUT-OFF DATE. The initial principal balance of the Pool would be
the aggregate Adjusted Balance of the Mortgage Loans on January 1
after deducting principal payments due on or before such date.
Principal payments due on January 1 and the accompanying
interest payments, which represent interest on December 1
balances, are not part of the Pool and will be retained by the
Servicer.
January 1-January 31.... PAYMENT PERIOD. Principal Prepayments posted during this period
will, together with interest, if any, collected thereon (adjusted
to the Pass-Through Rate), be deposited in the Certificate
Account and will be passed through to CitiCertificateholders on
February 25. The Servicer collects interest on the prepaid
amount to the date of prepayment and, for partial prepayments,
collects no interest on the prepaid amount for the month of
prepayment. Scheduled payments due on February 1 from Mortgagors
will be deposited in the Certificate Account as received. Such
payments will include the scheduled principal payments received,
plus interest on such Mortgage Loans calculated on the January 1
principal balances thereof (after deducting from such balances
all partial prepayments of principal applied as of January 1).
January 31.............. RECORD DATE. Distributions on February 25 will be made to
CitiCertificateholders of record at the close of business on the
last business day of the month immediately preceding the month
of distribution.
</TABLE>
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<TABLE>
<S> <C>
February 18............. DETERMINATION DATE. On the 18th day of the month, the Servicer
determines the aggregate amount of funds which are available to
make distributions on February 25, as described herein, and the
aggregate amount available in the Certificate Account, as
Voluntary Advances or as payments under credit support to make
such distributions.
February 22............. NOTICE DATE. By this date, if CMI is not the paying agent for
such CitiCertificates, notice of the amounts to be distributed on
February 25 is given to the Trustee (and, if a person other than
the Trustee is the paying agent, to such paying agent). Such
notice will indicate whether the obligations of any issuer of
credit support are sufficient to cover all delinquencies. If
they are, the distribution on February 25 will include an amount
equal to the principal and interest (adjusted to the
Pass-Through Rates for the related Mortgage Loans) due on the
Mortgage Loans on February 1. If not, the distribution will
include only those payments due on February 1 which have been
actually received and posted before February 18. In addition, in
either case, Principal Prepayments posted in January will be
included in the February 25 distribution together with interest
thereon for the entire month of January, adjusted to the Pass-
Through Rate. The Servicer will deposit in the Certificate
Account on February 24 the difference between such interest on
such Principal Prepayments for such entire month and the amount
of interest (adjusted to the Pass-Through Rate) paid by the
Mortgagors on such Principal Prepayments; PROVIDED, HOWEVER,
that the amount of such deposit shall not exceed Servicing
Compensation (exclusive of any amount designated as "additional
servicing compensation" in the related Prospectus Supplement).
February 25............. DISTRIBUTION DATE. On February 25, the Trustee (or such other
paying agent as may be specified in the related Prospectus
Supplement) will distribute the amounts set forth in the notice
to it on February 22 as available for distribution. If CMI is
the paying agent, the Servicer will furnish or cause such notice
to be furnished to the Trustee on or before the Distribution
Date. If a payment due February 1 is received from a Mortgagor
and posted on or after February 18 and a Certificate Account
Advance has been made with respect to such payment, such payment
will be deposited into the Certificate Account as reimbursement
therefor. If a Voluntary Advance or a payment under credit
support has been made with respect to such payment from a
Mortgagor, the Servicer will withdraw the amount of such payment
from the Certificate Account to reimburse the entity making the
Voluntary Advance or the issuer of any credit support. If no
such advance or payment has been made, such late payment will be
passed through to the CitiCertificateholder at the time of the
next distribution.
</TABLE>
Succeeding months follow the above, except with respect to the Cut-Off Date.
COLLECTION AND OTHER SERVICING PROCEDURES
The Issuer or the Servicer will make reasonable efforts to collect all
payments called for under the Mortgage Loans and shall, consistent with the
Pooling Agreement, follow such collection procedures as it deems necessary or
advisable. Consistent with the above, the Issuer or the Servicer may, in its
discretion, (i) waive any late payment charge or any prepayment or other charge
in connection with the prepayment of a Mortgage Loan and (ii) arrange with a
Mortgagor a schedule for the liquidation of delinquencies running for no more
than 180 days after the applicable Due Date. In the event of any such
arrangement, but only to the extent of an issuer's obligations under credit
support, such issuer of credit support will honor requests for payment or
otherwise distribute funds with respect to such a Mortgage Loan during the
scheduled period in accordance with the amortization schedule thereof and
without regard to the temporary modification thereof. (PA Section 3.01)
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If property subject to a Mortgage has been or is about to be conveyed by the
Mortgagor and the related Mortgage Loan includes a due-on-sale clause, the
Issuer or the Servicer is generally obligated to accelerate the maturity of the
Mortgage Loan. If it reasonably believes it is unable to enforce such
due-on-sale clause, the Issuer or the Servicer will enter into an assumption and
modification agreement with the person to whom such property has been or is
about to be conveyed, pursuant to which such person becomes liable under the
Mortgage Note or the Cooperative Note and (except with respect to CFSB Pools)
the original Mortgagor, to the extent permitted by applicable law, remains
liable thereon. The mortgage rate borne by the related fixed rate Mortgage Note
or Cooperative Note may not be decreased and the mortgage rate borne by the
related adjustable rate Mortgage Note or Cooperative Note may not be changed in
connection with any such assumption. The method for determining any increase in
the mortgage rate will be provided for in the related fixed-rate Mortgage Note
or Cooperative Note. Any fee collected by the Issuer or the Servicer for
entering into any such assumption agreement will be retained by the Issuer or
the Servicer, as additional servicing compensation. With regard to circumstances
in which the Issuer or the Servicer may be unable to enforce due-on-sale
clauses, see "Certain Legal Aspects of Mortgage Loans--Enforceability of Certain
Provisions, Prepayment Charges and Prepayments."
In addition to a Certificate Account, the Issuer or the Servicer will
maintain with a depository, expected to be Citibank (New York State) in the name
of its Trustee, a servicing account (a "Servicing Account") with respect to each
related Series (which account may include funds with respect to other similar
mortgage pass-through certificates) and will deposit and retain therein all
payments of taxes, assessments or comparable items received for the account of
the Mortgagors. Withdrawals from any Servicing Account may be made only to
effect payment of taxes, assessments or comparable items, to reimburse such
party out of related collections for any cost incurred in paying taxes and
assessments or otherwise preserving or protecting the value of the Mortgages, to
refund to Mortgagors any amounts determined to be overages, to pay interest to
Mortgagors on balances in such Servicing Account to the extent required by law
and to clear and terminate such Servicing Account at the termination of the
related Pooling Agreement. (PA Section 3.11)
The Issuer or the Servicer will exercise its best reasonable efforts to
maintain and keep in full force and effect such primary mortgage insurance as
specified under "General" above and in the related Prospectus Supplement for so
long as such insurance is required pursuant to the Pooling Agreement as
specified in such section and in such Prospectus Supplement. Primary mortgage
insurance may be replaced by substantially equivalent insurance but only if (i)
each nationally recognized statistical rating organization that initially rated
the Series advises the Issuer that such replacement will not adversely affect
the current rating of such Series or (ii) the claims-paying ability of the
substitute primary mortgage insurance company is rated in the same, an
equivalent or a higher category or categories as such Series by each such
nationally recognized statistical rating organization.
The Issuer or the Servicer and any successor servicer appointed following an
Event of Default, will be required to maintain certain insurance covering errors
and omissions in the performance of its obligations as servicer and certain
fidelity bond coverage ensuring against losses through wrongdoing of its
officers, employees and agents. (PA Section 6.07)
HAZARD INSURANCE
The Issuer or the Servicer will cause a hazard insurance policy to be
maintained for each Real Estate Loan. The coverage of each such policy is
required to be in an amount not less than (i) the maximum insurable value of the
improvements securing such Real Estate Loan or, as required by California law,
the replacement value of the improvements or (ii) the principal balance owing on
such Real Estate Loan, whichever is less. As set forth above, all amounts
collected by the Servicer under any hazard policy (except for amounts to be
applied to the restoration or repair of property subject to the related Mortgage
or property acquired by foreclosure or amounts released to the Mortgagor in
accordance with normal servicing procedures) will be deposited in the applicable
Certificate Account. (PA Section 3.14).
In general, the standard form of fire and extended coverage policy covers
physical damage to or destruction of the improvements on the property by fire,
lightning, explosion, smoke, windstorm and hail,
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riot, strike and civil commotion, subject to the conditions and exclusions
particularized in each policy. The policies relating to such Real Estate Loans
will be underwritten by different insurers and therefore will not contain
identical terms and conditions. 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. Where the property securing such
a Real Estate Loan is located in a federally designated special flood hazard
zone, the applicable Pooling Agreement will require that flood insurance be
maintained.
Most of the properties securing the Real Estate Loans will be covered by
homeowners' insurance policies which, in addition to the standard form of fire
and extended coverage, provide coverage for certain other risks. These
homeowners' policies typically contain a "coinsurance" 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 improvements on the
property in order to recover the full amount of any partial loss. If the
insured's coverage falls below this specified percentage, then the insurer's
liability in the event of a partial loss shall not exceed the lesser 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 the amount of hazard insurance required to be maintained on the
improvements securing such Real Estate Loans may decline, and since residential
properties generally have historically appreciated in value over time, the
effect of coinsurance in the event of partial loss may be that hazard insurance
proceeds will be insufficient to restore fully the damaged property. However, to
the extent of the amount available to cover hazard losses under the Guaranty or
other credit support, CitiCertificateholders will not suffer loss by reason of
delinquencies or foreclosures following hazard losses, whether or not subject to
coinsurance clauses.
The Issuer and the Servicer will not require that a hazard or flood
insurance policy be maintained for any Cooperative Loan. Generally, the
cooperative itself is responsible for maintenance of hazard insurance for the
property owned by the cooperative, and the tenant-stockholders of that
cooperative do not maintain individual hazard insurance policies. To the extent,
however, a cooperative and the related borrower on a Cooperative Note do not
maintain such insurance or do not maintain adequate coverage or any insurance
proceeds are not applied to the restoration of the damaged property, damage to
such borrower's cooperative apartment or such cooperative's building could
significantly reduce the value of the collateral securing such Cooperative Note.
If an issuer's obligations under credit support are exhausted, and if a
Mortgagor defaults on his obligations to make payments on a Mortgage Loan, the
CitiCertificateholders will bear all risk of loss resulting from hazard losses
not covered by hazard insurance.
REALIZATION UPON DEFAULTED MORTGAGE LOANS
If any Mortgage Loans become Liquidating Loans, an issuer of credit support
may, if so specified in the related Prospectus Supplement, be obligated to
purchase from the Trustee such Liquidating Loans up to the amount of its
remaining obligations under the related credit support. The Servicer may pay the
purchase price in respect of a Liquidating Loan on behalf of the issuer of
credit support in order to avoid demands or draws under such credit support. If
the ultimate net recovery is equal to or less than the unreimbursed payments
under the related credit support with respect to the Mortgage Loan, the amount
of an issuer's obligations under credit support will be replenished in an amount
equal to the amount of such ultimate net recovery. In the event that the
ultimate net recovery exceeds the unreimbursed payments, such excess will be
retained, in the case of a Guaranty issued by Citicorp, by Citicorp as
compensation for the issuance of such Guaranty, and in the case of other credit
support, the Servicer will be entitled to such proceeds unless otherwise
specified in the related Prospectus Supplement. Such excess will not be applied
to replenish the
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remaining Amount Available under any credit support. (PA Section 3.16) Although
a CitiCertificateholder will have no right to such excess proceeds, the previous
reduction in an issuer's obligations under credit support with respect to that
Series will have been fully restored.
If a default occurs on a Mortgage Loan at a time when the amount of the
remaining obligations under the related credit support is less than the purchase
price of such Mortgage Loan, no payments under such credit support for the
purchase of such Mortgage Loan or to cover delinquencies may be made with
respect to such default unless otherwise provided in the Related Prospectus
Supplement. With respect to Liquidating Loans which are not purchased by or on
behalf of the issuer of credit support, the Issuer or the Servicer will be
obligated to follow such normal practices and procedures as it deems necessary
or advisable to realize upon a defaulted Mortgage Loan. In this regard, the
Issuer or the Servicer may (directly or through an assignee) sell the property
at a foreclosure or trustee's or other sale, negotiate with the Mortgagor for a
deed in lieu of foreclosure or, in the event a deficiency judgment is available
against the Mortgagor or other person (see "Certain Legal Aspects of Mortgage
Loans--Anti-Deficiency Legislation and Other Limitations on Lenders" for a
description of the limited availability of deficiency judgments), foreclose
against such property and proceed for the deficiency against the appropriate
person. In such circumstances, the holder of any CitiCertificate evidencing an
interest in a Pool with a Liquidating Loan will realize a loss to the extent
that the ultimate net recovery, after reimbursement to the Issuer or the
Servicer of expenses incurred in connection with the liquidation of such
Mortgage Loan, is less than the outstanding principal balance and accrued and
unpaid interest thereon at the Pass-Through Rate for such Mortgage Loan. The
Pooling Agreement with respect to a Series will require that any property
acquired by the Servicer by deed in lieu of foreclosure with respect to a
Liquidating Loan be administered so that it meets the definition of "foreclosure
property" in Section 860G(a)(8) of the Internal Revenue Code of 1986, as amended
(the "Code") at all times, and so that no income from the rental or sale of such
property will be "net income from foreclosure property" within the meaning of
Code Section 860G(c).
Ordinarily, the holder of collateral acquired through foreclosure maximizes
recovery by providing financing to a new purchaser. As to collateral securing a
Cooperative Loan, any prospective purchaser will generally have to obtain the
approval of the board of directors of the relevant cooperative before purchasing
the shares and acquiring rights under the proprietary lease or occupancy
agreement securing that Cooperative Loan. See "CERTAIN LEGAL ASPECTS OF THE
MORTGAGE LOANS--Foreclosure on Shares of Cooperatives." This approval is usually
based on the purchaser's income and net worth and numerous other factors. The
necessity of acquiring such approval could, however, limit the number of
potential purchasers for those shares and otherwise limit the Issuer or the
Servicer or the Issuer's or the Servicer's ability to sell, and realize the
value of, those shares.
In general, a "tenant-stockholder" (as defined in Code Section 216(b)(2)) of
a corporation that qualifies as a "cooperative housing corporation" within the
meaning of Code Section 216(b)(1) is allowed a deduction for amounts paid or
accrued within his taxable year to the corporation representing his
proportionate share of certain interest expenses and certain real estate taxes
allowable as a deduction under Code Section 216(a) to the corporation under Code
Sections 163 and 164. In order for a corporation to qualify under Code Section
216(b)(1) for its taxable year in which such items are allowable as a deduction
to the corporation, such section requires, among other things, that at least 80%
of the gross income of the corporation be derived from its tenant-stockholders
(as defined in Code Section 216(b)(2)). By virtue of this requirement, the
status of a corporation for purposes of Code Section 216(b)(1) must be
determined on a year-to-year basis. Consequently, there can be no assurance that
cooperatives relating to the Cooperative Loans will qualify under such section
for any particular year. In the event that such a cooperative fails to qualify
for one or more years, the value of the collateral securing any related
Cooperative Loans could be significantly impaired because no deduction would be
allowable to tenant stockholders under Code Section 216(a) with respect to those
years. In view of the significance of the tax benefits accorded
tenant-stockholders of a corporation that qualifies under Code Section
216(b)(1), the likelihood that such a failure would be permitted to continue
over a period of years appears remote.
If at any time no further amount is payable under the credit support for a
Series of CitiCertificates, the Issuer or the Servicer may expend its own funds
to restore property securing a Liquidating Loan included in
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such Series which has sustained uninsured damage, but only if it determines that
such restoration will increase the proceeds to the CitiCertificateholders of
liquidation of the Liquidating Loan after reimbursement of the Issuer or the
Servicer for its expenses.
SERVICING AND OTHER COMPENSATION AND PAYMENT OF EXPENSES
The Issuer's or Servicer's primary compensation for its servicing activities
in respect of a Pool will come from the payment to it of a servicing fee. A
servicing fee will be paid to the Issuer in respect of Mortgage Loans underlying
a Pool as described under "DESCRIPTION OF CERTIFICATES--The Servicer" in the
body of this Prospectus. Such servicing fee paid to the Servicer in respect of a
Pool may be in an amount equal to a fixed annual percentage as specified in the
related Prospectus Supplement of the outstanding principal balance of such
Mortgage Loans on which interest is payable. In such event, the rate of
servicing compensation for each Mortgage Loan in a Pool will be fixed, and the
Pass-Through Rates of the Mortgage Loans will differ based on different mortgage
rates. Accordingly, the weighted average of the fixed Pass-Through Rates of the
Mortgage Loans underlying any Series of CitiCertificates will vary each month
based on the level of principal repayments (including prepayments) on the
underlying fixed rate Mortgage Loans. In such event, because the rate of
servicing compensation is fixed for each Mortgage Loan, disproportionate
principal payments among Mortgage Loans bearing different mortgage rates in a
Pool may affect the yield to the holder of a CitiCertificate, and accordingly,
may affect the market value of such CitiCertificate. Alternatively, if so
specified in the related Prospectus Supplement, the Pass-Through Rate may be the
same (or calculated in the same manner) for each Mortgage Loan in the Pool, and
the rate of servicing compensation with respect to each Mortgage Loan (equal to
the difference between the mortgage rate for such Mortgage Loan and such
Pass-Through Rate) may differ among different Mortgage Loans. In such event,
disproportionate principal payments among Mortgage Loans bearing different
mortgage rates in a Pool will not affect the weighted average Pass-Through Rate,
but may affect the weighted average rate of servicing compensation. Additional
information with respect to the Pass-Through Rates of the Mortgage Loans and the
related rates of servicing compensation will be set forth in the related
Prospectus Supplement. As principal payments are made on the Mortgage Loans, the
portion of each monthly payment which represents interest will decline and thus
the primary servicing compensation will ordinarily decrease as the Mortgage
Loans amortize.
In addition to its primary servicing compensation, the Issuer or Servicer
will retain all prepayment charges, if any, assumption fees and late payment
charges, all to the extent collected from Mortgagors, and has agreed to pay all
such amounts over to any related subservicer. Based upon the Originators'
experience and the experience of the residential financing industry generally
with respect to conventional one-to four-family real estate mortgages, such as
the Mortgage Loans, it appears that compensation to the Issuer from these
additional sources will be negligible in amount.
The Issuer or the Servicer will be responsible (to the extent of Servicing
Compensation (exclusive of any amount designated as "additional servicing
compensation" in the related Prospectus Supplement)) for payment of interest in
respect of prepayments of principal of the Mortgage Loans to be distributed to
CitiCertificateholders in excess of the amount of such interest received from
the Mortgagors.
The Issuer or the Servicer will pay all expenses incurred in connection with
its servicing of the related Mortgage Loans (subject to limited reimbursement as
described below), including, without limitation, payment of the fees and
disbursements of the Trustee and independent accountants, payments of all fees
and expenses in connection with the realization upon defaulted Mortgage Loans,
payment of expenses incurred in connection with distributions and reports to
CitiCertificateholders.
If no further amount is payable under the credit support for a Series, the
Issuer or the Servicer will be entitled to reimbursement for certain expenses
incurred by it in connection with the liquidation of defaulted Mortgage Loans,
and the holders of CitiCertificates will suffer loss to the extent that the
proceeds of the liquidation proceedings respecting any defaulted Mortgage Loan,
after reimbursement of the Issuer's or the Servicer's expenses, are less than
the principal balance of such Mortgage Loan. In addition, the Servicer will be
entitled to reimbursement of certain expenditures made by it in connection with
the preservation, protection or restoration of the security for a defaulted or
foreclosed Mortgage Loan.
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CERTAIN LEGAL ASPECTS OF THE MORTGAGE LOANS
MORTGAGES
The Real Estate Loans will be secured by either mortgages or deeds of trust,
depending upon the prevailing practice in the state in which the property
subject to a Real Estate Loan is located. A mortgage or a deed of trust creates
a lien upon the real property encumbered by such instrument and represents the
security for the repayment of an obligation that is customarily evidenced by a
promissory note or a bond. It is not prior to the lien for real estate taxes and
assessments and certain other statutory liens. Priority with respect to
mortgages and deeds of trust depends on their terms and generally on the order
of recording with a state, county or municipal office. There are two parties to
a mortgage, the mortgagor, who is the borrower/ homeowner or the land trustee
(as described below), and the mortgagee, who is the lender. Under the mortgage
instrument, the mortgagor delivers to the mortgagee a note or bond and the
mortgage. In the case of a land trust, title to the property is held by a land
trustee under a land trust agreement, while the borrower/ homeowner is the
beneficiary of the land trust; at origination of a mortgage loan, the borrower
executes a separate undertaking to make payments on the mortgage note. Although
a deed of trust is similar to a mortgage, a deed of trust formally has three
parties, the trustor (similar to a mortgagor), who is the homeowner and may or
may not be the borrower, the beneficiary (similar to a mortgagee), who is the
lender, and the trustee, a third-party grantee. Under a deed of trust, the
trustor 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. The mortgagee's authority under a mortgage and the trustee's
authority under a deed of trust are governed by law, the express provisions of
the mortgage or deed of trust, and, in some cases, the directions of the
beneficiary.
COOPERATIVES
All cooperative apartments relating to the Cooperative Loans are located in
the States of New York, New Jersey and Connecticut. The private, non-profit,
cooperative apartment corporation owns all the real property that comprises the
project, including the land, separate dwelling units and all common areas. The
cooperative is directly responsible for project management and, in most cases,
payment of real estate taxes and hazard and liability insurance. If there is a
blanket mortgage on the cooperative apartment building and/ or underlying land,
as is generally the case, the cooperative, as project mortgagor, is also
responsible for meeting these mortgage obligations. A blanket mortgage is
ordinarily incurred by the cooperative in connection with the construction or
purchase of the cooperative's apartment building. The interest of the occupant
under proprietary leases or occupancy agreements to which that cooperative is a
party are generally subordinate to the interest of the holder of the blanket
mortgage in that building. If the cooperative is unable to meet the payment
obligations arising under its blanket mortgage, the mortgagee holding the
blanket mortgage could foreclose on that mortgage and terminate all subordinate
proprietary leases and occupancy agreements. Also, the blanket mortgage on a
cooperative may provide financing in the form of a mortgage that does not fully
amortize, with a significant portion of principal being due in one lump sum at
final maturity. The inability of the cooperative to refinance this mortgage and
its consequent inability to make such final payment could lead to foreclosure by
the mortgagee providing the financing. A foreclosure in either event by the
holder of the blanket mortgage could eliminate or significantly diminish the
value of any collateral held by the lender who financed the purchase by an
individual tenant-stockholder of cooperative shares or the collateral securing
the Cooperative Loans.
The cooperative is owned by tenant-stockholders who, through ownership of
stock, shares or membership certificates in the corporation, receive proprietary
leases or occupancy agreements which confer exclusive rights to occupy specific
units. Generally, a tenant-stockholder of a cooperative must make a monthly
payment to the cooperative representing such tenant-stockholder's pro rata share
of the cooperative's payments for its blanket mortgage, real property taxes,
maintenance expenses and other capital or ordinary expenses. An ownership
interest in a cooperative and accompanying occupancy rights is financed through
a cooperative share loan evidenced by a promissory note and secured by a
security interest in the occupancy agreement or proprietary lease and in the
related cooperative shares. The lender takes possession of the share certificate
and a counterpart of the proprietary lease or occupancy agreement and a
financing
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statement covering the proprietary lease or occupancy agreement and the
cooperative shares is filed in the appropriate state and local offices to
perfect the lender's interest in its collateral. Subject to the limitations
discussed below, upon default of the tenant-stockholder, the lender may sue for
judgment on the promissory note, dispose of the collateral at a public or
private sale or otherwise proceed against the collateral or tenant-stockholder
as an individual as provided in the security agreement covering the assignment
of the proprietary lease or occupancy agreement and the pledge of corporate
shares. See "Foreclosure on Shares of Cooperatives" below.
FORECLOSURE ON MORTGAGES
Foreclosure of a deed of trust is generally accomplished by a non-judicial
trustee's sale under a specific provision in the deed of trust which authorizes
the trustee to sell the property upon any default by the borrower under the
terms of the note or deed of trust. 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 a notice of default and notice of sale. In
addition, the trustee in some states must provide notice to any other individual
having an interest in the real property, including any junior lienholders. The
trustor, borrower or any 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.
Generally, state law controls the amount of foreclosure expenses and costs,
including attorney's fees, which may be recovered by a lender. If the deed of
trust is not reinstated, a notice of sale must be posted in a public place and,
in most states, published for a specific period of time in one or more
newspapers. In addition, some state laws require that a copy of the notice of
sale be posted on the property or the courthouse door of the county in which the
property is located, recorded and sent to all parties having an interest in the
real property.
An action to foreclose a mortgage is an action to recover the mortgage debt
by enforcing the mortgagee's rights under the mortgage. It is regulated by
statutes and rules and subject throughout to the court's equitable powers. In
Texas, for example, it is necessary to give both notice of intent to accelerate
as well as notice of acceleration of an installment note. Generally, a mortgagor
is bound by the terms of the mortgage note and the mortgage as made and cannot
be relieved from his default. However, since a foreclosure action is equitable
in nature and is addressed to a court of equity, the court may relieve a
mortgagor of a default and deny the mortgagee foreclosure on proof that the
mortgagor's default was neither wilful nor in bad faith and that the mortgagee's
action was such as to establish a waiver, or fraud, bad faith, oppressive or
unconscionable conduct as to warrant a court of equity to refuse affirmative
relief to the mortgagee. Under certain circumstances a court of equity may
relieve the mortgagor from an entirely technical default where such default was
not willful.
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. Moreover, recent judicial decisions suggest that a
non-collusive, regularly conducted foreclosure sale may be challenged as a
fraudulent conveyance, regardless of the parties' intent, if a court determines
that the sale was for less than fair consideration and such sale occurred while
the mortgagor was insolvent and within one year (or within the statute of
limitations if the trustee in bankruptcy elects to proceed under state
fraudulent conveyance law) of the filing of bankruptcy. Similarly, a suit
against the debtor on the mortgage note or bond may take several years.
In case of foreclosure under either a mortgage or a deed of trust, the sale
by the referee or other designated officer or by the trustee is a public sale.
However, because of the difficulty potential third party purchasers at the sale
have in determining the exact status of title and because the physical condition
of the property may have deteriorated during the foreclosure proceedings, it is
uncommon for a third party to purchase the property at the foreclosure sale.
Rather, 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 or deed of
trust plus accrued and unpaid interest and the expenses of foreclosure.
Thereafter, the lender will assume the burdens of ownership, including obtaining
casualty insurance, paying real estate taxes and making such repairs at its own
expense as are necessary to render the property suitable for sale. The lender
will commonly obtain the
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services of a real estate broker and pay the broker's commission in connection
with the sale of the property. Depending upon market conditions, the ultimate
proceeds of the sale of the property may not equal the lender's investment in
the property. Any loss may be reduced by the receipt of any mortgage insurance
proceeds.
Foreclosure of a mortgage is accomplished in New York, New Jersey and
Florida in most cases, and in Illinois in all cases, by an action in foreclosure
culminating in a judicial sale (or, in the case of Illinois, a
judicially-approved sale) of the real property by a court-appointed referee,
sales agent or other official following a judgment of foreclosure. The purposes
of a foreclosure action are to enable the mortgagee to realize upon its security
and to bar the mortgagor, persons with liens subordinate to the foreclosing
mortgagee, and certain other persons with interests in the real property from
their statutory rights and "equity of redemption." The doctrine of equity of
redemption provides that, until the property covered by a mortgage has been sold
in accordance with a properly conducted foreclosure and foreclosure sale, those
having an equity of redemption may redeem the property by paying the entire debt
with interest and, in the event that a foreclosure action is pending, the costs
of such action. Those having a statutory right or equity of redemption must be
made parties and duly summoned to the foreclosure action in order for their
statutory right or equity of redemption to be barred.
In Connecticut a court in its discretion may order either a foreclosure by
judicial sale or strict foreclosure. Generally, Connecticut courts grant strict
foreclosure unless the court upon the motion of a party or upon its own motion
determines that the net value of the mortgaged property is materially in excess
of the debt being foreclosed. If a court orders strict foreclosure, it will
establish a "law day" for each defendant in the foreclosure action. The period
of time between the entry of the judgment of foreclosure and the first law day
will be set by the court. The first law day will be for the owner of the
mortgaged property, and then, in sequence, there will be a law day for each
party having a lien on, or other interest in, the mortgaged property which is
junior to the foreclosing mortgagee's interest, in inverse order of their
priority. Unless a party assigned a prior law day redeems by paying the debt due
the foreclosing mortgagee in full, each party will have the right on his law day
to redeem the mortgaged property by paying off the foreclosing mortgagee; after
redemption, the redeeming party will own the mortgaged property subject to any
other liens or interests as to which a law day has not passed. If a party fails
to redeem on his law day, his rights in the mortgaged property are extinguished.
If no party redeems, the foreclosing mortgagee becomes the owner of the
mortgaged property, subject to other liens or interests which are prior to the
mortgage foreclosed or as to which the holders thereof were not parties to the
foreclosure action. If the court orders foreclosure by sale rather than strict
foreclosure, a committee is appointed by the court to sell the mortgaged
property at auction. The proceeds of the sale will then be distributed first to
pay the costs of the sale and then to satisfy the debts of the parties in the
order of their priority to the extent the proceeds permit.
Upon foreclosure of a Connecticut mortgage, a mortgagor who is unemployed or
under-employed may, in certain circumstances, be granted a stay of the
foreclosure proceedings not to exceed six months, and a restructuring of the
mortgage debt to add unpaid interest and certain other charges to the
outstanding principal amount of the debt. The total amount of the restructured
debt may not exceed the larger of the original mortgage debt or 90% of the fair
market value at the time of restructuring and the restructured payments must be
made over the remaining portion of the original term of the mortgage.
In California, foreclosure can be judicial or nonjudicial. The primary
distinction between a judicial and a nonjudicial foreclosure is that in the case
of a judicial sale a deficiency judgment may be obtained while in the case of
the latter it may not. However, because of anti-deficiency legislation with
respect to purchase-money deeds of trust, the Issuer will, in almost all
instances, pursue nonjudicial foreclosure. A second difference between judicial
and nonjudicial foreclosure is that in the case of the former the trustor may
redeem the property by paying the amount bid at the sale for a period of three
months or one year after the sale, depending upon whether the proceeds of the
sale were sufficient to pay the lender in full, and the purchaser at the sale,
whether it be the lender or a third party, may not have possession of the
property until expiration of the redemption period.
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Following the entry of judgment in judicial foreclosure, the clerk of the
court issues a writ of special execution directing the sheriff to sell the
subject property at a sheriff's sale. Following the sheriff's sale, the
mortgagor has the right to redeem the property by paying the amount bid at the
sheriff's sale plus statutory interest (a) if the property is both abandoned and
not used primarily for agricultural or grazing purposes, within thirty days of
the date of the sheriff's sale, or (b) if the property is not abandoned or is
used primarily for agricultural or grazing purposes, within six months after the
date of the sheriff's sale. If the mortgagor does not redeem, the senior
creditor having a lien on the property may redeem within successive five-day
periods after the time allowed the prior lienholder, according to the priority
of liens.
While a lender may accept a deed in lieu of foreclosure instead of pursuing
either judicial or nonjudicial foreclosure, it will be the Issuer's policy not
to do so. By accepting a deed in lieu of foreclosure, the lender takes the
property back subject to all junior liens, which would be extinguished by either
judicial or nonjudicial foreclosure. Even when it can be verified that there are
no junior liens of record, it is not advantageous to accept a deed in lieu of
foreclosure because the trustor or another creditor can challenge the transfer
to the lender, either in bankruptcy court or in state court, as a fraudulent
conveyance if the property was worth more than the amount of the debt. Title
companies usually will not insure against this risk.(1)
In addition, California law can delay foreclosure and collection of late
charges if a lender participates in the sale of credit disability insurance in
connection with one of its loans and the borrower suffers a disability. Citibank
Service Corporation, a subsidiary of CFSB doing business as Citibank Insurance
Agency, sells such insurance in connection with Mortgage Loans originated by
CFSB. Finally, in California, the borrower has until 5 days before a trustee
sale to reinstate the loan.
In Illinois, a borrower in a mortgage foreclosure suit is granted the right
to reinstate a mortgage prior to the expiration of ninety days from the date the
court obtains jurisdiction over all mortgagors in respect of the property
subject to such mortgage foreclosures. In the event such right is exercised, the
delinquent borrower is required to pay only the actual delinquency costs and
reasonable attorney fees, but not any amount which is due as a result of any
acceleration provisions in the note evidencing the debt. As a result, the
borrower may unilaterally reinstate the mortgage loan and terminate the
foreclosure proceedings. In addition, when the lender bids less than the total
debt at the judicial sale, Illinois law provides the borrower with a special
30-day right of redemption in the foreclosure of a single-family residence. Upon
exercise of such right, the borrower need only redeem by paying the amount of
the sale price, plus interest and costs, and not the deficiency.
FORECLOSURE ON SHARES OF COOPERATIVES
The cooperative shares owned by the tenant-stockholder and pledged to the
lender are, in almost all cases, subject to restrictions on transfer as set
forth in the cooperative's Certificate of Incorporation and By-laws, as well as
in the proprietary lease or occupancy agreement, and may be cancelled by the
cooperative for failure by the tenant-stockholder to pay rent or other
obligations or charges owed by such tenant-stockholder, including mechanics'
liens against the cooperative apartment building incurred by such tenant-
stockholder. The proprietary lease or occupancy agreement generally permits the
cooperative to terminate such lease or agreement in the event an obligor fails
to make payments or defaults in the performance of covenants required
thereunder. Typically, the lender and the cooperative enter into a recognition
agreement which establishes the rights and obligations of both parties in the
event of a default by the tenant-stockholder
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(1) Even a transfer at a nonjudicial foreclosure sale has been held by one
federal court of appeals to constitute a fraudulent conveyance. The United
States Court of Appeals for the Ninth Circuit (in which California is
located), however, has held to the contrary. Amendments to the federal
bankruptcy laws addressed this conflict, at least in the bankruptcy context
(as opposed to a state court fraudulent conveyance claim), but not with
complete clarity. It is probable that a court would interpret these
amendments to permit challenging a nonjudicial foreclosure sale as a
fraudulent conveyance if the property is worth significantly more than the
amount paid at the sale.
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on its obligations under the proprietary lease or occupancy agreement. A default
by the tenant-stockholder under the proprietary lease or occupancy agreement
will usually constitute a default under the security agreement between the
lender and the tenant-stockholder.
The recognition agreement generally provides that, in the event that the
tenant-stockholder has defaulted under the proprietary lease or occupancy
agreement, the cooperative will take no action to terminate such lease or
agreement until the lender has been provided with an opportunity to cure the
default. The recognition agreement typically provides that if the proprietary
lease or occupancy agreement is terminated, the cooperative will recognize the
lender's lien against proceeds from a sale of the cooperative apartment,
subject, however, to the cooperative's right to sums due under such proprietary
lease or occupancy agreement. The total amount owed to the cooperative by the
tenant-stockholder, which the lender generally cannot restrict and does not
monitor, could reduce the value of the collateral below the outstanding
principal balance of the cooperative loan and accrued and unpaid interest
thereon.
Recognition agreements also provide that in the event of a foreclosure on a
cooperative loan, the lender must obtain the approval or consent of the
cooperative as required by the proprietary lease before transferring the
cooperative shares or assigning the proprietary lease. Generally, the lender is
not limited in any rights it may have to dispossess the tenant-stockholders.
In New York and New Jersey, foreclosure on the cooperative shares is
accomplished by a sale in accordance with the provisions of Article 9 of the
Uniform Commercial Code (the "UCC") and the security agreement relating to those
shares. Article 9 of the UCC requires that a sale be conducted in a
"commercially reasonable" manner. Whether a foreclosure sale has been conducted
in a "commercially reasonable" manner will depend on the facts in each case. In
determining commercial reasonableness, a court will look to the notice given the
debtor and the method, manner, time, place and terms of the foreclosure.
Generally, a sale conducted according to the usual practice of banks selling
similar collateral will be considered reasonably conducted.
Article 9 of the UCC provides that the proceeds of the sale will be applied
first to pay the costs and expenses of the sale and then to satisfy the
indebtedness secured by the lender's security interest. The recognition
agreement, however, generally provides that the lender's right to reimbursement
is subject to the right of the cooperative corporation to receive sums due under
the proprietary lease or occupancy agreement. If there are proceeds remaining,
the lender must account to the tenant-stockholder for the surplus. Conversely,
if a portion of the indebtedness remains unpaid, the tenant-stockholder is
generally responsible for the deficiency. See "Anti-Deficiency Legislation and
Other Limitations on Lenders" below.
RIGHTS OF REDEMPTION
In some states, after sale pursuant to a deed of trust or foreclosure of a
mortgage, the trustor or mortgagor and 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 nonstatutory right that must be exercised prior to the foreclosure sale. In
some states, redemption may occur only upon payment of the entire principal
balance of the loan, accrued interest and expenses of foreclosure. In other
states, redemption may be authorized if the former borrower pays only a portion
of the sums due. The effect of a statutory right of redemption is to diminish
the ability of the lender to sell the foreclosed property. The right of
redemption would defeat the title of any purchaser from the lender subsequent to
foreclosure or sale under a deed of trust. Consequently, the practical effect of
a right of redemption is to force the lender to retain the property and pay the
expenses of ownership until the redemption period has run. In some states, there
is no right to redeem property after a trustee's sale under a deed of trust or
after a foreclosure action.
ANTI-DEFICIENCY LEGISLATION AND OTHER LIMITATIONS ON LENDERS
Certain states have imposed statutory prohibitions which 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. A deficiency judgment is a personal judgment against the former
borrower equal in most cases to the
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difference between the net amount realized upon the public sale of the real
property and the amount due to the lender. Other statutes 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. Finally, other statutory
provisions limit any deficiency judgment against the former borrower following a
judicial sale to the excess of the outstanding debt over the fair market value
of the property at the time of the public sale. The purpose of these statutes is
generally to prevent a beneficiary or a mortgagee from obtaining a large
deficiency judgment against the former borrower as a result of low or no bids at
the judicial sale.
FOR MORTGAGE LOANS SECURED BY PROPERTY IN NEW YORK. Section 1371 of the New
York Real Property Actions and Proceedings Law provides that no award of a
deficiency judgment can be made unless the court has personal jurisdiction over
the defendant. Moreover, if no motion for a deficiency judgment is made within
90 days of the consummation of the sale by the delivery of the deed to the
purchaser, the proceeds of the foreclosure sale, regardless of the amount, are
deemed in full satisfaction of the mortgage debt and no right to recover any
deficiency in any action or proceeding exists. Section 1301 of the same law
limits the mortgagee's right to bring separate actions for the mortgage debt and
for foreclosure. While the foreclosure action is pending, or after final
judgment for the plaintiff therein, no other action may be commenced or
maintained to recover any part of the mortgage debt without leave of the court
in which the foreclosure action was brought. A deficiency judgment is limited to
an amount equal to the judgment amount in the foreclosure action, less (i) the
fair and reasonable market value of the mortgaged property as of the date of the
foreclosure sale or such nearest earlier date as there shall have been any
market value thereof as determined by the court or (ii) the sale price of the
property at the foreclosure sale, whichever shall be the higher.
Section 254-b of the New York Real Property Law also places a limitation on
the mortgagee with respect to late payment charges. Where the mortgage contains
a provision giving the mortgagee the right to collect a late payment charge on
any installment that has become due and remains unpaid, such charge cannot be
more than 2% of the delinquent installment and cannot be imposed on any
installment paid within 15 days of the due date. In addition, late payment
charges cannot be deducted from the regular installment payments; they must be
separately charged and collected by the mortgagee.
In New York the mortgagee of a loan on a residential leasehold property can
foreclose such mortgage by maintaining a traditional equitable foreclosure
action. Any rent or taxes paid by the mortgagee following default by the
mortgagor may be added to the unpaid balance of the mortgage debt upon
foreclosure. A judgment of foreclosure of a leasehold, however, results in a
public auction only if the mortgage expressly so provides, whereas judgment of
foreclosure on a real property mortgage would result in a public auction in all
cases. In the absence of an express provision, in a leasehold mortgage, the
mortgagee can only recover a money judgment. In this event, the mortgagee may
follow traditional enforcement procedures. In addition to enforcement of
judgment remedies, the leasehold interest may then be subject to a post-judgment
sale pursuant to an execution.
FOR MORTGAGE LOANS SECURED BY PROPERTY IN NEW JERSEY. Under New Jersey law
(N.J.S.A. 2A:50-1 et seq.) an action for deficiency judgment must be commenced
within three months from the date of the foreclosure sale of a mortgaged
premises. In a deficiency action, judgment will be rendered only for the balance
due on the debt and interest and costs of the action. The obligor under the note
may file an answer in the action for deficiency, disputing the amount of the
deficiency sued for. The court will determine the amount of the deficiency by
deducting from the debt the amount determined as the fair market value of the
premises.
FOR MORTGAGE LOANS SECURED BY PROPERTY IN CONNECTICUT. If the mortgagee took
title to the mortgaged property under strict foreclosure but the mortgaged
property had value lower than the debt, Connecticut law permits the mortgagee to
move for a deficiency judgment in the amount of the difference within thirty
days after the redemption period has expired. If there was foreclosure by sale
and the proceeds of sale were insufficient to discharge the mortgage debt in
full, the mortgagee may obtain a deficiency judgment for the
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difference. If, however, the sales price is less than the value of the mortgaged
property as found by the court, one half of the difference between such value
and the sales price must be credited against the deficiency claim of the person
who sought foreclosure by sale.
FOR MORTGAGE LOANS SECURED BY PROPERTY IN CALIFORNIA. The rule in California
commonly known as the "one-action rule" provides that a lender must include all
claims in one action and must foreclose its security before seeking to impose
any personal liability. The anti-deficiency rules limit the recovery of personal
judgments. If a foreclosure is conducted by way of a nonjudicial foreclosure
sale, California law prohibits the recovery of a deficiency judgment. In
addition, a deficiency judgment is prohibited even if judicial foreclosure is
pursued when a lender finances the purchase price of residential real property
and the property has four or fewer units and is occupied by the purchaser.
Because most mortgage loans fall into this category, the Issuer intends to
pursue nonjudicial foreclosure. While it is possible to sue the borrower for any
fraud or waste, it generally is not practical to do so.
FOR MORTGAGE LOANS SECURED BY PROPERTY IN TEXAS. In Texas most foreclosures
are non-judicial. However, it is necessary to give both notice of intent to
accelerate as well as notice of acceleration of the installment note unless
proper waiver language is included in the note. If the real property is used as
the debtor's residence, the debtor must be given at least 20 days to cure the
default before the entire debt is due and notice of sale is given. Any suit for
a deficiency judgment must be brought within 2 years after the date of
foreclosure. During the pendency of such suit, the debtor has the right to
request the court to determine the fair market value of the property foreclosed
upon. In the event the court determines that the fair market value of the
property is greater than the bid price paid at foreclosure, the debtor is
entitled to an offset against the deficiency claim in the amount by which the
fair market value exceeds the bid price.
FOR MORTGAGE LOANS SECURED BY PROPERTY IN ILLINOIS. In Illinois, if the
price at the foreclosure sale is less than the total amount adjudicated due in
the judgment of foreclosure plus costs incurred at the time of judicial sale,
the mortgagee may obtain deficiency judgment against the mortgagor provided that
there is personal jurisdiction over the mortgagor.
FOR MORTGAGE LOANS SECURED BY PROPERTY IN FLORIDA. Under Florida law, if the
amount bid for the mortgaged property at the foreclosure sale is less than the
debt, the mortgagee may seek a deficiency judgment, either as part of the
foreclosure action or in a separate action on the note. The decision whether to
grant a deficiency judgment sought as part of the foreclosure action lies within
the sound judicial discretion of the court. No award of a deficiency judgment
can be made, either as part of or separately from the foreclosure action, unless
the court has personal jurisdiction over the defendant.
FOR COOPERATIVE LOANS. Generally, Article 9 of the UCC governs foreclosure
on cooperative shares and the related proprietary lease or occupancy agreement
in New York or New Jersey. Some courts have interpreted section 9-504 of the UCC
to prohibit a deficiency award unless the creditor establishes that the sale of
the collateral (which, in the case of a Cooperative Loan, would be the shares of
the cooperative and the related proprietary lease or occupancy agreement) was
conducted in a commercially reasonable manner.
Section 254-b of the New York Real Property Law relating to late payment
charges, as discussed above, also applies to a note evidencing a cooperative
loan.
FOR ALL MORTGAGE LOANS. In addition to laws limiting or prohibiting
deficiency judgments, numerous other statutory provisions, including the federal
bankruptcy laws and state laws affording relief to debtors, may interfere with
or affect the ability of the secured mortgage lender to realize upon collateral
and/or enforce a deficiency judgment. For example, with respect to federal
bankruptcy law, the filing of a petition acts as a stay against the enforcement
of remedies for collection of a debt. Moreover, a court with federal bankruptcy
jurisdiction may permit a debtor through his or her Chapter 13 rehabilitative
plan to cure a monetary default with respect to a mortgage loan on a debtor's
residence by paying arrearages within a reasonable time period and reinstating
the original mortgage loan payment schedule even though the lender accelerated
the mortgage loan and final judgment of foreclosure had been entered in state
court (provided no sale of the
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property had 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 mortgage loan default by paying arrearages over a number of years.
Courts with federal bankruptcy jurisdiction have also indicated that the
terms of a mortgage loan secured by property of the debtor may be modified if
the borrower has filed a petition under Chapter 11. These courts have suggested
that such modifications may include reducing the amount of each monthly payment,
changing the rate of interest, altering the repayment schedule, and reducing the
lender's security interest to the value of the residence, thus leaving the
lender a general unsecured creditor for the difference between the value of the
residence and the outstanding balance of the loan. Most borrowers, however,
choose to file either under Chapter 7, in which the borrower's assets are
liquidated, or under Chapter 13, in which the borrower's debts are adjusted to
allow him or her to repay them over a period of three to five years. Under
Chapter 13, the terms of a mortgage loan secured by property that is not the
principal residence of the debtor may be modified. Courts with federal
bankruptcy jurisdiction have suggested that such modifications may include
reducing the amount of each monthly payment, changing the rate of interest and
altering the repayment schedule, thus leaving the lender a general unsecured
creditor for the difference between the value of the residence and the
outstanding balance of the loan. Federal bankruptcy law and United States
Supreme Court decisions indicate that the foregoing modifications could not be
applied to the terms of a loan secured by property that is the principal
residence of the debtor. Courts similarly may be able to modify the terms of a
Cooperative Loan, but to our knowledge no case law exists on this point. In all
cases, the secured creditor is entitled to the value of its security plus
post-petition interest, attorneys' fees and costs to the extent the value of the
security exceeds the debt.
The Code provides priority to certain tax liens over the lien of the
mortgage. This may have the effect of delaying or interfering with the
enforcement of rights in respect of a defaulted mortgage loan. In addition,
substantive requirements are imposed upon mortgage lenders in connection with
the origination and the servicing of mortgage loans by numerous federal and some
state consumer protection laws. The laws include the federal Truth-in-Lending
Act, Real Estate Settlement Procedures Act, Equal Credit Opportunity Act, Fair
Credit Billing Act, Fair Credit Reporting Act, and related statutes. These
federal laws impose specific statutory liabilities upon lenders who originate
mortgage loans and who fail to comply with the provisions of the law. In some
cases, this liability may affect assignees of the mortgage loans.
ENFORCEABILITY OF CERTAIN PROVISIONS, PREPAYMENT CHARGES AND PREPAYMENTS
Unless the Prospectus Supplement indicates otherwise, Mortgage Loans
representing at least 90% of the aggregate Adjusted Balance of the Mortgage
Loans in a Fixed Rate Pool will contain due-on-sale clauses. Generally, ARMs in
an ARM Pool will contain due-on-sale clauses permitting the mortgagee to
accelerate only in situations where its security may be impaired. These clauses
permit the lender to accelerate the maturity of the loan if the borrower sells,
transfers, or conveys the property or, in the case of a land trust, the
beneficial interest therein is transferred. The enforceability of these clauses
has been impaired in various ways in certain states by statute or decisional
law. The ability of mortgage lenders and their assignees and transferees to
enforce due-on-sale clauses was addressed by the Garn-St Germain Depository
Institutions Act of 1982 (the "Garn-St Germain Act") which was enacted on
October 15, 1982. This legislation, subject to certain exceptions, preempts
state constitutional, statutory and case law that prohibits the enforcement of
due-on-sale clauses. Exempted from this preemption are mortgage loans
(originated other than by federal savings and loan associations and federal
savings banks) that were made or assumed during the period beginning on the date
certain states ("Window Period States"), by statute or final appellate court
decision having statewide effect, prohibited the exercise of due-on-sale clauses
and ending on October 15, 1982 ("Window Period Loans"). Due-on-sale clauses
contained in mortgage loans originated by federal savings and loan associations
or federal savings banks are fully enforceable pursuant to regulations of the
Federal Home Loan Bank Board (now OTS) which preempt state law restrictions on
the enforcement of due-on-sale clauses. Mortgage loans originated by such
institutions are therefore not deemed to be Window Period Loans.
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Though neither the Garn-St Germain Act nor the Federal Home Loan Bank Board
regulations promulgated thereunder actually names the Window Period States,
FHLMC has taken the position, in prescribing mortgage loan servicing standards
with respect to mortgage loans which it has purchased, that the Window Period
States are: Arizona, Arkansas, California, Colorado, Florida, Georgia, Iowa,
Michigan, Minnesota, New Mexico, Utah and Washington. In regulations issued on
November 8, 1983, the Comptroller of the Currency indicated that certain
mortgage loans which were originated by national banks prior to October 15, 1982
and which were secured by property located in the states listed above were
Window Period Loans. These regulations limit the applicability of state law
restrictions on the enforcement of due-on-sale clauses with respect to Window
Period Loans originated by national banks. The National Credit Union
Administration issued final regulations on December 3, 1982, providing that
due-on-sale clauses contained in Window Period Loans originated by federal
credit unions are fully enforceable, notwithstanding state law restrictions.
Under the Garn-St Germain Act, unless a Window Period State took action by
October 15, 1985, the end of the Window Period, to further regulate enforcement
of due-on-sale clauses, such clauses would become enforceable even in Window
Period Loans. Four of the Window Period States (Minnesota, Michigan, New Mexico
and Utah) have taken actions which restrict the enforceability of due-on-sale
clauses in Window Period Loans beyond October 15, 1985. The actions taken vary
among such states. The Garn-St Germain Act also set forth nine specific
instances in which no mortgage lender covered by the Garn-St Germain Act may
exercise a due-on-sale clause, notwithstanding the fact that a transfer of the
property may have occurred. The inability to enforce a due-on-sale clause may
result in a Mortgage Loan bearing an interest rate below the current market rate
being assumed by a new home buyer rather than being paid off, which may have an
impact upon the average life of the Mortgage Loans underlying a Series and the
number of such Mortgage Loans which may be outstanding until maturity.
Upon foreclosure, courts have imposed 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 for 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 foreclose if the default under the mortgage instrument is not
monetary, such as the borrower's failure to adequately maintain the property or
the borrower's execution of a second mortgage or deed of trust 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 deeds of trust or mortgages 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 the sale by a trustee under a deed of trust, or under a mortgage having a
power of sale, does not involve sufficient state action to afford constitutional
protections to the borrower.
All conventional single-family Mortgage Loans originated by Citibank may be
prepaid in full or in part at any time, without penalty.
New Jersey statutes (N.J.S.A. 46:10B-2,3) provide that most New Jersey
residential mortgage loans may be prepaid in full at any time without penalty,
and that partial prepayments may be made in an amount not exceeding 33 1/3% of
the face amount of the mortgage loan in any six-month period without penalty.
California law regarding prepayment penalties is very complex. Whether or
not a lender can enforce a prepayment penalty depends in the first instance upon
whether the documents give the borrower the right to prepay or the lender the
right to charge a prepayment penalty. Other considerations are the date the loan
was originated, the amount of the loan, whether the loan was a fixed-rate or a
variable-rate loan, the kind of property securing the loan and when the borrower
wishes to make the prepayment. Federal savings and loan law prohibits the
imposition of prepayment penalties upon the exercise of a due-on-sale clause or
the failure to approve an assumption by a qualified transferee and the
subsequent transfer by the borrower of the property to that transferee and
prepayment of the loan in full.
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<PAGE>
Beginning on January 15, 1991, CFSB's California branches' standard forms
for 15-year fixed-rate tiered-payment Mortgage Loans provide for a penalty for
full or partial prepayment of up to six months' interest during the first 12
months following origination.
In Illinois, whenever the annual rate of interest exceeds 8% for a loan
secured by residential real estate, it is unlawful to provide for a prepayment
penalty.
Most conventional single-family mortgage loans originated by the Florida
branches of CFSB may be prepaid in full or in part without penalty. The
regulations of the Federal Home Loan Bank Board prohibit the imposition of a
prepayment penalty or equivalent fee for or in connection with the acceleration
of a loan by exercise of a due-on-sale clause. 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 to a refinancing
lender.
Under New York law, a prepayment penalty may not be charged on any loan
secured by a one-to six-family residence occupied by the owner or certificates
of stock in a cooperative corporation, where the interest rate exceeds 6% per
annum, if prepayment is made on or after one year from the making of the loan.
APPLICABILITY OF USURY LAWS
Title V of the Depository Institutions Deregulation and Monetary Control Act
of 1980, enacted in March 1980 ("Title V"), provides that state usury
limitations shall not apply to certain types of residential first mortgage loans
originated by certain lenders after March 31, 1980. A similar federal statute
was in effect with respect to mortgage loans made during the first three months
of 1980. The OTS as successor to the Federal Home Loan Bank Board is authorized
to issue rules and regulations and to publish interpretations governing
implementation of Title V. 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. In
addition, even where Title V is not so rejected, any state is authorized by the
law to adopt a provision limiting discount points or other charges on mortgage
loans covered by Title V. Certain states have taken action to reimpose interest
rate limits and/or to limit discount points or other charges.
The Issuer has been advised by counsel that a court interpreting Title V
would hold that mortgage loans related to a Series originated on or after
January 1, 1980 are subject to federal preemption. Therefore, in a state that
has not taken the requisite action to reject application of Title V or to adopt
a provision limiting discount points or other charges prior to origination of
such mortgage loans, any such limitation under such state's usury law would not
apply to such mortgage loans.
In any state in which application of Title V has been expressly rejected or
a provision limiting discount points or other charges is adopted, no mortgage
loans related to a Series originated after the date of such state action will be
eligible for inclusion in a Pool if such mortgage loans bear interest or provide
for discount points or charges in excess of permitted levels. No mortgage loan
related to a Series originated prior to January 1, 1980 will bear interest or
provide for discount points or charges in excess of permitted levels.
ADJUSTABLE INTEREST RATE MORTGAGE LOANS
Adjustable interest rate mortgage loans originated by non-federally
chartered lenders have historically been subject to a variety of restrictions.
Such restrictions differed from state to state, resulting in difficulties in
determining whether a particular alternative mortgage instrument originated by a
state-chartered lender complied with applicable law. These difficulties were
alleviated substantially as a result of the enactment of Title VIII of the
Garn-St Germain Act ("Title VIII"). Title VIII provides that, notwithstanding
any state law to the contrary, state-chartered banks may originate "alternative
mortgage instruments" (including adjustable rate mortgage loans) in accordance
with regulations promulgated by the Comptroller of the Currency with respect to
origination of alternative mortgage instruments by national banks;
state-chartered credit unions may originate alternative mortgage instruments in
accordance with regulations promulgated by the National Credit Union
Administration with respect to origination of alternative mortgage instruments
by federal credit unions and all other non-federally chartered housing
creditors, including state-chartered savings and loan associations; and
state-chartered savings banks and mortgage banking companies may
A-28
<PAGE>
originate alternative mortgage instruments in accordance with the regulations
promulgated by the Federal Home Loan Bank Board (now OTS) with respect to
origination of alternative mortgage instruments by federal savings and loan
associations. Title VIII provides that any state may reject applicability of the
provisions of Title VIII by adopting, prior to October 15, 1985, a law or
constitutional provision expressly rejecting the applicability of such
provisions. Certain states have taken such action.
The Issuer has been advised by its counsel that it is their opinion that a
court interpreting Title VIII would hold that adjustable interest rate mortgage
loans which were originated by state-chartered lenders before the date of
enactment of any state law or constitutional provision rejecting applicability
of Title VIII would not be subject to state laws imposing restrictions or
prohibitions on the ability of state-chartered lenders to originate alternative
mortgage instruments.
All of the ARMs which were originated by a state-chartered lender after the
enactment of a state law or constitutional provision rejecting the applicability
of Title VIII complied with applicable state law. All of the ARMs which were
originated by federally chartered lenders or which were originated by
state-chartered lenders prior to enactment of a state law or constitutional
provision rejecting the applicability of Title VIII were originated in
compliance with all applicable federal regulations.
A-29
<PAGE>
APPENDIX B
THE AGENCY CERTIFICATES
This Appendix describes GNMA, FHLMC, FNMA, their respective Mortgage
Certificates, the underlying mortgage loans and certain related matters.
GNMA
The Government National Mortgage Association ("GNMA") is a wholly-owned
corporate instrumentality of the United States within the Department of Housing
and Urban Development. Section 306(g) of Title III of the National Housing Act
of 1934, as amended (the "Housing Act"), authorizes GNMA to guarantee the timely
payment of the principal of and interest on certificates ("GNMA Certificates")
that are based on and backed by a pool of mortgage loans insured by the Federal
Housing Administration ("FHA") under the Housing Act ("FHA Loans") or Title V of
the Housing Act of 1949, or guaranteed by the United States Veterans
Administration ("VA") under the Servicemen's Readjustment Act of 1944, as
amended, or Chapter 37 of Title 38, United States Code or by pools of other
eligible mortgage loans.
Section 306(g) of the Housing Act provides that "the full faith and credit
of the United States is pledged to the payment of all amounts which may be
required to be paid under any guaranty under this subsection." In order to meet
its obligations under such guaranty, GNMA is authorized, under Section 306(d) of
the Housing Act, to borrow from the United States Treasury with no limitations
as to amount.
GNMA CERTIFICATES
All of the GNMA Certificates will be "fully modified pass-through"
mortgage-backed certificates issued and serviced by issuers approved by
GNMA--approved issuers. The mortgage loans underlying GNMA Certificates may
consist of FHA Loans secured by mortgages on one-to four-family residential
properties or multifamily residential properties, mortgage loans partially
guaranteed by the VA ("VA Loans"), and other mortgage loans eligible for
inclusion in mortgage pools underlying GNMA Certificates which may be level
payment mortgage loans (including "buydown" mortgage loans) or graduated payment
mortgage loans each secured by a first lien on a one-to four-family residential
property.
Except in the case of GNMA Certificates backed by graduated payment mortgage
loans, each GNMA Certificate provides for the payment by or on behalf of the
issuer of the GNMA Certificate to the registered holder of such GNMA Certificate
of monthly payments of principal and interest equal to the registered holder's
proportionate interest in the aggregate amount of the monthly scheduled
principal and interest payments on each underlying eligible mortgage loan, less
servicing and guaranty fees aggregating the excess of the interest on such
eligible mortgage loans over the pass-through rate of such GNMA Certificate. In
addition, each payment to a GNMA Certificateholder will include proportionate
pass-through payments to such holder of any prepayments of principal of the
mortgage loan underlying the GNMA Certificate, and the holder's proportionate
interest in the remaining principal balance in the event of a foreclosure or
other disposition of any such mortgage loan.
GNMA Certificates may be issued under either the GNMA I program ("GNMA I
Certificates") or the GNMA II program ("GNMA II Certificates"). Although the
holder of a GNMA Certificate has essentially the same rights with respect to a
GNMA Certificate issued under either program, a principal difference between the
two programs is that under the GNMA I program payments will be made directly by
the issuer of the GNMA I Certificate to the registered holder, while under the
GNMA II program payments will be made to the registered holder through Chemical
Bank as paying agent. A further difference between the two programs is that
under the GNMA I program single issuer approach, an individual GNMA issuer
assembles a pool of mortgages against which it issues and markets GNMA I
Certificates, while under the GNMA II program multiple issuer pools may be
formed through the aggregation of loan packages of more than one GNMA issuer.
Under this option, packages submitted by various GNMA issuers for a particular
issue date and interest rate are aggregated into a single pool which backs a
single issue of GNMA II Certificates. However, single issuer pools may be formed
under the GNMA II program as well.
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<PAGE>
If specified in the related Prospectus Supplement, GNMA Certificates
included in the Pool for a Series of CitiCertificates may be held on deposit at
the Participants Trust Company ("PTC"), a limited trust company organized under
the banking laws of the State of New York. PTC operates a private sector,
industry owned depository and settlement facility for book-entry transfer of
interests in GMNA Certificates. Distribution of principal of and interest on
such GNMA Certificate held through PTC will be credited by PTC to the PTC
participant to whose account the GNMA is credited.
All mortgage loans underlying a particular GNMA I Certificate must have the
same annual interest rate (except for pools of mortgages secured by mobile
homes). The annual interest rate on each GNMA I Certificate is 50 basis points
less than the annual interest rate on the mortgage loans included in the pool of
mortgages backing such GNMA I Certificate.
Mortgages underlying a particular GNMA II Certificate may have annual
interest rates that vary from each other by up to 100 basis points. The annual
interest rate on each GNMA II Certificate will be between 50 basis points and
150 basis points per annum less than the highest annual interest rate on the
mortgage loans included in the pool of mortgages backing such GNMA II
Certificate.
All of the GNMA Certificates included in the Pool for a Series of
Certificates will have original maturities of not more than 30 years (but may
have original maturities of substantially less than 30 years). In general, GNMA
requires that at least 90% of the original principal amount of the mortgage pool
underlying a GNMA Certificate must be mortgage loans with maturities of 20 years
or more. However, in certain circumstances GNMA Certificates may be backed by
pools of mortgage loans at least 90% of the original principal amount of which
have original maturities of at least 15 years.
Each mortgage loan underlying a GNMA Certificate, at the time GNMA issues
its guarantee commitment, must be originated no more than 12 months prior to
such commitment date.
The GNMA Certificates do not constitute a liability of, or evidence any
recourse against, the issuer of the GNMA Certificates, the issuer of a Series of
CitiCertificates or any affiliates thereof, and the only recourse of a
registered holder of GNMA Certificates, such as the Trustee, is to enforce the
guaranty of GNMA.
GNMA will have approved the issuance of each of the GNMA Certificates
included in the Pool for a Series of CitiCertificates in accordance with a
guaranty agreement between GNMA and the servicer of the mortgage loans
underlying such GNMA Certificate, which is the issuer of the GNMA Certificates.
Pursuant to such agreement, such issuer is required to advance its own funds in
order to make timely payments of all amounts due on the GNMA Certificate, even
if the payments received by such issuer on the mortgage loans backing the GNMA
Certificate are less than the amounts due on such GNMA Certificate. If such
issuer is unable to make payments on a GNMA Certificate as it becomes due, it
must promptly notify GNMA and request GNMA to make such payment. Upon such
notification and request, GNMA will make such payments directly to the
registered holder of the GNMA Certificate. In the event no payment is made by
such issuer and such issuer fails to notify and request GNMA to make such
payment, the registered holder of the GNMA Certificate has recourse only against
GNMA to obtain such payment. The Trustee or its nominee, as registered holder of
the GNMA Certificates included in the Pool for a Series of CitiCertificates, is
entitled to proceed directly against GNMA under the terms of the guaranty
agreement or contract relating to such GNMA Certificates for any amounts that
are not paid when due under each GNMA Certificate.
The GNMA Certificates included in the Pool for a Series of CitiCertificates
may have other characteristics and terms, different from those described above,
so long as such GNMA Certificates and underlying mortgage loans meet the
criteria of the rating agency or agencies rating the CitiCertificates of such
Series. Such GNMA Certificates and underlying mortgage loans will be described
in the related Prospectus Supplement.
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<PAGE>
FHLMC
The Federal Home Loan Mortgage Corporation ("FHLMC") is a corporate
instrumentality of the United States created pursuant to Title III of the
Emergency Home Finance Act of 1970, as amended (the "FHLMC Act"). FHLMC's common
stock is owned by the Federal Home Loan Banks. FHLMC was established primarily
for the purpose of increasing the availability of mortgage credit for the
financing of urgently needed housing. It seeks to provide an enhanced degree of
liquidity for residential mortgage investments primarily by assisting in the
development of secondary markets for conventional mortgages. The principal
activity of FHLMC currently consists of the purchase of first lien conventional
residential mortgage loans or participation interests in such mortgage loans and
the resale of the mortgage loans so purchased in the form of mortgage
securities. All mortgage loans purchased by FHLMC must meet certain standards
set forth in the FHLMC Act. FHLMC is confined to purchasing, so far as
practicable, conventional mortgage loans and participation interests therein
which it deems to be of such quality, type and class that generally meet the
purchase standards imposed by private institutional mortgage investors.
FHLMC CERTIFICATES
Each FHLMC Certificate represents an undivided interest in a group of
mortgages ("FHLMC Certificate Group").
Mortgage loans underlying the FHLMC Certificates included in the Pool for a
Series of CitiCertificates will consist of fixed rate mortgage loans with
original terms to maturity of between 10 and 30 years. Each such mortgage loan
must meet the applicable standards set forth in the FHLMC Act. A FHLMC
Certificate Group may include whole loans, participation interests in whole
loans and undivided interests in whole loans and/or participations comprising
another FHLMC Certificate Group.
With respect to certain FHLMC Certificates ("Original PCs"), the period
between the first day of the month in which the Certificate is issued and the
initial payment date in respect of the Certificate is approximately 75 days.
With respect to other FHLMC Certificates ("Gold PCs"), the period between the
first day of the month in which the Certificate is issued and the initial
payment date in respect of the Certificate is approximately 45 days. In addition
to the shorter payment delay, Gold PCs differ from Original PCs in that the
record date for payments of principal and interest on a Gold PC is the last day
of the month immediately preceding the month in which the related payment date
occurs, whereas the record date for payments of principal and interest on an
Original PC is the last day of the second month preceding the month in which the
payment date occurs.
FHLMC guarantees to each registered holder of a FHLMC Certificate the timely
payment of interest at the rate provided for by such FHLMC Certificate on the
registered holder's pro rata share of the unpaid principal balance outstanding
on the related mortgage loans, whether or not received. FHLMC also guarantees to
each registered holder of a FHLMC Certificate the ultimate collection by such
holder of all principal on the related mortgage loans, without any offset or
deduction, to the extent of such holder's pro rata share thereof, but does not,
except with respect to Gold PCs or if and to the extent specified in the
Prospectus Supplement relating to a Series of CitiCertificates secured by
Original PCs, guarantee the timely payment of scheduled principal. Pursuant to
its guarantees, FHLMC indemnifies holders of FHLMC Certificates against any
diminution in principal by reason of charges for property repairs, maintenance
and foreclosure. FHLMC may remit the amount due on account of its guarantee of
collection of principal at any time after default on an underlying mortgage
loan, but not later than (i) 30 days following foreclosure sale, (ii) 30 days
following payment of the claim by any mortgage insurer, or (iii) 30 days
following the expiration of any right of redemption, whichever occurs later, but
in any event no later than one year after demand has been made upon the
mortgagor for accelerated payment of principal. In taking actions regarding the
collection of principal after default on the mortgage loans underlying FHLMC
Certificates, including the timing of demand for acceleration, FHLMC reserves
the right to exercise its servicing judgment with respect to the mortgages in
the same manner as for mortgages which it has purchased but not sold.
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<PAGE>
FHLMC Certificates are not guaranteed by the United States or by any Federal
Home Loan Bank and do not constitute debts or obligations of the United States
or any Federal Home Loan Bank. The obligations of FHLMC under its guarantee are
obligations solely of FHLMC and are not backed by, nor entitled to, the full
faith and credit of the United States.
Registered holders of FHLMC Certificates are entitled to receive their
monthly pro rata share of all principal payments on the underlying mortgage
loans received by FHLMC, including any scheduled principal payments, full and
partial payments of principal, and principal received by FHLMC by virtue of
condemnation, insurance or foreclosure, and repurchases of the mortgages by
FHLMC or the sellers of the mortgages. FHLMC is required to remit to each
registered FHLMC Certificateholder its pro rata share of principal payments on
the underlying mortgage loans, interest at the FHLMC Certificate rate and any
other sums (such as prepayment fees), within 60 days of the date on which such
payments are deemed to have been received by FHLMC.
Under FHLMC's Cash Program, prior to June 1987 there was no limitation on
the amount by which interest rates on the mortgage loans underlying a FHLMC
Certificate may exceed the interest rate on the FHLMC Certificate. Under such
program, FHLMC purchases groups of whole mortgage loans from sellers at
specified percentages of their unpaid principal balances, adjusted for accrued
or prepaid interest, which, when applied to the interest rate of the mortgage
loans purchased, results in the yield (expressed as a percentage) required by
FHLMC. The required yield, which includes a minimum servicing fee retained by
the servicer, is calculated using the outstanding principal balance of the
mortgage loans, an assumed term and a prepayment period as determined by FHLMC.
No loan is purchased by FHLMC at greater than 100% of the outstanding principal
balance. The range of interest rates on the mortgage loans in a FHLMC
Certificate Goup under the Cash Program formed prior to June 1987 will vary
since mortgage loans are purchased and assigned to a FHLMC Certificate Group
based upon their yield to FHLMC rather than on the interest rate on the mortgage
loans. Since June 1987, the range of interest rates on the mortgage loans and
participations in a FHLMC Certificate Group comprised of 15-and 30-year
fixed-rate single family mortgage loans bought by FHLMC under the Cash Program
is restricted to one percentage point. Moreover, the lowest coupon on any
mortgage loan in the FHLMC Certificate Group is greater than or equal to the
annual pass-through rate on the related FHLMC Certificate, and the highest
mortgage interest rate is not more than two percentage points above such
pass-through rate. Under FHLMC's Guarantor Program, the annual pass-through rate
on a FHLMC Certificate is established based upon the lowest interest rate on the
underlying mortgage loans, minus a minimum servicing fee and the amount of
FHLMC's management and guarantee income as agreed upon between the seller and
FHLMC. For certain FHLMC Certificate Groups formed under the Guarantor Program
prior to December 1987, the range between the lowest and highest annual interest
rates on the mortgage loans in a FHLMC Certificate Group may not exceed two
percentage points; beginning in December 1987, such range may not exceed one
percentage point.
FHLMC Certificates duly presented for registration of transfer on or before
the last business day of a month are registered effective as of the first day of
that month. The first remittance check to a registered holder of a FHLMC
Certificate will be mailed so as to be received normally by the 15th day of the
second month following the month in which the purchaser became a registered
holder of the FHLMC Certificate. Thereafter checks will be mailed monthly to the
registered holder so as to be received normally by the 15th day of each month.
The Federal Reserve Bank of New York maintains book-entry accounts with respect
to FHLMC Certificates sold by FHLMC on or after January 2, 1985, and makes
payments of interest and principal each month to the registered holders thereof
in accordance with such holders' instructions.
See "Additional Information" for the availability of further information
respecting FHLMC and FHLMC Certificates.
The FHLMC Certificates included in the Pool for a Series of CitiCertificates
may have other characteristics and terms, different from those described above,
so long as such FHLMC Certificates and underlying mortgage loans meet the
criteria of the rating agency or agencies rating the CitiCertificates of such
Series. Such FHLMC Certificates and underlying mortgage loans will be described
in the related Prospectus Supplement.
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<PAGE>
FNMA
FNMA is a federally chartered and privately owned corporation organized and
existing under the Federal National Mortgage Association Charter Act, as amended
(the "Charter Act"). FNMA was originally established in 1938 as a United States
government agency to provide supplemental liquidity to the mortgage market and
was transformed into a stockholder-owned and privately managed corporation by
legislation enacted in 1968.
FNMA provides funds to the mortgage market primarily by purchasing home
mortgage loans from lenders, thereby replenishing their funds for additional
lending. FNMA acquires funds to purchase loans from many capital market
investors that may not ordinarily invest in mortgage loans, thereby expanding
the total amount of funds available for housing and, by operating nationwide,
FNMA helps to redistribute mortgage funds from capital-surplus to capital-short
areas. In addition, FNMA issues mortgage-backed securities primarily in exchange
for pools of mortgage loans from lenders.
Although the Secretary of the Treasury of the United States has
discretionary authority to advance funds to FNMA, neither the United States
government nor any agency or instrumentality thereof is obligated to assume
FNMA's obligations or assist FNMA in any manner.
FNMA CERTIFICATES
FNMA Certificates represent fractional undivided interests in a pool of
mortgage loans formed by FNMA. Each mortgage loan must meet the applicable
standards of the FNMA purchase program. Mortgage loans comprising a pool are
either provided by FNMA from its own portfolio or purchased pursuant to the
criteria of the FNMA purchase program.
Mortgage loans underlying FNMA Certificates included in the Pool for a
Series of CitiCertificates will consist of conventional mortgage loans, FHA
Loans or VA Loans. The original maturities of substantially all of the
conventional, level payment mortgage loans underlying a FNMA Certificate are
expected to be between either 8 and 15 years or 20 and 30 years. The original
maturities of substantially all of the level payment FHA Loans or VA Loans are
expected to be 30 years.
Mortgage loans underlying a FNMA Certificate may have annual interest rates
that vary by as much as two percentage points from each other. The rate of
interest payable on a FNMA Certificate is equal to the lowest interest rate of
any mortgage loan in the related pool, less a specified minimum annual
percentage representing servicing compensation and FNMA's guaranty fee. Under a
regular servicing option (pursuant to which the mortgagee or other servicer
assumes the entire risk of foreclosure losses), the annual interest rates on the
mortgage loan underlying a FNMA Certificate will be between 50 basis points and
250 basis points greater than the annual interest rate for the FNMA
Certificates; and under a special servicing option (pursuant to which FNMA
assumes the entire risk for foreclosure losses), the annual interest rates on
the mortgage loans underlying a FNMA Certificate will generally be between 55
basis points and 255 basis points greater than the annual FNMA Certificate
interest rate.
FNMA guarantees to each registered holder of a FNMA Certificate that it will
distribute amounts representing scheduled principal and interest (at the rate
provided for by such FNMA Certificate) on the mortgage loans in the pool
represented by such FNMA Certificate, whether or not received, and the full
principal amount of any foreclosed or other finally liquidated mortgage loan,
whether or not such principal amount is actually recovered. The obligations of
FNMA under its guarantees are obligations solely of FNMA and are not backed by,
nor entitled to, the full faith and credit of the United States.
Unless otherwise specified in the Prospectus Supplement relating to a Series
of CitiCertificates, FNMA Certificates evidencing interests in pools of mortgage
loans formed on or after May 1, 1985 are available in book-entry form only and
will not be convertible to definitive form. Distributions of principal and
interest on each FNMA Certificate will be made by FNMA on the 25th day of each
month to the persons in whose name the FNMA Certificate is entered on the books
of the Federal Reserve Bank (or registered in the FNMA Certificate register in
the case of fully registered FNMA Certificates) as of the close of business on
the last
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day of the preceding month. With respect to FNMA Certificates issued in
book-entry form, distributions thereon will be made by wire, and with respect to
fully registered FNMA Certificates, distributions thereon will be made by check.
See "Additional Information" for the availability of further information
respecting FNMA and FNMA Certificates.
The FNMA Certificates included in the Pool for a Series of CitiCertificates
may have other characteristics and terms, different from those described above,
so long as such FNMA Certificates and underlying mortgage loans meet the
criteria of the rating agency or agencies rating the CitiCertificates of such
Series. Such FNMA Certificates and underlying mortgage loans will be described
in the related Prospectus Supplement.
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INDEX OF PRINCIPAL DEFINITIONS
<TABLE>
<CAPTION>
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<S> <C>
Accrual CitiCertificates.................................................................................. 1
Adjusted Balance.......................................................................................... A-2
Affected Class............................................................................................ 29
Alternative Certificate Account........................................................................... A-11
Amount Available.......................................................................................... 10
ARM Pool.................................................................................................. A-1
ARMs...................................................................................................... A-5
BIF....................................................................................................... 18
Buydown Mortgage Loans.................................................................................... 15
Certificate Account....................................................................................... 17
Certificate Account Advance............................................................................... A-13
Certificate Distribution Amount........................................................................... 6
Certificateholders........................................................................................ 2
Certificates.............................................................................................. 1
CFSB...................................................................................................... 1
CFSB Pool................................................................................................. A-1
Charter Act............................................................................................... B-5
Citibank.................................................................................................. 1
Citibank Pool............................................................................................. A-1
CitiCertificates.......................................................................................... 1
Citicorp.................................................................................................. 26
CitiMortgageCertificates.................................................................................. 1
Class..................................................................................................... 1
CMI....................................................................................................... 1
CMI Pool.................................................................................................. A-1
CMSI Pool................................................................................................. A-1
Code...................................................................................................... 1
Commission................................................................................................ 2
Consolidation Agreements.................................................................................. A-2
Converted Mortgage Loan................................................................................... A-5
Cooperative Loans......................................................................................... A-1
Cooperative Notes......................................................................................... A-1
Cooperatives.............................................................................................. A-1
Credit Support Percentage................................................................................. 10
Cut-Off Date.............................................................................................. A-9
Depository................................................................................................ A-11
Determination Date........................................................................................ 4
Disqualified Organization................................................................................. 47
Distribution Date......................................................................................... 4
DTC....................................................................................................... 4
Due Period................................................................................................ 8
Eligible Investments...................................................................................... 17
Enhancement Act........................................................................................... 34
ERISA..................................................................................................... 32
Event of Default.......................................................................................... 28
Exchange Act.............................................................................................. 2
FDIC...................................................................................................... 18
FHA....................................................................................................... A-7
FHA Loans................................................................................................. B-1
FHLMC..................................................................................................... 17
FHLMC Act................................................................................................. B-3
FHLMC Certificate Group................................................................................... B-3
FHLMC Certificates........................................................................................ 17
</TABLE>
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<S> <C>
Fixed Rate Pool........................................................................................... A-1
FNMA...................................................................................................... 17
FNMA Certificates......................................................................................... 17
Form of Pooling Agreement................................................................................. 3
Garn-St. Germain Act...................................................................................... A-26
GNMA...................................................................................................... 17
GNMA Certificates......................................................................................... 17
GNMA I Certificates....................................................................................... B-1
GNMA II Certificates...................................................................................... B-1
Gold PCs.................................................................................................. B-3
Guaranty.................................................................................................. 1
Housing Act............................................................................................... B-1
HUD....................................................................................................... A-7
Index..................................................................................................... A-6
Interest Accrual Period................................................................................... 6
IRA....................................................................................................... 32
Issuer.................................................................................................... 1
Last Scheduled Distribution Date.......................................................................... 12
Leasehold Loans........................................................................................... 22
Letter of Credit.......................................................................................... 10
Liquidating Loan.......................................................................................... 11
Loss Allocation Event..................................................................................... 7
Maximum Note Rate......................................................................................... A-5
Minimum Note Rate......................................................................................... A-5
Modification Agreements................................................................................... A-2
Moody's................................................................................................... A-11
Mortgage Certificates..................................................................................... 1
Mortgage Loans............................................................................................ 1
Mortgage Margin........................................................................................... A-5
Mortgaged Properties...................................................................................... A-1
Mortgagor................................................................................................. A-2
Mortgagor Bankruptcy Bond................................................................................. 10
NCUA...................................................................................................... 34
1986 Act.................................................................................................. 37
Non-Conforming Loans...................................................................................... 15
Noneconomic Residual Interests............................................................................ 48
Non-U.S. Person........................................................................................... 51
Note Rate................................................................................................. A-4
Notice Date............................................................................................... A-14
NYBU...................................................................................................... 19
Original PCs.............................................................................................. B-3
Original Value............................................................................................ 21
Originators............................................................................................... 1
OTS....................................................................................................... 27
Pass-Through Entity....................................................................................... 47
Pass-Through Rate......................................................................................... A-4
Payment Period............................................................................................ A-13
Periodic Ceiling.......................................................................................... A-5
Periodic Floor............................................................................................ A-5
Plans..................................................................................................... 32
Policy Statement.......................................................................................... 34
Pool...................................................................................................... 1
Pool Distribution Amount.................................................................................. 5
Pool Insurance Policies................................................................................... 10
Pool Value................................................................................................ 6
Pool Value Group.......................................................................................... 6
</TABLE>
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<S> <C>
Pooling Agreement......................................................................................... 3
Prepayment Assumption..................................................................................... 39
Principal Prepayment...................................................................................... 5
Proposed OID Regulations.................................................................................. 38
Prospectus Supplement..................................................................................... A-3
PTC....................................................................................................... B-2
PTE 83-l.................................................................................................. 32
Purchase Amount Advance................................................................................... 11
Rating Requirements....................................................................................... A-11
Real Estate Loans......................................................................................... A-1
Record Date............................................................................................... 4
Registration Statement.................................................................................... 3
Regulations............................................................................................... 32
REMIC..................................................................................................... 1
REMIC Regulations......................................................................................... 35
REMIC Servicing Fee....................................................................................... 13
Reserve Fund.............................................................................................. 10
Residual Certificates..................................................................................... 1
Residual Holders.......................................................................................... 43
Retail Class CitiCertificate.............................................................................. 38
SAIF...................................................................................................... 18
Scheduled Principal....................................................................................... A-12
Senior Certificates....................................................................................... 1
Senior/Subordinated Series................................................................................ 1
Series.................................................................................................... 1
Servicer.................................................................................................. 13
Servicing Account......................................................................................... A-15
Servicing Compensation.................................................................................... 13
Single Certificate........................................................................................ 4
Special Distributions..................................................................................... 8
Special Hazard Insurance Policies......................................................................... 10
Spread.................................................................................................... 8
Startup Day............................................................................................... 18
Stated Amount............................................................................................. 6
Stated Rate............................................................................................... 5
Subclass.................................................................................................. 1
Subordinated Certificates................................................................................. 1
Subordination Amount...................................................................................... 9
Subordination Reserve Fund................................................................................ 9
S&P....................................................................................................... A-11
Title V................................................................................................... A-28
Title VIII................................................................................................ A-28
Transfer Instrument....................................................................................... 16
Trust..................................................................................................... 1
Trustee................................................................................................... 3
UCC....................................................................................................... A-23
U.S. Person............................................................................................... 48
VA........................................................................................................ 19
VA Loans.................................................................................................. B-1
Voluntary Advances........................................................................................ A-12
Window Period Loans....................................................................................... A-26
Window Period States...................................................................................... A-26
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