<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 16, 1996
REGISTRATION NO. 333-3200
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------
AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------------
BANKAMERICA MANUFACTURED HOUSING CONTRACT TRUST
(Issuer of the Certificates)
<TABLE>
<S> <C>
BANK OF AMERICA NATIONAL TRUST BANK OF AMERICA, FSB
AND SAVINGS ASSOCIATION
(ORIGINATORS OF THE TRUSTS DESCRIBED HEREIN)
UNITED STATES UNITED STATES
(State or other jurisdiction of (State or other jurisdiction of
incorporation or organization) incorporation or organization)
94-1687665 91-0221850
(I.R.S. EMPLOYER IDENTIFICATION NUMBER) (I.R.S. EMPLOYER IDENTIFICATION NUMBER)
555 CALIFORNIA STREET 555 CALIFORNIA STREET
SAN FRANCISCO, CALIFORNIA 94104 SAN FRANCISCO, CALIFORNIA 94104
(415) 622-3530 (415) 622-2220
(Address, including zip code, and telephone number,
including area code, of each registrant's principal executive offices)
CHERYL A. SOROKIN
BANKAMERICA CORPORATION
BANK OF AMERICA CENTER
555 CALIFORNIA STREET
SAN FRANCISCO, CALIFORNIA 94104
(415) 622-3530
(Name, address, including zip code, and telephone number, including area code, of agent for service)
COPIES TO:
Ellen R. Marshall, Esq. Andrea B. Sudmann, Esq.
Morrison & Foerster LLP Bank of America National
19900 MacArthur Boulevard Trust and Savings Association
Irvine, California 92715 555 South Flower Street
(714) 251-7500 Los Angeles, California 90071
(213) 228-5678
</TABLE>
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO THE
PUBLIC: As soon as practicable after the effective date of this Registration
Statement
If any of the securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, check the following box:
/ /
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box: /X/
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act of 1933, please check the
following box and list the registration statement number of the earlier
effective registration statement for the same offering. / / ________________
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act of 1933, check the following box and list the
registration statement number of the earlier effective registration statement
for the same offering. / / ________________
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF SECURITIES AMOUNT TO BE OFFERING PRICE AGGREGATE AMOUNT OF
TO BE REGISTERED REGISTERED PER UNIT* OFFERING PRICE REGISTRATION FEE
<S> <C> <C> <C> <C>
BankAmerica Manufactured Housing
Contract Trust Pass-Through
Certificates........................ $500,000,000.00 100% $500,000,000 $172,414.00(1)
</TABLE>
* Estimated solely for the purpose of calculating the registration fee.
(1) $345 of which was previously paid.
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME A FINAL PROSPECTUS SUPPLEMENT HAS
BEEN DELIVERED. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
[FORM OF PROSPECTUS SUPPLEMENT]
PRELIMINARY PROSPECTUS SUPPLEMENT DATED [ ]
(TO PROSPECTUS DATED [ ], 199[ ])
$[ ] (APPROXIMATE)
BANKAMERICA MANUFACTURED HOUSING CONTRACT TRUST
SENIOR/SUBORDINATE PASS-THROUGH CERTIFICATES, SERIES 199[ ]-[ ]
$[ ] (APPROXIMATE) [ ]% CLASS A
$[ ] (APPROXIMATE) [ ]% CLASS B
(Principal and interest payable on the 10th day of each month beginning in
[ ], 199[ ])
[BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, SELLER]
BANKAMERICA HOUSING SERVICES, AN UNINCORPORATED DIVISION
OF BANK OF AMERICA, FSB, [SELLER AND] SERVICER
The BankAmerica Manufactured Housing Contract Trust Senior/Subordinate
Pass-Through Certificates, Series 199[ ]-[ ] (the "Certificates") will
represent interests in a pool (the "Contract Pool") of [actuarial] manufactured
housing installment sales contracts and installment loan agreements (the
"Contracts"), together with certain contract rights and other rights relating to
such Contracts (the Contracts and such other property being referred to as the
"Trust Fund"). The Contracts will be conveyed to the Trust Fund by Bank of
America National Trust and Savings Association ("Bank of America") or
BankAmerica Housing Services, an unincorporated division of Bank of America, FSB
("BankAmerica Housing Services") or both of them. Each Contract was [either (i)]
originated or purchased by BankAmerica Housing Services or Security Pacific
Financial Services of California, Inc. ("SPFSC"), a wholly-owned subsidiary of
Bank of America, in each case on an individual basis in the ordinary course of
its business [or (ii) purchased by Bank of America, BankAmerica Housing
Services, SPFSC, or any combination thereof, in bulk from other lenders or
finance companies (including from affiliates of the Sellers), from governmental
agencies or instrumentalities or from other entities.] BankAmerica Housing
Services will serve as servicer of the Contracts (together with any successor
servicer, the "Servicer"). The term "approximate," with respect to the aggregate
principal amount of any Certificates or Contracts, means that the amount is
subject to a variance of plus or minus 5%. Terms used and not otherwise defined
herein have the respective meanings ascribed to such terms in the Prospectus
dated [ ], 199[ ] attached hereto (the "Prospectus").
(COVER CONTINUED ON NEXT PAGE)
FOR A DISCUSSION OF SIGNIFICANT MATTERS AFFECTING INVESTMENTS IN THE OFFERED
CERTIFICATES (DEFINED HEREIN), SEE "RISK FACTORS" HEREIN AT PAGE S-13 AND IN THE
PROSPECTUS AT PAGE 13.
PROCEEDS FROM THE ASSETS IN THE TRUST FUND WILL BE THE ONLY SOURCE OF
PAYMENT ON THE CERTIFICATES, AND THE CERTIFICATES WILL NOT REPRESENT INTERESTS
IN OR OBLIGATIONS OF BANK OF AMERICA, BANKAMERICA HOUSING SERVICES, THEIR PARENT
CORPORATION, BANKAMERICA CORPORATION, OR AFFILIATES THEREOF, SUBJECT TO CERTAIN
EXCEPTIONS DESCRIBED UNDER "RISK FACTORS" HEREIN AND IN THE PROSPECTUS. NEITHER
THE CERTIFICATES NOR THE UNDERLYING CONTRACTS OR COLLECTIONS THEREON WILL BE
INSURED OR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR BY 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>
PROCEEDS TO
PRICE TO UNDERWRITING SELLER(S)
PUBLIC (1) DISCOUNT (1)(2)
<S> <C> <C> <C>
Class A Certificates............................... % % %
Class B Certificates............................... % % %
Total.............................................. $ $ $
</TABLE>
(1) Plus accrued interest, if any, at the applicable rate from [ ],
199[ ].
(2) Before deducting expenses payable by the Seller[s], estimated to be
$ .
------------------------
The Offered Certificates are offered subject to prior sale, when, as and if
issued by the Trust Fund and accepted by the Underwriters and subject to their
right to reject orders in whole or in part. It is expected that delivery of the
Offered Certificates will be made in book-entry form only through the Same Day
Funds Settlement system of The Depository Trust Company on or about [ ],
199[ ].
------------------------
[UNDERWRITER]
---------------------
The date of this Prospectus Supplement is [ ], 199[ ].
<PAGE>
The Certificates will consist of one class of senior certificates designated
as the Class A Certificates (the "Senior Certificates"), one class of
subordinate certificates designated as the Class B Certificates (the
"Subordinate Certificates") and one class representing the residual interest
(the "Class R Certificates"). Only the Class A Certificates and the Class B
Certificates (collectively, the "Offered Certificates") are being offered
hereby. The Class A Certificates and the Class B Certificates will evidence in
the aggregate approximate initial [ ]% and [ ]% undivided interests in the
Contract Pool, respectively. The rights of the holders (the
"Certificateholders") of the Class B Certificates to receive distributions of
principal and interest are subordinated as described herein to such rights of
the Class A Certificateholders, and the rights of the Class R Certificateholders
to receive distributions of principal and interest are subordinated as described
herein to such rights of the Class B Certificateholders. See "Description of the
Certificates -- Subordination" herein and "Credit and Liquidity Enhancement" in
the Prospectus.
Distributions of principal and interest on the Certificates will be made to
the holders of the Certificates on the 10th day of each month (or if the 10th
day is not a business day, the next business day) (each, a "Distribution Date"),
beginning in [ ], 199[ ]. The Offered Certificates will have the
respective [fixed] Pass-Through Rates specified above. See "Description of the
Certificates" herein.
An election will be made to treat the Trust Fund as a real estate mortgage
investment conduit (a "REMIC") for federal income tax purposes. The Offered
Certificates will represent "regular interests" in the REMIC. See "Certain
Federal Income Tax Consequences" herein and in the Prospectus.
------------------------
The underwriters named herein (the "Underwriters") intend to make a
secondary market in the Offered Certificates, but have no obligation to do so.
There can be no assurance that a secondary market for the Offered Certificates
will develop, or if it does develop, that it will continue or provide sufficient
liquidity. See "Risk Factors" herein and in the Prospectus.
This Prospectus Supplement does not contain complete information about the
offering of the Offered Certificates. 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 Certificates may not be consummated
unless the purchaser has received both this Prospectus Supplement and the
Prospectus. Terms used and not otherwise defined herein have the respective
meanings ascribed to such terms in the Prospectus.
UNTIL NINETY DAYS AFTER THE DATE OF THIS PROSPECTUS SUPPLEMENT, ALL DEALERS
EFFECTING TRANSACTIONS IN THE OFFERED CERTIFICATES, WHETHER OR NOT PARTICIPATING
IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS SUPPLEMENT AND
PROSPECTUS. THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A
PROSPECTUS SUPPLEMENT AND PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH
RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE OFFERED
CERTIFICATES AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
S-2
<PAGE>
TERMS OF THE OFFERED CERTIFICATES
This summary is qualified in its entirety by reference to the detailed
information appearing elsewhere in this Prospectus Supplement and in the
accompanying Prospectus. Capitalized terms used and not otherwise defined herein
have the respective meanings assigned them in the Prospectus or elsewhere in
this Prospectus Supplement. Reference is made to the "Index of Significant
Definitions" beginning at page S-44 herein and to the Index of Significant
Definitions in the Prospectus beginning at page 73 therein for the location of
the definitions of certain capitalized terms.
<TABLE>
<S> <C>
Securities Offered................ BankAmerica Manufactured Housing Contract Trust Senior/
Subordinate Pass-Through Certificates, Series
199[ ]-[ ] (the "Certificates"), Class A Certificates
(the "Senior Certificates" or "Class A Certificates")
and Class B Certificates (the "Class B Certificates" or
"Subordinate Certificates"). The residual interest is
evidenced by the Class R Certificates (the "Class R
Certificates"). The Class R Certificates are not being
offered hereby.
The Class A Certificates are senior to the Class B
Certificates to the extent described herein, and the
Class B Certificates are senior to the Class R
Certificates to the extent described herein. The Class A
Certificates and the Class B Certificates are sometimes
referred to herein collectively as the "Series
199[ ]-[ ] Regular Certificates." The Class R
Certificates are sometimes referred to herein as the
"Series 199[ ]-[ ] Residual Certificates."
The Seller[s]..................... As to any Contract (as hereinafter defined), either Bank
of America National Trust and Savings Association ("Bank
of America") or BankAmerica Housing Services, an
unincorporated division of Bank of America, FSB
("BankAmerica Housing Services"), and, as to the Trust
Fund (as hereinafter defined), Bank of America,
BankAmerica Housing Services, or both of them.
Servicer.......................... BankAmerica Housing Services (together with any
successor servicer under the Agreement (defined below),
the "Servicer").
Trustee........................... [ ] (the "Trustee").
Cut-off Date...................... [ ], 199[ ].
Cut-off Date Pool Principal
Balance.......................... $[ ] (Approximate, subject to a variance of plus
or minus 5%).
Initial Class A Certificate
Balance.......................... $[ ] (Approximate, subject to a variance of plus
or minus 5%).
Initial Class B Certificate
Balance.......................... $[ ] (Approximate, subject to a variance of plus
or minus 5%).
Class A Pass-Through Rate......... [ ]%, calculated on the basis of a 360-day year
comprised of twelve 30-day months.
Class B Pass-Through Rate......... [ ]%, calculated on the basis of a 360-day year
comprised of twelve 30-day months.
Distribution Date................. The 10th day of each month (or if such 10th day is not a
business day, the next succeeding business day),
commencing in [ ], 199[ ]. The first Distribution
Date is [ ], 199[ ] (the "First Distribution
Date").
</TABLE>
S-3
<PAGE>
<TABLE>
<S> <C>
Collection Period................. With respect to any Distribution Date, the calendar
month prior to the month in which such Distribution Date
occurs (each, a "Collection Period").
Agreement......................... The Pooling and Servicing Agreement, dated as of
[ ], 199[ ] (the "Agreement"), by and among Bank
of America, BankAmerica Housing Services, or both of
them, in each case as Seller, BankAmerica Housing
Services, as Servicer, and the Trustee.
The Contract Pool................. The Contract Pool is comprised of [fixed] rate
[actuarial] manufactured housing installment sales
contracts and installment loan agreements (collectively,
the "Contracts"), in each case secured by a new or used
manufactured home (each manufactured home securing a
Contract being referred to herein as a "Manufactured
Home"). Each Contract was [either (i)] originated or
purchased by either Bank of America, BankAmerica Housing
Services or Security Pacific Financial Services of
California, Inc. ("SPFSC"), a wholly-owned subsidiary of
Bank of America, in each case on an individual basis in
the ordinary course of its business [or (ii) purchased
by Bank of America, BankAmerica Housing Services, SPFSC
or any combination thereof as part of bulk purchases of
manufactured housing contracts from other private
lenders or finance companies, or from governmental
agencies or instrumentalities or from other entities].
Neither the Contracts nor any collections thereon will
be insured or guaranteed by any governmental agency or
instrumentality.
As of the Cut-off Date, the Contract Pool consists of
approximately [ ] Contracts having an aggregate
unpaid principal balance of approximately $[ ].
The Contracts, as of their origination, were secured by
Manufactured Homes located in [ ] states and the
District of Columbia and have been selected by
BankAmerica Housing Services from the manufactured hous-
ing installment sale contracts and installment loan
portfolios of [Bank of America,] BankAmerica Housing
Services [and SPFSC, in each case] on the basis of the
criteria specified in the Agreement (as defined herein).
All of the Contracts bear interest at a [fixed] annual
percentage rate (the "Contract Rate") which is equal to
or higher than the sum of (i) the higher of the Class A
Pass-Through Rate or the Class B Pass-Through Rate, plus
(ii) [ ]%, which is the maximum annual rate at which
the Monthly Servicing Fee (as hereinafter defined) may
be paid. Monthly payments of principal and interest on
the Contracts will be due on various days (each, a "Due
Date") throughout each month. As of the Cut-off Date,
the Contract Rates on the Contracts ranged from [ ]% to
[ ]%, with a weighted average of approximately
[ ]%. As of the Cut-off Date, the Contracts had a
weighted average original term to maturity of
approximately [ ] months and a weighted average
remaining term to maturity of approximately [ ] months.
The final scheduled payment date on the Contract with
the latest maturity is in [ ] 20[ ]. The
Contracts were originated from 19[ ] through
</TABLE>
S-4
<PAGE>
<TABLE>
<S> <C>
19[ ], inclusive. See "The Contract Pool" and
"Prepayment and Yield Considerations" herein for a
detailed description of the Contracts.
Description of Certificates....... The Certificates evidence undivided interests in the
Contract Pool and certain contract rights and other
rights relating to the Contracts (including title to the
Manufactured Homes financed thereby and rights under
hazard insurance policies covering such Manufactured
Homes), which are collectively held in trust for the
benefit of the Certificateholders (the Contracts and
such other property being collectively referred to as
the "Trust Fund"). The Class A Certificates are Senior
Certificates and the Class B Certificates are
Subordinate Certificates, all as described herein. The
Residual Interest is evidenced by the Class R
Certificates. The Offered Certificates will be offered
in denominations of [$1,000] and integral multiples of
[one dollar] in excess thereof. The undivided percentage
interest (the "Percentage Interest") evidenced by a
Certificate of any Class (other than a Class R
Certificate) in the distributions to the related Class
will be equal to the percentage obtained by dividing the
original denomination of such Certificate by the initial
Certificate Balance of such Class of Certificates.
Non-Recourse Obligations.......... Neither Bank of America nor BankAmerica Housing Services
nor any of their affiliates will have any obligations
with respect to the Offered Certificates except, in the
case of the Sellers, for obligations arising from
certain representations and warranties of Bank of
America and BankAmerica Housing Services, as the case
may be, with respect to the Contracts sold by it in the
Contract Pool and, in the case of BankAmerica Housing
Services, for certain contractual servicing obligations,
each as further described herein. SUBJECT ONLY TO THE
FOREGOING EXCEPTIONS, THE OFFERED CERTIFICATES WILL NOT
REPRESENT INTERESTS IN OR OBLIGATIONS OF BANK OF AMERICA
OR BANKAMERICA HOUSING SERVICES, THEIR PARENT
CORPORATION, BANKAMERICA CORPORATION, OR ANY AFFILIATE
THEREOF, AND ASSETS IN THE TRUST FUND WILL CONSTITUTE
THE ONLY SOURCE OF FUNDS FOR PAYMENT ON THE OFFERED
CERTIFICATES. NONE OF THE OFFERED CERTIFICATES NOR THE
UNDERLYING CONTRACTS OR ANY COLLECTIONS THEREON WILL BE
INSURED OR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION OR BY ANY OTHER GOVERNMENTAL AGENCY OR
INSTRUMENTALITY.
Record Date....................... The last business day of the month preceding the month
in which the related Distribution Date occurs.
Distributions..................... Distributions to the holders of the Series 199[ ]-[ ]
Regular Certificates of interest and principal,
respectively, will be made first to the holders of the
Class A Certificates and second to the holders of the
Class B Certificates. Within each Class of Certifi-
cates, such distributions will be applied first to the
payment of interest and then to the payment of
principal. The funds available
</TABLE>
S-5
<PAGE>
<TABLE>
<S> <C>
in the Certificate Account (as hereinafter defined) for
distribution on a Distribution Date (the "Available
Distribution Amount," as further defined herein under
"Description of the Certificates -- Payments on the
Contracts; Certificate Account") will be applied in the
amounts and the order of priority set forth below.
Distributions of interest and principal to holders of
each Class of Certificates will be made on each
Distribution Date in an amount equal to their respective
Percentage Interests multiplied by the aggregate amount
distributed to such Class of Certificates on such
Distribution Date. Distributions will be made on each
Distribution Date to holders of record on the preceding
Record Date, except that the final distribution in
respect of the Certificates will only be made upon
presentation and surrender of the Certificates at the
office or agency appointed by the Trustee for that
purpose in [ ] [or] [New York City].
On each Distribution Date, the Available Distribution
Amount will be distributed in the following amounts and
in the following order of priority:
(i) to the Class A Certificateholders, the Class A
Interest Distribution Amount;
(ii) to the Class A Certificateholders, the Formula
Principal Distribution Amount (as defined below)
until the Class A Certificate Balance (as defined
below) is reduced to zero;
(iii) to the Class B Certificateholders, the Class B
Interest Distribution Amount;
(iv) to the Class B Certificateholders, any
remaining Formula Principal Distribution Amount
after distributions under clause (ii) above until
the Class B Certificate Balance (defined below) is
reduced to zero; and
(v) to the Class R Certificateholders, any remaining
Available Distribution Amount.
As to any Distribution Date, the "Class A Interest
Distribution Amount" is equal to the sum of (i) one
month's interest at the Class A Pass-Through Rate on the
Class A Certificate Balance and (ii) any previously
undistributed shortfalls in interest due to the Class A
Certificateholders in respect of prior Distribution
Dates; the "Class B Interest Distribution Amount" is
equal to the sum of (i) one month's interest at the
Class B Pass-Through Rate on the Class B Certificate
Balance and (ii) any previously undistributed shortfalls
in interest due to the Class B Certificateholders in
respect of prior Distribution Dates. Any shortfall in
interest due to Certificateholders will, to the extent
legally permissible, bear interest at the related Class
A or Class B Pass-Through Rate.
The "Formula Principal Distribution Amount" in respect
of a Distribution Date equals the sum of (a) the Total
Regular Principal Amount (as defined below) for such
Distribution Date and
</TABLE>
S-6
<PAGE>
<TABLE>
<S> <C>
(b) any previously undistributed shortfalls in the
distribution of the Total Regular Principal Amount in
respect of prior Distribution Dates.
The "Total Regular Principal Amount" on each
Distribution Date is the sum of (i) the Scheduled
Principal Reduction Amount (defined below) for such
Distribution Date, (ii) the Scheduled Principal Balance
(defined below) of each Contract which, during the
related Collection Period, was purchased by Bank of
America or BankAmerica Housing Services, as the case may
be, on account of certain breaches of representations
and warranties made by it in the Agreement, (iii) all
partial prepayments received during such related
Collection Period, (iv) the Scheduled Principal Balance
of each Contract that was prepaid in full during such
related Collection Period and (v) the Scheduled
Principal Balance of each Contract that became a
Liquidated Contract (defined below) during such related
Collection Period.
The "Scheduled Principal Balance" of a Contract for any
Distribution Date is its principal balance as of the Due
Date in the Collection Period immediately preceding such
Distribution Date, after giving effect to all previous
partial prepayments, all previous scheduled principal
payments (whether or not paid) and the scheduled
principal payment due on such Due Date, but without
giving effect to any adjustment due to bankruptcy or
similar proceedings. The "Scheduled Principal Reduction
Amount" for any Distribution Date is an approximate
calculation (performed on an aggregate basis rather than
on a Contract-by-Contract basis) of the scheduled
payments of principal due during the related Collection
Period. Both of these terms are more fully described
herein under "Description of the Certificates -- Distri-
butions" herein.
The "Pool Scheduled Principal Balance" for any
Distribution Date is equal to the Cut-off Date Pool
Principal Balance less the aggregate of the Total
Regular Principal Amounts for all prior Distribution
Dates.
In general, a "Liquidated Contract" is a defaulted
Contract as to which all amounts that the Servicer
expects to recover relating to such Contract
("Liquidation Proceeds") have been received. A
Liquidated Contract includes any defaulted Contract in
respect of which the related Manufactured Home has been
realized upon and disposed of and the proceeds of such
disposition have been received.
The "Class A Certificate Balance" as of any Distribution
Date is the Initial Class A Certificate Balance less all
amounts previously distributed to Class A
Certificateholders on account of principal; the "Class B
Certificate Balance" as of any Distribution Date is the
Initial Class B Certificate Balance less all amounts
previously distributed to holders of the Class B
Certificates on account of principal. In no event shall
the aggregate distributions of principal to the holders
of the Class A and Class B Certificates exceed the
Initial Class A Certificate Balance and the Initial
Class B Certificate Balance, respectively.
</TABLE>
S-7
<PAGE>
<TABLE>
<S> <C>
Subordination of the Class B
Certificates..................... The rights of the holders of the Class B Certificates to
receive distributions of available amounts in the Trust
Fund will be subordinate, to the extent described
herein, to such rights of the holders of the Class A
Certificates. This subordination is intended to enhance
the likelihood of regular receipt by the holders of the
Class A Certificates of the full amount of interest and
principal distributable thereon and to afford such
holders protection against losses on Liquidated
Contracts.
The protection afforded to the holders of Class A
Certificates by means of the subordination of the Class
B Certificates will be accomplished by the application
of the Available Distribution Amount in the order
specified under "Distributions" above. Accordingly, in
the event that the Available Distribution Amount on any
Distribution Date is not sufficient to permit the
distribution of the amount of interest and the specified
portion of the Formula Principal Distribution Amount due
to the holders of the Class A Certificates, the
subordination of the Class B Certificates will protect
the Class A Certificateholders by the right of such
Certificateholders to receive distributions of the
Available Distribution Amount in respect of interest and
the Formula Principal Distribution Amount that would
otherwise have been distributable to the holders of the
Class B Certificates, until any shortfall in
distributions to the holders of the Class A Certificates
has been satisfied, to the extent described herein. See
"Description of the Certificates -- Distributions" and
"Description of the Certificates -- Subordination"
herein.
Losses on Liquidated Contracts.... As described above, the Total Regular Principal Amount
distributable to the holders of the Series 199[ ]-[ ]
Regular Certificates on each Distribution Date includes
the Scheduled Principal Balance of each Contract that
became a Liquidated Contract during the immediately
preceding Collection Period. The Liquidation Proceeds,
net of (i) certain expenses incurred to liquidate such
Liquidated Contract, (ii) all accrued and unpaid
interest thereon and (iii) all Monthly Advances (as
defined below) required to be made in respect of such
Liquidated Contract (the "Net Liquidation Proceeds"),
may be less than the Scheduled Principal Balance of such
Liquidated Contract. Under such circumstances, the loss
on the Liquidated Contract, in the amount of the
deficiency between the Net Liquidation Proceeds and the
Scheduled Principal Balance of such Liquidated Contract,
may be covered to the extent of the amount (the "Excess
Interest"), if any, by which the interest collected on
nondefaulted Contracts during the same Collection Period
exceeds interest distributions due to the holders of the
Series 199[ ]-[ ] Regular Certificates and the
Monthly Servicing Fee.
The effect of any losses on Liquidated Contracts during
a Collection Period in excess of the aggregate of Excess
Interest generally will be to reduce the Pool Scheduled
Principal Balance below the aggregate Certificate
Balance of the Certificates (excluding the Class R
Certificates) on the related Distribution Date. In the
</TABLE>
S-8
<PAGE>
<TABLE>
<S> <C>
event the Pool Scheduled Principal Balance falls below
the aggregate Certificate Balance of the Certificates on
any Distribution Date, shortfalls and/or losses will
arise with respect to the Certificates, which shortfalls
and/or losses will be borne by the Class B
Certificateholders and the Senior Certificateholders, in
that order.
Monthly Advances.................. For each Distribution Date, the Servicer will be
obligated to make an advance (a "Monthly Advance") equal
to the lesser of (i) delinquent scheduled payments of
principal and interest on the Contracts that were due in
the preceding Collection Period and (ii) the amount, if
any, by which scheduled distributions of principal and
interest due on the Series 199[ ]-[ ] Regular
Certificates exceeds certain amounts on deposit in the
Certificate Account (as hereinafter defined) as of the
last day of the immediately preceding Collection Period,
except to the extent, in the Servicer's judgment, such
advance would not be recoverable from related late
payments, Liquidation Proceeds or otherwise. Advances
are reimbursable to the Servicer as described herein
under "Description of the Certificates -- Advances."
Security Interests in the Manufac-
tured Homes; Transfer of
Contracts and Security Interests;
Repurchase or Substitution
Obligations...................... In connection with the issuance of the Certificates,
[SPFSC will convey all of its interests in the Contracts
sold by it to Bank of America, and] each of Bank of
America and BankAmerica Housing Services will convey to
the Trustee all of their respective interests in the
Contracts. As described in the Prospectus under "Risk
Factors -- Security Interests in the Manufactured Homes"
and "Certain Legal Aspects of the Contracts -- Security
Interests in the Manufactured Homes" the certificates of
title for the Manufactured Homes [(including the
Manufactured Homes securing Contracts which are to be
sold by SPFSC to Bank of America)] will show BankAmerica
Housing Services as the lienholder, and the UCC
financing statements, where applicable, will show
BankAmerica Housing Services as secured party. Because
of the expense and administrative inconvenience
involved, neither the certificates of title for the
Manufactured Homes nor the UCC financing statements
evidencing the Trustee's interest in such Manufactured
Homes will be notated or amended, as the case may be, to
change the lienholder specified therein to the Trustee.
In some states, in the absence of such a notation or
amendment, the assignment to the Trustee of the security
interest in the Manufactured Homes may not be effective
against creditors of BankAmerica Housing Services.
However, neither Seller will be obligated to repurchase
or substitute a Contract solely on the basis of the
failure by Bank of America or BankAmerica Housing
Services to cause any such notation or amendment to be
made with respect to a document of title or UCC
financing statement relating to a Manufactured Home,
except under certain limited specified circumstances
described herein under "Description of the Certificates
-- Conveyance of Contracts."
</TABLE>
S-9
<PAGE>
<TABLE>
<S> <C>
Under the Agreement, each of the Sellers will agree to
repurchase, or at its option substitute another contract
for, a Contract sold by it if it has failed to perfect a
first-priority security interest in such Manufactured
Home or in the event of certain violations of federal
and state consumer protection laws applicable to credi-
tors or assignees of the Contracts, unless such failure
does not materially and adversely affect the Trustee's
interest in the Contract or such failure has been cured.
Under certain federal and state laws governing the
perfection of security interests in manufactured homes
and the enforcement of rights to realize upon the value
of manufactured homes, the Trustee's security interest
in a Manufactured Home could be rendered subordinate to
the interest of other parties if the Manufactured Home
has been affixed to real estate or is relocated to
another state without reperfection of the security
interest. Neither of the Sellers will have any
obligation to repurchase, or substitute another contract
for, a Contract sold by it unless such an affixation or
relocation occurs on or before the Closing Date. See
"Certain Legal Aspects of the Contracts -- Security
Interests in the Manufactured Homes" in the Prospectus.
Termination Auction............... Within ninety days following the Distribution Date as of
which the Pool Scheduled Principal Balance is less than
10% of the Cut-off Date Pool Principal Balance, the
Trustee shall solicit bids for the purchase of the
Contracts remaining in the Trust Fund. In the event that
satisfactory bids are received as described in the
Agreement, the net sale proceeds will be distributed to
Certificateholders, in the same order of priority as
collections received in respect of the Contracts. If
satisfactory bids are not received, the Trustee shall
decline to sell the Contracts and shall not be under any
obligation to solicit any further bids or otherwise
negotiate any further sale of the Contracts. [Such sale
and consequent termination of the Trust Fund must
constitute a "qualified liquidation" of the Trust Fund
under Section 860F of the Code, including the
requirement that the qualified liquidation takes place
over a period not to exceed 90 days.] See "Description
of the Certificates -- Termination Auction" herein and
"Description of the Certificates -- Optional and
Mandatory Repurchase; Termination Auction" in the
Prospectus. Any early termination of the Trust Fund and
early retirement of the Certificates that results from a
successful Termination Auction will have an effect on an
investor's yield on such Certificates. See "Prepayment
and Yield Considerations" herein and in the Prospectus.
Optional Termination.............. If the Trust Fund is not terminated pursuant to a
Termination Auction, the Servicer has the option to
purchase from the Trust Fund all Contracts then
outstanding and all other property in the Trust Fund on
any Distribution Date after the First Distribution Date
if, among other conditions, the Pool Scheduled Principal
Balance is less than 5% of the Cut-off Date Pool
Principal Balance. See "Description of the Certificates
-- Optional Termination" herein.
</TABLE>
S-10
<PAGE>
<TABLE>
<S> <C>
Registration of Offered
Certificates..................... The Offered Certificates initially will be represented
by certificates registered in the name of Cede & Co.
("Cede") as the nominee of The Depository Trust Company
("DTC"), and will only be available in the form of
book-entries on the records of DTC and participating
members thereof. Certificates representing the Offered
Certificates will be issued in definitive form only
under the limited circumstances described herein. All
references herein to "holders" or "Certificateholders"
shall reflect the rights of beneficial owners of the
Offered Certificates ("Certificate Owners") as they may
indirectly exercise such rights through DTC and
participating members thereof, except as otherwise
specified herein. See "Risk Factors" and "Description of
the Certificates -- Global Certificates" in the
Prospectus and "Description of the Certificates --
General" and "Description of the Certificates --
Distributions" herein.
Federal Income Tax
Consequences..................... For federal income tax purposes, an election will be
made to treat the Trust Fund as a real estate mortgage
investment conduit ("REMIC"). The Series 199[ ]-[ ]
Regular Certificates will constitute "regular interests"
in the REMIC and generally will be treated as debt
instruments of the Trust Fund for federal income tax
purposes with payment terms equivalent to the terms of
such Certificates. The Series 199[ ]-[ ] Residual
Certificates will be treated as the "residual interest"
in the REMIC for federal income tax purposes. Holders of
the Series 199[ ]-[ ] Regular Certificates that would
otherwise report income under a cash method of
accounting will be required to include in income inter-
est on the Series 199[ ]-[ ] Regular Certificates
(including original issue discount ("OID"), if any) in
accordance with an accrual method of accounting.
The Offered Certificates, depending on their respective
issue prices, may be issued with OID for federal income
tax purposes.
See "Certain Federal Income Tax Consequences" herein and
in the Prospectus.
ERISA Considerations.............. SENIOR CERTIFICATES. Subject to the conditions and
discussion set forth herein, the Class A Certificates
may be purchased by employee benefit plans that are
subject to the Employee Retirement Income Security Act
of 1974, as amended ("ERISA"). See "ERISA
Considerations" herein and in the Prospectus.
SUBORDINATE CERTIFICATES. A fiduciary of any employee
benefit plan or other plan subject to ERISA and/or
Section 4975 of the Internal Revenue Code of 1986, as
amended (the "Code") should not purchase or hold the
Class B Certificates as such actions may give rise to a
transaction prohibited under ERISA or Section 4975 of
the Code. See "ERISA Considerations" herein and in the
Prospectus.
Legal Investment.................. The [Class A] Certificates at the time of issuance will
qualify as "mortgage related securities" under the
Secondary Mortgage Market Enhancement Act of 1984, as
amended ("SMMEA") and,
</TABLE>
S-11
<PAGE>
<TABLE>
<S> <C>
as such, will constitute legal investments for certain
types of investors to the extent provided in SMMEA. Such
institutions should consult their own legal advisors in
determining whether and to what extent the [Class A]
Certificates constitute legal investments for such
investors.
[Because the Class B Certificates will not, at the time
of issuance, be rated in one of the two highest rating
categories of [ ], the Class B Certificates
will not constitute "mortgage related securities" for
purposes of SMMEA. Accordingly, many institutions with
legal authority to invest in more highly rated
securities based on first mortgage loans may not be
legally authorized to invest in the Class B
Certificates. No representation is made as to any
regulatory requirements or considerations (including
without limitation regulatory capital or permissible
investment requirements) applicable to the purchase of
the Class B Certificates by banks, savings and loan
associations or other financial institutions. Such
institutions should consult their own legal advisors in
determining whether and to what extent the Offered
Certificates constitute legal investments for such
investors. See "Legal Investment" herein and in the
Prospectus.]
Rating............................ It is a condition to the issuance of the Offered
Certificates that the Class A Certificates be rated
"[ ]" and that the Class B Certificates be rated
"[ ]" by [ ]. The Seller[s] [has][have] not
requested ratings on the Offered Certificates by any
rating agency other than [ ]. However, there
can be no assurance as to whether any other rating
agency will rate any or all of the Offered Certificates,
or if it does, what rating would be assigned by any such
other rating agency. A rating on any or all of the
Offered Certificates by certain other rating agencies,
if assigned at all, may be lower than the rating
assigned to such Certificates by [ ]. See
"Ratings" herein and in the Prospectus.
A security rating is not a recommendation to buy, sell
or hold securities and may be subject to revision or
withdrawal at any time.
</TABLE>
S-12
<PAGE>
RISK FACTORS
The discussion under "Risk Factors" in the Prospectus should be read
carefully in connection with a decision to invest in any of the Offered
Certificates. The following discussion supplements, and does not replace or
supersede the discussion under "Risk Factors" in the Prospectus, unless the
context expressly so provides.
1. LIMITED LIQUIDITY. Only the Offered Certificates are being offered
hereby. The Underwriters intend to make a secondary market in the Offered
Certificates, but have no obligation to do so. There can be no assurance that a
secondary market will develop for the Offered Certificates or, if it does
develop, that it will provide the holders of either Class of Offered
Certificates with liquidity of investment or that it will remain for the term of
such Class of Offered Certificates.
2. DISTRIBUTIONS OF PRINCIPAL. The yield to maturity on the Class B
Certificates will be affected by the rate at which Contracts become Liquidated
Contracts and the severity of ensuing losses on such Liquidated Contracts and
the timing thereof. [For any Distribution Date on which the Class A Certificate
Balance has not been reduced to zero, the Class A Certificateholders will
receive all payments of principal that are made on the Contracts.] It is not
possible to predict the timing of the occurrence of the Distribution Date, if
any, on which the Class A Certificate Balance will be reduced to zero, which
occurrences will be affected by the rate of voluntary prepayments in addition to
prepayments due to default and subsequent liquidation. Prepayment on Contracts
may be influenced by a variety of economic, geographic, social and other
factors, including repossessions, aging, seasonality, market interest rates,
changes in housing needs, job transfers and unemployment. See "Prepayment and
Yield Considerations" herein and in the Prospectus.
3. NO RECOURSE. Neither Bank of America nor BankAmerica Housing Services
nor any of their affiliates will have any obligations with respect to the
Offered Certificates except, in the case of the Sellers, for obligations arising
from certain representations and warranties of Bank of America and BankAmerica
Housing Services, as the case may be, with respect to the Contracts sold by it
in the Contract Pool and, in the case of BankAmerica Housing Services, for
certain contractual servicing obligations, each as further described herein.
SUBJECT ONLY TO THE FOREGOING EXCEPTIONS, THE OFFERED CERTIFICATES WILL NOT
REPRESENT INTERESTS IN OR OBLIGATIONS OF BANK OF AMERICA OR BANKAMERICA HOUSING
SERVICES, THEIR PARENT CORPORATION, BANKAMERICA CORPORATION, OR ANY AFFILIATE
THEREOF, AND ASSETS IN THE TRUST FUND WILL CONSTITUTE THE ONLY SOURCE OF FUNDS
FOR PAYMENT ON THE OFFERED CERTIFICATES. NONE OF THE OFFERED CERTIFICATES NOR
THE UNDERLYING CONTRACTS OR ANY COLLECTIONS THEREON WILL BE INSURED OR
GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR BY ANY OTHER
GOVERNMENTAL AGENCY OR INSTRUMENTALITY.
[4. CLASS B CERTIFICATES. The Class B Certificates will not constitute
"mortgage related securities" for purposes of SMMEA. Accordingly, many
institutions with legal authority to invest in SMMEA securities will not be able
to invest in the Class B Certificates, thereby limiting the market for such
securities. See "Legal Investment" in the Prospectus.]
THE CONTRACT POOL
Each Contract was purchased or originated by BankAmerica Housing Services or
SPFSC, in each case on an individual basis in the ordinary course of its
business. A description of BankAmerica Housing Services' and SPFSC's general
practices with respect to the origination or purchase of manufactured housing
contracts similar to the Contracts is set forth in the Prospectus under "The
Sellers -- Loan Originations" and "The Sellers -- Underwriting Policies."
On the date of initial issuance of the Offered Certificates, the Sellers
will convey to the Trust Fund the Contracts owned by it immediately prior to
such conveyance. The Contract Pool in the Trust Fund will consist of such
Contracts. BankAmerica Housing Services, as Servicer, will obtain and maintain
possession of all Contract documents.
S-13
<PAGE>
Approximately [ ]% of the Contracts (by outstanding principal balance as
of the Cut-off Date) will be sold by BankAmerica Housing Services and
approximately [ ]% will be sold by Bank of America. [Approximately [ ]% of
the Contracts in the Contract Pool were purchased by Bank of America from SPFSC
immediately prior to its conveyance of such Contracts to the Trust Fund.]
Subject to several exceptions, the Contracts being sold by Bank of America will
have one or both of the following attributes: (i) the amount financed is more
than 90% but not more than 95% of the Value (defined below) of any Manufactured
Home and (ii) the original term to maturity is more than 20 years but not more
than 30 years.
The Contracts are all [fixed] rate, [actuarial] Contracts. [None of the
Contracts in the Contract Pool (i) is secured by a lien on real estate, (ii) was
purchased in bulk from an unrelated third party, (iii) is insured in whole or in
part or guaranteed in whole or in part, as applicable, by the Veterans
Administration, the Federal Housing Administration or by any other governmental
entity or instrumentality, (iv) is amortized using the "simple interest"
amortization method or (v) has a variable Contract Rate or a Contract Rate which
steps up on particular dates.]
Management of BankAmerica Housing Services estimates that in excess of
[ ]% of the Manufactured Homes are used as primary residences by the Obligors
under the Contracts secured by such Manufactured Homes.
All Contracts have [fixed] Contract Rates. As of the Cut-off Date, the
Contract Rates on the Contracts ranged from [ ]% to [ ]%. The weighted
average Contract Rate of the Contracts as of the Cut-off Date was approximately
[ ]%. As of the Cut-off Date, the Contracts had remaining scheduled maturities
of at least [ ] months but not more than [ ] months, and original scheduled
maturities of at least [ ] months but not more than [ ] months. As of the
Cut-off Date, the Contracts had a weighted average remaining term to maturity of
approximately [ ] months, and a weighted average original term to scheduled
maturity of approximately [ ] months. The average outstanding principal balance
of the Contracts as of the Cut-off Date was approximately $[ ] and the
outstanding principal balances of the Contracts as of the Cut-off Date ranged
from approximately $[ ] to $[ ]. The weighted average loan-to-
value ratio for the Contracts at origination was approximately [ ]% and the
loan-to-value ratio of the Contracts at origination ranged from [ ]% to
[ ]%. "Value" in such calculation is equal to the stated cash sale price of
such Manufactured Home, including sales and other taxes, plus, to the extent
financed, filing and recording fees imposed by law, premiums for related
insurance and prepaid finance charges. BankAmerica Housing Services'
underwriting practices regarding loan-to-value ratios of Contracts it originates
or purchases are set forth in the Prospectus under "The Sellers -- Loan
Originations" and "The Sellers -- Underwriting Policies." Manufactured homes,
unlike site-built homes, generally depreciate in value, and it has been
BankAmerica Housing Services' experience that, upon repossession, the market
value of a manufactured home securing a manufactured housing contract is
generally lower than the principal balance of the related manufactured housing
contract. Certain statistical information relating to the average percentage of
principal recovered upon liquidation of certain manufactured housing contracts
is set forth herein and in the Prospectus under "The Sellers -- Delinquency and
Loan Loss/Repossession Experience." Such statistical information is included
herein and therein only for illustrative purposes. There is no assurance that
the Contracts have characteristics that are similar to the manufactured housing
contracts to which such statistical information relates. In addition, the
percentage recovery of principal on liquidation of manufactured housing
contracts historically has been adversely affected by downturns in regional or
local economic conditions. These regional or local economic conditions are often
volatile, and no predictions can be made regarding future economic loss upon
liquidation. In light of the foregoing, no assurance can be given that the
percentage of principal recovered upon liquidation of defaulted Contracts will
be similar to any statistical information contained herein. See "The Sellers --
Delinquency and Loan Loss/Repossession Experience" herein and in the Prospectus.
The Contracts are secured by Manufactured Homes located in [ ] states and
the District of Columbia; approximately [ ]% of the Contracts by outstanding
principal balance as of the Cut-off Date were secured by Manufactured Homes
located in [ ], [ ]% in [ ], [ ]% in [ ],
S-14
<PAGE>
[ ]% in [ ], [ ]% in [ ], [ ]% in [ ] and [ ]% in
[ ]. No other state represented more than 5% (by outstanding principal
balance as of the Cut-off Date) of the Contracts. [None of the Contracts is
secured by a Manufactured Home located in California.]
Approximately [ ]% of the Contracts by outstanding principal balance as
of the Cut-off Date are secured by Manufactured Homes which were new at the time
the related Contracts were originated, and approximately [ ]% of the
Contracts by outstanding principal balance as of the Cut-off Date are secured by
Manufactured Homes which were used at the time the related Contracts were
originated.
S-15
<PAGE>
Set forth below is a description of certain additional characteristics of
the Contracts:
GEOGRAPHICAL DISTRIBUTION OF MANUFACTURED HOMES AS OF ORIGINATION
<TABLE>
<CAPTION>
NUMBER OF % OF CONTRACT POOL
CONTRACTS AGGREGATE PRINCIPAL BY OUTSTANDING
AS OF CUT-OFF BALANCE OUTSTANDING PRINCIPAL BALANCE
STATE DATE AS OF CUT-OFF DATE AS OF CUT-OFF DATE (1)
- ---------------------------------------------------- ----------------- ------------------- -----------------------
<S> <C> <C> <C>
Arizona.............................................
Arkansas............................................
Colorado............................................
Connecticut.........................................
Delaware............................................
District of Columbia................................
Florida.............................................
Georgia.............................................
Idaho...............................................
Illinois............................................
Indiana.............................................
Iowa................................................
Kansas..............................................
Kentucky............................................
Louisiana...........................................
Maine...............................................
Maryland............................................
Massachusetts.......................................
Michigan............................................
Minnesota...........................................
Mississippi.........................................
Missouri............................................
Montana.............................................
Nebraska............................................
Nevada..............................................
New Hampshire.......................................
New Jersey..........................................
New Mexico..........................................
New York............................................
North Carolina......................................
North Dakota........................................
Ohio................................................
Oklahoma............................................
Oregon..............................................
Pennsylvania........................................
South Carolina......................................
South Dakota........................................
Tennessee...........................................
Texas...............................................
Utah................................................
Vermont.............................................
Virginia............................................
Washington..........................................
West Virginia.......................................
Wisconsin...........................................
Wyoming.............................................
------- -------- ---
Total........................................... $ %
------- -------- ---
------- -------- ---
</TABLE>
- ------------------------
(1) Entries may not add to 100.00% due to rounding.
S-16
<PAGE>
YEARS OF ORIGINATION OF CONTRACTS
<TABLE>
<CAPTION>
NUMBER OF % OF CONTRACT POOL
CONTRACTS AGGREGATE PRINCIPAL BY OUTSTANDING
AS OF CUT-OFF BALANCE OUTSTANDING PRINCIPAL BALANCE
YEAR OF ORIGINATION DATE AS OF CUT-OFF DATE AS OF CUT-OFF DATE (1)
- ---------------------------------------------------- ----------------- ------------------- -----------------------
<S> <C> <C> <C>
1993................................................
1994................................................
1995................................................
1996................................................
------- -------- ---
Total........................................... $ %
------- -------- ---
------- -------- ---
</TABLE>
- ------------------------
(1) Entries may not add to 100.00% due to rounding.
DISTRIBUTION OF ORIGINAL PRINCIPAL BALANCES OF CONTRACTS (1)
<TABLE>
<CAPTION>
NUMBER OF % OF CONTRACT POOL
CONTRACTS AGGREGATE PRINCIPAL BY OUTSTANDING
AS OF CUT-OFF BALANCE OUTSTANDING PRINCIPAL BALANCE
ORIGINAL CONTRACT AMOUNT DATE AS OF CUT-OFF DATE AS OF CUT-OFF DATE (2)
- ---------------------------------------------------- ----------------- ------------------- -----------------------
<S> <C> <C> <C>
$0 - 5,000..........................................
$5,001 - 7,500......................................
$7,501 - 10,000.....................................
$10,001 - 12,500....................................
$12,501 - 15,000....................................
$15,001 - 17,500....................................
$17,501 - 20,000....................................
$20,001 - 22,500....................................
$22,501 - 25,000....................................
$25,001 - 27,500....................................
$27,501 - 30,000....................................
$30,001 - 32,500....................................
$32,501 - 35,000....................................
$35,001 - 40,000....................................
$40,001 - 45,000....................................
$45,001 - 50,000....................................
$50,001 - 55,000....................................
$55,001 - 60,000....................................
$60,001 - 65,000....................................
$65,001 - 70,000....................................
$70,001 - 75,000....................................
$75,001 - 80,000....................................
------- -------- ---
Total........................................... $ %
------- -------- ---
------- -------- ---
</TABLE>
- ------------------------
(1) The greatest original Contract principal balance is $[ ], which
represents [ ]% of the outstanding principal balance of the Contracts as
of the Cut-off Date.
(2) Entries may not add to 100.00% due to rounding.
S-17
<PAGE>
DISTRIBUTION OF ORIGINAL LOAN-TO-VALUE RATIOS
<TABLE>
<CAPTION>
NUMBER OF % OF CONTRACT POOL
CONTRACTS AGGREGATE PRINCIPAL BY OUTSTANDING
AS OF CUT-OFF BALANCE OUTSTANDING PRINCIPAL BALANCE
LOAN-TO-VALUE RATIO (1) DATE AS OF CUT-OFF DATE AS OF CUT-OFF DATE (2)
- ---------------------------------------------------- ----------------- ------------------- -----------------------
<S> <C> <C> <C>
Less than or equal to 50%...........................
51-60%..............................................
61-70%..............................................
71-80%..............................................
81-85%..............................................
86-90%..............................................
91-95%..............................................
------- -------- ---
Total........................................... $ %
------- -------- ---
------- -------- ---
</TABLE>
- ------------------------
(1) Rounded to the nearest 1%. The definition of "Value" is set forth under "The
Contract Pool" above. Manufactured Homes, unlike site-built homes, generally
depreciate in value, and it should generally be expected, especially with
Contracts with high loan-to-value ratios at origination, that at any time
after the origination of a Contract, the market value of the Manufactured
Home securing such Contract may be lower than the outstanding principal
balance of such Contract.
(2) Entries may not add to 100.00% due to rounding.
DISTRIBUTION OF CONTRACT RATES
<TABLE>
<CAPTION>
NUMBER OF % OF CONTRACT POOL
CONTRACTS AGGREGATE PRINCIPAL BY OUTSTANDING
AS OF CUT-OFF BALANCE OUTSTANDING PRINCIPAL BALANCE
RANGES OF CONTRACTS BY CONTRACT RATE DATE AS OF CUT-OFF DATE AS OF CUT-OFF DATE (1)
- ---------------------------------------------------- ----------------- ------------------- -----------------------
<S> <C> <C> <C>
10.25-10.49%........................................
10.50-10.74%........................................
10.75-10.99%........................................
11.00-11.24%........................................
11.25-11.49%........................................
11.50-11.74%........................................
11.75-11.99%........................................
12.00-12.24%........................................
12.25-12.49%........................................
Total...........................................
</TABLE>
- ------------------------
(1) Entries may not add to 100.00% due to rounding.
S-18
<PAGE>
REMAINING MONTHS TO MATURITY
<TABLE>
<CAPTION>
NUMBER OF % OF CONTRACT POOL
CONTRACTS AGGREGATE PRINCIPAL BY OUTSTANDING
AS OF CUT-OFF BALANCE OUTSTANDING PRINCIPAL BALANCE
MONTHS REMAINING AS OF CUT-OFF DATE DATE AS OF CUT-OFF DATE AS OF CUT-OFF DATE (1)
- ---------------------------------------------------- ----------------- ------------------- ------------------------
<S> <C> <C> <C>
Greater than 15 and less than or equal to 30........
Greater than 31 and less than or equal to 60........
Greater than 61 and less than or equal to 90........
Greater than 91 and less than or equal to 120.......
Greater than 121 and less than or equal to 150......
Greater than 151 and less than or equal to 180......
Greater than 181 and less than or equal to 210......
Greater than 211 and less than or equal to 240......
Greater than 241 and less than or equal to 300......
Greater than 301 and less than or equal to 360......
------- -------- ---
Total........................................... $ %
------- -------- ---
------- -------- ---
</TABLE>
- --------------------------
(1) Entries may not add to 100.00% due to rounding.
THE SELLERS
The following information supplements the information in the Prospectus
under the heading "The Sellers."
The volume of manufactured housing contracts originated by SPHSI (the
business predecessor of BankAmerica Housing Services, as described in the
Prospectus under "The Sellers -- BankAmerica Housing Services"), BankAmerica
Housing Services or purchased by SPHSI or BankAmerica Housing Services from
dealers on an individual basis for the periods indicated below and certain other
information at the end of such periods are as follows:
CONTRACTS ORIGINATED OR PURCHASED ON AN INDIVIDUAL BASIS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
FIRST
QUARTER
YEAR ENDED DECEMBER 31, ENDED
--------------------------------------------------------- [MARCH 31,
1991 1992 1993 1994 1995 1996]
--------- --------- --------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Principal Balance of Contracts Purchased
(1)(2).................................. $ 605,861 $ 758,757 $ 873,227 $ 1,248,346 $ 2,586,896 $
Number of Contracts Purchased (1)........ 27,612 32,752 35,645 46,865 87,407
Average Contract Size (2)................ $ 21.9 $ 23.2 $ 24.5 $ 26.6 $ 29.6 $
Weighted Average Contract Rate (2)....... 13.00% 11.55% 10.03% 10.68% 10.04%
Number of Regional Offices (3)........... 20 23 26 35 38
</TABLE>
- --------------------------
(1) Does not include any portfolios acquired in bulk from third parties.
Includes only contracts originated by SPHSI or BankAmerica Housing Services
or purchased from dealers.
(2) Based on principal balance or Contract Rate, as applicable, at the time of
origination or purchase in the specified period.
(3) Includes regional offices in the United States originating or purchasing
manufactured housing contracts as of the end of the time period.
S-19
<PAGE>
The following table shows the size of the portfolio of manufactured housing
contracts serviced (including contracts already in repossession) by SPHSI and
now BankAmerica Housing Services through the manufactured housing regional
office system as of the dates indicated:
SIZE OF SERVICED PORTFOLIO
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
FIRST
AT DECEMBER 31, QUARTER
--------------------------------------------------------------- ENDED MARCH
1991 1992 1993 1994 1995 31, 1996
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Unpaid Principal Balance of
Contracts Being Serviced........... $ 3,480,706 $ 4,028,114 $ 4,337,902 $ 4,877,858 $ 6,739,285 $
Average Contract Unpaid Principal
Balance............................ $18.6 $18.6 $19.0 $19.8 $22.2 $
Number of Contracts Being
Serviced........................... 187,636 216,714 228,452 246,572 303,739
</TABLE>
DELINQUENCY AND LOAN LOSS/REPOSSESSION EXPERIENCE
The delinquency, repossession and loan loss experience shown in the
following tables for the periods referenced therein is for illustrative purposes
only, and there is no assurance that the delinquency, repossession or loan loss
experience of any Contracts sold to the Trust Fund will be similar to that set
forth below. Differences between the Contract Pool and the serviced portfolio as
a whole as to interest rates, borrower characteristics and location and type of
collateral may result in significant differences in performance as to
delinquency, repossession and loan loss experience.
The following table sets forth the delinquency experience since 1991 of
manufactured housing contracts serviced through SPHSI's and now BankAmerica
Housing Services' manufactured housing regional office system (other than
contracts already in repossession as of the dates indicated):
DELINQUENCY EXPERIENCE
<TABLE>
<CAPTION>
FIRST
YEAR ENDED DECEMBER 31, QUARTER
----------------------------------------------------- ENDED MARCH
1991 1992 1993 1994 1995 31, 1996
--------- --------- --------- --------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Number of Contracts Outstanding (1)................ 186,376 215,544 227,411 245,432 302,455
Number of Contracts Delinquent (2)
30-59 days......................................... 2,460 2,317 1,992 2,599 4,408
60-89 days......................................... 607 540 469 633 974
90 days or more.................................... 758 640 641 739 1,179
--------- --------- --------- --------- --------- -----------
Total Contracts Delinquent......................... 3,825 3,497 3,102 3,971 6,561
Delinquencies as a Percentage of Contracts
Outstanding (3)................................... 2.05% 1.62% 1.36% 1.62% 2.17%
</TABLE>
- --------------------------
(1) Excludes contracts already in repossession.
(2) Based on number of days payments are contractually past due (assuming 30-day
months). Consequently, a payment due on the first day of a month is not 30
days delinquent until the first day of the following month. Excludes
contracts already in repossession.
(3) By number of contracts, as of period end.
S-20
<PAGE>
The following table sets forth the loan loss/repossession experience of
manufactured housing contracts serviced through SPHSI's and now BankAmerica
Housing Services' manufactured housing regional office system (including
contracts already in repossession) as of the dates indicated:
LOAN LOSS/REPOSSESSION EXPERIENCE
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
FIRST
YEAR ENDED DECEMBER 31, QUARTER
--------------------------------------------------------------- ENDED MARCH
1991 1992 1993 1994 1995 31, 1996
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Number of Contracts Serviced (1).... 187,636 216,714 228,452 246,572 303,739
Principal Balance of Contracts Being
Serviced (1)....................... $ 3,480,706 $ 4,028,114 $ 4,337,902 $ 4,877,858 $ 6,739,285 $
Average Principal Recovery Upon
Liquidation (2).................... 48.64% 47.25% 45.61% 47.61% 50.92% %
Contract Liquidations (3)........... 3.02% 2.93% 2.51% 2.19% 2.04% %
Net Losses (4):
Dollars........................... $ 62,435 $ 75,435 $ 70,510 $ 63,601 $ 69,864 $
Percentage (5).................... 1.79% 1.87% 1.63% 1.30% 1.04% %
Contracts in Repossession........... 1,260 1,170 1,041 1,140 1,284
</TABLE>
- --------------------------
(1) As of period end. Includes contracts already in repossession.
(2) As a percentage of the outstanding principal balance of contracts that were
liquidated during the applicable period, based on the gross amounts
recovered upon liquidation less any liquidation proceeds applied to unpaid
interest accrued through the date of liquidation and after the payment of
repossession and other liquidation expenses.
(3) Number of contracts liquidated during the period as a percentage of the
total number of contracts being serviced as of period end.
(4) The calculation of net loss includes unpaid interest accrued through the
date of liquidation and all repossession and other liquidation expenses.
(5) The aggregate net loss amount as a percentage of the principal balance of
contracts being serviced as of period end.
[BANKAMERICA HOUSING SERVICES' MANAGEMENT'S DISCUSSION AND ANALYSIS OF
DELINQUENCY, REPOSSESSION AND LOAN LOSS EXPERIENCE]
[TO PROSPECTUS SUPPLEMENT, AS APPLICABLE.]
S-21
<PAGE>
PREPAYMENT AND YIELD CONSIDERATIONS
The general prepayment and yield considerations discussed in the Prospectus
under "Prepayment and Yield Considerations" should be read carefully in
connection with a decision to invest in any of the Offered Certificates. The
following discussion supplements, and does not replace or supersede the
discussion under "Prepayment and Yield Considerations" in the Prospectus.
The Contracts had maturities at origination ranging from [ ] months to [ ]
months, but may be prepaid in full or in part at any time. The prepayment
experience of the Contracts (including prepayments due to liquidations of
defaulted Contracts) will affect the average life and the maturity of the
Offered Certificates. BankAmerica Housing Services does not maintain statistics
with respect to the rate of prepayment of manufactured housing contracts in its
servicing portfolio, except for contracts in certain pools of manufactured
housing contracts sold by SPHSI [and contracts in certain pools of manufactured
housing contracts sold by BankAmerica Housing Services, Bank of America or
SPFSC, as the case may be,] for which at least eighteen months of prepayment
information is available, as described in Appendix A to this Prospectus
Supplement. For example, the Contract Pool might include Contracts with Contract
Rates that are generally higher or lower, in absolute terms or in comparison to
prevailing rates, than the contract rates of the contracts from which are
derived certain historical statistical data set forth in Appendix A. As a
result, the prepayment performance of the Contracts contained in the Contract
Pool might be higher or lower than the prepayment performance of the contracts
reflected in the historical data. In addition, although BankAmerica Housing
Services' management is aware of limited publicly available information relating
to historical rates of prepayment on manufactured housing contracts, BankAmerica
Housing Services' management believes that such information is not necessarily
indicative of the rate of prepayment that may be expected to be exhibited by the
Contracts. Nevertheless, BankAmerica Housing Services' management anticipates
that a number of Contracts will be prepaid in full in each year during which the
Offered Certificates are outstanding. See "Prepayment and Yield Considerations
- -- Prepayment Considerations," "Description of the Certificates -- Optional and
Mandatory Repurchase; Termination Auction" and "Certain Legal Aspects of the
Contracts -- Transfers of Manufactured Homes; Enforceability of Restrictions on
Transfer" in the Prospectus[, "Description of the Certificates -- Termination
Auction"] and "Description of the Certificates -- Optional Termination" herein
for a discussion of certain factors that may influence prepayments, including
homeowner mobility, general and regional economic conditions, prevailing
interest rates, provisions in the Contracts prohibiting the owner from selling
the Manufactured Home without the prior consent of the holder of the related
Contract, the early termination of the Trust Fund pursuant to a successful
Termination Auction and the option of the Servicer (whether or not BankAmerica
Housing Services remains the Servicer) to purchase the Contracts and any other
property constituting the Trust Fund. In addition, repurchases of Contracts on
account of certain breaches of representations and warranties as described below
under "Description of the Certificates -- Conveyance of Contracts" will have the
effect of prepaying such Contracts and therefore will affect the average life of
the Certificates.
The allocation of distributions to the Certificateholders in accordance with
the Agreement will have the effect of accelerating the amortization of the Class
A Certificates and delaying the amortization of the Class B Certificates from
the amortization that otherwise would be applicable if distributions in respect
of the Total Regular Principal Amount were made pro rata according to the
outstanding principal balances of the Series 199[ ]-[ ] Regular Certificates. If
a purchaser of Offered Certificates in either Class purchases them at a discount
and calculates its anticipated yield to maturity based on an assumed rate of
distributions of principal on such Class of Offered Certificates that is faster
than the rate actually realized, such purchaser's actual yield to maturity will
be lower than the yield so calculated by such purchaser. See "Description of the
Certificates -- Distributions" herein and "Prepayment and Yield Considerations"
in the Prospectus.
There can be no assurance that the delinquency or repossession experience
set forth under "The Sellers -- Delinquency and Loan Loss/Repossession
Experience" will be representative of the results that may be experienced with
respect to the Contracts. See "Prepayment and Yield Considerations" in the
Prospectus for a discussion of the effect delinquencies and repossessions on the
Contracts would have on the average life of the Certificates.
S-22
<PAGE>
The expected final scheduled payment date on the Contract with the latest
maturity is in [ ].
As described herein under "Description of the Certificates -- Subordination"
and "Description of the Certificates -- Losses on Liquidated Contracts," to the
extent that, on any Distribution Date, the Available Distribution Amount is not
sufficient to permit a full distribution of the Total Regular Principal Amount
to the holders of any Class of Offered Certificates, the effect will be to cause
the Offered Certificates to be amortized more slowly than they otherwise would
have been amortized, and losses on Liquidated Contracts and delinquencies on the
Contracts (if not covered by Monthly Advances) will be borne by the holders of
such Class of Offered Certificates in the manner described thereunder and as
described below.
In the event there is a sufficiently large number of delinquencies on the
Contracts in any Collection Period that were not covered by Monthly Advances as
described herein, the amounts distributed to the holders of the Offered
Certificates could be less than the amount of principal and interest that
otherwise would be payable on such Certificates on the related Distribution
Date. In such event, even if delinquent payments on the Contracts were
eventually recovered upon liquidation, if the amounts received do not include
interest on delinquent interest payments, the effective yield on the Contracts
would be reduced, and under certain circumstances it is possible that sufficient
Available Distribution Amounts might not be available to provide for aggregate
distributions on the Offered Certificates equal to the sum of their initial
outstanding Certificate Balances plus accrued interest thereon, thereby reducing
the effective yield on such Certificates.
Although Contract Rates on the Contracts vary, prepayments on Contracts will
not affect the respective Pass-Through Rates on the Offered Certificates because
such Pass-Through Rates [are fixed and] will not exceed the Contract Rate on any
Contract (less [ ]% per annum for the Monthly Servicing Fee, as defined
hereinafter). Obligors are not required to pay interest on the Contracts after
the date of full prepayment of principal or the date of a partial prepayment of
principal (to the extent of such partial prepayment). As a result, partial or
full prepayments in advance of the related Due Dates for such Contracts in any
Collection Period will reduce the amount of interest received from the related
Obligors during such Collection Period to less than one month's interest.
However, when a partial prepayment is made on a Contract or a Contract is
prepaid in full during any Collection Period, but after the Due Date for such
Contract in such Collection Period, the effect will be to increase the amount of
interest received from the related Obligor during such Collection Period to more
than one month's interest. If a sufficient amount of partial prepayments are
made or a sufficient number of Contracts are prepaid in full in a given
Collection Period in advance of their respective Due Dates, interest received on
all of the Contracts during that Collection Period, after netting out the
Monthly Servicing Fee (and other expenses of the Trust Fund), may be less than
the interest payable on the Class A and/or Class B Certificates on the related
Distribution Date. As a result, the Available Distribution Amount for the
related Distribution Date may not be sufficient to distribute the interest on
the Offered Certificates in the full amount set forth herein under "Description
of the Certificates -- Distributions" and to make a full distribution of the
Total Regular Principal Amount to the Class A and/or Class B Certificateholders.
Although no assurance can be given in this matter, BankAmerica Housing Services
does not anticipate that the net shortfall of interest caused by partial
prepayments or prepayments in full in any Collection Period would be great
enough, in the absence of delinquencies or liquidation losses, to reduce the
Available Distribution Amount for a Distribution Date below the amount that
would have been required to be distributed to the holders of the Offered
Certificates on that Distribution Date in the absence of such prepayment
interest shortfalls.
Because the Contracts are [actuarial] Contracts, the outstanding principal
balances thereof will reduce, for purposes of accrual of interest thereon, by a
precomputed amortization amount on each Due Date whether or not the Scheduled
Payment for such Due Date is received in advance of or subsequent to such Due
Date. See "The Contract Pools" in the Prospectus. Thus, the effect of delinquent
Scheduled Payments, even if they are ultimately paid by the Obligor, will be to
reduce the yields on such Contracts below their respective Contract Rates
(because interest will not have accrued on the principal portion of any
Scheduled Payment while it is delinquent). If the Servicer does not make an
advance with respect to such delinquent Contracts as described herein, the
result will be to reduce the effective yield to the Trust Fund derived from
S-23
<PAGE>
such Contracts to a yield below their Contract Rates. Under certain
circumstances, such yield reductions could cause the aggregate yield to the
Trust Fund derived from the Contract Pool to be insufficient to support the
distribution of interest on the Offered Certificates, after netting out other
expenses of the Trust Fund.
The table below sets forth with respect to each pool of contracts described
in Appendix A to this Prospectus Supplement (a) the initial aggregate principal
balance (calculated as of the first day of the month of the sale), (b) the
weighted average contract rate ("WAC") of the contracts in the pool as of the
first day of the month of the sale of such pool, (c) the weighted average
remaining term to maturity ("WAM") of the contracts in the pool as of the first
day of the month of the sale of such pool, (d) the estimated average age of the
pool as of the first day of the month of the sale of such pool, (e) the
aggregate principal balance of such pool as of [ ], 199[ ], (f) the WAC of
the contracts in the pool as of [ ], 199[ ] and (g) the percentage of the
Prepayment Model (as described in "-- Weighted Average Life of the Offered
Certificates" below) for the life of each pool through [ ], 199[ ]
(calculated as the annual rate of the decline in the outstanding aggregate
principal balance exhibited over the life of the pool from prepayments using the
weighted average coupon as of the first day of the month of the sale of the
pool). The prepayment performance of the contract pools described in the
following table is not indicative of the prepayment performance of the Contracts
in the Trust Fund, and no assurance can be given that the prepayment performance
of the Contracts in the Trust Fund will correspond with the prepayment
performance of any of the pools described below or in Appendix A to this
Prospectus Supplement.
<TABLE>
<CAPTION>
AGGREGATE PERCENTAGE OF
ORIGINAL ESTIMATED AGGREGATE THE
PRINCIPAL ORIGINAL ORIGINAL WAM AVERAGE AGE AT PRINCIPAL PREPAYMENT
MONTH AND YEAR OF SALE BALANCE WAC (MONTHS) SALE (MONTHS) BALANCE WAC(1) MODEL(1)
- ------------------------------ -------------- ----------- ------------- --------------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
September 1988................ $ 106,635,430 13.44% 178 5
December 1988................. 104,666,978 13.35 184 4
May 1989...................... 105,629,211 13.84 185 4
September 1989................ 125,140,010 13.10 184 8
November 1989................. 105,106,711 13.14 192 2
March 1990.................... 140,369,133 13.48 186 5
June 1990..................... 149,153,886 13.61 188 4
September 1990................ 176,504,848 13.79 185 5
December 1990................. 176,277,296 13.69 189 5
March 1991.................... 115,743,068 13.46 187 12
June 1991..................... 139,806,805 13.21 192 3
September 1991................ 150,531,673 13.11 196 3
December 1991................. 150,837,421 12.76 193 3
March 1992.................... 140,964,598 12.10 192 3
June 1992..................... 175,780,463 12.21 191 3
October 1992.................. 175,970,703 11.57 198 3
</TABLE>
- ------------------------
(1) As of [ ], 199[ ]
WEIGHTED AVERAGE LIFE OF THE OFFERED CERTIFICATES
The following information is given solely to illustrate the effect of
prepayments of the Contracts on the weighted average life of the Offered
Certificates under the stated assumptions and is not a prediction of the
prepayment rate that might actually be experienced by the Contracts.
Weighted average life refers to the average amount of time from the date of
issuance of a security until each dollar of principal of such security is repaid
to the investor. The weighted average life of an Offered Certificate is
determined by (i) multiplying the amount of cash distributions in reduction of
the Certificate
S-24
<PAGE>
Balance of such Certificate by the number of years from the date of issuance of
such Certificate to the stated Distribution Date, (ii) adding the results, and
(iii) dividing the sum by the Initial Certificate Balance of such Certificate.
The weighted average life of the Offered Certificates will be affected by the
rate at which principal on the Contracts is paid. Principal payments on
Contracts may be in the form of scheduled amortization or prepayments (for this
purpose, the term "prepayment" includes repayments (other than from scheduled
amortization) and liquidations due to default or other dispositions of
Contracts). Prepayments on Contracts may be measured by a prepayment standard or
model. The model used in this Prospectus Supplement ("Prepayment Model") is
based on an assumed rate of prepayment each month of the then unpaid principal
balance of a pool of new contracts. 100% of the Prepayment Model assumes
prepayment rates of [ ]% per annum of the then unpaid principal balance of
such Contracts in the first month of the life of the Contracts and an additional
[ ]% per annum in each month thereafter (for example, [ ]% per annum in
the third month) until the [ ]th month. Beginning in the [ ]th month and in
each month thereafter during the life of the Contracts, 100% of the Prepayment
Model assumes a constant prepayment rate of [ ]% per annum.
As used in the following table, "0% of the Prepayment Model" assumes no
prepayments on the Contracts; "100% of the Prepayment Model" assumes the
Contracts will prepay at rates equal to 100% of the Prepayment Model assumed
prepayment rates; "150% of the Prepayment Model" assumes the Contracts will
prepay at rates equal to 150% of the Prepayment Model assumed prepayment rates;
"200% of the Prepayment Model" assumes the Contracts will prepay at rates equal
to 200% of the Prepayment Model assumed prepayment rates; "250% of the
Prepayment Model" assumes the Contracts will prepay at rates equal to 250% of
the Prepayment Model assumed prepayment rates; and "300% of the Prepayment
Model" assumes the Contracts will prepay at rates equal to 300% of the
Prepayment Model assumed prepayment rates.
There is no assurance, however, that prepayments of the Contracts will
conform to any level of the Prepayment Model, and no representation is made that
the Contracts will prepay at the prepayment rates shown or any other prepayment
rate. The rate of principal payments on pools of manufactured housing contracts
is influenced by a variety of economic, geographic, social and other factors,
including the level of interest rates and the rate at which manufactured
homeowners sell their manufactured homes or default on their contracts. Other
factors affecting prepayment of such contracts include changes in obligors'
housing needs, job transfers, unemployment and obligors' net equity in the
manufactured homes. In the case of mortgage loans secured by site-built homes,
in general, if prevailing interest rates fall significantly below the interest
rates on such mortgage loans, the mortgage loans are likely to be subject to
higher prepayment rates than if prevailing interest rates remained at or above
the rates borne by such mortgage loans. Conversely, if prevailing interest rates
rise above the interest rates on such mortgage loans, the rate of prepayment
would be expected to decrease. In the case of manufactured housing contracts,
however, because the outstanding principal balances are, in general, smaller
than mortgage loan balances and the original term to maturity of each such
contract is generally shorter, the reduction or increase in the size of the
monthly payments on contracts of the same maturity and principal balance arising
from a change in the interest rate thereon is generally smaller. Consequently,
changes in prevailing interest rates may not have a similar effect, or may have
a similar effect, but to a smaller degree, on the prepayment rates on
manufactured housing contracts.
The percentages and weighted average lives in the following tables were
determined assuming that (i) scheduled interest and principal payments on the
Contracts are received in a timely manner and prepayments are made at the
indicated percentages of the Prepayment Model set forth in the tables, (ii) the
Trust Fund is terminated pursuant to a Termination Auction, (iii) the Contracts,
as of the Cut-off Date, will be grouped into [four] groups having the additional
characteristics set forth in the table entitled "Assumed Contract
Characteristics" below, (iv) the Class A Certificates initially represent
[ ]% of the entire ownership interest in the Trust Fund and have a Class A
Pass-Through Rate of [ ]% per annum and the Class B Certificates will
initially represent [ ]% of the entire ownership interest in the Trust Fund
and have a Class B Pass-Through Rate of [ ]% per annum, (v) no interest
shortfalls will arise in connection with prepayment in full of the Contracts,
(vi) there will be no repurchases of any Contracts due to a breach in a
representation or warranty with respect thereto, and (vii) a servicing fee of
[ ]% per annum will be paid
S-25
<PAGE>
to the Servicer. The tables assume that there are no losses or delinquencies on
the Contracts. No representation is made that losses or delinquencies on the
Contracts will be experienced at the rate assumed in the preceding sentence or
at any other rate.
ASSUMED CONTRACT CHARACTERISTICS
<TABLE>
<CAPTION>
CURRENT ORIGINAL REMAINING
PRINCIPAL TERM TO MATURITY TERM TO MATURITY
POOL BALANCE CONTRACT RATE (MONTHS) (MONTHS)
- -------------------------------------------- ---------------- ------------- ---------------- ----------------
<S> <C> <C> <C> <C>
1........................................... $ %
2...........................................
3...........................................
4...........................................
---------------- ------------- ---------------- ----------------
Total or weighted average...................
$ %
</TABLE>
Since the tables were prepared on the basis of the assumptions in the
preceding paragraph, there are discrepancies between the payment characteristics
of the actual Contracts and the payment characteristics of the Contracts assumed
in preparing the tables. Any such discrepancy may have an effect upon the
percentages of the Initial Class A Certificate Balance and Initial Class B
Certificate Balance outstanding and weighted average lives of such Certificates
set forth in the tables. In addition, since the actual Contracts and the Trust
Fund have payment characteristics which differ from those assumed in preparing
the tables set forth below, the distributions of principal on the Offered
Certificates may be made earlier or later than as indicated in the tables.
It is not likely that Contracts will prepay at any constant percentage of
the Prepayment Model to maturity or that all Contracts will prepay at the same
rate. In addition, the diverse remaining terms to maturity of the Contracts
(which include recently originated Contracts) could produce slower distributions
of principal than indicated in the tables at the various percentages of the
Prepayment Model specified even if the weighted average remaining term to
maturity of the Contracts is [ ] months.
Investors are urged to make their investment decisions on a basis that
includes their determination as to anticipated prepayment rates under a variety
of the assumptions discussed herein.
Based on the foregoing assumptions, the following tables indicate the
resulting weighted average lives of the Offered Certificates and sets forth the
percentage of the Initial Class A Certificate Balance and the Initial Class B
Certificate Balance that would be outstanding after each of the dates shown at
the indicated percentages of the Prepayment Model.
S-26
<PAGE>
PERCENT OF THE INITIAL CLASS A CERTIFICATE BALANCE AT THE
RESPECTIVE PERCENTAGES OF THE PREPAYMENT MODEL
<TABLE>
<CAPTION>
PREPAYMENTS (% OF PREPAYMENT MODEL)
-------------------------------------
<S> <C> <C> <C> <C> <C> <C>
DATE 0% 100% 150% 200% 250% 300%
- ------------------------------------------------------------------------ --- ---- ---- ---- ---- ----
Initial Percentage...................................................... 100 100 100 100 100 100
[ ], 19[ ] (first distribution date).............................
[ ], 19[ ] (anniversary of first distribution date)..............
[ ], 19[ ].......................................................
[ ], 19[ ].......................................................
[ ], 20[ ].......................................................
[ ], 20[ ].......................................................
[ ], 20[ ].......................................................
[ ], 20[ ].......................................................
[ ], 20[ ].......................................................
[ ], 20[ ].......................................................
[ ], 20[ ].......................................................
Weighted Average Life (years)...........................................
</TABLE>
PERCENT OF THE INITIAL CLASS B CERTIFICATE BALANCE AT THE
RESPECTIVE PERCENTAGES OF THE PREPAYMENT MODEL
<TABLE>
<CAPTION>
PREPAYMENTS (% OF PREPAYMENT MODEL)
-------------------------------------
<S> <C> <C> <C> <C> <C> <C>
DATE 0% 100% 150% 200% 250% 300%
- ------------------------------------------------------------------------ --- ---- ---- ---- ---- ----
Initial Percentage...................................................... 100 100 100 100 100 100
[ ], 19[ ] (first distribution date).............................
[ ], 19[ ] (anniversary of first distribution date)..............
[ ], 19[ ].......................................................
[ ], 19[ ].......................................................
[ ], 20[ ].......................................................
[ ], 20[ ].......................................................
[ ], 20[ ].......................................................
[ ], 20[ ].......................................................
[ ], 20[ ].......................................................
[ ], 20[ ].......................................................
[ ], 20[ ].......................................................
[ ], 20[ ].......................................................
Weighted Average Life (years)...........................................
</TABLE>
DESCRIPTION OF THE CERTIFICATES
The Certificates will be issued pursuant to the Pooling and Servicing
Agreement (the "Agreement"). A form of the Pooling and Servicing Agreement will
be made available to prospective investors upon request (made to the Servicer at
the address specified in the Prospectus under "Incorporation of Certain
Documents by Reference") and will be filed with the Securities and Exchange
Commission after the initial issuance of the Certificates as exhibits to a
Current Report on Form 8-K. Reference is made to the Prospectus for additional
information regarding the terms and conditions of the Agreement. The following
discussion supplements, and does not replace or supersede the discussion under
"Description of the Certificates" in the Prospectus.
Set forth below are summaries of the specific terms and provisions pursuant
to which the Certificates will be issued. The following summaries do not purport
to be complete and are subject to, and are qualified
S-27
<PAGE>
in their entirety by reference to, the provisions of the Agreement. When
particular provisions or terms used in the Agreement are referred to, the actual
provisions (including definitions of terms) are incorporated by reference.
GENERAL
[All the Offered Certificates initially will be issuable in one or more
Global Certificates registered in the name of Cede as the nominee of DTC.
Ownership in Offered Certificates represented by such Global Certificates will
only be available in the form of book-entries on the records of DTC and
participating members thereof. All references to "holders" or
"Certificateholders," and to authorized denominations, when used with respect to
the Offered Certificates issued as Global Certificates, shall reflect the rights
of beneficial owners of the Offered Certificates ("Certificate Owners"), and
limitations thereof, as they may be indirectly exercised through DTC and its
participating members, except as otherwise specified herein. See "Description of
the Certificates -- Global Certificates" in the Prospectus. See the Prospectus
under "Description of the Certificates -- Global Certificates" for a description
of the circumstances in which Definitive Certificates in the future may be
issued. Any Offered Certificates issued as Definitive Certificates will be
transferable and exchangeable at the corporate trust office of the Trustee at
its Corporate Trust Department in [ ] or, if it so elects, at the
office of an agent in [New York, New York]. No service charge will be made for
any registration of exchange or transfer, but the Trustee may require payment of
a sum sufficient to cover any tax or other governmental charge.
The Offered Certificates will be issued in fully registered form only, in
denominations equal to [$1,000] or any integral multiple of [one dollar] in
excess thereof. The "Percentage Interest" of a Class A Certificate or Class B
Certificate is the percentage obtained from dividing the original denomination
of such Certificate by the Initial Class A Certificate Balance or Initial Class
B Certificate Balance, respectively.
The Trust Fund includes (i) the Contract Pool, including certain rights to
receive payments on the Contracts on and after the Cut-off Date, (ii) the
amounts held from time to time in the "Certificate Account" (as described below
under "-- Payment on Contracts; Certificate Account") maintained by the Trustee
pursuant to the Agreement, (iii) any property which initially secured a Contract
and which is acquired in the process of realizing thereon, (iv) the obligations
of Bank of America and BankAmerica Housing Services, under certain conditions,
to repurchase Contracts sold by it with respect to which certain representations
and warranties have been breached and not cured and (v) the proceeds of all
insurance policies described herein.
Bank of America and BankAmerica Housing Services will convey the Contracts
to the Trustee. See "The Contract Pool" herein and "-- Conveyance of Contracts"
below. BankAmerica Housing Services, as Servicer, will service the Contracts
pursuant to the Agreement. The Contract documents will be held for the benefit
of the Trustee by the Servicer.
Distributions of principal and interest to the holders of the Certificates
will be made on the 10th day of each month, or, if such day is not a business
day, the next succeeding business day (each, a "Distribution Date") beginning in
[ ], 199[ ], to the persons in whose names the Certificates are registered
at the close of business on the last business day of the month preceding the
month in which such distribution payment is made (the "Record Date").
CONVEYANCE OF CONTRACTS
On the date of initial issuance of the Certificates, Bank of America and
BankAmerica Housing Services will convey to the Trustee, without recourse, all
right, title and interest of Bank of America and BankAmerica Housing Services in
and to the Contracts, and all rights under the standard hazard insurance
policies on the related Manufactured Homes. The conveyance of the Contracts to
the Trustee will include a conveyance of all rights to receive Scheduled
Payments thereon that were due on or after the Cut-off Date, even if received
prior to the Cut-off Date, as well as all rights to any payments received on or
after the Cut-off Date (other than late receipts of Scheduled Payments that were
due prior to the Cut-off Date). The Contracts will be described on a schedule
attached to the Agreement (the "Contract Schedule"). The Contract Schedule will
include the principal balance of each Contract as of the Cut-off Date, the
amount of each Scheduled
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Payment due on each Contract as of the Cut-off Date, the Contract Rate on each
Contract (determined as of the Cut-off Date) and the maturity date of each
Contract. Prior to the conveyance of the Contracts to the Trustee, the
BankAmerica Housing Services operations department will be required to complete
a review of all of the originals of the Contracts, the certificates of title to,
or other evidence of a perfected security interest in, the Manufactured Homes,
any related mortgages, and any assignments or modifications of the foregoing
(collectively, the "Contract Files") confirming the accuracy of the Contract
Schedule delivered to the Trustee. Any Contract discovered not to agree with
such schedule in a manner that is materially adverse to the interests of the
Certificateholders will be repurchased by Bank of America or BankAmerica Housing
Services, as applicable, or replaced with another Contract, except that if the
discrepancy relates to the principal balance of a Contract (determined as
described above), Bank of America or BankAmerica Housing Services, as
applicable, may, under certain conditions, deposit cash in the Certificate
Account in an amount sufficient to offset such discrepancy. The Trustee will not
review the Contract Files.
The Servicer will hold, as custodian and agent on behalf of the Trustee, the
original Contracts and copies of documents and instruments relating to each
Contract and the security interest in the Manufactured Home relating to each
Contract. See "Risk Factors -- Security Interests in the Manufactured Homes" and
"Certain Legal Aspects of the Contracts -- Security Interests in Manufactured
Homes" in the Prospectus for discussion of the consequences of the Servicer
maintaining possession of the original Contracts and the security interest in
the related Manufactured Homes. In order to give notice of the Trustee's right,
title and interest in and to the Contracts, a UCC-1 financing statement
identifying the Trustee as the secured party and identifying all the Contracts
as collateral will be filed in the appropriate office in the appropriate states.
The Contracts will be stamped or otherwise marked to reflect their assignment to
the Trustee. To the extent that the Contracts do not constitute "chattel paper"
within the meaning of the UCC as in effect in the applicable jurisdictions or to
the extent that the Contracts do constitute chattel paper and a subsequent
purchaser is able to take physical possession of the Contracts without notice of
such assignment, the Trustee's interest in the Contracts could be defeated. See
"Certain Legal Aspects of the Contracts" in the Prospectus.
Bank of America, BankAmerica Housing Services or both of them, as
applicable, will make certain representations and warranties to the Trustee with
respect to each Contract sold by it, as of the Closing Date (unless expressly
stated otherwise), including the following: (a) as of the Cut-off Date, no
Contract is more than 59 days delinquent; (b) no provision of such Contract has
been waived, altered or modified in any respect, except by instruments or
documents identified in the related Contract File; (c) such Contract is a legal,
valid and binding obligation of the Obligor and is enforceable in accordance
with its terms (except as may be limited by laws affecting creditors' rights
generally or by general equity principles); (d) such Contract is not subject to
any right of rescission, set-off, counterclaim or defense; (e) such Contract is
covered by hazard insurance described under "Description of the Certificates --
Servicing Compensation and Payment of Expenses; Certain Matters Regarding the
Servicer -- A. Hazard Insurance Policies" in the Prospectus; (f) such Contract
was either (i) originated by a manufactured housing dealer acting, to the
knowledge of BankAmerica Housing Services, in the regular course of its business
and purchased on an individual basis by BankAmerica Housing Services in the
ordinary course of its business, [or] (ii) originated by BankAmerica Housing
Services in the ordinary course of its business [or (iii) purchased by Bank of
America, BankAmerica Housing Services or SPFSC, or any combination thereof, as
part of bulk purchases of manufactured housing contracts from other private
lenders or finance companies, or from governmental agencies or instrumentalities
or from other entities]; (g) such Contract was neither originated in nor is
subject to the laws of any jurisdiction whose laws would make the transfer of
the Contract or an interest therein to the Trustee pursuant to the Agreement or
pursuant to the Certificates unlawful; (h) such Contract complies with all
requirements of law; (i) such Contract has not been satisfied or subordinated in
whole or in part or rescinded and the Manufactured Home securing such Contract
has not been released from the lien of such Contract; (j) such Contract creates
a valid and enforceable first-priority security interest in favor of BankAmerica
Housing Services in the Manufactured Home covered thereby; (k) such security
interest has been assigned to the Trustee, and, after such assignment, the
Trustee has a valid and perfected first-priority security interest in the
Manufactured Home securing such Contract; (l) such Contract has not been sold,
assigned or pledged to any other person, and prior to the transfer of the
Contracts to the Trustee, Bank of America or BankAmerica
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Housing Services, as the case may be, had good and marketable title to such
Contract sold by it, free and clear of any encumbrance, equity, loan, pledge,
charge, claim or security interest, and it was the sole owner thereof and had
full right to transfer such Contract to the Trustee; (m) as of the Cut-off Date,
there was no default, breach, violation or event permitting acceleration under
such Contract and no event which, with notice and the expiration of any grace or
cure period, would constitute such a default, breach, violation or event
permitting acceleration (except payment delinquencies permitted by clause (a)
above), and Bank of America or BankAmerica Housing Services, as the case may be,
has not waived any of the foregoing; (n) as of the Closing Date (as defined
below), there were, to the knowledge of Bank of America's or BankAmerica Housing
Services', as applicable, no liens or claims which have been filed for work,
labor or materials affecting a Manufactured Home securing such Contract, which
are or may be liens prior to or equal with or subordinate to the lien of such
Contract; (o) such Contract is a fully-amortizing loan with a [fixed] Contract
Rate and provides for level payments over the term of such Contract; (p) such
Contract contains customary and enforceable provisions such as to render the
rights and remedies of the holder thereof adequate for realization against the
collateral of the benefits of the security; (q) the information contained in the
Contract Schedule with respect to such Contract is true and correct; (r) there
is only one original of such Contract; (s) such Contract did not have a
loan-to-value ratio at origination greater than 100%; (t) the related
Manufactured Home is not considered or classified as part of the real estate on
which it is located under the laws of the jurisdiction in which it is located,
and as of the Closing Date such Manufactured Home is, to the knowledge of Bank
of America or BankAmerica Housing Services, as applicable, free of damage and in
good repair; (u) such Contract is a "qualified mortgage" under Section
860G(a)(3) of the Code; (v) the related Manufactured Home is a "manufactured
home" within the meaning of Section 5402(6) of Title 42 of the United States
Code and, as to each Contract sold by Bank of America or BankAmerica Housing
Services to the Trust Fund, BAFSB is a federally-chartered savings bank as of
the time of such Contract's origination as required under Section
3(a)(41)(A)(ii) of the Exchange Act; (w) such Contract is secured by a "single
family residence" within the meaning of Section 25(e)(10) of the Code; (x) such
Contract has been stamped to indicate its assignment to the Trustee; and (y) the
Contract with the lowest Contract Rate has a Contract Rate of % and the
Contract with the highest Contract Rate has a Contract Rate of %. Under the
terms of the Agreement, and subject to the relevant Seller's option to effect a
substitution with respect to Contracts sold by it as described in the last
paragraph under this subheading, Bank of America or BankAmerica Housing
Services, as the case may be, will be obligated to repurchase, at the price
described below, any Contract sold by it within 90 days after Bank of America or
BankAmerica Housing Services, as the case may be, becomes aware, or after Bank
of America's or BankAmerica Housing Services' receipt of written notice from the
Trustee or the Servicer, of a breach of any representation or warranty of Bank
of America or BankAmerica Housing Services, as the case may be, in the Agreement
that materially and adversely affects the Trust Fund's interest in any Contract
it sold thereto unless such breach has been cured.
Notwithstanding the foregoing, neither Bank of America nor BankAmerica
Housing Services will be required to repurchase or substitute any Contract
relating to a Manufactured Home located in any jurisdiction on account of a
breach of the representation and warranty described in clause (j) above solely
on the basis of the failure by Bank of America or BankAmerica Housing Services,
as applicable, to cause a notation to be made on any document of title relating
to any such Manufactured Home or to execute any transfer instrument relating to
any such Manufactured Home (other than a notation or transfer instrument
necessary to show Bank of America or BankAmerica Housing Services as lienholder
or legal title holder) unless (i) a court of competent jurisdiction has adjudged
that, because of such failure, the Trustee does not have a perfected
first-priority security interest in such related Manufactured Home or (ii)(A)
the Servicer has received written advice of counsel to the effect that a court
of competent jurisdiction has held that, solely because of a substantially
similar failure on the part of a pledgor or assignor of manufactured housing
contracts (who has perfected the assignment or pledge of such contracts), a
perfected first-priority security interest was not created in favor of the
pledgee or assignee in a related manufactured home which is located in such
jurisdiction and which is subject to the same laws regarding the perfection of
security interests therein applicable to the Manufactured Homes located in such
jurisdiction and (B) the Servicer shall not have completed all appropriate
remedial action with respect to such Manufactured Home within 180 days after
receipt of such written advice. Any such advice will be from counsel selected by
the Servicer on a non-
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discriminatory basis from among the counsel used by the Servicer in its general
business in the jurisdiction in question. The Servicer will have no ongoing
obligation to seek advice with respect to the matters described in clause (ii)
above. However, the Servicer is required to seek advice with respect to such
matters whenever information comes to the attention of its counsel which causes
such counsel to determine that a holding of the type described in clause (ii)(A)
might exist. If any counsel selected by the Servicer informs the Servicer that
no holding of the type described in clause (ii)(A) exists, such advice will be
conclusive and binding on the parties to the Agreement pursuant to which a
Trustee has an interest in any Contracts in the applicable jurisdiction as of
the applicable date. If any holding described above which would give rise to a
repurchase obligation on the part of Bank of America or BankAmerica Housing
Services, as applicable, were to result from proceedings brought by a receiver
or conservator of Bank of America or BankAmerica Housing Services, it is likely
that such receiver or conservator would also reject the resulting repurchase
obligation.
The repurchase obligation described above generally constitutes the sole
remedy available to the Trustee and the Certificateholders for a breach of a
representation or warranty under the Agreement with respect to the Contracts.
The repurchase price for any Contract will be equal to the remaining principal
balance of such Contract as of the beginning of the month of repurchase, plus
accrued and unpaid interest from the Due Date with respect to which the Obligor
last made a payment to the Due Date occurring in the Collection Period during
which such Contract is repurchased.
In lieu of repurchasing a Contract as specified above, during the two-year
period following the date of the initial issuance of the Certificates (the
"Closing Date"), BankAmerica Housing Services or, where applicable, Bank of
America, may, at its option, substitute an Eligible Substitute Contract (as
defined below) for the Contract that it is otherwise obligated to repurchase
(referred to herein as the "Replaced Contract"). An "Eligible Substitute
Contract" is a Contract that satisfies, as of the date of its substitution, the
representations and warranties specified in the Agreement, has a Scheduled
Principal Balance that is not greater than the Scheduled Principal Balance of
the Replaced Contract as of the beginning of the month in which such
substitution takes place, has a Contract Rate that is at least equal to the
Contract Rate of the Replaced Contract, has a remaining term to scheduled
maturity that is not greater than the remaining term to scheduled maturity of
the Replaced Contract and has not been delinquent for more than 31 days as to
any Scheduled Payment due in the twelve months prior to its substitution.
BankAmerica Housing Services or Bank of America, as applicable, will be required
to deposit in the Certificate Account cash in the amount, if any, by which the
Scheduled Principal Balance of the Replaced Contract as of the beginning of the
month in which substitution takes place exceeds the Scheduled Principal Balance
of the Contract it sold being substituted as of the beginning of the month.
PAYMENTS ON THE CONTRACTS; CERTIFICATE ACCOUNT
The Trustee will initially establish and maintain an account (the
"Certificate Account") at a depository institution organized under the laws of
the United States or any state, the deposits of which are insured to the full
extent permitted by law by the Federal Deposit Insurance Corporation (the
"FDIC") whose commercial paper, long-term deposits or long-term unsecured senior
debt has a rating of [ ] by [ ][and [ ] by [ ] (if rated by
[ ])] in the case of commercial paper or in one of the two highest
rating categories by [ ] [and] [ ] (if rated by [ ])] in
the case of long-term deposits or long-term unsecured senior debt, and which is
subject to examination by federal or state authorities or a depository
institution otherwise acceptable to [ ] and [ ] (an "Eligible
Institution"). The funds in the Certificate Account are required to be invested
in Eligible Investments that will mature not later than the business day
preceding the applicable Distribution Date. "Eligible Investments" include,
among other investments, obligations of the United States or of any agency
thereof backed by the full faith and credit of the United States; certificates
of deposit, time deposits and bankers' acceptances sold by eligible financial
institutions; commercial paper rated [ ] by [ ] [and [ ] by
[ ] (if rated by [ ])]; money market funds acceptable to
[ ] [and [ ]] (as evidenced by a letter from [ ] [and
[ ]] to such effect); and other obligations acceptable to [ ]
[and [ ]].
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All payments in respect of principal and interest on the Contracts received
[during any Collection Period] by the Servicer (exclusive of Scheduled Payments
due prior to the Cut-off Date), including Liquidation Proceeds (net of
Liquidation Expenses, as defined below), are required to be paid into the
Certificate Account not later than the [second business day following receipt
thereof][last day of such Collection Period or, if such day is not a business
day, on the first business day thereafter]. Amounts received as late payment
fees, extension fees, assumption fees or similar fees may be retained by the
Servicer as part of its servicing fees. See "-- Servicing Compensation; Certain
Other Matters Regarding the Servicer" below. In addition, the amount paid by
BankAmerica Housing Services or Bank of America for any Contract repurchased by
it as a result of a breach of a representation or warranty under the Agreement,
and amounts required to be deposited upon substitution of an Eligible Substitute
Contract because of a breach of a representation or warranty (which amounts will
be treated as partial principal prepayments), as described under "-- Conveyance
of Contracts" above, are required to be paid into the Certificate Account.
On the third business day prior to each Distribution Date (the
"Determination Date"), the Servicer will determine the Available Distribution
Amount and the amounts to be distributed on the Certificates on such
Distribution Date. The "Available Distribution Amount" for any Distribution Date
is the sum of (a) the Monthly Advance for such Distribution Date (as defined
below under "-- Advances") and (b) the amount in the Certificate Account on the
close of business on the last day of the immediately preceding Collection
Period, less the sum of (i) any repossession profits (of which there are
expected to be a de minimis amount) on defaulted Contracts, (ii) payments on
Contracts that have been repurchased as a result of a breach of a representation
or warranty that are received during or after the month of repurchase, (iii)
Excess Contract Payments (as defined below) and any other payments not required
to be distributed to Certificateholders on the related Distribution Date, (iv)
reimbursements to the Servicer in the amount of expenses incurred in connection
with the liquidation of a Contract ("Liquidation Expenses") and certain taxes
and insurance premiums advanced by the Servicer in respect of Manufactured Homes
(as described below under "-- Advances"), (v) reimbursements to the Servicer for
Nonrecoverable Advances in respect of Contracts and Monthly Advances to the
extent permitted by the Agreement (as described below under "-- Advances") and
(vi) the Monthly Servicing Fee (as hereinafter defined).
An "Excess Contract Payment" is a payment received on a Contract that is in
excess of the Scheduled Payment (or, generally, an integral multiple thereof) on
such Contract, is not a partial principal prepayment or prepayment in full and
is not part of any Liquidation Proceeds. Excess Contract Payments will be held
by the Trustee in the Certificate Account and may be applied as described under
"-- Advances" below.
The Trustee or its paying agent will withdraw funds from the Certificate
Account on each Distribution Date (but only to the extent of the related
Available Distribution Amount) to make payments to Certificateholders as
specified under "-- Distributions" below. From time to time, as provided in the
Agreement, the Servicer will also withdraw funds from the Certificate Account to
make payments to it or Bank of America or BankAmerica Housing Services as
permitted by the Agreement and described in subclauses (i), (ii), (iv), (v) and
(vi) of clause (b) in the second preceding paragraph.
DISTRIBUTIONS
Distributions to the holders of the Series 199[ ]-[ ] Regular Certificates
will be applied first to the holders of the Class A Certificates and then to the
holders of the Class B Certificates. The Available Distribution Amount for each
Distribution Date will be applied in the amounts and the order of priority set
forth below. Distributions of principal and interest to holders of each Class of
Certificates will be made on each Distribution Date in an amount equal to their
respective Percentage Interests multiplied by the aggregate amount distributed
to such Class of Certificates on such Distribution Date. Interest will be
calculated on the basis of a 360-day year consisting of twelve 30-day months.
Each distribution with respect to book-entry certificates will be paid to
DTC, which will credit the amount of such distribution to the accounts of its
participants in accordance with its normal procedures. Each participant will be
responsible for disbursing such distribution to the Certificate Owners that it
represents and to each indirect participating brokerage firm (a "brokerage firm"
or "indirect participating firm") for which it acts as agent. Each brokerage
firm will be responsible for disbursing funds to the
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Certificate Owners that it represents. All such credits and disbursements with
respect to book-entry certificates are to be made by DTC and its participants in
accordance with DTC's rules. See "Description of the Certificates -- Global
Certificates" below.
On each Distribution Date, the Available Distribution Amount will be
distributed in the following amounts and in the following order of priority:
(i) to the Class A Certificateholders, the Class A Interest Distribution
Amount;
(ii) to the Class A Certificateholders, the Formula Principal
Distribution Amount until the Class A Certificate Balance is reduced to
zero;
(iii) to the Class B Certificateholders, the Class B Interest
Distribution Amount;
(iv) to the Class B Certificateholders, any remaining Formula Principal
Distribution Amount after distributions under clause (ii) above until the
Class B Certificate Balance is reduced to zero; and
(v) to the Class R Certificateholders, any remaining Available
Distribution Amount.
As to any Distribution Date, the "Class A Interest Distribution Amount" is
equal to the sum of (i) one month's interest at the Class A Pass-Through Rate on
the Class A Certificate Balance and (ii) any previously undistributed shortfalls
in interest due to the Class A Certificateholders in respect of prior
Distribution Dates; the "Class B Interest Distribution Amount" is equal to the
sum of (i) one month's interest at the Class B Pass-Through Rate on the Class B
Certificate Balance and (ii) any previously undistributed shortfalls in interest
due to the Class B Certificateholders in respect of prior Distribution Dates.
Any shortfall in interest due to Certificateholders will, to the extent legally
permissible, bear interest at the related Class A or Class B Pass-Through Rate.
The "Formula Principal Distribution Amount" in respect of a Distribution
Date equals the sum of (a) the Total Regular Principal Amount for such
Distribution Date and (b) any previously undistributed shortfalls in the
distribution of the Total Regular Principal Amount in respect of prior
Distribution Dates.
The "Total Regular Principal Amount" on each Distribution Date is the sum of
(i) the Scheduled Principal Reduction Amount (defined below) for such
Distribution Date, (ii) the Scheduled Principal Balance (defined below) of each
Contract which, during the related Collection Period, was purchased by Bank of
America or BankAmerica Housing Services, as the case may be, on account of
certain breaches of representations and warranties made by it in the Agreement,
(iii) all partial prepayments received during such related Collection Period,
(iv) the Scheduled Principal Balance of each Contract that was prepaid in full
during such related Collection Period and (v) the Scheduled Principal Balance of
each Contract that became a Liquidated Contract (defined below) during such
related Collection Period.
The "Scheduled Principal Balance" of a Contract for any Distribution Date is
its principal balance as of the Due Date in the Collection Period immediately
preceding such Distribution Date, after giving effect to all previous partial
prepayments, all previous scheduled principal payments (whether or not paid) and
the scheduled principal payment due on such Due Date, but without giving effect
to any adjustment due to bankruptcy or similar proceedings. The "Scheduled
Principal Reduction Amount" for any Distribution Date is an approximate
calculation (performed on an aggregate basis rather than on a
Contract-by-Contract basis) of the scheduled payments of principal due during
the related Collection Period. Both of these terms are more fully described
herein under "-- Distributions" above.
The "Pool Scheduled Principal Balance" for any Distribution Date is equal to
the Cut-off Date Pool Principal Balance less the aggregate of the Total Regular
Principal Amounts for all prior Distribution Dates.
In general, a "Liquidated Contract" is a defaulted Contract as to which all
amounts that the Servicer expects to recover relating to such Contract
("Liquidation Proceeds") have been received. A Liquidated Contract includes any
defaulted Contract in respect of which the related Manufactured Home has been
realized upon and disposed of and the proceeds of such disposition have been
received.
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The "Class A Certificate Balance" as of any Distribution Date is the Initial
Class A Certificate Balance less all amounts previously distributed to Class A
Certificateholders on account of principal; the "Class B Certificate Balance" as
of any Distribution Date is the Initial Class B Certificate Balance less all
amounts previously distributed to holders of the Class B Certificates on account
of principal. In no event shall the aggregate distributions of principal to the
holders of the Class A and Class B Certificates exceed the Initial Class A
Certificate Balance and the Initial Class B Certificate Balance, respectively.
SUBORDINATION
The rights of the holders of the Class B Certificates to receive
distributions of available amounts in the Trust Fund will be subordinate, to the
extent described herein, to such rights of the holders of the Class A
Certificates. This subordination is intended to enhance the likelihood of
regular receipt by the holders of the Class A Certificates of the full amount of
interest and principal distributable thereon and to afford such holders
protection against losses on Liquidated Contracts.
The protection afforded to the holders of Class A Certificates by means of
the subordination of the Class B Certificates will be accomplished by the
application of the Available Distribution Amount in the order specified under
"-- Distributions" above. Accordingly, in the event that the Available
Distribution Amount on any Distribution Date is not sufficient to permit the
distribution of the amount of interest and the specified portion of the Formula
Principal Distribution Amount due to the holders of the Class A Certificates,
the subordination will protect such Certificateholders by the right of such
Certificateholders to receive distributions of the Available Distribution Amount
in respect of interest and the Formula Principal Distribution Amount that would
otherwise have been distributable to the holders of the Class B Certificates,
until any shortfall in distributions to the holders of the Class A Certificates
has been satisfied, to the extent described herein.
LOSSES ON LIQUIDATED CONTRACTS
As described above, the Total Regular Principal Amount distributable to the
holders of the Series 199[ ]-[ ] Regular Certificates on each Distribution Date
includes the Scheduled Principal Balance of each Contract that became a
Liquidated Contract during the immediately preceding Collection Period. The
Liquidation Proceeds, net of (i) certain expenses incurred to liquidate such
Liquidated Contract, (ii) all accrued and unpaid interest thereon and (iii) all
Monthly Advances required to be made in respect of such Liquidated Contract (the
"Net Liquidation Proceeds"), may be less than the Scheduled Principal Balance of
such Liquidated Contract. Under such circumstances, the loss on the Liquidated
Contract, in the amount of the deficiency between the Net Liquidation Proceeds
and the Scheduled Principal Balance of such Liquidated Contract, may be covered
to the extent Excess Interest during the same Collection Period exceeds interest
distributions due to the holders of the Series 199[ ]-[ ] Regular Certificates
and the Monthly Servicing Fee.
The effect of any losses on Liquidated Contracts during a Collection Period
in excess of the aggregate of Excess Interest generally will be to reduce the
Pool Scheduled Principal Balance below the aggregate Certificate Balance of the
Certificates on the related Distribution Date. In the event the Pool Scheduled
Principal Balance falls below the aggregate Certificate Balance of the
Certificates on any Distribution Date, shortfalls and/or losses will arise with
respect to the Certificates, which shortfalls and/or losses will be borne by the
Class B Certificateholders and the Class A Certificateholders, in that order.
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EXAMPLE OF DISTRIBUTIONS
The following chart sets forth an example of the flow of funds on the
Certificates for the Distribution Date occurring in [June 1996]:
<TABLE>
<S> <C>
[May] 1................................(A) Cut-off Date.
[May 1-31].............................(B) Servicer receives scheduled payments on the
Contracts and any principal prepayments made
by Obligors and applicable interest thereon.
[May 31]...............................(C) Record Date.
[June 5]...............................(D) Determination Date.
[June 10]..............................(E) Distribution Date. (Distribution Date is the
10th day of each month or, if the 10th day is
not a business day, the next business day.)
Succeeding months follow the pattern of (B) through (E).
</TABLE>
- ------------------------
(A) The Cut-off Date Pool Principal Balance on [May 1, 1996] will be computed as
described under
"-- Conveyance of Contracts" above.
(B) Scheduled Payments, principal prepayments and Liquidation Proceeds (net of
Liquidation Expenses) and amounts for the repurchase of Contracts may be
received at any time during this period and will be distributed to
Certificateholders on [June 10, 1996]. When a partial prepayment is made or
a Contract is prepaid in full, interest on the amount prepaid is collected
from the Obligor only to the date of payment. The Available Distribution
Amount for the distribution on [June 10, 1996] are described under
"-- Payments on Contracts; Certificate Account" above.
(C) Distributions on [June 10, 1996] will be made to Certificateholders of
record at the close of business on [May 31, 1996].
(D) On [June 5, 1996] (three business days prior to the Distribution Date), the
Servicer will determine the amounts of principal and interest which will be
passed through on [June 10, 1996] to Certificateholders.
(E) On [June 10, 1996], the amounts determined on [June 5, 1996] will be
distributed to Certificateholders.
ADVANCES
For each Distribution Date, the Servicer will be obligated to make an
advance (a "Monthly Advance") equal to the lesser of (i) delinquent scheduled
payments of principal and interest on the Contracts that were due in the
preceding Collection Period and (ii) the amount, if any, by which scheduled
distributions of principal and interest due on the Series 199[ ]-[ ] Regular
Certificates exceeds the amount specified in clause (b) of the definition of
Available Distribution Amount (as set forth above under "-- Payments on
Contracts; Certificate Account"), except to the extent, in the Servicer's
judgment, such advance would not be recoverable from related late payments,
Liquidation Proceeds or otherwise (a "Nonrecoverable Advance").
The aggregate amount of any additional advances made by the Servicer that
have not been reimbursed to the Servicer as described below is referred to
herein as the "Outstanding Amount Advanced." The Servicer may apply any Excess
Contract Payments in the Certificate Account (rather than its own funds) to make
all or a portion of a Monthly Advance, but must replace such Excess Contract
Payments to the extent required to make scheduled payments on the related
Contracts. In addition, upon the determination that a Nonrecoverable Advance has
been made in respect of a Contract, the Servicer will reimburse itself (but only
to the extent of the Outstanding Amount Advanced) out of funds in the
Certificate Account for the delinquent Scheduled Payments on such Contract or
out of any other funds in the Certificate Account.
In making Monthly Advances, the Servicer will be attempting to maintain a
regular flow of scheduled interest and principal to the Series 199[ ]-[ ]
Regular Certificateholders rather than to guarantee or insure against losses.
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<PAGE>
The Servicer will also be obligated to make advances, to the extent
recoverable out of Liquidation Proceeds or otherwise, in respect of certain
taxes and insurance premiums not paid by an Obligor on a timely basis. Funds so
advanced are reimbursable to the Servicer as provided in the Agreement.
REPORTS TO CERTIFICATEHOLDERS
The Trustee will include with each distribution to a Certificateholder a
statement as of the related Distribution Date setting forth, among other things:
(1) the aggregate amount distributed on the Class A Certificates on
such Distribution Date;
(2) the amount of such distribution on such Class A Certificate which
constitutes principal;
(3) the amount of such distribution on such Class A Certificate which
constitutes interest;
(4) the remaining Class A Certificate Balance;
(5) the aggregate amount distributed on the Class B Certificates on
such Distribution Date;
(6) the amount of such distribution on such Class B Certificate which
constitutes principal;
(7) the amount of such distribution on such Class B Certificate which
constitutes interest;
(8) the remaining Class B Certificate Balance;
(9) the Monthly Servicing Fee payable on such Distribution Date and
the amount of any other fees payable out of the Trust Fund;
(10) the number of and aggregate unpaid principal balance of Contracts
with payments delinquent 31 to 59, 60 to 89, and 90 or more days,
respectively;
(11) the number of Contracts that were repurchased or replaced by a
Seller in accordance with the Agreement during the prior Collection Period,
identifying such Contracts and (i) the Repurchase Price of such Contracts
and (ii) the amount, if any, paid by such Seller due to the differences, if
any, between the remaining principal balances of the replaced Contracts and
the Eligible Substitute Contracts;
(12) the aggregate principal balances of all Contracts that are not
Liquidated Contracts and in respect of which the related Manufactured Homes
have been repossessed or foreclosed upon;
(13) the aggregate liquidation losses (less costs of liquidation)
realized by the Trust Fund through the Collection Period immediately
preceding such Distribution Date, expressed in dollars;
(14) the aggregate liquidation losses (less costs of liquidation)
realized by the Trust Fund through the Collection Period immediately
preceding such Distribution Date, expressed as a percentage of the Cut-off
Date Pool Principal Balance;
(15) the amount of any Monthly Advance for such Distribution Date and
the aggregate amount of Monthly Advances that remain outstanding as of such
Distribution Date;
(16) the weighted average Contract Rate for the Contract Pool for the
Collection Period immediately preceding the month of such Distribution Date;
and
(17) the number of Manufactured Homes currently held by the Servicer
due to repossessions and the aggregate principal balance of the related
defaulted Contracts.
In addition, within a reasonable period of time after the end of each
calendar year, the Trustee will furnish a report to each holder of a Series
199[ ]-[ ] Regular Certificate of record at any time during such calendar year
as to the aggregate of amounts reported pursuant to clauses (2) and (3) and (6)
and (7), as the case may be, above for such calendar year.
TERMINATION AUCTION
[The Agreement provides that within ninety days following the Distribution
Date as of which the Pool Scheduled Principal Balance is less than 10% of the
Cut-off Date Pool Principal Balance, the Trustee shall solicit bids for the
purchase of the Contracts remaining in the Trust Fund. In the event that
satisfactory bids are received as described in the Agreement, the net sale
proceeds will be distributed to Certificateholders, in
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<PAGE>
the same order of priority as collections received in respect of the Contracts.
If satisfactory bids are not received, the Trustee shall decline to sell the
Contracts and shall not be under any obligation to solicit any further bids or
otherwise negotiate any further sale of the Contracts. Under the Agreement, the
winning bid must equal or exceed the Minimum Termination Amount (as defined
below). Such sale and consequent termination of the Trust Fund must constitute a
"qualified liquidation" of the Trust Fund under Section 860F of the Code,
including the requirement that the qualified liquidation takes place over a
period not to exceed 90 days. See "Description of the Certificates -- Optional
Termination" herein and in the Prospectus.]
OPTIONAL TERMINATION
If the Trust Fund has not terminated pursuant to a successful Termination
Auction, the Agreement also provides that on any Distribution Date after the
First Distribution Date on which the Pool Scheduled Principal Balance is less
than 5% of the Cut-off Date Pool Principal Balance, the Servicer will have the
option to repurchase, upon giving notice mailed no later than the 10th day of
the month next preceding the month of the exercise of such option, all
outstanding Contracts at a price equal to the greater of (a) the sum of (x) 100%
of the Scheduled Principal Balance of each Contract (other than any Contract as
to which the related Manufactured Home has been acquired and not yet disposed of
and whose fair market value is included pursuant to clause (y) below) as of the
final Distribution Date, and (y) the fair market value of such acquired property
(as determined by the Servicer), and (b) the aggregate fair market value (as
determined by the Servicer) of all of the assets of the Trust Fund, plus, in the
case of both clause (a) and (b), an amount sufficient to reimburse
Certificateholders for any shortfall in interest due thereto in respect of prior
Distribution Dates. Notwithstanding the foregoing, the Servicer's option shall
not be exercisable if there will not be distributed to the Class A
Certificateholders an amount equal to the Class A Certificate Balance together
with any shortfall in interest due to the Class A Certificateholders in respect
of prior Distribution Dates and one month's interest on the Class A Certificate
Balance at the Class A Pass-Through Rate, and to the Class B Certificateholders
an amount equal to the Class B Certificate Balance together with any shortfall
in interest due to the Class B Certificateholders in respect of prior
Distribution Dates and one month's interest on the Class B Certificate Balance
at the Class B Pass-Through Rate (collectively the "Minimum Termination
Amount").
TERMINATION OF THE AGREEMENT
The Agreement will terminate upon the last action required to be taken by
the Trustee on the final Distribution Date following the earlier of (i) the
purchase by the Servicer of all Contracts and all property acquired in respect
of any Contract remaining in the Trust Fund as described above under "--
Optional Termination[,]" [or] (ii) the final payment or other liquidation (or
any advance with respect thereto) of the last Contract remaining in the Trust
Fund or the disposition of all property acquired upon repossession of any
Manufactured Home [or (iii) the sale in a Termination Auction of all Contracts
and all other property acquired in respect of any Contract remaining in the
Trust Fund as described above under "-- Termination Auction"].
Upon presentation and surrender of the Series 199[ ]-[ ] Regular
Certificates, the Trustee shall cause to be distributed, to the extent of funds
available, to such Certificateholders on the final Distribution Date in
proportion to their respective Percentage Interests the amount distributable
thereon in the applicable order of priority specified under "-- Distributions"
above. If the Agreement is then being terminated, any amount which remains on
deposit in the Certificate Account (other than amounts retained to meet claims)
after distribution to the holders of the Series 199[ ]-[ ] Regular Certificates
will be distributed to the Class R Certificateholders.
COLLECTION AND OTHER SERVICING PROCEDURES
The Servicer will administer, service and make collections on the Contracts,
exercising the degree of care that the Servicer exercises with respect to
similar contracts serviced by the Servicer.
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Subject to the requirements of applicable law, the Servicer will be required
to commence repossession and other realization procedures with respect to any
defaulted Contract promptly after the Servicer determines that such Contract
will not be brought current. The Servicer may rescind, cancel or make material
modifications of the terms of a Contract (including modifying the amounts and
Due Dates of Scheduled Payments) in connection with a default or imminent
default thereunder.
SERVICING COMPENSATION; CERTAIN OTHER MATTERS REGARDING THE SERVICER
For its servicing of the Contracts, the Servicer will be entitled to receive
a monthly servicing fee equal to the product of one-twelfth of 1.00% and the
Pool Scheduled Principal Balance for the related Distribution Date (the "Monthly
Servicing Fee"), whether or not the related Scheduled Payments on the Contracts
are received. The Available Distribution Amount will be net of the Monthly
Servicing Fee. See "-- Payments on the Contracts; Certificate Account" above.
As part of its servicing fees, the Servicer will also be entitled to retain,
as compensation for the additional services provided in connection therewith,
any fees for late payments made by Obligors, extension fees paid by Obligors for
the extension of scheduled payments and assumption fees for permitted
assumptions of Contracts by purchasers of the related Manufactured Homes.
THE TRUSTEE
[ ] (the "Trustee") has its corporate trust offices at
[ ]. The Trustee may resign at any time, in which event the
Sellers will be obligated to appoint a successor Trustee. The Sellers may also
remove the Trustee if the Trustee ceases to be eligible to continue as such
under the Agreement or if the Trustee becomes insolvent. In such circumstances,
the Sellers will also 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.
The Agreement requires the Trustee to maintain, at its own expense, an
office or agency in New York City or [ ] where Certificates may be
surrendered for registration of transfer or exchange and where notices and
demands to or upon the Trustee and the certificate registrar in respect of the
Certificates pursuant to the Agreement may be served.
The Trustee, or any of its affiliates, in its individual or any other
capacity, may become the owner or pledgee of Certificates with the same rights
as it would have if it were not Trustee.
The Trustee will also act as paying agent, certificate registrar and
authenticating agent under the Agreement.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The discussion under this heading has been prepared and reviewed by Morrison
& Foerster LLP, special counsel to Bank of America and BankAmerica Housing
Services, and supplements the discussion under "Certain Federal Income Tax
Consequences" in the Prospectus. Morrison & Foerster LLP is of the opinion that
the statements contained herein and under "Certain Federal Income Tax
Consequences" in the Prospectus, to the extent they constitute matters of law or
legal conclusions with respect thereto, are correct in all material respects,
under the assumptions stated herein and therein and under the law in effect as
of the date hereof. In connection with the issuance of the Certificates,
Morrison & Foerster LLP will deliver an opinion regarding certain federal income
tax matters, including an opinion to the foregoing effect. That opinion will be
filed with the Commission as an exhibit to a Current Report on Form 8-K promptly
following the issuance of the Certificates.
The Trust Fund will elect to be treated as a "real estate mortgage
investment conduit" ("REMIC") for federal income tax purposes. The Offered
Certificates represent regular interests in the REMIC and, hence, will be
Regular Certificates (as defined in the Prospectus under "Certain Federal Income
Tax Consequences -- REMIC Certificates"). Generally, the Offered Certificates
will be treated as debt instruments for
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<PAGE>
federal income tax purposes with payment terms equivalent to the terms of the
Offered Certificates. Holders of Offered Certificates will be required to report
income with respect to such Offered Certificates under an accrual method,
regardless of their normal tax accounting method.
The Offered Certificates, depending on their respective issue prices, may be
issued with original issue discount ("OID") for federal income tax purposes.
The Offered Certificates will be treated as regular interests in a REMIC
under Section 860G of the Internal Revenue Code of 1986, as amended (the
"Code"). Accordingly, the Offered Certificates will be treated as (i) qualifying
real property loans within the meaning of Section 593(d)(1) of the Code, (ii)
assets described in Section 7701(a)(19)(C) of the Code and (iii) "real estate
assets" within the meaning of Section 856(c)(5) of the Code, in each case to the
extent described in the Prospectus. Interest on the Offered Certificates will be
treated as interest on obligations secured by mortgages on real property within
the meaning of Section 856(c)(B) of the Code to the same extent that the Offered
Certificates are treated as real estate assets.
If an Offered Certificate is sold, exchanged, redeemed or retired, the
seller of such Certificate will recognize gain or loss equal to the difference
between the amount realized on the sale, exchange, redemption, or retirement and
such seller's adjusted basis in the Offered Certificate. Such adjusted basis
generally will equal the cost of the Offered Certificate to the seller,
increased by any OID and market discount included in the seller's gross income
with respect to the Offered Certificate, and reduced (but not below zero) by
payments included in the stated redemption price at maturity previously received
by the seller and by any amortized premium. Similarly, a holder who receives a
payment that is part of the stated redemption price at maturity of an Offered
Certificate will recognize gain equal to the excess, if any, of the amount of
the payment over the holder's adjusted basis in the Offered Certificate. An
Offered Certificateholder who receives a final payment that is less than the
holder's adjusted basis in the Offered Certificate will generally recognize a
loss. Except as provided in the following paragraph, any such gain will be and
any such loss may be capital gain or loss, provided that the Offered Certificate
is held as a "capital asset" (generally, property held for investment) within
the meaning of Code Section 1221.
Gain from the sale or other disposition of an Offered Certificate that might
otherwise be a capital gain will be treated as ordinary income to the extent
that such gain does not exceed the excess, if any, of (i) the amount that would
have been includible in such holder's income with respect to the Offered
Certificate had income accrued thereon at a rate equal to 110% of the applicable
federal rate as defined in Code Section 1274(d) determined as of the date of
purchase of such Offered Certificate, over (ii) the amount actually includible
in such holder's income.
See "Certain Federal Income Tax Consequences" in the Prospectus.
ERISA CONSIDERATIONS
GENERAL
The Employee Retirement Income Security Act of 1974, as amended ("ERISA"),
imposes certain restrictions on employee benefit plans that are subject to ERISA
("Plans") and on persons who are fiduciaries with respect to such Plans. See
"ERISA Considerations" in the Prospectus.
Prospective Plan investors should consult with their legal advisors
concerning the impact of ERISA and the Code, the applicability of the Exemption
(defined below) and other administrative exemptions under ERISA and the
potential consequences in their specific circumstances, prior to making an
investment in the Offered Certificates. Moreover, each Plan fiduciary should
determine whether under the general fiduciary standards of investment prudence
and diversification an investment in the Offered Certificates is appropriate for
the Plan, taking into account the overall investment policy of the Plan and the
composition of the Plan's investment portfolio.
CLASS A CERTIFICATES
[The Department of Labor ("DOL") has granted to [Underwriter] an
administrative exemption (DOL Prohibited Transaction Exemption [ ], [ ] Fed.
Reg. [ ] (19 ) (the "Exemption")) from certain of
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<PAGE>
the prohibited transaction rules of ERISA. The Exemption exempts from the
prohibitions of Sections 406(a) and 407(a) of ERISA, and the related excise tax
provisions of Section 4975 of the Code, the purchase, holding, and resale by
Plans of pass-through certificates representing interests in trusts that hold
assets consisting primarily of certain receivables, loans, and other obligations
that meet the general conditions summarized below. The receivables covered by
the Exemption include manufactured housing installment sales contracts and
installment loan agreements secured by manufactured homes such as the Contracts.
[Underwriter] has advised the Sellers that the Exemption will apply to the
acquisition and holding of Class A Certificates by Plans and that all conditions
of the Exemption other than those within the control of the investors have been
or will be met.
[Among the general conditions which must be satisfied for the Exemption to
apply to the acquisition, holding and resale by a Plan of the Class A
Certificates are the following:
[(1) The acquisition of the Class A Certificates by a Plan is on terms
(including the price for the Class A Certificates) that are at least as
favorable to the Plan as they would be in an arm's-length transaction with an
unrelated party.
[(2) The rights and interests evidenced by the Class A Certificates acquired
by the Plan are not subordinated to the rights and interests evidenced by other
Certificates of the Trust.
[(3) The Class A Certificates acquired by the Plan have received a rating at
the time of such acquisition that is in one of the three highest generic rating
categories from either [ ] or [ ].
[(4) The Trustee is not an affiliate of the Underwriters, Bank of America,
BankAmerica Housing Services, SPFSC, any Obligor with respect to Contracts
included in the Trust Fund constituting more than 5% of the aggregate
unamortized principal balance of the assets in the Trust Fund, or any affiliate
of such parties. (Such parties, and the Trustee and its affiliates, are
sometimes referred to herein collectively as the "Restricted Group"). As of the
date hereof, no Obligor with respect to Contracts included in the Trust Fund is
an Obligor with respect to Contracts constituting more than 5% of the aggregate
unamortized principal balance of the assets of the Trust Fund.
[(5) The sum of all payments made to and retained by the Underwriters in
connection with the distribution of the Class A Certificates represents not more
than reasonable compensation for underwriting the Class A Certificates. The sum
of all payments made to and retained by the Sellers pursuant to the sale of the
Contracts to the Trust Fund represents not more than the fair market value of
such Contracts. The sum of all payments made to and retained by BankAmerica
Housing Services represents not more than reasonable compensation for
BankAmerica Housing Services' services under the Agreement and reimbursement of
BankAmerica Housing Services' reasonable expenses in connection therewith.
[(6) The Plan is an "accredited investor" as defined in Rule 501(a)(1) of
Regulation D of the Securities and Exchange Commission under the Securities Act
of 1933.
[In addition, the Exemption exempts from the prohibitions of Sections
406(a), 406(b) and 407(a) of ERISA, and the related excise tax provisions of
Section 4975 of the Code, transactions undertaken in connection with the
servicing, management and operation of such a trust pursuant to a binding
pooling and servicing agreement, subject to the foregoing general conditions and
to certain additional requirements. [Underwriter] has advised the Sellers that
the Exemption will apply to such transactions undertaken with respect to the
Trust Fund and the Contracts and that all conditions of the Exemption other than
those within the control of the investors have been or will be met.
[The Exemption also exempts from the prohibition of Sections 406(b)(1) and
406(b)(2) of ERISA the related excise tax provisions of Section 4975 of the
Code, the direct or indirect sale, exchange or transfer of Class A Certificates
between either Seller or the Underwriters and a Plan when the person who has
discretionary authority or renders investment advice with respect to the
investment of the Plan's assets in the
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<PAGE>
Class A Certificates (the "Fiduciary") is (a) an obligor with respect to 5% or
less of the fair market value of Contracts in the Trust Fund or (b) an affiliate
of any such person, subject to the general conditions summarized above and to
the following additional requirements:
[(1) No member of the Restricted Group is a sponsor of the Plan.
[(2) In connection with the initial issuance of Class A Certificates, at
least 50% in Percentage Interests of such Class of Certificates is acquired by
persons independent of the Restricted Group and at least 50% of the aggregate
interest in the Trust Fund is acquired by persons independent of the Restricted
Group.
[(3) The Plan's investment in the Class A Certificates does not exceed 25%
in Percentage Interests of any such Class of Certificates outstanding at the
time of acquisition.
[(4) Immediately after the acquisition of the Class A Certificates, no more
than 25% of the assets of the Plan with respect to which the Fiduciary has
discretionary authority or renders investment advice are invested in
certificates representing an interest in a trust containing assets sold or
serviced by the same entity.
[This exemption also applies to the direct or indirect acquisition or
disposition of Class A Certificates by a Plan in the secondary market if certain
conditions are met and the continued holding of Class A Certificates acquired in
initial or secondary markets.
[Before purchasing a Class A Certificate, a fiduciary of a Plan should make
its own determination as to the availability of the exemptive relief provided in
the Exemption or the availability of any other prohibited transaction
exemptions, and whether the conditions of any such exemption will be applicable
to the Certificate. Any fiduciary of a Plan considering whether to purchase a
Class A Certificate should also carefully review with its own legal advisors the
applicability of the fiduciary duty and prohibited transaction provisions of
ERISA and the Code to such investment. See "ERISA Considerations" in the
Prospectus.]
[CLASS B CERTIFICATES
[A PLAN OR FIDUCIARY SHOULD NOT PURCHASE OR HOLD THE CLASS B CERTIFICATES AS
SUCH ACTIONS MAY GIVE RISE TO A TRANSACTION PROHIBITED UNDER ERISA OR SECTION
4975 OF THE CODE. SEE "ERISA CONSIDERATIONS" IN THE PROSPECTUS. BECAUSE THE
CLASS B CERTIFICATES DO NOT MEET THE REQUIREMENTS OF THE EXEMPTION, IT DOES NOT
APPLY TO THEM.
[IN ADDITION, NO TRANSFER OF A CLASS B CERTIFICATE SHALL BE REGISTERED
UNLESS THE PROSPECTIVE TRANSFEREE PROVIDES THE TRUSTEE, THE SELLER[S] AND THE
SERVICER WITH (A) A CERTIFICATION TO THE EFFECT THAT SUCH TRANSFEREE (1) IS
NEITHER AN EMPLOYEE BENEFIT PLAN SUBJECT TO SECTION 406 OR SECTION 407 OF THE
EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED ("ERISA"), OR
SECTION 4975 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE"), THE
TRUSTEE OF ANY SUCH PLAN OR A PERSON ACTING ON BEHALF OF ANY SUCH PLAN NOR A
PERSON USING THE ASSETS OF ANY SUCH PLAN AND (2) SUCH TRANSFEREE IS AN INSURANCE
COMPANY WHICH IS PURCHASING SUCH CERTIFICATES WITH FUNDS CONTAINED IN AN
"INSURANCE COMPANY GENERAL ACCOUNT" (AS SUCH TERM IS DEFINED IN SECTION V(E) OF
THE PROHIBITED TRANSACTION CLASS EXEMPTION 95-60 ("PTCE 95-60")) AND THAT THE
PURCHASE AND HOLDING OF SUCH CERTIFICATES ARE COVERED UNDER PTCE 95-60; OR (B)
AN OPINION OF COUNSEL (A "BENEFIT PLAN OPINION") SATISFACTORY TO THE TRUSTEE,
THE SELLER[S] AND THE SERVICER, AND UPON WHICH THE TRUSTEE, THE SELLER[S] AND
THE SERVICER SHALL BE ENTITLED TO RELY, TO THE EFFECT THAT THE PURCHASE OR
HOLDING OF SUCH CLASS B CERTIFICATE BY THE PROSPECTIVE TRANSFEREE WILL NOT
RESULT IN THE ASSETS OF THE TRUST FUND BEING DEEMED TO BE PLAN ASSETS AND
SUBJECT TO THE PROHIBITED TRANSACTION PROVISIONS OF ERISA OR THE CODE AND WILL
NOT SUBJECT THE TRUSTEE, THE SELLER[S] OR THE SERVICER TO ANY OBLIGATION IN
ADDITION TO THOSE UNDERTAKEN BY SUCH ENTITIES IN THE AGREEMENT, WHICH OPINION OF
COUNSEL SHALL NOT BE AN EXPENSE OF THE TRUSTEE, THE SELLER[S] OR THE SERVICER.]
RATINGS
It is a condition to the issuance of the Certificates that the Class A
Certificates be rated "[ ]" by [ ] and that the Class B Certificates be
rated "[ ]" by [ ]. A security rating is not a
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<PAGE>
recommendation to buy, sell or hold securities and may be subject to revision or
withdrawal at any time by the assigning rating agency. The security rating of
the Class A Certificates should be evaluated independently of similar security
ratings assigned to other kinds of securities.
The ratings assigned by [ ] to pass-through certificates address the
likelihood of the receipt by the related certificateholders of their allocable
share of principal and interest on the underlying assets. [ ] ratings take
into consideration the credit quality of the related underlying assets, any
credit support arrangements, structural and legal aspects associated with such
certificates, and the extent to which the payment stream on such underlying
assets is adequate to make payments required by such certificates. [ ]
ratings on such certificates do not, however, constitute a statement regarding
frequency of prepayments on the underlying assets or as to whether yield may be
adversely affected as a result thereof. An explanation of the significance of
such ratings may be obtained from [ ], [ ], New York, New York
[ ], telephone [( )- ].
The Sellers have not requested a rating on the Offered Certificates by any
rating agency other than [ ]. However, there can be no assurance as
to whether any other rating agency will rate any or all of the Offered
Certificates, or if it did, what rating would be assigned to the Offered
Certificates by any such other rating agency. A rating on any or all of the
Offered Certificates by certain other rating agencies, if assigned at all, may
be lower than the rating assigned to such Certificates by [ ].
LEGAL INVESTMENT
The [Class A] Certificates at the time of issuance will qualify as "mortgage
related securities" under the Secondary Mortgage Market Enhancement Act of 1984,
as amended ("SMMEA") and, as such, will constitute legal investments for certain
types of investors to the extent provided in SMMEA. Such institutions should
consult their own legal advisors in determining whether and to what extent the
[Class A] Certificates constitute legal investments for such investors.
[Because the Class B Certificates will not, at the time of issuance, be
rated in one of the two highest rating categories of [ ], the Class B
Certificates will not constitute "mortgage related securities" for purposes of
SMMEA. Accordingly, many institutions with legal authority to invest in more
highly rated securities based on first mortgage loans may not be legally
authorized to invest in the Class B Certificates. No representation is made as
to any regulatory requirements or considerations (including without limitation
regulatory capital or permissible investment requirements) applicable to the
purchase of the Class B Certificates by banks, savings and loan associations or
other financial institutions. Such institutions should consult their own legal
advisors in determining whether and to what extent the Offered Certificates
constitute legal investments for such investors. See "Legal Investment" in the
Prospectus.]
METHOD OF DISTRIBUTION
Subject to the terms and conditions of the Underwriting Agreement dated
[ , 19 ] (the "Underwriting Agreement"), the Sellers have agreed to
sell, and [each of ] (the "Underwriters") has agreed to purchase from the
Sellers the Offered Certificates offered hereby upon issuance.
In the Underwriting Agreement, the Underwriters have agreed, subject to the
terms and conditions set forth therein, to purchase all of the Offered
Certificates offered hereby if any Offered Certificates are purchased. In the
event of default by an Underwriter, the Underwriting Agreement provides that, in
certain circumstances, the Underwriting Agreement may be terminated.
Distribution of the Offered Certificates will be made from time to time in
negotiated transactions or otherwise at varying prices to be determined at the
time of sale. Proceeds to the Sellers from the sale of the Offered Certificates
will be [ ]% of the initial Class A Certificate Balance plus accrued interest
thereon from the Cut-off Date, but before deducting expenses payable by the
Sellers. In connection with the purchase and sale of the Offered Certificates
offered hereby, the Underwriter may be deemed to have received compensation from
the Sellers in the form of underwriting discounts.
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The Underwriting Agreement provides that the Sellers will indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933, as amended, or contribute to payments the Underwriters
may be required to make in respect thereof.
USE OF PROCEEDS
[Substantially all of the net proceeds to be received from the sale of the
Offered Certificates will be used by the Sellers for general corporate purposes,
including the purchase of the Contracts and the payment of other expenses
connected with pooling the Contracts and issuing the Offered Certificates.]
LEGAL MATTERS
Certain legal matters relating to the Offered Certificates, including legal
matters relating to material federal income tax consequences concerning the
Offered Certificates, will be passed upon for the Sellers by Morrison & Foerster
LLP, Irvine, California and for the Underwriters by .
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<PAGE>
INDEX OF SIGNIFICANT DEFINITIONS
<TABLE>
<CAPTION>
PAGE IN PROSPECTUS
SUPPLEMENT ON WHICH
TERM TERM IS DEFINED, S-
- -------------------------------------------------------------------------------------------- --------------------
<S> <C>
Agreement................................................................................... 4, 27
Available Distribution Amount............................................................... 6, 32
Bank of America............................................................................. 1, 3
BankAmerica Housing Services................................................................ 1, 3
Cede........................................................................................ 11
Certificate Account......................................................................... 31
Certificate Owners.......................................................................... 11, 28
Certificateholders.......................................................................... 2, 28
Certificates................................................................................ 1, 3
Class A Certificates........................................................................ 3
Class A Certificate Balance................................................................. 7, 34
Class A Interest Distribution Amount........................................................ 6, 32
Class A Pass-Through Rate................................................................... 3
Class B Certificates........................................................................ 3
Class B Certificate Balance................................................................. 7, 34
Class B Interest Distribution Amount........................................................ 6, 33
Class B Pass-Through Rate................................................................... 3
Class R Certificates........................................................................ 2, 3
Closing Date................................................................................ 31
Code........................................................................................ 11, 39
Collection Period........................................................................... 4
Contract File............................................................................... 29
Contract Pool............................................................................... 1, 4
Contract Rate............................................................................... 4
Contract Schedule........................................................................... 28
Contracts................................................................................... 1, 4
CPR......................................................................................... A-1
Cut-off Date................................................................................ 3
Cut-off Date Pool Principal Balance......................................................... 3
Determination Date.......................................................................... 32
Distribution Date........................................................................... 2, 28
DOL......................................................................................... 39
DTC......................................................................................... 11
Due Date.................................................................................... 4
Eligible Institution........................................................................ 31
Eligible Investments........................................................................ 31
Eligible Substitute Contract................................................................ 31
ERISA....................................................................................... 11, 39
Excess Contract Payment..................................................................... 32
Excess Interest............................................................................. 8
Exemption................................................................................... 39
Fiduciary................................................................................... 41
First Distribution Date..................................................................... 3
Formula Principal Distribution Amount....................................................... 6, 33
Initial Class A Certificate Balance......................................................... 3
Initial Class B Certificate Balance......................................................... 3
Legal Investment............................................................................ 11
Liquidated Contract......................................................................... 7, 33
</TABLE>
S-44
<PAGE>
<TABLE>
<CAPTION>
PAGE IN PROSPECTUS
SUPPLEMENT ON WHICH
TERM TERM IS DEFINED, S-
- -------------------------------------------------------------------------------------------- --------------------
<S> <C>
Liquidation Expenses........................................................................ 32
Liquidation Proceeds........................................................................ 7, 33
Manufactured Home........................................................................... 4
Minimum Termination Amount.................................................................. 37
Monthly Advance............................................................................. 9, 35
Monthly Servicing Fee....................................................................... 38
Net Liquidation Proceeds.................................................................... 8, 34
Nonrecoverable Advance...................................................................... 35
Offered Certificates........................................................................ 2
OID......................................................................................... 11, 39
Optional Termination........................................................................ 10
Outstanding Amount Advanced................................................................. 35
Percentage Interest......................................................................... 5, 28
Plans....................................................................................... 39
Pool Scheduled Principal Balance............................................................ 33
Prepayment Model............................................................................ 25
Prospectus.................................................................................. 1
Rating...................................................................................... 12
Record Date................................................................................. 5, 28
REMIC....................................................................................... 2, 11, 38
Replaced Contract........................................................................... 31
Restricted Group............................................................................ 40
Scheduled Principal Balance................................................................. 7, 33
Scheduled Principal Reduction Amount........................................................ 7, 33
Senior Certificates......................................................................... 2, 3
Series 199[ ]-[ ] Regular Certificates...................................................... 3
Series 199[ ]-[ ] Residual Certificates..................................................... 3
Servicer.................................................................................... 1, 3
SMMEA....................................................................................... 11, 42
SPFSC....................................................................................... 1, 4
Subordinate Certificates.................................................................... 2, 3
Total Regular Principal Amount.............................................................. 7, 33
Trust Fund.................................................................................. 1, 5
Trustee..................................................................................... 3, 38
Underwriters................................................................................ 2, 42
Underwriting Agreement...................................................................... 42
Value....................................................................................... 14
WAC......................................................................................... 24, A-1
WAM......................................................................................... 24
</TABLE>
S-45
<PAGE>
APPENDIX A
PREPAYMENT EXPERIENCE OF CERTAIN POOLS
Certain statistical information relating to the prepayment behavior of
certain but not all pools of manufactured housing contracts sold by SPHSI[,
SPFSC, Bank of America] or BankAmerica Housing Services and serviced by SPHSI
and now BankAmerica Housing Services is set forth below in tabular form. These
tables relate to [ ] sold pools for which prepayment information is available
covering a period of at least 18 months and which had an aggregate principal
balance as of the first day of the month of sale of at least $100,000,000. In
evaluating whether the data contained in these tables contain useful information
with respect to the expected prepayment behavior of any particular contract
pool, prospective Certificateholders should consider the following: neither
BankAmerica Housing Services nor SPHSI has performed statistical analysis to
determine whether the contracts to which such tables relate constitute a
statistically significant sample of manufactured housing contracts for purposes
of determining expected prepayment behavior. Furthermore, no assurance can be
given that the Contracts in the Contract Pool will have characteristics similar
to the contracts in any sold pool to which the following tables relate. FOR
THESE REASONS, AND BECAUSE OF THE UNPREDICTABLE NATURE OF THE FACTORS DESCRIBED
HEREIN AS INFLUENCING THE AMOUNT OF PREPAYMENTS OF MANUFACTURED HOUSING
CONTRACTS, NO ASSURANCE CAN BE GIVEN THAT THE PREPAYMENT EXPERIENCE FOR THE
CONTRACT POOL WITH AN AVERAGE AGE AS OF THE CUT-OFF DATE SIMILAR TO THE AVERAGE
AGES (AS OF THE FIRST DAY OF THE MONTH OF SALE) OF THE POOLS TO WHICH THE TABLES
RELATE WILL EXHIBIT PREPAYMENT BEHAVIOR SIMILAR TO THE BEHAVIOR SUMMARIZED IN
SUCH TABLES FOR THE PERIODS COVERED BY SUCH TABLES.
In addition to the foregoing, prospective Certificateholders should consider
that the tables set forth below are limited in the periods which are covered
thereby and thus cannot reflect the effects, if any, of aging on the prepayment
behavior of manufactured housing contracts beyond the periods covered thereby.
The following tables set forth, with respect to each sold pool, an initial
aggregate principal balance (calculated as of the first day of the month of the
sale), the decline in outstanding aggregate principal balance for each
subsequent month (whether due to liquidations, scheduled principal payments,
principal prepayments or repurchases), the constant prepayment rate ("CPR") for
each such month and for the life of the pool through [19 ] (calculated as the
annual rate of the decline in the outstanding aggregate principal balance due to
liquidations, principal prepayments and repurchases exhibited during such month
or over the life of the pool) and the weighted average annual percentage rate
("WAC") of the contracts in each pool as of the first day of the month of the
sale of each pool and the first day of every month thereafter up to and
including [ 1, 199 ]. The estimated average age of each pool as of the first
day of the month of sale is listed in "Prepayment and Yield Considerations"
herein.
A-1
<PAGE>
[TO PROSPECTUS SUPPLEMENT, AS APPLICABLE]
<TABLE>
<S> <C> <C> <C>
POOL #1 Aggregate
First Day Contract
of: Balance CPR WAC
- --------------------------------------------
POOL #2 Aggregate
First Day Contract
of: Balance CPR WAC
- --------------------------------------------
</TABLE>
A-2
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
SUBJECT TO COMPLETION, DATED MAY , 1996
PROSPECTUS
BANKAMERICA MANUFACTURED HOUSING CONTRACT TRUST
PASS-THROUGH CERTIFICATES
(ISSUABLE IN SERIES)
BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, SELLER
BANKAMERICA HOUSING SERVICES,
AN UNINCORPORATED DIVISION OF
BANK OF AMERICA, FSB, SELLER AND SERVICER
BankAmerica Manufactured Housing Contract Trust Pass-Through Certificates
("Certificates") of one or more series (each, a "Series") may be sold from time
to time under this Prospectus and a Prospectus Supplement for each such Series.
The Certificates of each Series may be issued in one or more classes or
subclasses (each, a "Class"), as further described herein. If the Certificates
of a Series are issued in more than one Class, all or less than all of such
Classes may be sold under this Prospectus, and there may be separate Prospectus
Supplements for one or more of such Classes so sold. Any reference herein to the
Prospectus Supplement relating to a Series comprised of more than one Class
should be understood to refer to each of the Prospectus Supplements relating to
the Classes sold hereunder.
The Certificates of each Series will represent interests, as specified in
the related Prospectus Supplement, in one or more of a number of trust funds
(each, a "Trust Fund") created by Bank of America National Trust and Savings
Association ("Bank of America" or "Seller") or BankAmerica Housing Services, an
unincorporated division of Bank of America, FSB ("BankAmerica Housing Services"
or "Seller," and, together with Bank of America, the "Sellers") or both. A
separate Trust Fund will be established for each Series of Certificates. Each
Trust Fund will include a pool (each, a "Contract Pool") of manufactured housing
installment sales contracts and installment loan agreements (the "Contracts")
together with certain contract rights and other rights relating to such
Contracts (as discussed below) (the Contracts and such other property being
referred to as the "Trust Fund"). BankAmerica Housing Services will act as the
servicer of the Contracts in each Trust Fund (together with any successor
servicer appointed as described herein, the "Servicer").
The Contracts comprising each Contract Pool will be conveyed to the relevant
Trust Fund by the applicable Sellers. Each Contract will have been either (i)
originated or purchased by Bank of America, BankAmerica Housing Services or
Security Pacific Financial Services of California, Inc. ("SPFSC"), a
wholly-owned subsidiary of Bank of America, in each case on an individual basis
in the ordinary course of its business or (ii) purchased by Bank of America,
BankAmerica Housing Services, SPFSC, or any combination thereof, in bulk from
other lenders or finance companies (including from affiliates of the Sellers),
from governmental agencies or instrumentalities or from other entities.
Interests in each Trust Fund will be evidenced by a separate Series of
Certificates. SPFSC will not be conveying any Contracts to any Trust Fund. Any
Contracts purchased on an individual basis or in bulk by SPFSC will be sold by
it to Bank of America, and conveyed by Bank of America to the Trustee of a Trust
Fund immediately before the issuance of Certificates evidencing interests in
such Contracts.
FOR A DISCUSSION OF SIGNIFICANT MATTERS AFFECTING INVESTMENTS IN THE
CERTIFICATES, SEE "RISK FACTORS" HEREIN AT PAGE 13 AND IN THE PROSPECTUS
SUPPLEMENT.
(COVER CONTINUED ON NEXT PAGE)
--------------------------
PROCEEDS FROM THE ASSETS IN THE TRUST FUND FOR A SERIES WILL BE THE ONLY SOURCE
OF PAYMENT ON THE CERTIFICATES OF SUCH SERIES, AND THE CERTIFICATES WILL NOT
REPRESENT INTERESTS IN OR OBLIGATIONS OF BANK OF AMERICA, BANKAMERICA HOUSING
SERVICES, THEIR PARENT CORPORATION, BANKAMERICA CORPORATION, OR OTHER
AFFILIATES, SUBJECT TO CERTAIN EXCEPTIONS DESCRIBED UNDER "RISK FACTORS" HEREIN.
NEITHER THE CERTIFICATES NOR (UNLESS OTHERWISE SPECIFIED IN THE RELATED
PROSPECTUS SUPPLEMENT) UNDERLYING CONTRACTS OR ANY COLLECTIONS THEREON WILL BE
INSURED OR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR BY 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. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
--------------------------
This Prospectus may not be used to consummate sales of Certificates unless
accompanied by a Prospectus Supplement.
THE DATE OF THIS PROSPECTUS IS MAY , 1996.
<PAGE>
If a Series of Certificates is comprised of more than one Class, the related
Prospectus Supplement will set forth the interest in the applicable Trust Fund
represented by each Class sold hereunder. The timing of distributions of
principal and/or interest to the holders of Certificates of such Classes may be
on a sequential, pro-rata or other basis as specified in the related Prospectus
Supplement. In addition, if specified in the related Prospectus Supplement, the
rights of the holders of the Certificates of one or more Classes of a
multiple-Class Series to receive distributions with respect to some or all of
the assets of the related Trust Fund may be subordinate to such rights of the
holders of the Certificates of one or more other Classes.
Neither Bank of America nor BankAmerica Housing Services nor any of their
affiliates will have any obligations with respect to any Series of Certificates
except, in the case of the Sellers, for obligations arising from certain
representations and warranties of Bank of America and BankAmerica Housing
Services, as the case may be, with respect to the Contracts sold by it in the
related Contract Pool and, in the case of BankAmerica Housing Services, for
certain contractual servicing obligations, each as further described herein. See
"Risk Factors -- No Recourse" herein.
To the extent specified in the related Prospectus Supplement, the holders of
the Certificates of any Series, or of one or more Classes within a Series, may
be entitled to the benefit of overcollateralization or subordination of one or
more Classes of Certificates within such Series, one or more spread accounts or
other reserve funds, one or more letters of credit, one or more surety bonds or
other credit facilities and/or one or more certificate purchase agreements or
other liquidity facilities. See "Credit and Liquidity Enhancement" herein and
the related Prospectus Supplement.
Unless otherwise specified in the applicable Prospectus Supplement, the
Certificates of a Series or of any Class within a Series will be issuable in the
form of one or more global certificates represented by book-entries on the
records of a depository or participating members thereof. See "Reports to
Certificateholders," "Risk Factors," and "Description of the Certificates --
Global Certificates" herein and the related Prospectus Supplement.
There will have been no public market for any Certificates sold hereunder
prior to the offering thereof and there is no assurance that any such market
will develop. The Underwriters named in the Prospectus Supplement relating to a
Series may from time to time buy and sell Certificates of such Series, but there
can be no assurance that an active secondary market therefor will develop, and
there is no assurance that any such market, if established, will continue. See
"Risk Factors" herein.
An election may be made to cause the Trust Fund relating to a Series of
Certificates to be treated as a real estate mortgage investment conduit (a
"REMIC") for federal income tax purposes. See "Certain Federal Income Tax
Consequences" herein.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
There are incorporated herein by reference all reports and other documents
filed or caused to be filed by either Seller or the Servicer (if other than
BankAmerica Housing Services) with respect to the Trust Fund for any Series of
Certificates, pursuant to Section 13(a), 13(c), 14 or 15(d) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), subsequent to the date of
this Prospectus and prior to the termination of the offering of the Certificates
of such Series. Any statement contained in a document incorporated or deemed to
be incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein
or in any other subsequently filed document which also is or is deemed to be
incorporated by reference herein modifies or supersedes such statement. Any such
statement so modified or superseded shall not be deemed, except as modified or
superseded, to constitute a part of this Prospectus. Upon request by any person
to whom this Prospectus and the applicable Prospectus Supplement are delivered
in connection with the offering of one or more Classes of Certificates, the
Servicer will provide or cause to be provided without charge a copy of any such
documents and/or reports incorporated herein by reference, in each case to the
extent such documents or reports relate to such Classes of Certificates, other
than the exhibits to such documents (unless such exhibits are specifically
incorporated by reference in such documents). Requests to the Servicer should be
directed orally or in writing to BankAmerica Housing Services, Investor
Services, 10089 Willow Creek Road,
2
<PAGE>
San Diego, California, 92131-9516, telephone number (619) 530-9394. Each of Bank
of America and BankAmerica Housing Services has determined that its respective
financial statements are not material to the offering of any Certificates.
ADDITIONAL INFORMATION
This Prospectus contains, and the Prospectus Supplement for each Series of
Certificates will contain, a summary of certain material terms of certain of the
documents referred to herein and therein, but neither contains or will contain
all of the information set forth in the Registration Statement of which this
Prospectus is a part (the "Registration Statement"). For further information,
reference is made to such Registration Statement and the exhibits thereto which
the Sellers have jointly filed with the Securities and Exchange Commission (the
"Commission"), Washington, D.C., under the Securities Act of 1933, as amended
(the "Securities Act"). Statements contained in this Prospectus and any
Prospectus Supplement describing a provision of any contract or other document
referred to are summaries, and if this Prospectus or such Prospectus Supplement
indicates that such contract or other document has been filed as an exhibit to
the Registration Statement, reference is made to the copy of the contract or
other document filed as an exhibit, each such statement being qualified in all
respects by reference to the actual provision being described. Copies of the
Registration Statement can be inspected and, upon payment of the Commission's
prescribed charges, copies can be obtained at the public reference facilities
maintained by the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549,
and at the Commission's following regional offices: Northeast Regional Office, 7
World Trade Center, Suite 1300, New York, New York 10048; and Midwest Regional
Office, Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois
60661.
REPORTS TO CERTIFICATEHOLDERS
Unless and until Definitive Certificates (as defined herein) with respect to
a Trust Fund are issued, monthly and annual reports, which contain unaudited
information concerning the Trust Fund and are prepared by the Servicer, will be
sent on behalf of the Trust Fund to Cede & Co. ("Cede"), as nominee of The
Depository Trust Company ("DTC") and registered holder of the Certificates
offered hereby, pursuant to the Agreement (as defined herein). See "Description
of the Certificates -- Global Certificates." Such reports will not constitute
financial statements prepared in accordance with generally accepted accounting
principles. The Agreement will not require the sending of, and the Sellers do
not intend to send, any of their financial reports to registered holders (the
"Certificateholders") of the Certificates offered hereby or to owners (the
"Certificate Owners") of beneficial interests in the Certificates. The Servicer
will file with the Commission such periodic reports with respect to the Trust
Fund as are required under the Exchange Act, and the rules and regulations of
the Commission thereunder.
3
<PAGE>
SUMMARY OF TERMS
This summary is qualified in its entirety by reference to the detailed
information appearing elsewhere in this Prospectus and by reference to the
information with respect to each Series of Certificates contained in the related
Prospectus Supplement. Reference is made to the "Index of Significant
Definitions" herein beginning at page 73 for the location in this Prospectus of
the definitions of certain capitalized terms.
<TABLE>
<S> <C>
Title of Certificates........... BankAmerica Manufactured Housing Contract Trust
Pass-Through Certificates (Issuable in Series).
Seller or Sellers............... As to any Contract (as hereinafter defined), Bank of
America National Trust and Savings Association ("Bank of
America") or BankAmerica Housing Services, an
unincorporated division of Bank of America, FSB
("BankAmerica Housing Services"), and, as to any Trust
Fund (as hereinafter defined), Bank of America,
BankAmerica Housing Services, or both of them.
Servicer........................ BankAmerica Housing Services (together with any successor
servicer under the Agreement (as defined herein), the
"Servicer").
Risk Factors.................... Certain risk factors are particularly relevant to a
decision to invest in any Certificates sold hereunder. See
"Risk Factors" herein.
The Contracts................... The Certificates of any Series will represent undivided
ownership in a pool (a "Contract Pool") of certain
manufactured housing installment sales contracts and
installment loan agreements (each, a "Contract" and,
collectively, the "Contracts"). Contracts comprising a
Contract Pool will have been either (i) originated or
purchased by Bank of America, BankAmerica Housing
Services, Security Pacific Financial Services of
California, Inc. ("SPFSC"), a wholly-owned subsidiary of
Bank of America, or any combination thereof, in each case
on an individual basis in the ordinary course of its
business or (ii) purchased by Bank of America, BankAmerica
Housing Services, SPFSC, or any combination thereof, in
bulk from other lenders or finance companies (including
from affiliates of the Sellers), from governmental
agencies or instrumentalities or from other entities.
SPFSC will not be conveying any Contracts to any Trust
Fund. Any Contracts purchased on an individual basis or in
bulk by SPFSC will be sold by it to Bank of America, and
conveyed by Bank of America to the Trustee of a Trust Fund
immediately before the issuance of Certificates evidencing
interests in such Contracts.
Each Contract will be secured by a new or used
manufactured home (each manufactured home securing a
Contract being referred to herein as a "Manufactured
Home"). Unless otherwise specified in the related
Prospectus Supplement, none of the Contracts nor
collections thereon will be insured or guaranteed by any
governmental agency or instrumentality. The applicable
Prospectus Supplement will specify if any of the related
Contracts will be secured by real property and whether the
annual percentage rate ("Contract Rate") for each such
Contract is fixed, is variable or increases ("steps up")
in specified increments on certain dates.
The Prospectus Supplement relating to each Series of
Certificates will provide information as of the first day
of the month of initial issuance of such Certificates (the
"Cut-off Date") with respect to, among other things, (i)
the number, the aggregate unpaid principal balance, and
the range of outstanding principal balances of the
</TABLE>
4
<PAGE>
<TABLE>
<S> <C>
Contracts comprising the related Contract Pool; (ii) the
weighted average of the Contract Rates ("Weighted Average
Contract Rate") of the Contracts and the distribution of
Contract Rates; (iii) the weighted average original and
remaining terms to maturity of the Contracts and the
distribution of remaining terms to maturity; (iv) the
average outstanding principal balance of the Contracts;
(v) the geographical distribution of the related
Manufactured Homes at origination; (vi) the years of
origination of the Contracts; (vii) the distribution of
original principal balances of the Contracts; (viii) the
percentage amount of Contracts secured by new or used
Manufactured Homes; (ix) the range of and weighted average
loan-to-value ratios at origination; and (x) the month and
year in which the final scheduled payment date for the
Contract with the latest maturity is scheduled to occur.
If a Contract Pool contains Step-Up Rate Contracts (as
defined herein), the related Prospectus Supplement will
specify the percentage of the Contract Pool comprised of
such Contracts, the period during which the Contract Rates
for such Contracts will be stepped up, the range of
increases in such Contract Rates and the range of
increases in the Scheduled Payments (as defined herein)
for such Contracts. If a Contract Pool contains variable
rate Contracts, the related Prospectus Supplement will
contain a description of the basis on which such rates are
determined, including any maximum or minimum rates and the
frequency with which any such rate adjusts. The Prospectus
Supplement relating to a Series of Certificates also will
contain certain information about Contracts in the related
Trust Fund that are Land Home Contracts (as defined
herein), Land-in-Lieu Contracts (as defined herein) or
Contracts that are partially guaranteed by the Veterans
Administration or partially insured by the Federal Housing
Administration. To the extent that Bank of America or
BankAmerica Housing Services, as the case may be, believes
such information to be material, any Prospectus Supplement
may also include additional information concerning the
related Contract Pool that is stored in BankAmerica
Housing Services' electronic data processing system.
Description of Certificates..... Each Series of Certificates will be issued pursuant to a
pooling and servicing agreement (each, an "Agreement")
entered into by Bank of America or BankAmerica Housing
Services, or both of them, in each case as Seller with
respect to Contracts sold by it for the related Contract
Pool, BankAmerica Housing Services, as Servicer, the
trustee specified in the related Prospectus Supplement
(the "Trustee"), and such other parties, if any, as may be
specified in the related Prospectus Supplement. The
Certificates of a Series may be issued in one or more
classes or subclasses (each referred to in this Prospectus
as a "Class"). If the Certificates of a Series are issued
in more than one Class, the Certificates of all or less
than all of such Classes may be sold under this
Prospectus, and there may be separate Prospectus
Supplements relating to one or more of such Classes so
sold. Any reference herein to the Prospectus Supplement
relating to a Series comprised of more than one Class
should be understood to refer to each of the Prospectus
Supplements relating to the Classes of such Series sold
hereunder. Any reference herein to
</TABLE>
5
<PAGE>
<TABLE>
<S> <C>
the Certificates of a Class should be understood as a
reference to the Certificates of a Class within a Series,
the Certificates of a subclass within a Class or all of
the Certificates of a single-Class Series, as the context
may require.
The Certificates of each Series will evidence an interest,
as specified in the related Prospectus Supplement, in one
of a number of trust funds (each, a "Trust Fund") created
by Bank of America, BankAmerica Housing Services or both
of them, as the case may be, pursuant to an Agreement.
Each Trust Fund will include a Contract Pool together with
certain contract rights and other rights relating to such
Contracts (as discussed below). Each Trust Fund may from
time to time also include title to any Manufactured Home
that is repossessed following a Contract default, hazard
insurance claims and proceeds from the sale of any such
Manufactured Home or such hazard insurance claims. The
Contracts comprising each Contract Pool will be sold to
the related Trust Fund by Bank of America, BankAmerica
Housing Services or both of them. If specified in the
related Prospectus Supplement, the terms of the sale of
some or all of the Contracts from Bank of America or
BankAmerica Housing Services or both to the related Trust
Fund may provide for the retention by Bank of America or
BankAmerica Housing Services or both, as the case may be,
of the right to receive a portion of the interest accruing
thereon (the "Retained Yield"), either through ownership
of the Residual Certificates issued by such Trust Fund or
through a right to receive Excess Interest (as defined
herein) collected on the related Contract Pool. In either
case, the Retained Yield would be in the form of a right
to receive payments from the applicable Trust Fund.
Non-Recourse Obligations........ Neither Bank of America nor BankAmerica Housing Services
nor any of their affiliates will have any obligations with
respect to any Series of Certificates except, in the case
of the Sellers, for obligations arising from certain
representations and warranties of Bank of America and
BankAmerica Housing Services, as the case may be, with
respect to the Contracts sold by it in the related
Contract Pool and, in the case of BankAmerica Housing
Services, for certain contractual servicing obligations,
each as further described herein. SUBJECT ONLY TO THE
FOREGOING EXCEPTIONS, THE CERTIFICATES WILL NOT REPRESENT
INTERESTS IN OR OBLIGATIONS OF BANK OF AMERICA OR
BANKAMERICA HOUSING SERVICES, THEIR PARENT CORPORATION,
BANKAMERICA CORPORATION, OR ANY AFFILIATE THEREOF, AND
ASSETS IN THE TRUST FUND WILL CONSTITUTE THE ONLY SOURCE
OF FUNDS FOR PAYMENT ON THE CERTIFICATES. NONE OF THE
CERTIFICATES NOR (UNLESS OTHERWISE SPECIFIED IN THE
RELATED PROSPECTUS SUPPLEMENT) THE UNDERLYING CONTRACTS OR
ANY COLLECTIONS THEREON WILL BE INSURED OR GUARANTEED BY
THE FEDERAL DEPOSIT INSURANCE CORPORATION OR BY ANY OTHER
GOVERNMENTAL AGENCY OR INSTRUMENTALITY.
</TABLE>
6
<PAGE>
<TABLE>
<S> <C>
Distributions on Certificates... All Certificates will entitle the holders thereof to
distributions, on the dates specified in the related
Prospectus Supplement (each, a "Distribution Date"), from
amounts collected on the underlying Contracts. The
Certificates of a Class may entitle the holders thereof to
(a) distributions of both principal and interest, (b)
distributions of principal only or (c) distributions of
interest only. Such distributions will be made in
accordance with a formula described in the related
Prospectus Supplement, and, unless otherwise specified in
such Prospectus Supplement, distributions allocable to a
Class of Certificates will be applied first to interest,
if any, and second to principal, if any. To the extent
specified in the related Prospectus Supplement, the rights
of the holders of the Certificates of one or more Classes
of a multiple-Class Series to receive distributions of
principal and/or interest from amounts collected on the
Contracts may be subordinate to such rights of the holders
of Certificates of one or more other Classes. See "Credit
and Liquidity Enhancement" herein and the applicable
Prospectus Supplement.
A. Distributions of Principal... If the Certificates of a Class entitle the holders thereof
to distributions of principal, the related Prospectus
Supplement will specify an initial aggregate principal
balance for the Certificates of such Class (the related
"Certificate Balance") and a method of computing the
amount of principal, if any, to be distributed to the
holders of such Certificates on each Distribution Date.
Unless otherwise specified in the related Prospectus
Supplement, principal distributions for the Certificates
of a Class will be computed on the basis of a formula
which, on each Distribution Date, allocates all or a
portion of the Total Regular Principal Amount relating to
such Distribution Date to the Certificates of such Class.
The "Total Regular Principal Amount" is the total amount
by which the aggregate outstanding principal balance of
the Contracts in the related Contract Pool is reduced
during one or more collection periods prior to such
Distribution Date designated in such Prospectus Supplement
(each, a "Collection Period"). Such reduction may occur as
a result of actuarially predetermined scheduled principal
reductions, receipt of principal prepayments, liquidation
of Contracts, losses on Contracts and repurchases of
Contracts under certain conditions or other events. See
"The Contract Pools," "Description of the Certificates --
Conveyance of Contracts," "Description of the Certificates
-- Optional and Mandatory Repurchase of Certificates;
Termination Auction" and "Description of the Certificates
-- Collection and Other Servicing Procedures" herein.
Distributions with respect to all or a portion of the
Total Regular Principal Amount are sometimes referred to
herein as distributions of "Regular Principal." The Total
Regular Principal Amount with respect to any Contract Pool
and any Distribution Date may be estimated in a manner
specified in the related Prospectus Supplement.
If, due to liquidation losses or other circumstances
adversely affecting the collections on the underlying
Contract Pool, the Contract collections available on any
Distribution Date to make distributions of Regular
Principal to the holders of the Certificates of a Class
are less than the portion of the Total Regular Principal
</TABLE>
7
<PAGE>
<TABLE>
<S> <C>
Amount allocable to such Class, the deficiency may be made
up from (i) the amount, if any, by which the interest
collected on nondefaulted Contracts during the same
Collection Period exceeds the interest distribution due to
the holders of Certificates for the related Series, the
servicing fee of the Servicer (to the extent such
servicing fee is payable prior to distributions of
interest to the holders of any Class of Certificates) and
other expenses of the Trust Fund or (ii) funds available
from one or more forms of credit support, but only to the
extent, if any, specified in the applicable Prospectus
Supplement. See "Credit and Liquidity Enhancement" herein.
If specified in the applicable Prospectus Supplement, the
Certificate Balance of the Certificates of a Class will be
reduced on each Distribution Date by the full amount of
the portion of the Total Regular Principal Amount
allocable to such Class even if, due to deficient Contract
collections, a full distribution thereof is not made.
The applicable distribution formula for each Class of a
multiple-Class Series may allocate the Total Regular
Principal Amount among the various Classes on a pro rata,
sequential or other basis, as specified in the related
Prospectus Supplement. If specified in the related
Prospectus Supplement, any such formula may entitle the
holders of Certificates of a particular Class to receive
on certain Distribution Dates, distributions of Regular
Principal from particular sources of credit support upon
the occurrence of certain losses or delinquencies, even if
the holders of the Certificates of such Class would not
have been entitled to receive principal distributions on
such Distribution Dates from amounts collected on the
underlying Contracts in the absence of such losses or
delinquencies.
If specified in the applicable Prospectus Supplement, the
Certificates of a Class may entitle the holders thereof to
special principal distributions on particular Distribution
Dates that are unrelated to the Total Regular Principal
Amount for any such Distribution Date ("Special Principal
Distributions"). Special Principal Distributions may be
made, under the circumstances set forth in the applicable
Prospectus Supplement, from interest collected on the
underlying Contract Pool, from funds available from one or
more forms of credit support or from such other source as
may be specified in such Prospectus Supplement. The
Certificates of a Class having an initial Certificate
Balance may entitle the holders thereof to distributions
of Regular Principal only, to distributions of Regular
Principal and to Special Principal Distributions or to
Special Principal Distributions only. However, unless
otherwise stated in the related Prospectus Supplement, the
Certificates of a Class will not entitle the holders
thereof to aggregate principal distributions in excess of
the initial Certificate Balance for such Class.
B. Distributions of Interest.... The distribution formula for a Class of Certificates
having an initial Certificate Balance may, but need not,
also specify a method of computing the interest, if any,
to be distributed on specified Distribution Dates (which
may include all or less than all of the Distribution
Dates) to the holders of the Certificates of such Class.
Such interest may be equal, subject to such adjustments as
may be described in the related Prospectus Supplement, to
a specified
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number of days' interest on the applicable Certificate
Balance (before giving effect to any reduction thereof on
such Distribution Date), calculated at a rate (the
"Pass-Through Rate") specified in the related Prospectus
Supplement. The Pass-Through Rate may be fixed or
variable, and, if specified in the related Prospectus
Supplement, may shift from a variable rate to a fixed rate
under the conditions specified in such Prospectus
Supplement. See "Description of the Certificates --
Distributions on Certificates -- B. Distributions of
Interest" herein for a general description of the types of
variable Pass-Through Rates that might be applicable to a
Class of Certificates. Alternatively, such interest may be
equal to all or a portion (which portion will be
determined as described in the related Prospectus
Supplement) of the interest due on the related Contracts
during one or more Collection Periods occurring prior to
such Distribution Date. Classes of Certificates that do
not entitle the holders thereof to receive distributions
of principal may nevertheless entitle such holders to
receive interest distributions calculated on this basis.
If, due to liquidation losses or other circumstances
adversely affecting the collections on the underlying
Contract Pool, the Contract collections available to make
distributions of interest to the holders of the
Certificates of a Class are less than the amount of
interest computed as described above, the deficiency may
be made up from other sources, but only to the extent, if
any, specified in the related Prospectus Supplement. See
"Credit and Liquidity Enhancement" herein and the
applicable Prospectus Supplement.
C. Residual Interests........... If specified in the related Prospectus Supplement, a Class
of Certificates sold hereunder may evidence a residual
interest in the related Trust Fund (the "Residual
Interest"). Certificates evidencing a Residual Interest
will not have the features described above. Rather, unless
otherwise specified in such Prospectus Supplement, such
Certificates will entitle the holders thereof to receive
distributions from amounts collected on the Contracts
which would not be needed to make distributions to the
holders of other interests in the Trust Fund (or to pay
expenses of the related Trust Fund) in the absence of
liquidation losses or other events resulting in deficient
Contract collections.
In addition, if specified in the related Prospectus
Supplement, certain or all Certificates evidencing
Residual Interests may also entitle the holders thereof to
receive additional distributions of assets of the related
Trust Fund, to the extent any such assets remain after
being applied to make distributions to the holders of
other interests in the Trust Fund (or to pay expenses of
the Trust Fund). The Certificates evidencing a Residual
Interest may entitle the holders thereof to distributions
at various times throughout the life of the related Trust
Fund or only upon termination of the Trust Fund, all as
more fully set forth in the related Prospectus Supplement.
If an election is made to treat the related Trust Fund as
a REMIC, the holders of a Residual Interest in such Trust
Fund will be subject to federal income taxation with
respect to their ownership
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of such Residual Interest as described herein under
"Certain Federal Income Tax Consequences -- REMIC
Certificates -- D. Taxation of Residual Certificates."
Global Certificates............. Unless otherwise specified in the related Prospectus
Supplement, the Certificates of a Series, or of one or
more Classes within a Series, will be issuable in the form
of one or more global certificates (each, a "Global
Certificate") to be held by Cede & Co ("Cede"), as nominee
of The Depository Trust Company ("DTC"), on behalf of the
beneficial owners (the "Certificate Owners") of the
Certificates, as described herein under "Description of
the Certificates -- Global Certificates." If some or all
of the Certificates of a Series are issued in the form of
one or more Global Certificates, certain monthly and
annual reports prepared by the Servicer under the related
Agreement will be sent on behalf of the related Trust Fund
to Cede and not to the Certificate Owners, as described in
"Reports to Certificateholders" above.
Credit and Liquidity
Enhancement.................... The extent, if any, to which a Class of Certificates in
any Series may be entitled to the benefit of one or more
forms of credit and liquidity enhancement by means of
overcollateralization or subordination of one or more
Classes of Certificates in such Series, the deposit of
funds into one or more spread accounts or other reserve
funds, the issuance of one or more letters of credit,
surety bonds, or other credit facilities, or a combination
thereof, and/or the performance under one or more
certificate purchase agreements or other liquidity
facilities, or a combination thereof, will be described in
the related Prospectus Supplement. See "Credit and
Liquidity Enhancement" herein and the related Prospectus
Supplement.
Advances........................ The extent, if any, to which the Servicer will be required
to make advances of delinquent scheduled payments on the
Contracts in a Contract Pool will be described in the
related Prospectus Supplement.
Termination Auction............. If specified in the applicable Prospectus Supplement, the
Trustee for the related Trust Fund shall solicit bids for
the purchase at an auction (a "Termination Auction") of
the Contracts remaining in the Trust Fund within ninety
days following the Distribution Date as of which the Pool
Principal Balance for a Contract Pool is less than 10% of
such Contract Pool's Cut-off Date Pool Principal Balance.
In the event that satisfactory bids are received as
described in the applicable Agreement, the net sale
proceeds will be distributed to Certificateholders, in the
same order of priority as collections received in respect
of the Contracts. If satisfactory bids are not received,
the Trustee shall decline to sell the Contracts and shall
not be under any obligation to solicit any further bids or
otherwise negotiate any further sale of the Contracts. If
an election has been made to treat the related Trust Fund
as a REMIC, such sale and consequent termination of the
related Trust Fund must constitute a "qualified
liquidation" of the Trust Fund under Section 860F of the
Code, including the requirement that the qualified
liquidation takes place over a period not to exceed 90
days. See "Description of the Certificates -- Optional and
Mandatory Repurchase; Termination Auction" herein and the
applicable Prospectus Supplement. Any
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early termination of a Trust Fund and early retirement of
the related Certificates that results from a successful
Termination Auction will have an effect on an investor's
yield on such Certificates. See "Prepayment and Yield
Considerations" herein and in the applicable Prospectus
Supplement.
Optional Termination............ If so specified in the related Prospectus Supplement and
if the related Trust Fund has not been terminated
following a successful Termination Auction, the Servicer
will have the option to purchase from the related Trust
Fund all Contracts then outstanding and all other property
in such Trust Fund at the time, in the manner and at the
price specified in such Prospectus Supplement and subject
to the conditions set forth in the related Agreement. See
"Description of the Certificates -- Optional and Mandatory
Repurchase; Termination Auction" and "Description of the
Certificates -- Termination of the Agreement" herein. Any
early termination of the related Trust Fund and early
retirement of the Certificates of the related Series that
result from the Servicer exercising either such option
will have an effect on an investor's yield on such
Certificates. See "Prepayment and Yield Considerations"
herein and in the related Prospectus Supplement.
Federal Income Tax
Consequences................... The federal income tax consequences of the purchase,
ownership and disposition of the Certificates in any
Series will depend on, among other factors, whether an
election is made to treat the related Trust Fund as a
REMIC under the provisions of the Internal Revenue Code of
1986, as amended (the "Code"). See "Certain Federal Income
Tax Consequences -- REMIC Certificates" herein for a
discussion of the federal income tax consequences of the
purchase, ownership and disposition of the Certificates in
any Series if such an election is made. See "Certain
Federal Income Tax Consequences -- Non-REMIC Certificates"
for a discussion of the federal income tax consequences of
the purchase, ownership and disposition of the
Certificates in any Series if such an election is not
made.
ERISA Considerations............ A fiduciary of any employee benefit plan subject to the
Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), or Section 4975 of the Code should
carefully review with its own legal advisors whether the
purchase or holding of Certificates could give rise to a
transaction that is prohibited or otherwise impermissible
under ERISA or the Code. See "ERISA Considerations" herein
and in the related Prospectus Supplement. If specified in
the related Prospectus Supplement, certain Certificates
sold hereunder will not be transferable to certain benefit
plan investors except under the conditions set forth in
such Prospectus Supplement.
Legal Investment................ Unless otherwise indicated in the applicable Prospectus
Supplement, any Certificates offered hereby that are rated
by at least one nationally recognized statistical rating
organization in one of its two highest rating categories
will generally constitute "mortgage related securities"
under the Secondary Mortgage Market Enhancement Act of
1984, as amended ("SMMEA") and, as such, would be "legal
investments" for certain types of institutional investors
to the extent provided in SMMEA. Certain state laws have
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overridden SMMEA and, therefore, institutional investors
should review with their own legal advisors whether such
Certificates would constitute a legal investment. In
addition, some Classes of Certificates offered hereby may
not be rated in one of the two highest rating categories
and thus would not constitute "mortgage related
securities." See "Legal Investment" herein and in the
related Prospectus Supplement.
Rating.......................... It is a condition to the issuance of each Class of
Certificates sold under this Prospectus that it be rated
at the time of issuance by at least one nationally
recognized statistical rating organization in one of its
four highest rating categories. 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. The security rating of any Class
of Certificates should be evaluated independently of
similar security ratings assigned to other kinds of
securities, including Certificates in the same Series or
Certificates of other Series sold under this Prospectus.
Ratings on manufactured housing contract pass-through
certificates address the likelihood of the receipt by
certificateholders of their allocable share of principal
and interest on the underlying manufactured housing
contract assets. These ratings address structural and
legal aspects associated with such certificates, the
extent to which the payment stream on such underlying
assets is adequate to make payments required by such
certificates and the credit quality of the credit
enhancer, if any. Ratings on the Certificates do not,
however, constitute a statement regarding the likelihood
of principal prepayments by Obligors under the Contracts
in the related Contract Pool, the degree by which
prepayments made by such Obligors might differ from those
originally anticipated or whether the yield originally
anticipated by investors of any Series of Certificates may
be adversely affected as a result of such prepayments. As
a result, investors of any Series of Certificates might
suffer a lower than anticipated yield.
See "Rating" herein and in the related Prospectus
Supplement.
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RISK FACTORS
Prospective purchasers of Certificates should consider, among other things,
the following factors in connection with the purchase of Certificates:
1. LIMITED LIQUIDITY. There can be no assurance that a secondary market
will develop for Certificates or, if it does develop, that it will provide the
holders of Certificates with liquidity of investment or that it will remain for
the term of such Certificates.
2. BOOK-ENTRY FORM. To the extent any Certificate is represented by a
Global Certificate, the issuance of such Certificates in book-entry form may
reduce the liquidity of such Certificates in the secondary trading market since
investors may be unwilling to purchase Certificates for which they cannot obtain
physical certificates. See "Description of the Certificates -- Global
Certificates" herein.
3. PREVAILING ECONOMIC CONDITIONS. An investment in Certificates may be
affected by, among other things, a downturn in national, regional or local
economic conditions. The geographic location of the Manufactured Homes in any
Contract Pool at origination of the related Contract will be set forth in the
related Prospectus Supplement under "The Contract Pool." Regional and local
economic conditions are often volatile and, historically, regional and local
economic conditions, as well as national economic conditions, have affected the
delinquency, loan loss and repossession experience of manufactured housing
installment sales contracts and/or installment loan contracts (hereinafter
generally referred to as "contracts" or "manufactured housing contracts").
Sufficiently high delinquencies and liquidation losses on the Contracts in any
Contract Pool will have the effect of reducing, and possibly eliminating, the
protection against loss afforded by any credit enhancement supporting any Class
of the related Certificates. If such protection is eliminated with respect to a
Class of Certificates, the holders of such Certificates will bear all risk of
loss on the related Contracts and will have to rely on the value of the related
Manufactured Homes for recovery of the outstanding principal of and unpaid
interest on any defaulted Contracts in the related Contract Pool. See "Credit
and Liquidity Enhancement" herein and the related Prospectus Supplement.
4. DEPRECIATION OF MANUFACTURED HOMES. Manufactured housing generally
depreciates in value, regardless of its location. Thus, Certificateholders
should expect that, as a general matter, the market value of any Manufactured
Home will be lower than the outstanding principal balance of the related
Contract. See "The Contract Pools" herein and "The Contract Pool" in the related
Prospectus Supplement. To the extent the Servicer has to repossess Manufactured
Homes relating to Contracts in a Contract Pool (or to the extent there are
casualty losses on the related Manufactured Homes), there are likely to be
liquidation losses on the Contracts in such Contract Pool, which will have the
effect of reducing, and possibly eliminating, the protection against loss
afforded by any credit enhancement supporting any Class of the related
Certificates. If such protection is eliminated with respect to a Class of
Certificates, the holders of such Certificates will bear all risk of loss on the
related Contracts and will have to rely on the value of the related Manufactured
Homes for recovery of the outstanding principal of and unpaid interest on any
defaulted Contracts in the related Contract Pool. See "Credit and Liquidity
Enhancement" herein and the related Prospectus Supplement.
5. NO RECOURSE. Neither Bank of America nor BankAmerica Housing Services
nor any of their affiliates will have any obligations with respect to any Series
of Certificates except, in the case of the Sellers, for obligations arising from
certain representations and warranties of Bank of America and BankAmerica
Housing Services, as the case may be, with respect to the Contracts sold by it
in the related Contract Pool, and, in the case of BankAmerica Housing Services,
for certain contractual servicing obligations, each as further described herein.
In all other respects, the purchase of any Certificate will be without recourse
unless the related Prospectus Supplement (i) specifies that some or all of the
Contracts evidenced by such Certificate are partially guaranteed by the Veterans
Administration or partially insured by the Federal Housing Administration, or
(ii) describes one or more forms of credit or liquidity enhancement supporting
distributions on the related Certificates. SUBJECT ONLY TO THE FOREGOING
EXCEPTIONS, PROCEEDS FROM THE ASSETS IN THE RELATED TRUST FUND WILL CONSTITUTE
THE ONLY SOURCE OF FUNDS FOR PAYMENT ON THE CERTIFICATES OF THE RELATED SERIES,
THE CERTIFICATES WILL NOT REPRESENT INTERESTS IN OR OBLIGATIONS OF BANK OF
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AMERICA, BANKAMERICA HOUSING SERVICES, THEIR PARENT CORPORATION, BANKAMERICA
CORPORATION, OR ANY AFFILIATE THEREOF, AND NEITHER THE CERTIFICATES NOR THE
UNDERLYING CONTRACTS OR ANY COLLECTIONS THEREON WILL BE INSURED OR GUARANTEED BY
THE FEDERAL DEPOSIT INSURANCE CORPORATION OR BY ANY OTHER GOVERNMENTAL AGENCY OR
INSTRUMENTALITY.
6. SECURITY INTERESTS IN THE MANUFACTURED HOMES. On the date of initial
issuance of Certificates in any Series, Bank of America or BankAmerica Housing
Services or both will convey the related Contracts to the related Trust Fund.
BankAmerica Housing Services, as Servicer, will obtain and maintain physical
possession of the Contract documents as custodian and agent for the related
Trustee. Each Contract is secured by a security interest in a Manufactured Home
and, in the case of Land Home Contracts or Land-in-Lieu Contracts (both as
defined herein), the real estate on which the related Manufactured Home is
located. Perfection of security interests in the Manufactured Homes and
enforcement of rights to realize upon the value of the Manufactured Homes as
collateral for the Contracts are subject to a number of federal and state laws,
including the Uniform Commercial Code (the "UCC") as adopted in the states in
which the Manufactured Homes are located and such states' certificate of title
statutes, but generally not their real estate laws. Under such federal and state
laws, a number of factors may limit the ability of a holder of a perfected
security interest in Manufactured Homes to realize upon such Manufactured Homes
or may limit the amount realized to less than the amount due under the related
Contract. See "Certain Legal Aspects of the Contracts--Security Interests in the
Manufactured Homes" herein.
Unless otherwise specified in the related Prospectus Supplement, the
certificates of title for the Manufactured Homes (including Manufactured Homes
securing Contracts which are purchased by SPFSC and then conveyed by Bank of
America to the related Trust Fund) will show "Security Pacific Financial
Services, a Division of Bank of America, FSB" (the name under which BankAmerica
Housing Services was conducting business from approximately February 1993 to
February 1994), "Security Pacific Housing Services, a Division of Bank of
America, FSB" (the name under which BankAmerica Housing Services was conducting
business from approximately February 1994 to June 1995), "Bank of America, FSB,"
or "BankAmerica Housing Services, a Division of Bank of America, FSB" as the
lienholder; the UCC financing statements, where applicable, will show
BankAmerica Housing Services (under one of the foregoing names) as secured
party. Because of the expense and administrative inconvenience involved,
BankAmerica Housing Services will not amend the certificates of title to change
the lienholder specified therein to the relevant Trustee at the time Contracts
are conveyed to a Trust Fund, and will not execute any transfer instrument
(including, among other instruments, UCC-3 assignments) relating to any
Manufactured Home in favor of the relevant Trustee or deliver any certificate of
title to such Trustee or note thereon such Trustee's interest. In some states,
in the absence of such an amendment, notation, execution or delivery, the
assignment to the Trustee of the security interest in the Manufactured Homes
located therein may not be effective or such security interest may not be
perfected. If any otherwise effectively assigned security interest in favor of
the Trustee is not perfected, such assignment of the security interest to the
Trustee may not be effective against creditors of BankAmerica Housing Services,
which continues to be specified as lienholder on any certificate of title or as
secured party on any UCC filing, or against a receiver or conservator of
BankAmerica Housing Services. See "Description of the Certificates -- Conveyance
of Contracts" in the applicable Prospectus Supplement for a description of
certain limited circumstances under which BankAmerica Housing Services or Bank
of America, as the case may be, will be obligated to repurchase, or at its
option substitute another contract for, a Contract sold by it if, as a result of
the failure by BankAmerica Housing Services to take any action described above
in this paragraph with respect to the related Manufactured Home, the Trustee
does not have a perfected first-priority security interest in such Manufactured
Home.
7. TRANSFER OF CONTRACTS AND RELATED SECURITY INTERESTS. Each Contract
generally will be "chattel paper" as defined in the UCC as in effect in
California (where BankAmerica Housing Services' and Bank of America's chief
executive offices are located and where the chief executive office of SPFSC is
located) and the jurisdiction in which the related Manufactured Home was located
at origination. Under the UCC as in effect in each such jurisdiction, the sale
of chattel paper is treated in a manner similar to perfection of a security
interest in chattel paper. BankAmerica Housing Services or Bank of America, as
the case may be,
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will make or cause to be made appropriate filings of UCC-1 financing statements
to give notice of the Trustee's ownership of the Contracts sold by it. The
Trustee's interest in the Contracts could be defeated if a subsequent purchaser
were able to take physical possession of the Contracts without notice of such
assignment. Unless otherwise specified in the applicable Prospectus Supplement,
BankAmerica Housing Services or Bank of America or both of them, as the case may
be, will be required under the related Agreement to stamp or cause to be stamped
each Contract sold by it to indicate its transfer to the Trustee. To the extent
the Contracts do not constitute "chattel paper" within the meaning of the UCC as
in effect in California and the jurisdictions in which the related Manufactured
Homes were located at origination, these steps may not be sufficient to protect
the Trustee's interest in the Contracts against the claims of BankAmerica
Housing Services' or Bank of America's (or an affiliate's) creditors, a receiver
or conservator of BankAmerica Housing Services or Bank of America or a receiver,
conservator or trustee in bankruptcy of an affiliate
thereof that sold such Contracts to BankAmerica Housing Services or Bank of
America.
In addition, a federal circuit court decision may adversely affect a
Trustee's interest in Contracts comprising a Contract Pool even if such
Contracts constitute chattel paper. In OCTAGON GAS SYSTEMS, INC. V. RIMMER, 995
F.2d 948 (10th Cir. 1993), the court's decision included language to the effect
that accounts sold by an entity which subsequently became bankrupt remained
property of the debtor's bankruptcy estate. Sales of chattel paper, like sales
of accounts, are governed by Article 9 of the UCC. If any affiliate of Bank of
America or BankAmerica Housing Services has sold Contracts to Bank of America or
BankAmerica Housing Services and becomes a debtor in a proceeding under the
federal bankruptcy code, and the court with jurisdiction for such bankruptcy
proceeding were to follow the reasoning of the Tenth Circuit and apply such
reasoning to chattel paper, Certificateholders could experience a delay in, or
reduction of, distributions as to the Contracts that constitute chattel paper
and were sold by such debtor.
8. FEDERAL AND STATE CONSUMER PROTECTION LAWS. Numerous federal and state
consumer protection laws could adversely affect the interest of any Trust Fund
in the Contracts comprising the related Contract Pool. For example, as described
herein under "Certain Legal Aspects of the Contracts -- Consumer Protection
Laws," the Soldiers' and Sailors' Civil Relief Act of 1940, as amended (the
"Relief Act") could, under certain circumstances, cap the amount of interest
that may be charged on certain Contracts at 6% per annum and may hinder the
ability of the Servicer to foreclose on such Contracts in a timely fashion. In
addition, other federal and state consumer protection laws impose requirements
on lending under installment sales contracts and installment loan agreements
such as the Contracts, and the failure by the lender or seller of goods to
comply with such requirements could give rise to liabilities of assignees for
amounts due under such agreements and the right of set-off against claims by
such assignees. These laws could apply to any Trust Fund as assignee of the
related Contracts. Pursuant to each Agreement, BankAmerica Housing Services or
Bank of America or both of them, as the case may be, will represent and warrant
that each Contract sold by it complies with all requirements of law. To the
extent described in the applicable Prospectus Supplement under "Description of
Certificates -- Conveyance of Contracts," a breach of any such representation or
warranty that materially and adversely affects the related Trust Fund's interest
in a Contract will create an obligation by BankAmerica Housing Services or Bank
of America, as the case may be, to repurchase, or at its option substitute
another contract for, such Contract, unless such breach is cured within the time
period specified in the related Agreement. Neither BankAmerica Housing Services
nor Bank of America will have any obligation to repurchase any Contract because
of limitations imposed under the Relief Act, however.
9. PREPAYMENT CONSIDERATIONS. The prepayment experience on the Contracts
underlying any Series of Certificates (including prepayments due to liquidations
of defaulted Contracts) will affect the average life and the maturity of such
Certificates. Prepayments on the Contracts in any Contract Pool may be
influenced by a variety of economic, geographic, social and other factors,
including repossessions, aging, seasonality and interest rates. Other factors
affecting prepayment on such Contracts include changes in housing needs, job
transfers and unemployment. In addition, in the event a partial prepayment is
made on a Contract, or a Contract is prepaid in full, interest on such Contract
to the extent of such prepayment will cease to accrue as of the date of
prepayment. If with respect to any Trust Fund such prepayments and related
interest shortfalls were sufficiently high during a Collection Period, the
Available Distribution Amount (as defined in the
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applicable Prospectus Supplement) for the related Distribution Date could be
less than the amount of principal and interest that would be distributable to
the related Certificateholders in the absence of such shortfalls. See
"Prepayment and Yield Considerations" herein and in the related Prospectus
Supplement.
10. DIFFICULTY IN PLEDGING. To the extent transactions in Certificates can
be effected only through DTC, participating organizations, indirect participants
and certain banks, the ability of a Certificate Owner to pledge any such
Certificate to persons or entities that do not participate in the DTC system, or
otherwise to take actions in respect of such Certificates, may be limited due to
the lack of physical certificates representing any such Certificate. See
"Description of the Certificates -- Global Certificates" herein.
11. POTENTIAL DELAYS IN RECEIPT OF DISTRIBUTIONS. To the extent any
Certificate is represented by a Global Certificate, Certificate Owners with
respect thereto may experience some delay in their receipt of distributions.
Distributions will be forwarded by the Trustee to DTC and DTC will credit such
distributions to the accounts of its Participants (as defined herein), which
will thereafter credit them to the accounts of Certificate Owners either
directly or indirectly through indirect participants. See "Description of the
Certificates -- Global Certificates" herein.
12. INSOLVENCY, RECEIVERSHIP OR BANKRUPTCY OF CONTRACT SELLERS. In the
event of an insolvency, conservatorship or receivership of BankAmerica Housing
Services or Bank of America, as the case may be, or the insolvency or bankruptcy
of any affiliate thereof that has sold Contracts to Bank of America or
BankAmerica Housing Services and becomes a debtor in a proceeding under the
federal bankruptcy code, the sale of Contracts by Bank of America or BankAmerica
Housing Services or both of them, or the sale of Contracts by an insolvent
affiliate to either of them, as the case may be, could be recharacterized as a
borrowing secured by a pledge of the Contracts. Such an attempt, even if
unsuccessful, could result in delays in or reductions of distributions on the
Certificates. See "Other Considerations" herein.
13. INSOLVENCY, CONSERVATORSHIP OR RECEIVERSHIP OF SERVICER. In the event
of a conservatorship or receivership of Bank of America, FSB (of which
BankAmerica Housing Services is an unincorporated division), the receiver or
conservator could prevent the termination of BankAmerica Housing Services as
Servicer if no event of default under the applicable Agreement exists other than
the receivership or conservatorship or insolvency of the Servicer. Such
restriction could result in a delay or possibly a reduction in payments on the
Certificates to the extent BankAmerica Housing Services received (but did not
deposit with the trustee) Contract collections before the date of receivership
or conservatorship. See 'Other Considerations' herein.
THE CONTRACT POOLS
Each Contract contained in a Contract Pool will have been (i) originated by
Bank of America, BankAmerica Housing Services or SPFSC or purchased by Bank of
America, BankAmerica Housing Services or SPFSC from a manufactured housing
dealer on an individual basis in the ordinary course of its business and/or (ii)
purchased by Bank of America, BankAmerica Housing Services or SPFSC, from one or
more governmental agencies or instrumentalities and/or from one or more other
lenders or finance companies (including affiliates of the Sellers) that purchase
and hold manufactured housing contracts ("Bulk Sellers"), all as more
particularly specified in the related Prospectus Supplement. Each Contract will
be secured by a new or used Manufactured Home. Unless otherwise specified in the
related Prospectus Supplement, the Contracts will not be insured by any
governmental agency or instrumentality. However, if so specified in the related
Prospectus Supplement, some or all of the Contracts and collections thereon
will, subject to the conditions described below, be partially insured by the
Federal Housing Administration or partially guaranteed by the Veterans
Administration.
On the date of initial issuance of the Certificates of any Series, Bank of
America, BankAmerica Housing Services or both of them will convey the Contracts
comprising the related Contract Pool to the related Trust Fund. BankAmerica
Housing Services, as Servicer, will obtain and maintain possession of all
Contract documents. If specified in the related Prospectus Supplement, the terms
of the conveyance of some or all of such Contracts from Bank of America,
BankAmerica Housing Services or both to the applicable Trust Fund may provide
for the retention by Bank of America, BankAmerica Housing Services or both (as
the case may
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be) of the right to receive a Retained Yield. The right of Bank of America,
BankAmerica Housing Services or both (as the case may be) to receive any
Retained Yield relating to any Contract or any Contract Pool may be on a parity
with, or subordinate to, the right of the applicable Trust Fund to receive other
amounts due thereon, all as more specifically set forth in the related
Prospectus Supplement.
Unless otherwise specified in the applicable Prospectus Supplement, the
Agreement relating to each Contract Pool will require the related Manufactured
Homes to comply with the requirements of certain federal statutes which
generally would require the Manufactured Homes to have a minimum of 400 square
feet of living space and a minimum width of 102 inches and to be of a kind
customarily used at a fixed location. Such statutes would also require the
Manufactured Homes to be transportable in one or more sections, built on a
permanent chassis and designed to be used as dwellings, with or without
permanent foundations, when connected to the required utilities. The statutes
also would require that the security interest in any Manufactured Home include
the plumbing, heating, air conditioning and electrical systems relating to such
Manufactured Home.
Each Agreement will require the Servicer to maintain hazard insurance
policies with respect to each Manufactured Home in the amounts and manner set
forth herein under "Description of the Certificates -- Servicing Compensation
and Payment of Expenses; Certain Matters Regarding the Servicer -- A. Hazard
Insurance Policies." Generally, no other insurance will be required with respect
to the Manufactured Homes, the Contracts or any Contract Pool.
Each Contract Pool may contain actuarial or simple interest Contracts (as
further described below) bearing a Contract Rate that is fixed or variable or
increases in specified increments on particular dates (a "Step-Up Rate"). The
rate at which the Contracts in a particular Contract Pool bear interest will be
further described in the applicable Prospectus Supplement. Unless otherwise
specified in the applicable Prospectus Supplement, each Contract will provide
for payments on scheduled monthly due dates (each, a "Due Date"). The day of
each month constituting the Due Date will vary from Contract to Contract. Unless
the Contracts bear interest at a variable rate, the scheduled payment due on
each monthly Due Date (the "Scheduled Payment") will be specified in the
Contract. The Scheduled Payments for fixed-rate Contracts will be constant
assuming no prepayments. Unless otherwise specified in the applicable Prospectus
Supplement, the Scheduled Payments for Contracts bearing interest at a Step-Up
Rate ("Step-Up Rate Contracts") will increase on the dates on which the Contract
Rates are stepped up. In addition, unless otherwise specified in the related
Prospectus Supplement, the Contracts may be prepaid in full or in part at any
time.
Unless otherwise stated in the applicable Prospectus Supplement, Scheduled
Payments whether for actuarial or simple interest Contracts, may be paid prior
to their Due Dates, whether in, or in months prior to, the months of their Due
Dates. Thus, the obligor under a Contract (each, an "Obligor") may, in June, pay
the Scheduled Payments due in June, July and August. In that event, no further
payment will become due on such Contract until the September Due Date. In the
case of a simple interest Contract, the Obligor would have to instruct the
Servicer to apply such payment as a pay-ahead of future Scheduled Payments;
otherwise such payment would be applied as a partial principal prepayment. There
is no limit to the number of Scheduled Payments that may be paid ahead in this
manner. The effect of paid-ahead Scheduled Payments will be different for
actuarial Contracts than for simple interest Contracts, as further described
below.
The Scheduled Payments for each actuarial Contract (whether a fixed rate
Contract or a Step-Up Rate Contract) will fully amortize the principal balance
of the Contract over its term. The portion of each Scheduled Payment allocable
to principal is equal to the total amount thereof less the portion allocable to
interest. The portion of each Scheduled Payment due in a particular month that
is allocable to interest is a precomputed amount equal to one month's interest
on the principal balance of the Contract, which principal balance is determined
by reducing the initial principal balance by the principal portion of all
Scheduled Payments that were due in prior months (whether or not such Scheduled
Payments were timely made) and all prior partial principal prepayments. Thus,
each Scheduled Payment will be applied to interest and to principal in
accordance with a precomputed allocation, whether such Scheduled Payments are
received in advance of or subsequent to their Due Dates. Unless otherwise
specified in the applicable Prospectus Supplement, all payments received in a
Collection Period on an actuarial Contract in excess of the related
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<PAGE>
Obligor's Scheduled Payment (other than payments not allocated to principal and
interest (such as late payment charges) or payments sufficient to pay in full
the outstanding principal balance of and all accrued and unpaid interest on such
Contract) are applied as a partial prepayment of principal on the Contract,
unless (i) the related Obligor notifies or confirms with the Servicer that such
payments are to be applied to future Scheduled Payments in the order of the Due
Dates of such payments or (ii) the amount of such excess payment is
approximately equal (subject to a variance of plus or minus 10%) to the amount
of a future Scheduled Payment.
The Scheduled Payments for each simple interest Contract (whether a fixed
rate Contract or a Step-Up Rate Contract) would, if made exactly on their
respective Due Dates, result in a nearly full amortization of the Contract.
However, each such Scheduled Payment will be applied when received first to
accrued interest on the unpaid principal balance of the Contract (computed on a
daily simple interest basis) and then to principal. Thus, the portions of each
such Scheduled Payment allocable to principal and interest will depend on the
amount of interest accrued to the date payment is received. Unless otherwise
stated in the applicable Prospectus Supplement, no Scheduled Payment on a
Contract will be considered to be delinquent once 90% of the amount thereof is
received. Late payments or payments of less than 100% of any Scheduled Payment
on a simple interest Contract will result in such Contract amortizing more
slowly than originally scheduled and could extend the maturity date of any such
Contract beyond its original scheduled maturity date.
Under certain circumstances, the amount of accrued interest on a simple
interest Contract could exceed the amount of the Scheduled Payment. This could
happen, for example, in the case of delinquency, or in the case of the first
Scheduled Payment due after one or more Scheduled Payments have been paid ahead
as described above (because interest continues to accrue on simple interest
Contracts during the months in which the paid-ahead Scheduled Payments would
have become due). In any such event, the entire amount of the payment will be
allocated to interest, and although some accrued interest will remain unpaid,
the unpaid interest will not be added to the principal balance of the Contract
and will not bear interest. Under other circumstances, no interest will have
accrued between the dates of receipt of Scheduled Payments on simple interest
Contracts. This could be the case if, for example, one or more Scheduled
Payments were paid ahead on a Due Date occurring in a month prior to the months
in which such Scheduled Payments would have become due, as described above. In
that event, the entire amount of such paid-ahead Scheduled Payments generally
will be allocated to principal.
Variable rate Contracts may be either actuarial or simple interest
Contracts. Unless otherwise specified in the related Prospectus Supplement, the
Scheduled Payments on variable rate Contracts will be allocated between
principal and interest as described above for actuarial Contracts and simple
interest Contracts, respectively, based upon the Contract Rate in effect when
such Scheduled Payments are due. Unless otherwise specified in the related
Prospectus Supplement, the amounts of such Scheduled Payments will be adjusted,
on the basis described in such Prospectus Supplement, whenever the related
variable rate is adjusted.
If so specified in the applicable Prospectus Supplement, the related
Contract Pool may contain Contracts which combine certain features of actuarial
and simple interest Contracts as follows: Scheduled Payments will be applied to
principal and interest as if such Contracts were actuarial Contracts, but if any
such Contract is prepaid in full, the amount required to be paid will be
calculated as if the Scheduled Payments received prior to the date of prepayment
were applied to principal and interest in the same manner as they would have
been had such Contract been a simple interest Contract.
If specified in the related Prospectus Supplement, certain Contracts ("Land
Home Contracts") will also be secured by liens on the real estate on which the
related Manufactured Homes are located. Unless otherwise specified in the
related Prospectus Supplement, all Land Home Contracts will have financed the
purchase of the related Manufactured Home together with the real estate on which
the Manufactured Home is located. In certain jurisdictions, a lender cannot
obtain separate evidence of its lien on the Manufactured Home securing a Land
Home Contract and its lien on the property on which the Manufactured Home is
located. In those jurisdictions, the only evidence of liens on the Manufactured
Homes securing Land Home Contracts will be the deeds of trust, mortgages or
similar security instruments (in each case, a "Mortgage")
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<PAGE>
on the real estate on which the Manufactured Homes are located. It is a policy
of BankAmerica Housing Services to obtain title insurance policies with respect
to any such Contract that it originates insuring that the related Manufactured
Home is subject to the lien of the related Mortgage, although title policies may
not have been obtained with respect to Land Home Contracts acquired from Bulk
Sellers. Where the real estate on which the related Manufactured Home is located
is owned by the related Obligor, the Obligor may provide a Mortgage on the real
estate in lieu of all or part of any required down payment for any such
Contract. Any such Contract is referred to herein as a "Land-in-Lieu Contract"
rather than a "Land Home Contract." Generally, separate evidences of liens on
Manufactured Homes securing Land-in-Lieu Contracts can be obtained. As a result,
no title insurance is obtained in respect of such Contracts.
The Prospectus Supplement relating to each Series of Certificates will
provide information as of the Cut-off Date for such Series with respect to,
among other things, (i) the number, the aggregate principal balance, and the
range of outstanding principal balances of the Contracts comprising the related
Contract Pool; (ii) the weighted average of the Contract Rates ("Weighted
Average Contract Rate") of the Contracts and the distribution of Contract Rates;
(iii) the weighted average original and remaining terms to maturity of the
Contracts and the distribution of remaining terms to maturity; (iv) the average
outstanding principal balance of the Contracts; (v) the geographical
distribution of the related Manufactured Homes at origination; (vi) the years of
origination of the Contracts; (vii) the distribution of original principal
balances of the Contracts; (viii) the percentage amount of Contracts secured by
new or used Manufactured Homes; (ix) the range of and weighted average
loan-to-value ratios at origination; and (x) the month and year in which the
final scheduled payment date for the Contract with the latest maturity is
scheduled to occur. If a Contract Pool contains Step-Up Rate Contracts, the
related Prospectus Supplement will specify the percentage of the Contract Pool
comprised of such Contracts, the period during which the Contract Rates for such
Contracts will be stepped up, the range of increases in such Contract Rates and
the range of increases in the Scheduled Payments for such Contracts. If a
Contract Pool contains variable rate Contracts, the related Prospectus
Supplement will contain a description of the basis on which such rates are
determined, including any maximum or minimum rates and the frequency with which
any such rate adjusts. The Prospectus Supplement relating to a Series of
Certificates also will contain certain information about Contracts in the
related Trust Fund that are Land Home Contracts, Land-in-Lieu Contracts or
Contracts that are partially guaranteed by the Veterans Administration or
partially insured by the Federal Housing Administration. In addition, to the
extent Bank of America's or BankAmerica Housing Services' management believes
such information to be material, any Prospectus Supplement may also include
additional information concerning the related Contract Pool that is stored in
BankAmerica Housing Services' electronic data processing system.
See "The Sellers" herein for a description of certain origination and
underwriting practices of BankAmerica Housing Services with respect to
manufactured housing contracts that have been originated by BankAmerica Housing
Services or purchased by BankAmerica Housing Services or SPFSC on an individual
basis. To the extent any Contracts in a Contract Pool were purchased by one or
more of the Sellers from one or more Bulk Sellers, the applicable Prospectus
Supplement will contain a description of certain practices observed by such
Seller or the Sellers, as the case may be, in connection with any such purchase.
THE SELLERS
BANKAMERICA HOUSING SERVICES, AN UNINCORPORATED DIVISION OF BANK OF AMERICA, FSB
BankAmerica Housing Services is an unincorporated division of Bank of
America, FSB ("BAFSB"); BankAmerica Housing Services is not a separate legal
entity from BAFSB, and all references in this Prospectus and any Prospectus
Supplement to BankAmerica Housing Services (unless otherwise specified herein)
are intended to reflect its status as a division of, and not a corporate entity
separate from, BAFSB. In the fourth quarter of 1992, BankAmerica Housing
Services began purchasing and originating manufactured housing installment
contracts through the regional offices in the United States of its affiliate,
Security Pacific Housing Services, Inc. ("SPHSI"). Prior to that time, SPHSI
conducted the business of purchasing, originating, servicing and selling
manufactured housing contracts. SPHSI discontinued the conduct of that business
in July 1993, transferring to BankAmerica Housing Services the regional office
structure, systems and employees relating to that business. The applicable
Prospectus Supplement will contain a description of
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SPHSI's loan origination and underwriting practices for any Contract contained
in the related Contract Pool that was originated or purchased by SPHSI on an
individual basis in the ordinary course of its business. BankAmerica Housing
Services' principal office is located at 10089 Willow Creek Road, San Diego,
California 92131-2447 (telephone 619-549-4700).
BANK OF AMERICA, FSB
BAFSB is a federal savings bank and wholly owned subsidiary of BankAmerica
Corporation. As of December 31, 1995, BAFSB and its consolidated subsidiaries
accounted for approximately 3% of the consolidated total assets of BankAmerica
Corporation and constituted BankAmerica Corporation's sixth largest bank
subsidiary. As of December 31, 1995, and based on the Thrift Financial Report of
BAFSB at such date, BAFSB and its consolidated subsidiaries had total deposits
of $1.6 billion, total assets of $7.4 billion and capital and surplus of $828
million. BAFSB's headquarters are located in Portland, Oregon, and its
administrative offices are located at 555 California Street, San Francisco,
California 94104 (telephone 415-622-2220).
BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION
Bank of America, a wholly-owned subsidiary of BankAmerica Corporation, is a
national banking association. As of December 31, 1995, Bank of America and its
consolidated subsidiaries accounted for approximately 70% of the consolidated
total assets of the BankAmerica Corporation and constituted BankAmerica
Corporation's largest bank subsidiary. As of December 31, 1995, and based on the
Consolidated Report of Condition of Bank of America at such date, Bank of
America and its consolidated subsidiaries had total deposits of $119.2 billion
(including deposits from BankAmerica Corporation and other subsidiaries of
BankAmerica Corporation of $2.0 billion), total assets of $163.4 billion and
capital and surplus of $11.7 billion. Bank of America's headquarters are located
at 555 California Street, San Francisco, California 94104 (telephone
415-622-3530).
Currently, Bank of America originates and purchases manufactured housing
contracts but does not purchase on an individual basis any of the manufactured
housing contracts originated or purchased by BankAmerica Housing Services. Bank
of America expects that any Contracts it conveys to a Trust Fund will have been
originated or purchased by BankAmerica Housing Services on an individual basis,
transferred by BankAmerica Housing Services to SPFSC (as further described under
"-- Loan Originations." below), and purchased by Bank of America from SPFSC
immediately prior to Bank of America's conveyance of such Contracts to a Trust
Fund. If any Contracts that Bank of America conveys to a Trust Fund are not
transferred between BankAmerica Housing Services, SPFSC and Bank of America in
the foregoing manner, the related Prospectus Supplement will describe the
conveyances for such Contracts from such Contracts' origination to their
conveyance to the related Trust Fund.
SECURITY PACIFIC FINANCIAL SERVICES OF CALIFORNIA, INC.
SPFSC is a subsidiary of Bank of America and an affiliate of BAFSB. In the
second quarter of 1994, SPFSC began purchasing certain contracts on an
individual basis from BankAmerica Housing Services. SPFSC's headquarters are
located in San Diego, California (telephone 619-578-6150).
LOAN ORIGINATIONS
BankAmerica Housing Services purchases and originates manufactured housing
contracts on an individual basis through 38 regional offices throughout the
United States, serving 48 states. Through its regional offices, BankAmerica
Housing Services arranges to purchase manufactured housing contracts originated
by manufactured housing dealers located throughout the United States. Generally,
these purchases result from BankAmerica Housing Services' regional office
personnel contacting dealers located in their regions and explaining BankAmerica
Housing Services' available financing plans, terms, prevailing rates and credit
and financing policies. If a dealer wishes to make such financing available to
its customers, the dealer must apply for dealer approval. Upon satisfactory
results of BankAmerica Housing Services' investigation of the dealer's
creditworthiness and general business reputation, BankAmerica Housing Services
and the dealer will enter into a dealer agreement. BankAmerica Housing Services
also originates manufactured housing contracts directly with customers.
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Under current laws and regulations applicable to federal savings banks such
as BAFSB, a federal savings bank cannot maintain in its portfolio any
manufactured housing contract that has a term to maturity of more than twenty
years or any manufactured housing contract with respect to which the financed
amount is greater than 90% of the value of the manufactured home. Manufactured
housing contracts that cannot be maintained in the portfolio of BankAmerica
Housing Services for these reasons are currently acquired by SPFSC on an
individual basis at or about the time such contracts are originated or purchased
by BankAmerica Housing Services. Any such contracts that constitute Contracts
for a Contract Pool will be purchased by Bank of America from SPFSC immediately
prior to Bank of America's conveyance of such Contracts to the related Trust
Fund. The foregoing circumstances may change if the relevant laws or regulations
are modified to permit the investment by federal savings banks in contracts
having terms to maturity of more than twenty years or with respect to which the
financed amount is greater than 90% of the value of the related manufactured
homes. The documents of title in respect of a Contract sold by BankAmerica
Housing Services to SPFSC, then by SPFSC to Bank of America and then by Bank of
America to any Trust Fund will show BankAmerica Housing Services as the
lienholder. See "Risk Factors -- Security Interests in the Manufactured Homes"
and "Certain Legal Aspects of the Contracts -- Security Interests in the
Manufactured Homes" herein. If any Contracts having terms to maturity of more
than twenty years or with respect to which the financed amount is greater than
90% of the value of the related manufactured homes are not transferred between
BankAmerica Housing Services, SPFSC and Bank of America in the foregoing manner
(or if any Contracts conveyed by Bank of America to a Trust Fund were not
originated or purchased on an individual basis by BankAmerica Housing Services),
the related Prospectus Supplement will describe the conveyances for such
Contracts from such Contracts' origination to their conveyance to the related
Trust Fund.
In addition to purchasing and originating manufactured housing contracts on
an individual basis, BankAmerica Housing Services makes bulk purchases of
manufactured housing contracts. These bulk purchases may be from the portfolios
of other lenders or finance companies (including affiliates of BankAmerica
Housing Services), the portfolios of governmental agencies or instrumentalities
or the portfolios of other entities that purchase and hold manufactured housing
contracts. Moreover, BankAmerica Housing Services, on behalf of other owners
(including SPFSC), services manufactured housing contracts that were not
purchased or originated by BankAmerica Housing Services. Currently, the
servicing of all such contracts is, and BankAmerica Housing Services' management
currently anticipates that servicing of all such contracts will continue to be,
performed through BankAmerica Housing Services' manufactured housing regional
office system. However, BankAmerica Housing Services can provide no assurance
that this will continue to be the case.
BankAmerica Housing Services' general practices with regard to the
origination of contracts and the purchase of contracts from manufactured housing
dealers are described below under "-- Underwriting Practices." See "--
Servicing" below for a description of certain of BankAmerica Housing Services'
servicing practices.
UNDERWRITING PRACTICES
With respect to each retail manufactured housing contract that is purchased
from a dealer, BankAmerica Housing Services' general practice is to have the
dealer submit the customer's credit application, manufacturer's invoice (if the
contract is for a new home) and certain other information relating to the
contract to the applicable regional office of BankAmerica Housing Services.
Personnel at the regional office analyze the creditworthiness of the customer
and certain other aspects of the proposed transaction. If the creditworthiness
of the customer and other aspects of the transaction are approved by the
regional office, the customer and the dealer execute a contract on a form
provided or approved in advance by BankAmerica Housing Services. After the
manufactured home financed under such contract is delivered and set up by the
dealer, and the customer has moved in, BankAmerica purchases the contract from
the dealer.
Because manufactured homes generally depreciate in value, BankAmerica
Housing Services' management believes that the creditworthiness of a potential
obligor should be the most important criterion in determining whether to approve
the purchase or origination of a contract. As a result, BankAmerica Housing
Services' underwriting guidelines generally require, and have required, regional
office personnel to
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examine each applicant's credit history, residence history, employment history
and debt-to-income ratio. There is no minimum requirement for any of these
criteria, although BankAmerica Housing Services has developed certain guidelines
for employment history and debt-to-income ratios. In the case of employment
history, BankAmerica Housing Services generally requires its regional office
personnel to consider whether the applicant has worked continuously for the same
employer for at least 24 months and, if not, whether the applicant has worked in
the same occupational field for at least 24 months. The recommended debt-to-
income ratio for a particular credit application depends on the credit score
recommendation (described below) generated for that application. In general, the
maximum debt-to-income ratio for each application that is either recommended for
approval or approved by the credit scoring system ranges from 70 percent to 53
percent, based on BankAmerica Housing Services' estimate of the applicant's
after-tax income. Although BankAmerica Housing Services has guidelines for some
of these criteria, BankAmerica Housing Services management does not believe that
an applicant's inability to satisfy some of these guidelines warrants denial of
credit in all cases. For example, if an applicant fails to meet a guideline by a
certain margin for one of the criteria mentioned above, the applicant generally
must exceed the threshold for one or more other criteria by a compensating
margin for such applicant's credit application to be approved. In addition, in
special cases, credit applications are approved even if certain of the criteria
are not met. For these reasons, BankAmerica Housing Services' management
believes that the ultimate decision whether to approve or reject a credit
application should be made by regional office personnel. To assist personnel in
evaluating credit applications, BankAmerica Housing Services began using a
Fair-Isaacs credit scoring system in January 1995. The Fair-Isaacs credit
scoring system generates a recommendation to approve or deny a credit
application based on certain criteria established by BankAmerica Housing
Services' management. BankAmerica Housing Services' underwriting guidelines
allow the recommendation generated by the Fair-Isaacs credit scoring system to
be used by regional personnel as a guide in determining whether to extend credit
to an applicant, but do not require regional personnel to make credit decisions
based solely on the system's recommendations. BankAmerica Housing Services does
not disclose the criteria used by this credit scoring system either to regional
personnel or to the dealers assisting in the preparation of credit applications.
The criteria is periodically reviewed by management at BankAmerica Housing
Services' headquarters, and modified as necessary.
It is the policy of BankAmerica Housing Services that one authorized person
provide written approval of credit applications for amounts up to or equal to
certain limits and that two authorized persons provide written approval of
credit applications for amounts over those limits. The credit limits established
by BankAmerica Housing Services vary with each regional office. In addition,
each person authorized to make these credit decisions has to be either a
regional manager or another regional office employee to whom the authority to
approve credit applications has been delegated. Any such delegated authority may
be limited in that the person to whom such authority is delegated may not be
authorized to approve credit applications for contracts with initial principal
amounts above certain specified levels. The qualifications of all regional
office personnel authorized to approve or reject credit applications are
reviewed and approved by BankAmerica Housing Services' management. Generally,
both the dealer service manager and the credit manager in each regional office
(in addition to the regional manager) have authority to approve credit
applications. However, each regional office may at various times have
additional, or in some cases fewer, personnel authorized to approve or reject
credit applications. BankAmerica Housing Services has no set qualifications for
regional managers or for other employees to whom authority to approve credit
applications may be delegated; rather, such authority is given commensurate with
such manager's or employee's experience.
It is and has been the policy of BankAmerica Housing Services that each
credit application be approved or rejected within one to seven days after
receipt. Thus, there is less time for credit investigation than is the case, for
example, with loans for site-built homes. Although BankAmerica Housing Services'
management believes that the seven day period for approval or rejection of each
credit application is consistent with industry practice, no assurance can be
given that any credit application that was approved in one to seven days would
have been approved if a longer period had been provided for credit
investigation.
The credit review and approval practices of each regional office are subject
to internal reviews and audits (which are performed in certain instances by an
affiliate of BankAmerica Housing Services) that,
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through sampling, examine the nature of the verification of credit histories,
residence histories, employment histories and debt-to-income ratios of the
applicants and evaluate the credit risks associated with the contracts purchased
through such regional offices by rating the obligors on such contracts according
to their credit histories, employment histories and debt-to-income ratios.
Selection of underwriting files for review is generally made by the personnel
performing the examination, without prior knowledge on the part of regional
office personnel of the files to be selected for review. However, BankAmerica
Housing Services has no requirement that any specific random selection
procedures be followed and no assurance can be given that the files reviewed in
any examination process are representative of the contract originations in the
related regional office. In addition, no statistical analysis is performed on
the results of any such examination of underwriting files.
Conventional manufactured housing contracts (that is, contracts that are not
insured or guaranteed by a governmental agency or instrumentality) currently
comprise 100% (by initial principal balance) of the manufactured housing
contracts purchased or originated by BankAmerica Housing Services. However,
BankAmerica Housing Services can provide no assurance that it will not seek to
originate or purchase manufactured housing contracts, whether on an individual
basis from authorized dealers or in bulk from Bulk Sellers, that are partially
insured or guaranteed by one or more governmental agencies or instrumentalities.
Before May 1994, in the case of conventional manufactured housing contracts
secured by new manufactured homes, it was the policy of BankAmerica Housing
Services to finance no more than the lower of (i) 125% of the manufacturer's
invoice price plus taxes, freight charges, certain dealer installed equipment
and certain set-up costs and (ii) 90% of the buyer's total cost of any new
manufactured home. A buyer's cost includes certain fees, prepaid financing
charges (points), sales tax and certain insurance premiums (including up to five
years of premiums on required hazard insurance). Before May 1994, in the case of
conventional manufactured housing contracts secured by used manufactured homes,
the maximum amount financed by BankAmerica Housing Services was the lower of (i)
90% of retail value, as specified in the National Automobile Dealers Association
("NADA") Mobile/Manufactured Housing Appraisal Guide or the "Kelley Blue Book",
plus taxes and certain set-up costs, and (ii) an amount determined by
BankAmerica Housing Services using a formula based on the square feet, age and
type of manufactured home, plus sales tax, license fee and insurance.
Since May 1994, it has been the policy of BankAmerica Housing Services to
finance, with respect to new and used manufactured homes, no more than 90% or,
in the case of manufactured housing contracts to be held by SPFSC, 95%, of the
total buyer's cost of any manufactured home. Such buyer's cost includes certain
fees, prepaid financing charges (points), sales tax and certain insurance
premiums (including up to five years of premiums on required hazard insurance).
In the case of new manufactured homes, the maximum amount financed cannot exceed
130% of the manufacturer's invoice price plus taxes, freight charges, certain
dealer installed equipment and certain set-up costs. BankAmerica Housing
Services also has had a policy from May 1994 to July 1995 not to finance
manufactured housing contracts for terms exceeding 20 years (or, in the case of
certain contracts held by SPFSC, for terms exceeding 25 years). In July 1995,
that policy was modified to permit financing of manufactured housing contracts
for terms up to 30 years provided that such contracts are sold to SPFSC at the
time of origination or purchase by BankAmerica Housing Services.
BankAmerica Housing Services requires a down payment in the form of cash
and/or the trade-in value of a previously owned manufactured home and/or, in the
case of Land in Lieu Contracts, an estimated value of equity in real property
pledged as an additional collateral. For previously owned homes, the trade-in
allowance accepted by the dealer must be consistent with the value of such home
determined by BankAmerica Housing Services in light of current market
conditions. The value of real property pledged as additional collateral is
estimated by regional personnel or appraisers who are familiar with the area in
which the property is located.
Underwriting policies for the origination or purchase on an individual basis
of manufactured housing contracts are established by BankAmerica Housing
Services' management at its headquarters in San Diego and are applicable to all
regional offices in BankAmerica Housing Services' manufactured housing regional
office system.
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The volume of manufactured housing contracts originated by SPHSI,
BankAmerica Housing Services or purchased by SPHSI or BankAmerica Housing
Services from dealers on an individual basis for the periods indicated below and
certain other information at the end of such periods are as follows:
CONTRACTS ORIGINATED OR PURCHASED ON AN INDIVIDUAL BASIS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------------------------
1991 1992 1993 1994 1995
---------- ---------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Principal Balance of Contracts
Purchased (1)(2)................................ $ 605,861 $ 758,757 $ 873,227 $ 1,248,346 $ 2,586,896
Number of Contracts Purchased (1)................ 27,612 32,752 35,645 46,865 87,407
Average Contract Size (2)........................ $21.9 $23.2 $24.5 $26.6 $29.6
Weighted Average Contract Rate (2)............... 13.00% 11.55% 10.03% 10.68% 10.04%
Number of Regional Offices (3)................... 20 23 26 35 38
</TABLE>
- ------------------------
(1) Does not include any portfolios acquired in bulk from third parties.
Includes only contracts originated by SPHSI or BankAmerica Housing Services
or purchased from dealers.
(2) Based on principal balance or Contract Rate, as applicable, at the time of
origination or purchase in the specified period.
(3) Includes regional offices in the United States originating or purchasing
manufactured housing contracts as of the end of the time period.
SERVICING
BankAmerica Housing Services, through its manufactured housing regional
office system, services all of the manufactured housing contracts that it
purchases or originates, whether on an individual basis or in bulk. Generally,
whenever any contracts are sold, BankAmerica Housing Services will retain
servicing responsibilities with respect to such contracts. In addition,
BankAmerica Housing Services has made arrangements, and is actively seeking
further arrangements, pursuant to which it services, or would service,
manufactured housing contracts owned by other entities. Such contracts would not
be purchased by BankAmerica Housing Services. Generally, such servicing
responsibilities are, and would be, carried out through BankAmerica Housing
Services' manufactured housing regional office system. BankAmerica Housing
Services also services contracts purchased on an individual basis or in bulk by
SPHSI or SPFSC, as well as those previously serviced (but not owned) by SPHSI.
Servicing responsibilities include collecting principal and interest payments,
taxes, insurance premiums and other payments from obligors and, when such
contracts are not owned by BankAmerica Housing Services, remitting principal and
interest payments to the owners thereof, to the extent such owners are entitled
thereto. Collection procedures include repossession and resale of manufactured
homes securing defaulted contracts and, if deemed advisable by BankAmerica
Housing Services, entering into workout arrangements with obligors under certain
defaulted contracts. Although decisions as to whether to repossess any
manufactured home are made on an individual basis, BankAmerica Housing Services'
general policy is to institute repossession procedures promptly after regional
office personnel determine that it is unlikely that a defaulted contract will be
brought current, and thereafter to diligently pursue the resale of such
manufactured homes. See "-- Delinquency and Loan Loss/Repossession Experience"
below and "The Seller(s)" in the Prospectus Supplement for any Series of
Certificates offered hereby for certain historical statistical data relating to
the delinquency and repossession experience of the contracts serviced through
BankAmerica Housing Services' manufactured housing regional office system.
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The following table shows the size of the portfolio of manufactured housing
contracts serviced (including contracts already in repossession) by SPHSI and
now BankAmerica Housing Services through the manufactured housing regional
office system as of the dates indicated:
SIZE OF SERVICED PORTFOLIO
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
AT DECEMBER 31,
--------------------------------------------------------------------
1991 1992 1993 1994 1995
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Unpaid Principal Balance of Contracts Being
Serviced.................................. $ 3,480,706 $ 4,028,114 $ 4,337,902 $ 4,877,858 $ 6,739,285
Average Unpaid Principal Balance........... $18.6 $18.6 $19.0 $19.8 $22.2
Number of Contracts Being Serviced......... 187,636 216,714 228,452 246,572 303,739
</TABLE>
DELINQUENCY AND LOAN LOSS/REPOSSESSION EXPERIENCE
The delinquency, repossession and loan loss experience shown in the
following tables for the periods referenced therein is for illustrative purposes
only, and there is no assurance that the delinquency, repossession or loan loss
experience of any Contracts sold to a Trust Fund will be similar to that set
forth below. Differences between the related Contract Pool and the serviced
portfolio as a whole as to interest rates, borrower characteristics and location
and type of collateral may result in significant differences in performance as
to delinquency, repossession and loan loss experience.
The following table sets forth the delinquency experience since 1991 of
manufactured housing contracts serviced through SPHSI's and now BankAmerica
Housing Services' manufactured housing regional office system (other than
contracts already in repossession as of the dates indicated):
DELINQUENCY EXPERIENCE
<TABLE>
<CAPTION>
AT DECEMBER 31,
-----------------------------------------------------
1991 1992 1993 1994 1995
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Number of Contracts Outstanding (1)........................ 186,376 215,544 227,411 245,432 302,455
Number of Contracts Delinquent (2)
30-59 days............................................... 2,460 2,317 1,992 2,599 4,408
60-89 days............................................... 607 540 469 633 974
90 days or more.......................................... 758 640 641 739 1,179
--------- --------- --------- --------- ---------
Total Contracts Delinquent................................. 3,825 3,497 3,102 3,971 6,561
Delinquencies as a Percentage of Contracts
Outstanding (3)........................................... 2.05% 1.62% 1.36% 1.62% 2.17%
</TABLE>
- ------------------------
(1) Excludes contracts already in repossession.
(2) Based on number of days payments are contractually past due (assuming 30-day
months). Consequently, a payment due on the first day of a month is not 30
days delinquent until the first day of the following month. Excludes
contracts already in repossession.
(3) By number of contracts, as of period end.
25
<PAGE>
The following table sets forth the loan loss/repossession experience of
manufactured housing contracts serviced through SPHSI's and now BankAmerica
Housing Services' manufactured housing regional office system (including
contracts already in repossession) as of the dates indicated:
LOAN LOSS/REPOSSESSION EXPERIENCE
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------------------------------
1991 1992 1993 1994 1995
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Number of Contracts Serviced (1)........... 187,636 216,714 228,452 246,572 303,739
Principal Balance of Contracts Being
Serviced (1).............................. $ 3,480,706 $ 4,028,114 $ 4,337,902 $ 4,877,858 $ 6,739,285
Average Principal Recovery Upon Liquidation
(2)....................................... 48.64% 47.25% 45.61% 47.61% 50.92%
Contract Liquidations (3).................. 3.02% 2.93% 2.51% 2.19% 2.04%
Net Losses (4):
Dollars.................................. $ 62,435 $ 75,435 $ 70,510 $ 63,601 $ 69,864
Percentage (5)........................... 1.79% 1.87% 1.63% 1.30% 1.04%
Contracts in Repossession.................. 1,260 1,170 1,041 1,140 1,284
</TABLE>
- ------------------------
(1) As of period end. Includes contracts already in repossession.
(2) As a percentage of the outstanding principal balance of contracts that were
liquidated during the applicable period, based on the gross amounts
recovered upon liquidation less any liquidation proceeds applied to unpaid
interest accrued through the date of liquidation and after the payment of
repossession and other liquidation expenses.
(3) Number of contracts liquidated during the period as a percentage of the
total number of contracts being serviced as of period end.
(4) The calculation of net loss includes unpaid interest accrued through the
date of liquidation and all repossession and other liquidation expenses.
(5) The aggregate net loss amount as a percentage of the principal balance of
contracts being serviced as of period end.
BANKAMERICA HOUSING SERVICES' MANAGEMENT'S DISCUSSION AND ANALYSIS OF
DELINQUENCY, REPOSSESSION AND LOAN LOSS EXPERIENCE
The delinquency, repossession and loan loss experience exhibited by the
foregoing tables for the periods referenced therein are for illustrative
purposes only and there is no assurance that the delinquency, repossession or
loan loss experience of any Contracts sold to a Trust Fund will be similar to
that set forth above. Management has not observed any material economic
development in the general business environment of the country or in local areas
where BankAmerica Housing Services' manufactured housing contracts are
originated which have favorably affected portfolio performance in relation to
delinquencies, repossessions and loan losses during this period. Portfolio
performance in these respects has been somewhat worse in Southern California
than in other geographical areas. As of December 31, 1995, contracts related to
manufactured homes located in Southern California represent 1.95% of BankAmerica
Housing Services' loan servicing portfolio based on the aggregate principal
balance of the contracts being serviced. In Southern California, the
delinquencies as a percentage of contracts outstanding were 2.15% and 2.14%, as
of December 31, 1994 and December 31, 1995, respectively, as compared to 1.62%
and 2.17% for the portfolio as a whole for these periods. Losses on defaulted
contracts as a percentage of the aggregate principal balance of contracts being
serviced in Southern California for these periods were 11.60% and 13.64%,
respectively, as compared with 1.30% and 1.04% for the portfolio as a whole.
BankAmerica Housing Services' management believes that these differences reflect
the adverse prevailing economic conditions in Southern California during these
periods, including job losses and declines in real estate values. They also may
in part result from different minimum loan underwriting criteria used in
underwriting loans in California prior to July 1991. Prior to that date, SPHSI
used more liberal loan underwriting criteria in California in
26
<PAGE>
response to the underwriting practices of competing lenders. Although these
standards were used throughout California, only the portion of the portfolio in
Southern California has suffered materially different delinquency and loss
experience than the rest of the country. The differing underwriting practices
for California were discontinued in July 1991. Presently, BankAmerica Housing
Services is not actively originating contracts in Southern California. In 1993,
1994 and 1995, loan originations in Southern California were less than 3% of
total originations, based on the number of contracts.
No assurance can be given that local or national economic conditions may not
in the future adversely affect portfolio performance in these respects.
PREPAYMENT AND YIELD CONSIDERATIONS
PREPAYMENT CONSIDERATIONS
Unless otherwise specified in the related Prospectus Supplement, the
Contracts in any Contract Pool may be prepaid in full or in part at any time.
The prepayment experience of the Contracts (including prepayments due to
liquidations of defaulted Contracts) will affect the average life and the
maturity of the related Certificates. BankAmerica Housing Services does not
maintain statistics with respect to the rate of prepayment of manufactured
housing contracts in its servicing portfolio, except for certain pools of
manufactured housing contracts sold by SPHSI, BankAmerica Housing Services'
business predecessor, and certain pools of manufactured housing contracts sold
by BankAmerica Housing Services, Bank of America or SPFSC for which at least
eighteen months of prepayment information is available. As to such pools, the
Prospectus Supplement for any Series of Certificates will contain information
concerning the historical rates of prepayment on manufactured housing contracts
in such pools through a date as to which such information is available as of the
date of such Prospectus Supplement. For example, a Contract Pool might include
Contracts with Contract Rates that are generally higher or lower, in absolute
terms or in comparison to prevailing rates, than the contract rates of the
contracts from which are derived certain historical statistical data set forth
in the Prospectus or Prospectus Supplement. As a result, the prepayment
performance of the Contracts contained in that Contract Pool might be higher or
lower than the prepayment performance of the contracts reflected in the
historical data. In addition, Housing Services' management is aware of limited
publicly available information relating to historical rates of prepayment on
manufactured housing contracts. However, BankAmerica Housing Services'
management believes that neither the prepayment experience of other pools of
manufactured housing contracts nor the historical rates of prepayment for any
other manufactured housing contracts will necessarily be indicative of the rate
of prepayment that may be expected to be exhibited by the Contracts in any other
Contract Pool. Nevertheless, BankAmerica Housing Services' management
anticipates that a number of Contracts will be prepaid in full in each year
during which any related Certificates are outstanding. The amount of prepayments
on such Contracts (including prepayments due to liquidations of defaulted
Contracts) during any particular year may be influenced by a variety of
economic, geographic, social and other factors, including repossessions, aging,
seasonality, interest rates and the rate at which manufactured homeowners sell
their manufactured homes. Other factors affecting prepayments on such Contracts
include changes in Obligors' housing needs, job transfers, unemployment and
Obligors' net equity in manufactured homes. Because of the depreciating nature
of manufactured housing, which limits the possibilities for refinancing, and
because the terms of manufactured housing contracts are generally shorter than
the terms for mortgage loans secured by site-built homes (and changes in
interest rates have a correspondingly smaller effect on the monthly payments on
manufactured housing contracts as opposed to mortgage loans secured by
site-built homes), changes in interest rates may play a smaller role in
prepayment behavior of manufactured housing contracts than they do in the
prepayment behavior of loans secured by mortgages on site-built homes.
Conversely, local economic conditions and certain of the other factors mentioned
above are likely to play a larger role in the prepayment behavior of
manufactured housing contracts than they do in the prepayment behavior of loans
secured by mortgages on site-built homes.
Repurchases of Contracts on account of certain breaches of representations
and warranties as described in the applicable Prospectus Supplement also will
have the effect of prepaying such Contracts and therefore will affect the
average life of and yield on the Certificates. See "Description of the
Certificates -- Conveyance of Contracts." In addition, most of the Contracts
contain provisions that prohibit the related owner
27
<PAGE>
from selling the Manufactured Home without the prior consent of the holder of
the related Contract. Such provisions are similar to "due-on-sale" clauses and
may not be enforceable in certain states. See "Certain Legal Aspects of the
Contracts -- Transfers of Manufactured Homes; Enforceability of Restrictions on
Transfer" herein. The Servicer's policy is to permit most sales of Manufactured
Homes where the proposed buyer meets the Servicer's then current underwriting
standards and enters into an assumption agreement.
To the extent provided in the related Prospectus Supplement, the Servicer
under each Agreement will have the option to purchase all of the Contracts in
the related Contract Pool, at the price and under the conditions specified in
such Prospectus Supplement, when the aggregate Pool Principal Balance (as
defined in the related Prospectus Supplement) of the Contract Pool has been
reduced to 5% of its initial Pool Principal Balance. The exercise of any such
option will affect the average life of and yield on the related Certificates. To
the extent provided in the related Prospectus Supplement, the Trustee for the
related Trust Fund shall solicit bids for the purchase of the Contracts
remaining in the Trust Fund at a Termination Auction (as defined herein) within
ninety days following the Distribution Date as of which the Pool Principal
Balance for a Contract Pool is less than 10% of such Contract Pool's Cut-off
Date Pool Principal Balance. The sale and consequent termination of the related
Trust Fund pursuant to a Termination Auction will affect the average life and
yield on the related Certificates.
The average life and maturity of the Certificates of any Class will also be
affected by the amount and timing of any Special Principal Distributions to the
holders of such Certificates. In addition, if any Certificate of a Class is
subject to mandatory repurchase, the occurrence of the Repurchase Date (as
hereinafter defined) for such Certificate will have the same effect as the
maturation of such Certificate (with the repurchase price being equivalent to
the amount due at maturity). See "Description of the Certificates --
Distributions on Certificates" and "Description of the Certificates -- Optional
and Mandatory Repurchase of Certificates; Termination Auction" herein. The
Prospectus Supplement relating to any Class that is entitled to Special
Principal Distributions or is subject to mandatory repurchase will contain a
description of the conditions under which such distributions or repurchases will
take place and a description of some of the factors that might affect the rate
of Special Principal Distributions or the timing of any Repurchase Dates.
Information regarding the "Prepayment Model" (to be defined in the related
Prospectus Supplement) or any other rate of assumed prepayment, as applicable,
will be set forth in the Prospectus Supplement applicable to the relevant Class
or Classes of Certificates offered hereby.
YIELD CONSIDERATIONS
To the extent that any credit enhancement or any advancing obligation of the
Servicer described in the related Prospectus Supplement is insufficient to
protect the holders of any Class of Certificates from losses or delinquencies on
the related Contract Pool, the yield to such holders from their investment in
such Certificates will be adversely affected should such losses or delinquencies
occur. In the absence of losses or delinquencies which are not covered by credit
enhancement or advances, respectively, on a Distribution Date, the effective
yield on the Certificates will depend upon, among other things, the price at
which the Certificates are purchased, the rate at which the Contracts for the
related Trust Fund liquidate or are prepaid and the amount and timing of any
Special Principal Distributions. If a purchaser of Certificates purchases them
at a discount (premium) and calculates its anticipated yield to maturity based
on an assumed rate of distributions of principal on such Certificates that is
faster (slower) than the rate actually realized, such purchaser's actual yield
to maturity will be lower than the yield so calculated by such purchaser. Losses
which are covered by credit enhancement, but on later than anticipated
Distribution Dates will have the same effect on anticipated yield as prepayments
that are made later than anticipated, as just described, depending on whether
the Certificates were purchased at a discount or premium.
Unless otherwise specified in the applicable Prospectus Supplement, the
yield to holders of any Class of Certificates will be below that otherwise
produced by the applicable Pass-Through Rate because, while, in the absence of
losses or delinquencies, one month's interest on the related Contracts will be
collected during each Collection Period, the portion of such interest to which
the holders of such Certificates are entitled will not be distributed until the
first Distribution Date after such Collection Period.
28
<PAGE>
If a Certificate is subject to mandatory repurchase, the yield to the
Repurchase Date will be affected by, among other things, the applicable
repurchase price, the ability of any Liquidity Facility Provider (as hereinafter
defined) to distribute the repurchase price and the date, if any, on which the
Repurchase Date occurs. If, in connection with a mandatory repurchase, the
repurchase price for a Certificate is equal to its Percentage Interest (as
hereinafter defined) of the then current Certificate Balance, and the
Certificate is purchased at a discount, and the purchaser calculates its
anticipated yield to the Repurchase Date based on an assumed Repurchase Date
that is earlier than the actual Repurchase Date, then such purchaser's actual
yield to maturity will be lower than it would have been if a repurchase occurred
on the assumed date.
The payment features of the Contracts comprising any Contract Pool (as
described above under "The Contract Pools") may, under certain extraordinary
circumstances, cause the amounts collected thereon during particular Collection
Periods to be insufficient to fund all distributions of principal and interest
to the holders of some or all of the Certificates of the related Series, even in
the absence of losses or delinquencies. Such circumstances could occur if a
sufficiently large number of partial or full prepayments, as a percentage of the
then outstanding Pool Principal Balance of the related Contract Pool, are
received on Contracts in a particular Collection Period, if such prepayments are
made in advance of such Contracts' respective Due Dates during such Collection
Period. In such case, a non-default collection shortfall could occur because
interest that actually accrues on such Contracts is less than interest that
would have accrued if the payments were paid on the Contracts' respective Due
Dates. A non-default collection shortfall could adversely affect the yield to
holders of any Class of Certificates to the extent such shortfalls are not
covered by credit enhancement or advances.
DESCRIPTION OF THE CERTIFICATES
Each Series of Certificates will be issued pursuant to a separate Agreement.
The following summaries describe certain provisions expected to be common to
each Agreement and the related Certificates, but do not purport to be complete
and are subject to, and are qualified in their entirety by reference to, the
provisions of the related Agreement and the description set forth in the related
Prospectus Supplement. Section references contained herein refer to sections of
the form of Agreement filed as an exhibit to the Registration Statement. The
Prospectus Supplement for each Series will describe any material provisions of
the Agreement relating to such Series which differ materially from the form of
the Agreement filed as an exhibit to the Registration Statement. The material
differences will be described in the related Prospectus Supplement. Capitalized
terms used and not otherwise defined herein shall have the meanings assigned to
them in the form of Agreement filed as an exhibit to the Registration Statement.
GENERAL
The Certificates may be issued in one or more Classes. If the Certificates
of a Series are issued in more than one Class, the Certificates of all or less
than all of such Classes may be sold pursuant to this Prospectus, and there may
be separate Prospectus Supplements relating to one or more of such Classes so
sold. Any reference herein to the Prospectus Supplement relating to a Series
comprised of more than one Class should be understood as a reference to each of
the Prospectus Supplements relating to the Classes sold hereunder. Any reference
herein to the Certificates of a Class should be understood to refer to the
Certificates of a Class within a Series, the Certificates of a subclass within a
Series or all of the Certificates of a single-Class Series, as the context may
require.
The Certificates will be issued in the denominations specified in the
related Prospectus Supplement. (Section 6.02.) The "Percentage Interest" of a
Certificate is the percentage obtained from dividing the original denomination
of such Certificate by the initial principal balance of all of the Certificates
of such Class. Certificates, if issued in registered form ("Definitive
Certificates") to Certificate Owners or nominees thereof, will be transferable
and exchangeable at the corporate trust office of the Trustee or, if it so
elects, at the office of an agent in New York, New York. (Sections 6.02 and
9.11.) No service charge will be made for any registration of exchange or
transfer, but the Trustee may require payment of a sum sufficient to cover any
tax or other governmental charge. (Section 6.02.)
29
<PAGE>
The Certificates of each Series will evidence an interest, as specified in
the related Prospectus Supplement, in one or more Trust Funds. Each Trust Fund
will include (i) a Contract Pool, including certain rights to receive payments
on the Contracts comprising such Contract Pool on and after the Cut-off Date,
(ii) the amounts held from time to time in the "Certificate Account" (as
described in the applicable Prospectus Supplement under "-- Payment on
Contracts; Certificate Account") maintained by the Trustee pursuant to the
Agreement, (iii) any property which initially secured a Contract and which is
acquired in the process of realizing thereon, (iv) the obligations of Bank of
America, BankAmerica Housing Services or both of them, as applicable, under
certain conditions, to repurchase Contracts sold by it with respect to which
certain representations and warranties have been breached and not cured, (v)
certain contractual servicing obligations of the Servicer, (iv) the proceeds of
all insurance policies described herein and (vii) if applicable, one or more
forms of credit support.
Bank of America, BankAmerica Housing Services or both of them, as
applicable, will convey the Contracts to the Trustee. See "The Contract Pools"
herein and "-- Conveyance of Contracts" below. BankAmerica Housing Services, as
Servicer, will service the Contracts pursuant to the Agreement. The Contract
documents will be held for the benefit of the Trustee by the Servicer.
CONVEYANCE OF CONTRACTS
On the date of initial issuance of the Certificates of a Series, BankAmerica
Housing Services, Bank of America, or both of them will sell to the Trustee,
without recourse, all right, title and interest of BankAmerica Housing Services
or Bank of America, as the case may be, in and to the Contracts sold by it, and
all rights under the standard hazard insurance policies on the related
Manufactured Homes. The conveyance of the Contracts to the Trustee will include
a conveyance of all rights to receive Scheduled Payments thereon that were due
on or after the Cut-off Date, even if received prior to the Cut-off Date, as
well as all rights to any payments received on or after the Cut-off Date other
than late receipts of Scheduled Payments that were due prior to the Cut-off
Date. The Contracts will be described on a schedule attached to the Agreement
(the "Contract Schedule"). The Contract Schedule will include the principal
balance of each Contract as of the Cut-off Date, the amount of each Scheduled
Payment due on each Contract as of the Cut-off Date, the Contract Rate on each
Contract (determined as of the Cut-off Date) and the maturity date of each
Contract. Prior to the conveyance of the Contracts to the Trustee, the
BankAmerica Housing Services' operations department will be required to complete
a review of all of the originals of the Contracts, the certificates of title to,
or other evidence of a perfected security interest in, the Manufactured Homes,
any related Mortgages, and any assignments or modifications of the foregoing
(collectively, the "Contract Files") confirming the accuracy of the Contract
Schedule delivered to the Trustee. Any Contract discovered not to agree with
such schedule in a manner that is materially adverse to the interests of the
Certificateholders will be repurchased by Bank of America or BankAmerica Housing
Services, as applicable, or replaced with another Contract, except that if the
discrepancy relates to the principal balance of a Contract (determined as
described above), Bank of America or BankAmerica Housing Services, as
applicable, may, under certain conditions, deposit cash in the Certificate
Account in an amount sufficient to offset such discrepancy. The Trustee will not
review the Contract Files. (Section 2.01.)
The Servicer will hold, as custodian and agent on behalf of the Trustee, the
original Contracts and copies of documents and instruments relating to each
Contract and the security interest in the Manufactured Home relating to each
Contract. In order to give notice of the Trustee's right, title and interest in
and to the Contracts, a UCC-1 financing statement identifying the Trustee as the
secured party and identifying all the Contracts as collateral will be filed in
the appropriate office in the appropriate states. The Contracts will be stamped
or otherwise marked to reflect their assignment to the Trustee. To the extent
that the Contracts do not constitute "chattel paper" within the meaning of the
UCC as in effect in the applicable jurisdictions or to the extent that the
Contracts do constitute chattel paper and a subsequent purchaser is able to take
physical possession of the Contracts without notice of such assignment, the
Trustee's interest in the Contracts could be defeated. See "Certain Legal
Aspects of the Contracts -- Security Interests in the Manufactured Homes"
herein.
30
<PAGE>
Bank of America, BankAmerica Housing Services or both of them, as
applicable, will make certain representations and warranties to the Trustee with
respect to each Contract sold by it. The applicable Prospectus Supplement will
describe the representations and warranties made by Bank of America, BankAmerica
Housing Services or both of them in connection with the Contracts conveyed to
the related Trust Fund, the terms pursuant to which Bank of America or
BankAmerica Housing Services, as the case may be, will be obligated to
repurchase, at the price specified therein, any Contract sold by it if any such
representation and warranty has been breached (unless such breach has been cured
or otherwise is not required to be cured), and the terms pursuant to which Bank
of America or BankAmerica Housing Services may remedy any such breach. (Section
3.05.)
PAYMENTS ON CONTRACTS
The applicable Prospectus Supplement will specify the arrangements pursuant
to which Contract collections are held pending distribution to
Certificateholders. (Section 4.05.) Certain Contract collections will be applied
to pay the Servicer's servicing compensation and to reimburse it for certain
expenses, as set forth in each Prospectus Supplement and as set forth herein
under "-- Servicing Compensation and Payment of Expenses; Certain Matters
Regarding the Servicer" below.
DISTRIBUTIONS ON CERTIFICATES
The Certificates of any Class will entitle the holders thereof to
distributions, on the Distribution Dates specified in the related Prospectus
Supplement, from amounts collected on the underlying Contracts. The Certificates
of a Class may entitle the holders thereof to (a) distributions of both
principal and interest, (b) distributions of principal only, or (c)
distributions of interest only. Such distributions will be made in accordance
with a formula described in the related Prospectus Supplement, and, unless
otherwise specified in such Prospectus Supplement, such distributions will be
applied first to interest, if any, and second to principal, if any. To the
extent specified in the related Prospectus Supplement, the rights of the holders
of the Certificates of one or more Classes of a multiple Class Series to receive
distributions of principal and/or interest from amounts collected on the
Contracts may be subordinate to such rights of the holders of Certificates of
one or more other Classes. See "Credit and Liquidity Enhancement" herein.
A. DISTRIBUTIONS OF PRINCIPAL. If the Certificates of a Class entitle the
holders thereof to distributions of principal, the related Prospectus Supplement
will specify an initial aggregate Certificate Balance for the Certificates of
such Class and a method of computing the amount of principal, if any, to be
distributed to the holders of such Certificates on each Distribution Date.
Unless otherwise specified in the related Prospectus Supplement, principal
distributions for the Certificates of a Class will be computed on the basis of a
formula which, on each Distribution Date, allocates all or a portion of the
Total Regular Principal Amount relating to such Distribution Date to the
Certificates of such Class. The "Total Regular Principal Amount" is the total
amount by which the aggregate outstanding principal balance of the Contracts in
the related Contract Pool is reduced during one or more collection periods prior
to such Distribution Date designated in such Prospectus Supplement (each, a
"Collection Period"). Such reduction may occur as a result of actuarially
predetermined scheduled principal reductions, receipt of principal prepayments,
liquidation of Contracts, repurchases of Contracts under certain conditions,
losses on Contracts, the failure of a third party credit support provider, if
any, to make a required payment, or a combination of any of the foregoing
events. See "The Contract Pools" and "-- Servicing Compensation and Payment of
Expenses; Certain Matters Regarding the Servicer" herein. Distributions with
respect to all or a portion of the Total Regular Principal Amount are sometimes
referred to herein as distributions of "Regular Principal." The Total Regular
Principal Amount with respect to any Contract Pool and any Distribution Date may
be estimated in a manner specified in the related Prospectus Supplement.
If, due to liquidation losses or other circumstances adversely affecting the
collections on the underlying Contract Pool, the Contract collections available
on any Distribution Date to make distributions of Regular Principal to the
holders of the Certificates of a Class are less than the portion of the Total
Regular Principal Amount allocable to such Class, the deficiency may be made up
from (i) the amount ("Excess Interest"), if any, by which the interest collected
on nondefaulted Contracts during the same Collection Period exceeds the interest
distribution due to the holders of the Certificates for the related Series and
the Monthly
31
<PAGE>
Servicing Fee (as defined hereinafter and in the related Prospectus Supplement),
or (ii) funds available from one or more forms of credit support referred to
below, but only to the extent, if any, specified in the applicable Prospectus
Supplement. See "Credit and Liquidity Enhancement" herein. If specified in the
applicable Prospectus Supplement, the Certificate Balance of the Certificates of
a Class will be reduced on each Distribution Date by the full amount of the
portion of the Total Regular Principal Amount allocable to such Class even if,
due to deficient Contract collections, a full distribution thereof is not made.
The applicable distribution formula for each Class of a multiple-Class
Series may allocate the Total Regular Principal Amount among the various Classes
on a pro rata, sequential or other basis, as specified in the related Prospectus
Supplement. If specified in the related Prospectus Supplement, any such formula
may entitle the holders of Certificates of a particular Class to receive on
certain Distribution Dates, distributions of Regular Principal from particular
sources of funds (E.G., one or more of the forms of credit support referred to
below) upon the occurrence of certain losses or delinquencies, even if the
holders of the Certificates of such Class would not have been entitled to
receive principal distributions on such Distribution Dates from amounts
collected on the underlying Contracts in the absence of such losses or
delinquencies.
If specified in the applicable Prospectus Supplement, the Certificates of a
Class may entitle the holders thereof to special principal distributions on
particular Distribution Dates that are unrelated to the Total Regular Principal
Amount for any such Distribution Date ("Special Principal Distributions").
Special Principal Distributions may be made, under the circumstances set forth
in the applicable Prospectus Supplement, from interest collected on the
underlying Contract Pool, from funds available from one or more forms of credit
support or from any other source specified in such Prospectus Supplement. The
Certificates of a Class having an initial Certificate Balance may entitle the
holders thereof to distributions of Regular Principal only, to distributions of
Regular Principal and to Special Principal Distributions or to Special Principal
Distributions only. However, unless otherwise stated in the related Prospectus
Supplement, the Certificates of a Class will not entitle the holders thereof to
aggregate principal distributions in excess of the initial Certificate Balance
for such Class.
B. DISTRIBUTIONS OF INTEREST. The distribution formula for a Class of
Certificates having an initial Certificate Balance may, but need not, also
specify a method of computing the interest, if any, to be distributed on
specified Distribution Dates (which may include all or less than all of the
Distribution Dates) to the holders of the Certificates of such Class. Such
interest may be equal, subject to such adjustments as may be described in the
related Prospectus Supplement, to a specified number of days' interest on the
applicable Certificate Balance (before giving effect to any reduction thereof on
such Distribution Date), calculated at a rate (the "Pass-Through Rate")
specified in the related Prospectus Supplement. The Pass-Through Rate may be
fixed or variable, and, if specified in the related Prospectus Supplement, may
shift from a variable rate to a fixed rate under the conditions specified in
such Prospectus Supplement. Variable Pass-Through Rates may vary from time to
time based upon changes in an index or other measure of certain market rates,
all as more fully described in the related Prospectus Supplement. In that case,
the time period between Pass-Through Rate adjustments (each, a "Rate Period")
and the specific basis on which the Pass-Through Rate for each Rate Period will
be determined (including the particular market rates and measures thereof
relevant for determining the Pass-Through Rate for each Rate Period) may remain
constant or may change from time to time at the election of the Servicer or
otherwise, all as specified in the related Prospectus Supplement. Variable
Pass-Through Rates may also vary from time to time, in the manner specified in
the related Prospectus Supplement, based upon changes in the weighted average of
the Contract Rates of the Contracts in the related Contract Pool or on any other
basis. To the extent set forth in the related Prospectus Supplement, variable
Pass-Through Rates may also have floor rates and/or ceiling rates which may be
fixed or subject to adjustment as set forth in such Prospectus Supplement. In
addition, a variable Pass-Through Rate may be converted to a fixed Pass-Through
Rate at the election of the Sellers or upon the occurrence of certain
conditions. In that event, the related Prospectus Supplement will set forth the
conditions under which the variable Pass-Through Rate may be converted to a
fixed Pass-Through Rate.
Rather than entitling the holders thereof to receive distributions of
interest based upon a Pass-Through Rate, the distribution formula for the
Certificates of a Class may entitle the holders thereof to distributions of
interest on specified Distribution Dates (which may include all or less than all
of the Distribution Dates)
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equal, in the case of any such Distribution Date, to all or a portion (which
portion will be determined as described in the related Prospectus Supplement) of
the interest payable on the related Contracts during one or more Collection
Periods occurring prior to such Distribution Date. Classes of Certificates that
do not entitle the holders thereof to receive distributions of principal may
nevertheless entitle such holders to receive interest distributions calculated
on this basis.
If, due to liquidation losses or other circumstances adversely affecting the
collections on the underlying Contract Pool, the Contract collections available
to make distributions of interest to the holders of the Certificates of a Class
are less than the amount of interest computed as described above, the deficiency
may be made up from other sources, but only to the extent, if any, specified in
the applicable Prospectus Supplement. See "Credit and Liquidity Enhancement"
herein.
Each Prospectus Supplement will contain information relating to the full
amounts of principal and interest required to be distributed to the holders of
the related Class or Classes of Certificates, to the extent there are sufficient
Contract collections available therefor (sometimes referred to herein as "full
distributions"), to the amounts paid or payable on the underlying Contracts.
C. RESIDUAL INTERESTS. If specified in the related Prospectus Supplement, a
Class of Certificates sold hereunder may evidence a residual interest in the
related Trust Fund (the "Residual Interest"). Certificates evidencing a Residual
Interest will not have the features described above. Rather, unless otherwise
specified in such Prospectus Supplement, such Certificates will entitle the
holders thereof to receive distributions from amounts collected on the Contracts
which would not be needed to make distributions to the holders of other
interests in the Trust Fund (or to pay expenses of the Trust Fund) in the
absence of liquidation losses or other events resulting in deficient Contract
collections. In addition, if specified in such Prospectus Supplement, any such
Certificates may also entitle the holders thereof to receive additional
distributions of assets of the related Trust Fund, to the extent any such assets
remain after being applied to make distributions to the holders of other
interests in the Trust Fund (or to pay expenses of the Trust Fund). The
Certificates evidencing a Residual Interest may entitle the holders thereof to
distributions at various times throughout the life of the related Trust Fund or
only upon termination of the Trust Fund, all as more fully set forth in the
related Prospectus Supplement. If an election is made to treat the related Trust
Fund as a REMIC (as hereinafter defined), the holders of a Residual Interest in
such Trust Fund will be subject to federal income taxation with respect to their
ownership of such Residual Interest as described herein under "Certain Federal
Income Tax Consequences -- REMIC Certificates -- D. Taxation of Residual
Certificates."
GLOBAL CERTIFICATES
Unless otherwise specified in the applicable Prospectus Supplement, the
Certificates of a Series, or of one or more Classes within a Series, will be
issuable in the form of one or more global certificates (each, a "Global
Certificate") that are initially registered in the name of Cede & Co. ("Cede"),
as nominee of The Depository Trust Company ("DTC"), on behalf of the beneficial
owners (the "Certificate Owners") of the Certificates. DTC is a limited-purpose
trust company organized under the laws of the State of New York, a member of the
Federal Reserve System, a "clearing corporation" within the meaning of the New
York Uniform Commercial Code, and a "clearing agency" registered pursuant to the
provisions of Section 17A of the Exchange Act. DTC accepts securities for
deposit from its participating organizations ("Participants") and facilitates
the clearance and settlement of securities transactions between Participants in
such securities through electronic book-entry changes in accounts of
Participants, thereby eliminating the need for physical movement of
certificates. Participants include securities brokers and dealers, banks and
trust companies and clearing corporations and may include certain other
organizations. Indirect access to the DTC system is also available to others
such as banks, brokers, dealers and trust companies that clear through or
maintain a custodial relationship with a Participant, either directly or
indirectly ("Indirect Participants").
Certificate Owners who are not Participants but desire to purchase, sell or
otherwise transfer ownership of Certificates may do so only through Participants
(unless and until Definitive Certificates are issued). In addition, Certificate
Owners will receive all distributions of principal of, and interest on, the
Certificates from the Trustee through DTC and Participants. Certificate Owners
will not receive or be entitled to receive certificates representing their
respective interests in the Certificates, except under the limited circumstances
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described below. In addition, if some or all of the Certificates of a Series are
issued in the form of one or more Global Certificates, certain monthly and
annual reports prepared by the Servicer under the related Agreement will be sent
on behalf of the related Trust Fund to Cede and not to the Certificate Owners.
Unless and until Definitive Certificates are issued, it is anticipated that
the only "Certificateholder" of the Certificates will be Cede, as nominee of
DTC. Certificate Owners will not be Certificateholders as that term is used in
the Agreement. Certificate Owners are only permitted to exercise the rights of
Certificateholders indirectly through Participants and DTC.
Unless otherwise specified in the related Prospectus Supplement, while the
Certificates are outstanding (except under the circumstances described below),
under the rules, regulations and procedures creating and affecting DTC and its
operations (the "DTC Rules"), Participants are required to make book-entry
transfers through DTC's facilities with respect to the Certificates, and DTC as
the sole holder of the Certificates is required to receive and transmit
distributions of principal of, and interest on, the Certificates. Unless and
until Definitive Certificates are issued, Certificate Owners who are not
Participants may transfer ownership of Certificates only through Participants by
instructing such Participants to transfer Certificates, by book-entry transfer,
through DTC for the account of the purchasers of such Certificates, which
account is maintained with their respective Participants. Under the DTC Rules
and in accordance with DTC's normal procedures, transfers of ownership of
Certificates will be executed through DTC, and the accounts of the respective
Participants at DTC will be debited and credited.
Definitive Certificates will be issued to Certificate Owners, or their
nominees, rather than to DTC, only if (i) the Servicer advises the Trustee in
writing that DTC is no longer willing or qualified to discharge properly its
responsibilities as nominee and depository with respect to the Certificates and
the Servicer or the Trustee is unable to locate a qualified successor, (ii) the
Sellers, at their option, jointly elect to terminate the book-entry system
through DTC, or (iii) after the occurrence of an Event of Default (See "--
Servicing Compensation and Payment of Expenses; Certain Matters Regarding the
Servicer -- Events of Default" below), Certificate Owners having a majority in
Percentage Interests of each Class of the Certificates advise the Trustee and
DTC through the Participants, in writing, that the continuation of a book-entry
system through DTC (or a successor thereto) to the exclusion of any physical
certificates being issued to Certificate Owners is no longer in the best
interests of Certificate Owners. Upon issuance of Definitive Certificates to
Certificate Owners, such Certificates will be transferable directly (and not
exclusively on a book-entry basis), and registered holders will deal directly
with the Trustee with respect to transfers, notices and distributions.
Except as otherwise specified in the related Prospectus Supplement, unless
and until Definitive Certificates are issued, DTC will take any action permitted
to be taken by a Certificateholder under the Agreement only at the direction of
one or more Participants to whose DTC accounts the Certificates are credited and
will take such action with respect to any Percentage Interests of the
Certificates only at the direction of and on behalf of such Participants with
respect to such Percentage Interests of the Certificates. DTC may take actions,
at the direction of the related Participants, with respect to some Certificates
which conflict with actions taken with respect to other Certificates.
OPTIONAL AND MANDATORY REPURCHASE OF CERTIFICATES; TERMINATION AUCTION
A. OPTIONAL REPURCHASE. Unless otherwise specified in the applicable
Prospectus Supplement, the Servicer for any Trust Fund will have the option to
repurchase, upon giving notice mailed no later than the Distribution Date next
preceding the month of the exercise of such option, all outstanding Contracts
after the first Distribution Date on which the Pool Scheduled Principal Balance
(as defined hereinafter) is less than 5% of the initial Pool Principal Balance
on the Cut-off Date. The price at which the Servicer for such Trust Fund may
repurchase the related Contracts pursuant to (1) above will equal the greater of
(a) the sum of (x) 100% of the Pool Scheduled Principal Balance of each Contract
(other than any Contract as to which the related Manufactured Home has been
acquired and not yet disposed of and whose fair market value is included
pursuant to clause (y) below) as of the final Distribution Date, and (y) the
fair market value of such acquired property (as determined by the Servicer) and
(b) the aggregate fair market value (as determined by the Servicer) of all of
the assets of such Trust Fund, plus, in the case of both clause (a) and (b), an
amount
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sufficient to reimburse Certificateholders for each outstanding Class for any
shortfall in interest due thereto in respect of prior Distribution Dates.
Notwithstanding the foregoing, the Servicer's option shall not be exercisable if
there will not be distributed to the Certificateholders for each outstanding
Class an amount equal to the aggregate Certificate Balance for each outstanding
Class together with any shortfall in interest due to such Certificateholders in
respect of prior Distribution Dates and one month's interest on the aggregate
Certificate Balance for each outstanding Class at the respective Pass-Through
Rates for such Classes together with any shortfall in interest due to such
Certificateholders in respect of prior Distribution Dates (the "Minimum
Termination Amount"). See "Description of the Certificates -- Optional
Termination" in the related Prospectus Supplement. (Section 10.01.)
B. MANDATORY REPURCHASE. Some or all of the Certificates of a Class may be
subject to repurchase by or on behalf of the Sellers at the option of the
holders thereof and/or at the option of the Sellers, but only to the extent, at
the prices, on the dates and under the conditions specified in the related
Prospectus Supplement. In addition, some or all of the Certificates of a Class
may be subject to mandatory repurchase by or on behalf of the Sellers to the
extent, at the prices, on the dates and under the conditions specified in the
related Prospectus Supplement. On the date on which any Certificate is subject
to repurchase (the "Repurchase Date") the holder thereof will cease to be
entitled to any benefit of the Certificate or the related Agreement and will be
entitled only to receive from the Trustee the repurchase price of the
Certificate upon surrender thereof at the office or agency designated by the
Trustee. To the extent specified in the related Prospectus Supplement, the funds
necessary to distribute the repurchase price of any Certificate subject to
mandatory or optional repurchase as described therein will be provided under a
certificate purchase agreement or other Liquidity Facility as described in
"Credit and Liquidity Enhancement" herein.
C. TERMINATION AUCTION. If specified in the applicable Prospectus
Supplement, the Trustee for the related Trust Fund shall solicit bids for the
purchase at an auction (a "Termination Auction") of the Contracts remaining in
the Trust Fund no later than ninety days following a Distribution Date as of
which the Pool Principal Balance for a Contract Pool is less than 10% of such
Contract Pool's Cut-off Date Pool Principal Balance. In the event that
satisfactory bids are received as described in the applicable Agreement, the net
sale proceeds will be distributed to Certificateholders, in the same order of
priority as collections received in respect of the Contracts. If satisfactory
bids are not received, the Trustee shall decline to sell the Contracts and shall
not be under any obligation to solicit any further bids or otherwise negotiate
any further sale of the Contracts. Under the applicable Agreement, the winning
bid must equal or exceed the Minimum Termination Amount. If an election has been
made to treat the related Trust Fund as a REMIC, such sale and consequent
termination of the related Trust Fund must constitute a "qualified liquidation"
of the Trust Fund under Section 860F of the Code, including the requirement that
the qualified liquidation takes place over a period not to exceed 90 days.
(Section 10.01.)
TERMINATION OF THE AGREEMENT
The Agreement will terminate upon the last action required to be taken by
the Trustee on the final Distribution Date following the earlier of (i) the
purchase or sale of all Contracts and all property acquired in respect of any
Contract remaining in the Trust Fund as described above under "-- Optional and
Mandatory Repurchase of Certificates; Termination Auction" or (ii) the final
payment or other liquidation (or any advance with respect thereto) of the last
Contract remaining in the relevant Trust Fund (including the disposition of all
property acquired upon repossession of any Manufactured Home). (Section 10.01.)
In the event of the termination of any Agreement, the holders of
Certificates of any Class of the related Series will be entitled to receive,
upon presentation and surrender of their Certificates at the office or agency
designated by the Trustee, a final distribution in an amount computed as
described in the related Prospectus Supplement.
COLLECTION AND OTHER SERVICING PROCEDURES
Except as otherwise provided in the related Agreement, the Servicer may
rescind, cancel or make material modifications of the terms of a Contract
(including modifying the amounts and Due Dates of Scheduled Payments) in
connection with a default or imminent default thereunder. However, unless
otherwise specified in the related Prospectus Supplement and unless required by
the applicable law or to bring
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Contracts into conformity with the representations and warranties contained in
the Agreement, the Servicer may not rescind, cancel or materially modify any
Contract unless the Servicer obtains an opinion of counsel to the effect that
such action will not have certain adverse federal income tax consequences.
(Section 4.07.)
SERVICING COMPENSATION AND PAYMENT OF EXPENSES; CERTAIN MATTERS REGARDING THE
SERVICER
The monthly servicing fee (the "Monthly Servicing Fee") and any additional
servicing compensation with respect to the Contracts underlying a Series of
Certificates will be specified in the applicable Prospectus Supplement. (Section
1.01.)
The Monthly Servicing Fee provides compensation for customary manufactured
housing contract third-party servicing activities to be performed by the
Servicer for the Trust Fund and for additional administrative services performed
by the Servicer on behalf of the Trust Fund. Customary servicing activities
include collecting and recording payments, communicating with Obligors,
investigating payment delinquencies, providing billing and tax records to
Obligors and maintaining internal records with respect to each Contract.
Administrative services performed by the Servicer on behalf of the Trust Fund
include calculating distributions to Certificateholders and providing related
data processing and reporting services for Certificateholders and on behalf of
the Trustee. Unless otherwise specified in the applicable Prospectus Supplement,
expenses incurred in connection with servicing the Contracts and paid by the
Servicer from its Monthly Servicing Fee include, without limitation, payment of
fees and expenses of accountants, payment of all fees and expenses incurred in
connection with the enforcement of Contracts (except liquidation expenses and
certain other expenses) and payment of expenses incurred in connection with
distributions and reports to Certificateholders. The Servicer will be reimbursed
out of the liquidation proceeds from a defaulted Contract for all reasonable,
out-of-pocket liquidation expenses incurred by it in realizing upon the related
Manufactured Home as well as for advances of taxes and insurance premiums
previously made with respect to any such Contract (to the extent not previously
recovered).
Unless otherwise specified in the related Prospectus Supplement, as part of
its servicing fees, the Servicer will also be entitled to retain, as
compensation for the additional services provided in connection therewith, any
fees for late payments made by Obligors, extension fees paid by Obligors for the
extension of scheduled payments and assumption fees for permitted assumptions of
Contracts by purchasers of the related Manufactured Homes. (Sections 4.15 and
5.03.)
Unless otherwise specified in the applicable Prospectus Supplement, any
person with which the Servicer is merged or consolidated, or any corporation
resulting from any merger, conversion or consolidation to which the Servicer is
a party, or any person succeeding to the business of the Servicer, will be the
successor to the Servicer under the Agreement, so long as such successor has a
net worth of at least $50 million and has serviced at least $100 million of
manufactured housing contracts for at least one year. The Servicer may assign
its rights and delegate its duties under the Agreement (whereupon it will no
longer be liable for the obligations of the Servicer under the Agreement),
provided that, among other conditions, any rating assigned to the Certificates
will not be reduced because of such assignment and delegation. (Sections 7.04,
7.06 and 7.07.)
A. HAZARD INSURANCE POLICIES. Unless otherwise specified in the related
Prospectus Supplement, the Servicer will be obligated to cause to be maintained
one or more hazard insurance policies with respect to each Manufactured Home in
an amount at least equal to the lesser of its maximum insurable value or the
principal amount due from the Obligor under the related Contract. Such hazard
insurance policies will, at a minimum, provide fire and extended coverage on
terms and conditions customary in manufactured housing hazard insurance
policies. If a Manufactured Home is located within a federally designated flood
area, the Servicer will, to the extent required by applicable law or regulation,
also be obligated to cause flood insurance to be maintained in an amount equal
to the lesser of the amounts described above or the maximum amount available for
such Manufactured Home under the federal flood insurance programs. Such policies
may provide for customary deductible amounts. Coverage thereunder will be
required to be sufficient to avoid the application of any co-insurance
provisions. Such policies will be required to contain a standard loss payee
clause in favor of the Servicer and its successors and assigns. In general, the
Servicer will not be
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obligated to cause to be obtained and maintained hazard insurance policies that
provide earthquake coverage. If earthquake coverage is required with respect to
Contracts in a particular Trust Fund, that fact will be disclosed in the related
Prospectus Supplement.
Unless otherwise specified in the related Prospectus Supplement, all amounts
collected by the Servicer under a hazard or flood insurance policy will be
applied either to the restoration or repair of the Manufactured Home or against
the remaining principal balance of the related Contract upon repossession of the
Manufactured Home, after reimbursing the Servicer for amounts previously
advanced by it for such purposes. The Servicer may satisfy its obligation to
maintain hazard and flood insurance policies with respect to each Manufactured
Home by maintaining a blanket policy insuring against hazard and flood losses on
the related Obligor's interest in such Manufactured Home. Such blanket policy
may contain a deductible clause, in which case the Servicer will be required to
make payments to the related Trust Fund in the amount of any deductible amounts
in connection with insurance claims on repossessed Manufactured Homes.
Unless otherwise specified in the related Prospectus Supplement, if the
Servicer repossesses a Manufactured Home on behalf of the Trustee, the Servicer
is required to either maintain a Hazard Insurance Policy with respect to such
Manufactured Home meeting the requirements set forth above, or to indemnify the
Trust Fund against any damage to such Manufactured Home prior to resale or other
disposition. (Section 4.09.)
B. EVIDENCE AS TO COMPLIANCE. Unless otherwise specified in the related
Prospectus Supplement, the Servicer will be required to deliver to the Trustee
each year an officer's certificate executed by an officer of the Servicer (i)
stating that a review of the activities of the Servicer during the preceding
calendar year and of performance under the Agreement has been made under the
supervision of such officer, and (ii) stating that to the best of such officer's
knowledge, the Servicer has fulfilled all its obligations under the Agreement
throughout such year, or, if there has been a default in the fulfillment of any
such obligation, specifying each such default known to such officer and the
nature and status thereof. Such officer's certificate will be accompanied by a
statement of a firm of independent public accountants to the effect that, on the
basis of an examination of certain documents and records relating to servicing
of the Contracts under the Agreement (or, at the Servicer's option, the
Contracts and other contracts being serviced by the Servicer under agreements
similar to the Agreement), conducted in accordance with generally accepted
auditing standards, the Servicer's servicing has been conducted in compliance
with the provisions of the Agreement (or such agreements), except (i) such
exceptions as such firm believes to be immaterial and (ii) such other exceptions
as may be set forth in such statement. (Sections 4.20 and 4.21.)
C. EVENTS OF DEFAULT. Unless otherwise specified in the related Prospectus
Supplement, events of default under the Agreement will consist of (i) any
failure by the Servicer to make any deposit or payment required of it under the
Agreement which continues unremedied for five days after the giving of written
notice, (ii) any failure by the Servicer duly to observe or perform in any
material respect any of its other covenants or agreements in the Agreement which
continues unremedied for 30 days after the giving of written notice of such
failure, and (iii) certain events of insolvency, readjustment of debt,
marshalling of assets and liabilities or other similar proceedings regarding the
Servicer. Unless otherwise specified in the related Prospectus Supplement,
"notice" as used in this paragraph means notice to the Servicer by the Trustee,
the Sellers or, if applicable, the Credit Facility Provider, or to the Servicer,
the Trustee and the Sellers by the holders of Certificates evidencing interests
("Fractional Interests") in the outstanding principal balance of outstanding
Certificates that, in the aggregate, equal at least 25% of the principal balance
of all outstanding Certificates (excluding Certificates held by the Sellers,
BankAmerica Housing Services (as well as any successor Servicer, if BankAmerica
Housing Services is not the Servicer) or any of their respective affiliates).
(Section 8.01.)
D. RIGHTS UPON EVENT OF DEFAULT. Unless otherwise specified in the related
Prospectus Supplement so long as an event of default remains unremedied, the
Trustee may (but only with the consent of the Credit Facility Provider (if any)
if the Credit Facility has not expired or if the Credit Facility has expired or
been terminated and such Credit Facility Provider has not been reimbursed for
all amounts due it), and at the written direction of the holders of Certificates
evidencing Fractional Interests aggregating not less than 51%
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shall, terminate all of the rights and obligations of the Servicer under the
Agreement and in and to the related Contracts, whereupon (subject to applicable
law regarding the Trustee's ability to make monthly advances) the Trustee or a
successor Servicer under the Agreement will succeed to all the responsibilities,
duties and liabilities of the Servicer under the Agreement and will be entitled
to similar compensation arrangements. If the Trustee is obligated to succeed the
Servicer but is unwilling or unable so to act, it may appoint, or petition a
court of competent jurisdiction for the appointment of, a Servicer. Pending such
appointment, the Trustee is obligated to act in such capacity. The Trustee and
such successor may agree upon the servicing compensation to be paid, which in no
event may be greater than a monthly amount specified in the Agreement. (Sections
7.07 and 8.01.)
Unless otherwise specified in the related Prospectus Supplement, no
Certificateholder will have any right under the Agreement to institute any
proceeding with respect to the Agreement unless such holder previously has given
to the Trustee written notice of default and unless the holders of Certificates
evidencing Fractional Interests aggregating not less than 25% have requested the
Trustee in writing to institute such proceeding in its own name as Trustee and
have offered to the Trustee reasonable indemnity and the Trustee for 60 days has
neglected or refused to institute any such proceeding. The Trustee will be under
no obligation to take any action or institute, conduct or defend any litigation
under the Agreement at the request, order or direction of any of the holders of
Certificates, unless such Certificateholders have offered to the Trustee
reasonable security or indemnity against the costs, expenses and liabilities
which the Trustee may incur. (Sections 8.01 and 11.08.)
AMENDMENT
Unless otherwise specified in the related Prospectus Supplement, the
Agreement may be amended by the Sellers, the Servicer and the Trustee without
the consent of the Certificateholders (but only with the consent of the Credit
Facility Provider (if any) if the Credit Facility has not expired or if the
Credit Facility has expired or been terminated and such Credit Facility Provider
has not been reimbursed for all amounts due it), (i) to cure any ambiguity, (ii)
to correct or supplement any provision therein that may be inconsistent with any
other provision therein, (iii) to add to the duties or obligations of the
Servicer, (iv) to obtain a rating from a nationally recognized rating agency or
to maintain or improve the ratings of any Class of the Certificates then given
by any rating agency (it being understood that, after obtaining the rating of
the Certificates from the rating agencies specified in such Agreement, none of
the Trustee, the Sellers or the Servicer is obligated to obtain, maintain or
improve any rating assigned to the Certificates), or (v) to make any other
provisions with respect to matters or questions arising under such Agreement,
provided that such action will not, as evidenced by an opinion of counsel,
adversely affect in any material respect the interests of the
Certificateholders. The Agreement may also be amended, by the Sellers, the
Servicer and the Trustee with the consent of at least 51% of the holders of
Certificates of each Class affected thereby for the purpose of adding any
provisions to or changing in any manner or eliminating any of the provisions of
such Agreement or of modifying in any manner the rights of the
Certificateholders; provided, however, that no such amendment shall (i) reduce
in any manner the amount of, or delay the timing of, any distributions on any
Certificate, without the consent of the Holder of such Certificate as the case
may be, (ii) adversely affect in any material respect the interests of the
Holders of any Class of Certificates in a manner other than as described in (i),
without the consent of the Holders of Certificates of such Class evidencing, as
to such Class, Percentage Interests aggregating 66% or (iii) 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 then outstanding, and no such amendment shall adversely affect the
status of the Trust Fund as a REMIC.
Unless otherwise specified in the applicable Prospectus Supplement, the
Agreement may also be amended from time to time, without the consent of any
Certificateholders, by the Sellers, the Trustee and the Servicer to modify,
eliminate or add to the provisions of the Agreement to (i) maintain the
qualification of the Trust Fund as a REMIC under the Code or avoid, or minimize
the risk of, the imposition of any tax on the Trust Fund under the Code that
would be a claim against the Trust Fund assets, provided that an opinion of
counsel is delivered to the Trustee to the effect that such action is necessary
or appropriate to maintain such qualification or avoid any such tax or minimize
the risk of its imposition, or (ii) prevent the Trust Fund
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from entering into any "prohibited transaction" as defined in Section 860F of
the Code, provided that an opinion of counsel is delivered to the Trustee to the
effect that such action is necessary or appropriate to prevent the Trust Fund
from entering into such prohibited transaction. (Section 11.01.)
The Agreement may otherwise be subject to amendment without the consent of
any Certificateholders and, under certain circumstances, without the consent of
the Trustee, if and to the extent specified in the related Prospectus
Supplement.
THE TRUSTEE
The Trustee with respect to a Series will be identified in the applicable
Prospectus Supplement. Unless otherwise specified therein, the Trustee may
resign at any time, in which event the Sellers will be obligated to appoint a
successor Trustee. The Sellers may also remove the Trustee if the Trustee ceases
to be eligible to continue as such under the related Agreement or if the Trustee
becomes insolvent. In such circumstances, the Sellers will also 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 9.07.)
Unless otherwise specified in the related Prospectus Supplement, the
Agreement for any Series will require the Trustee to maintain, at its own
expense, an office or agency in New York City where the Certificates for such
Series may be surrendered for registration of transfer or exchange and where
notices and demands to or upon the Trustee and the Certificate Registrar in
respect of such Certificates pursuant to the related Agreement may be served.
Unless otherwise specified in the related Prospectus Supplement, the
Trustee, or any of its affiliates, in its individual or any other capacity, may
become the owner or pledgee of the Certificates of any Series with the same
rights as it would have if it were not Trustee.
Unless otherwise specified in the related Prospectus Supplement, the Trustee
will act as Paying Agent, Certificate Registrar and Authenticating Agent for the
related Series of Certificates.
INDEMNIFICATION
Unless otherwise specified in the applicable Prospectus Supplement, each
Agreement will provide that neither the Servicer nor any of its directors,
officers, employees or agents will be under any liability to the Trustee or the
Certificateholders for any action taken or for refraining from the taking of any
action in good faith pursuant to such Agreement, or for errors in judgment;
provided, however, that such provision shall not protect the Servicer or any
such person against any liability that would otherwise be imposed by reason of
willful misfeasance, bad faith or gross negligence. The Servicer shall not be
under any obligation to appear in, prosecute or defend any legal action which
arises under an Agreement (other than in connection with the enforcement of any
Contract in accordance with the Agreement) and which in its opinion may involve
it in any expenses or liability; provided, however, that the Servicer may in its
discretion undertake any such other legal action which it may deem necessary or
desirable in respect of the Agreement and the rights and duties of the parties
thereto. In such event, the legal expenses and costs of such other legal action
and any liability resulting therefrom shall be expenses, costs and liabilities
payable from the Trust Fund and the Servicer shall be entitled to be reimbursed
therefor from amounts collected on the Contracts. (Section 7.05.)
CREDIT AND LIQUIDITY ENHANCEMENT
To the extent specified in the related Prospectus Supplement, a Class of
Certificates may be entitled to the benefit of one or more of the following
forms of credit and liquidity enhancement:
SUBORDINATION
The Certificates of one or more Classes of a multiple-Class Series (the
"Senior Certificates") may afford the holders thereof a right to receive
distributions of principal and/or interest on each Distribution Date from
amounts collected on the related Contract Pool that is prior to the right to
receive such
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distributions afforded by the Certificates of the other Class or Classes (the
"Junior Certificates" or "Subordinate Certificates"). Unless otherwise specified
in the related Prospectus Supplement, this prior right will result from one or
both of the following two features:
1. The Senior Certificates will entitle the holders thereof to receive
on some or all Distribution Dates, prior to any distribution of principal or
of both principal and interest (as specified in the related Prospectus
Supplement) being made to the holders of the Junior Certificates on any such
Distribution Date, a full distribution of principal or of both principal and
interest (as specified in the related Prospectus Supplement) from amounts
collected on the Contracts during the related Collection Period(s). To the
extent that Contract collections during the related Collection Period(s)
would, in the absence of liquidation losses or other circumstances adversely
affecting such Contract collections, have been applied to make distributions
to the holders of the Junior Certificates, this feature will enhance the
likelihood of timely receipt by the holders of the Senior Certificates of
full distributions of principal and interest in accordance with the
applicable distribution formula.
2. The distribution formula for the Senior Certificates will entitle
the holders thereof to receive, on some or all Distribution Dates, all or a
disproportionate share of the Total Regular Principal Amount until the
Certificate Balance of the Senior Certificates has been reduced to zero. See
"Description of Certificates -- Distributions on Certificates -- A.
Distributions of Principal" above. This feature, in effect, will provide the
holders of the Senior Certificates with a prior right to receive the
principal collected on the Contracts until the Certificate Balance of the
Senior Certificates has been reduced to zero. The degree of priority will
depend on the share of the Total Regular Principal Amount to which the
holders of the Senior Certificates are entitled on particular Distribution
Dates. If the holders of the Senior Certificates are entitled to receive all
of the Total Regular Principal Amount on each Distribution Date (to the
extent of the Contract collections available to make distributions of
Regular Principal on such Distribution Date), then the holders of the Senior
Certificates will, in effect, have a right to receive all principal
collected on the Contracts that is absolutely prior to the right of the
holders of the Junior Certificates to receive any principal collected on the
Contracts. If, however, the holders of the Senior Certificates are entitled
to receive only a disproportionate share of the Total Regular Principal
Amount, or are entitled to receive all or a disproportionate share of the
Total Regular Principal Amount only on certain Distribution Dates, then the
prior right of the holders of the Senior Certificates to receive
distributions of principal collected on the Contracts will, to that extent,
be limited. The prior right to receive distributions of principal
collections described above will enhance the likelihood that the holders of
the Senior Certificates will ultimately receive distributions of principal
in an aggregate amount equal to the initial Certificate Balance of the
Senior Certificates. It will not, however, enhance the likelihood of timely
receipt by the holders of the Senior Certificates of full distributions of
the amounts to which they would have been entitled in the absence of
liquidation losses or other circumstances adversely affecting Contract
collections.
If specified in the related Prospectus Supplement, the features described
above may be characteristic of different Classes within a multiple-Class Series.
Thus, Certificates which constitute Senior Certificates under the criteria
described in paragraph 1 above may constitute Junior Certificates under the
criteria described in paragraph 2 above, and Certificates which constitute
Senior Certificates under the criteria described in paragraph 2 above may
constitute Junior Certificates under the criteria described in paragraph 1
above. In general, the splitting of the features described above among two
separate Classes of a multiple-Class Series will undercut the protection against
loss afforded by each of such features. The particular effects of any such
splitting will be discussed in the applicable Prospectus Supplement. The
following discussion is based on the assumption that the features described
above will not be characteristic of different Classes within a multiple-Class
Series.
The degree of protection against loss provided to the holders of the Senior
Certificates at any time by either of the subordination features described above
will be determined primarily by the degree to which the aggregate principal
balance of the underlying Contracts (the "Pool Principal Balance") exceeds the
Certificate Balance of the Senior Certificates (and to a lesser extent, if the
holders of the Senior Certificates also have a prior right to receive interest,
by the degree to which the interest payable on the Contracts, net of the
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portions thereof used to pay the servicing fee of the Servicer (if such
servicing fee is payable prior to distributions of interest to the holders of
the Senior Certificates) and other expenses of the Trust Fund, exceeds the
interest distributable to the holders of the Senior Certificates). The relative
levels of the Certificate Balance of the Senior Certificates (the "Senior
Certificate Balance") and the related Pool Principal Balance, and hence the
degree of protection against loss afforded by the subordination features
described above, may change over time depending on, among other things, the
formula by which principal is distributed to the holders of the Senior
Certificates and the level of liquidation losses on the underlying Contracts.
Generally, if the holders of Senior Certificates receive a disproportionate
share of the Total Regular Principal Amount on any Distribution Date, the effect
will be to increase, as a relative matter, the degree by which the Pool
Principal Balance exceeds the Certificate Balance of the Senior Certificates,
thus increasing the degree of protection against loss afforded by the
subordination of the Junior Certificates. In addition, Special Principal
Distributions to the holders of the Senior Certificates from sources other than
principal collections on the underlying Contracts generally will increase the
degree of protection against loss above the protection that would have been
provided if such distributions were not made (because the Senior Certificate
Balance will be reduced without a reduction in the Pool Principal Balance). On
the other hand, if, due to liquidation losses or other circumstances adversely
affecting Contract collections, the holders of Senior Certificates receive less
than their proportionate share of the Total Regular Principal Amount, the effect
will be to decrease, as a relative matter, the degree to which the Pool
Principal Balance exceeds the Certificate Balance of the Senior Certificates,
thus decreasing the degree of protection against loss afforded by the
subordination of the Junior Certificates. The effects of particular principal
distribution formulae in this regard will be discussed in the applicable
Prospectus Supplement. The description of any such effects in a particular
Prospectus Supplement may relate the Certificate Balances of the Senior
Certificates to Pool Principal Balances which are estimated or adjusted as
described therein. Such Pool Principal Balances may sometimes be referred to in
a Prospectus Supplement as "Pool Scheduled Principal Balances."
Where there is more than one Class of Junior Certificates, the rights of one
or more of such Classes of Junior Certificates to receive distributions of
principal, interest or principal and interest may be subordinated to the rights
of one or more other Classes of Junior Certificates to receive such
distributions. Any Class of Junior Certificates that is entitled to receive such
distributions from Contract Pool collections prior to any other Class of Junior
Certificates is a "mezzanine" Class of Junior Certificates. The subordination of
any Class of Junior Certificate to a mezzanine Class of Junior Certificates will
enhance the likelihood of timely receipt by the holders of such mezzanine Class
of Junior Certificates relative to any Class of Junior Certificates that is
subordinate to such mezzanine Class of Junior Certificates. Junior Certificates,
including any mezzanine Classes of Junior Certificates, may only be sold
hereunder if rated in one of the four highest rating categories of a nationally
recognized statistical rating organization. (See "Rating" herein). The effect of
any subordination on any Classes of Junior Certificates sold hereunder will be
discussed in the applicable Prospectus Supplement.
RESERVE FUNDS
The Certificates of one or more Classes may be entitled to the benefit of
one or more spread accounts or other reserve funds (each, a "Reserve Fund")
which, to the extent specified in the related Prospectus Supplement, will cover
shortfalls created when collections on the related Contract Pool that are
available to make distributions to the holders of such Certificates are not
sufficient to fund full distributions of principal and interest to such
Certificateholders. Any Reserve Fund may be available to cover all or a portion
of such shortfalls and may be available to cover any shortfalls, no matter what
the cause, or only shortfalls due to certain causes (E.G., liquidation losses
only or delinquencies only), all as specified in the related Prospectus
Supplement. In addition, to the extent specified in the related Prospectus
Supplement, a Reserve Fund may be used to make distributions of interest or
Regular Principal to the holders of a Class of Certificates on particular
Distribution Dates upon the occurrence of certain losses, delinquencies or other
events, even if such Certificateholders would not have been entitled to any such
distributions on such Distribution Dates in the absence of losses, delinquencies
or other events. A Reserve Fund may also be used to fund Special Principal
Distributions under the circumstances set forth in the related Prospectus
Supplement. The related Prospectus Supplement will specify whether any Reserve
Fund will be established as part of the Trust Fund
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or held outside of the Trust Fund by a collateral agent or similar third party
(who may be the Trustee acting in a different capacity) and will contain a
description of any arrangement pursuant to which the Reserve Fund is held
outside of the Trust Fund.
The method of funding any Reserve Fund, and the required levels of funding,
if any, as well as the circumstances under which amounts on deposit in any
Reserve Fund may be distributed to persons other than Certificateholders, will
be described in the applicable Prospectus Supplement. To the extent that a
Reserve Fund may be funded in whole or in part from some or all of the interest
collected on the Contracts in excess of the interest needed to make
distributions to the holders of one or more Classes of Certificates, such
Reserve Fund may be referred to in the applicable Prospectus Supplement as a
"Spread Account."
CREDIT FACILITIES
The Certificates of one or more Classes may be entitled to the benefit of
one or more letters of credit, surety bonds or similar credit facilities (each,
a "Credit Facility"). Each such Credit Facility may be in an amount greater
than, equal to or less than the Certificate Balance of the Certificates of each
Class entitled to the benefits thereof, and may be subject to reduction or be
limited as to duration, all as described in the applicable Prospectus
Supplement. To the extent specified in the related Prospectus Supplement,
amounts realized under a Credit Facility supporting the Certificates of any
Class may be used for the same purposes as amounts on deposit in Reserve Funds.
See "-- Reserve Funds" above. A Credit Facility may be held by a Trustee as part
of the related Trust Fund or may be held by a collateral agent or other third
party (who may be the Trustee acting in a different capacity). The related
Prospectus Supplement will contain a description of the material terms of any
Credit Facility and any arrangement pursuant to which the Credit Facility is
held outside of the Trust Fund. Such Prospectus Supplement will also contain
certain information concerning the provider of the Credit Facility (the "Credit
Facility Provider"), which information will have been provided to the Sellers by
the Credit Facility Provider for use in such Prospectus Supplement. Bank of
America, BankAmerica Housing Services or an affiliate thereof may be a Credit
Facility Provider.
If specified in the applicable Prospectus Supplement, a Credit Facility,
rather than guaranteeing distributions of particular amounts to the holders of
Certificates of particular Classes, may, instead, guarantee certain collections
on the related Contract Pool. These collections may be of all or a portion of
amounts due on Contracts in liquidation, all or a portion of the scheduled
monthly payments due on the Contracts or of other amounts. The extent to which
any such collections are guaranteed under a Credit Facility which functions in
this manner will be described in the applicable Prospectus Supplement.
LIQUIDITY FACILITIES
The Certificates of one or more Classes may be entitled to the benefit of
one or more certificate purchase agreements or other liquidity facilities (each,
a "Liquidity Facility"), pursuant to which the provider of such Liquidity
Facility (the "Liquidity Facility Provider") will provide funds to be used to
purchase some or all of such Certificates on the Repurchase Dates applicable
thereto. Unless otherwise specified in the applicable Prospectus Supplement, a
Liquidity Facility will be held outside of the Trust Fund by a third party
(which may be the Trustee acting in another capacity). The related Prospectus
Supplement will contain a description of the material terms of any such
Liquidity Facility and any arrangement pursuant to which it is held outside of
the Trust Fund, and will contain certain information concerning the Liquidity
Facility Provider, which information will have been provided to the Sellers by
the Liquidity Facility Provider for use in such Prospectus Supplement. Bank of
America, BankAmerica Housing Services or an affiliate thereof may be a Liquidity
Facility Provider. If specified in the related Prospectus Supplement, a Reserve
Fund or Credit Facility may also serve as a Liquidity Facility.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following discussion, which has been prepared and reviewed by Morrison &
Foerster LLP, special counsel to Bank of America and BankAmerica Housing
Services, is a general discussion of all anticipated material federal income tax
consequences of the purchase, ownership and disposition of Certificates. This
discussion is based on current provisions of the Code, including Sections 860A
through 860G of the Code
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and upon regulations, rulings and decisions now in effect, including Treasury
Regulations issued on December 23, 1992 (the "REMIC Regulations"), all of which
are subject to change or possibly differing interpretations. The discussion
below does not purport to deal with the federal tax consequences applicable to
all categories of investorship (for example, life insurance companies, tax
exempt organizations, dealers in securities and taxpayers subject to the
alternative minimum tax), some of which may be subject to special rules.
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 Certificates. For purposes of this tax discussion (other than
the discussion of information reporting), references to a "Certificateholder" or
a "holder" mean the beneficial owner of a Certificate.
With respect to any Series of Certificates, Morrison & Foerster LLP, special
counsel to Bank of America and BankAmerica Housing Services, is of the opinion
that the statements contained in the discussion hereunder, to the extent they
constitute matters of law or legal conclusions with respect thereto, are correct
in all material respects, under the assumptions stated therein and existing law
as of the date hereof.
REMIC ELECTIONS
Under the Code, an election may be made with respect to a Trust Fund related
to any Series of Certificates to treat such Trust Fund as a "real estate
mortgage investment conduit" ("REMIC") within the meaning of Section 860D(a) of
the Code, in which case the Certificates of any Class of such Series will be
either "regular interests" in the REMIC within the meaning of Section 860G(a)(1)
of the Code or "residual interests" in the REMIC within the meaning of Section
860G(a)(2) of the Code. The Prospectus Supplement for each Series of
Certificates will indicate whether each Seller of Contracts to the related
Contract Pool intends to cause an election to be made to treat the Trust Fund as
a REMIC, and if such an election is to be made, which Certificates will be
regular interests and which will be the residual interest in the REMIC. The
discussion under the heading "-- REMIC Certificates" discusses Series with
respect to which each Seller of Contracts to the related Contract Pool will
cause a REMIC election to be made and the discussion under the heading "--
Non-REMIC Certificates" discusses Series with respect to which the Sellers (or
if only one Seller sells Contracts to the related Contract Pool, the applicable
Seller) will not cause a REMIC election to be made.
REMIC CERTIFICATES
The discussion in this section applies only to a Series of Certificates for
which a REMIC election is made. Upon the issuance of each Series of Certificates
for which a REMIC election is made, Morrison & Foerster LLP, special counsel to
Bank of America and BankAmerica Housing Services, will deliver its opinion
generally to the effect that, with respect to each such Series of Certificates,
under then existing law and assuming compliance by the Seller(s), the Servicer
and the Trustee for such Series with all of the provisions of the related
Agreement, the agreement or agreements, if any, providing for a Credit Facility
or a Liquidity Facility, together with any agreement documenting the arrangement
through which a Credit Facility or a Liquidity Facility is held outside the
related Trust Fund, and agreement or agreements with any Underwriter, the Trust
Fund will be a REMIC, and the Certificates of such Series will be treated as
either "regular interests" in the REMIC ("Regular Certificates") or "residual
interests" in the REMIC ("Residual Certificates").
A. TAX STATUS OF REMIC CERTIFICATES. Unless otherwise specified in the
related Prospectus Supplement, the Certificates of any Series, in their
entirety, will generally be considered (i) "qualifying real property loans"
within the meaning of Section 593(d) of the Code, (ii) "real estate assets"
within the meaning of Section 856(c)(5)(A) of the Code and (iii) assets
described in Section 7701(a)(19)(C) of the Code (assets qualifying under one or
more of those sections, applying each section separately, "qualifying assets")
for a calendar quarter if at least 95% of the assets of the related Trust Fund
are qualifying assets during such calendar quarter. In the event the percentage
of the Trust Fund's assets which are qualifying assets falls below 95% for any
calendar quarter, then a corresponding percentage of the Certificates will be
treated as qualifying assets for such calendar quarter. Any amount includable in
gross income with respect to the Certificates will be treated as "interest on
obligations secured by mortgages on real property or on interests in real
property" within the meaning of Section 856(c)(3)(B) of the Code to the extent
that the Certificates are treated as "real estate assets" within the meaning of
Section 856(c)(5)(A) of the Code. The assets of the Trust Fund will include, in
addition to the Contracts, payments on the Contracts held pending distribution,
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and may include, among other assets, one or more Reserve Funds. With respect to
the treatment of Contracts as qualifying assets, (i) the Treasury Regulations
under Section 593 of the Code define a "qualifying real property loan" to
include a loan secured by manufactured housing that qualifies as a single family
residence under the Code, (ii) the Treasury Regulations under Section 856 of the
Code define a "real estate asset" under Section 856(c)(5)(A) of the Code to
include a loan secured by manufactured housing that qualifies as a single family
residence under the Code, and (iii) the Treasury Regulations under Section
7701(a)(19)(C) of the Code provide that assets described in that Section include
loans secured by manufactured housing that qualify as a single family residence
under the Code. It is unclear whether other assets of the Trust Fund would be
treated as qualifying assets under the three foregoing sections of the Code.
However, the REMIC Regulations provide that "permitted investments," as defined
below under "-- B. Qualification as a REMIC," will be considered to be
"qualifying real property loans" within the meaning of Section 593(b) of the
Code and "real estate assets" within the meaning of Section 856(c)(5)(A) of the
Code. REMIC Certificates held by a real estate investment trust will not
constitute "Government Securities" within the meaning of Code Section
856(c)(5)(A), and REMIC Certificates held by a regulated investment company will
not constitute "Government Securities" within the meaning of Code Section
851(b)(4)(A)(ii).
B. QUALIFICATION AS A REMIC. Qualification as a REMIC requires ongoing
compliance with certain conditions. The following discussion assumes that such
requirements will be satisfied by a Trust Fund so long any REMIC Certificates
related to such Trust Fund are outstanding. Substantially all of the assets of
the REMIC must consist of "qualified mortgages" and "permitted investments" as
of the close of the third month beginning after the day on which the REMIC
issues all of its regular and residual interests (the "Startup Day") and at all
times thereafter. The term "qualified mortgage" means any obligation (including
a participation or certificate of beneficial ownership in such obligation) which
is principally secured by an interest in real property that is transferred to
the REMIC on the Startup Day in exchange for regular or residual interests in
the REMIC or is purchased by the REMIC within the three-month period beginning
on the Startup Day if such purchase is pursuant to a fixed price contract in
effect on the Startup Day. The REMIC Regulations provide that a manufactured
housing contract is principally secured by an interest in real property if the
fair market value of the real property securing the contract is at least equal
to either (i) 80% of the issue price (generally, the principal balance) of the
contract at the time it was originated or (ii) 80%, of the adjusted issue price
(the then outstanding principal balance, with certain adjustments) of the
contract at the time it is contributed to a REMIC. The fair market value of the
underlying real property is to be determined after taking into account other
liens encumbering that real property. Alternatively, a manufactured housing
contract is principally secured by an interest in real property if substantially
all of the proceeds of the contract were used to acquire or to improve or
protect an interest in real property that, at the origination date, is the only
security for the contract (other than the personal liability of the obligor).
The REMIC Regulations as well as a published notice issued by the Internal
Revenue Service (the "Service") provide that obligations secured by interests in
manufactured housing, which qualify as "single family residences" within the
meaning of Section 25(e)(10) of the Code, are to be treated as "qualified
mortgages" for qualifying a Trust Fund as a REMIC. Under Section 25(e)(10) of
the Code, the term "single family residence" includes any manufactured home
which has a minimum of 400 square feet of living space and a minimum width in
excess of 102 inches and which is of a kind customarily used at a fixed
location. Bank of America or BankAmerica Housing Services or both of them, as
the case may be, will represent and warrant that each of the manufactured homes
securing the Contracts conveyed by it to a Trust Fund meets this definition of a
"single family residence." A qualified mortgage also includes a "qualified
replacement mortgage" that is used to replace any "qualified mortgage" within
three months of the Startup Day or to replace a defective mortgage within two
years of the Startup Day.
"Permitted investments" consist of (a) temporary investments of cash
received under qualified mortgages before distribution to holders of interests
in the REMIC ("cash-flow investments"), (b) amounts, such as a reserve fund, if
any, reasonably required to provide for full payment of expenses of the REMIC,
the principal and interest due on regular or residual interests in the event of
defaults on qualified mortgages, lower than expected returns on cash-flow
investments, prepayment interest shortfalls or certain other contingencies
("qualified reserve assets") and (c) certain property acquired as a result of
foreclosure of defaulted qualified mortgages ("foreclosure property"). A reserve
fund will not be qualified if more than
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30% of the gross income from the assets in the reserve fund is derived from the
sale or other disposition of property held for three months or less, unless such
sale is necessary to prevent a default in payment of principal or interest on
Regular Certificates. In accordance with Section 860G(a)(7) of the Code, a
reserve fund must be "promptly and appropriately" reduced as payments on
contracts are received. Foreclosure property will be a permitted investment only
to the extent that such property is not held for more than two years unless an
extension of such holding period is obtained from the Service.
The Code requires that in order to qualify as a REMIC an entity must make
reasonable arrangements designed to ensure that certain specified entities,
generally including governmental entities or other entities that are exempt from
United States tax, including the tax on unrelated business income ("Disqualified
Organizations"), not hold the residual interest in the REMIC. Consequently, it
is expected that in the case of any Trust Fund for which a REMIC election is
made the transfer, sale, or other disposition of a Residual Certificate to a
Disqualified Organization will be prohibited, and the ability of a Residual
Certificate to be transferred will be conditioned on the Trustee's receipt of a
certificate or other document representing that the proposed transferee is not a
Disqualified Organization. The transferor of a Residual Certificate must not, as
of the time of the transfer, have actual knowledge that such representation is
false. The Code further requires that reasonable arrangements be made to enable
a REMIC to provide the Service and certain other parties, including transferors
of residual interests in a REMIC, with the information needed to compute the tax
imposed by Section 860E(e)(1) of the Code if, in spite of the steps taken to
prevent Disqualified Organizations from holding residual interests, such an
organization does, in fact, acquire a residual interest. See "Restrictions on
Transfer of Residual Certificates" below.
For certain Series of Certificates, two separate elections may be made to
treat segregated portions of the assets of a single Trust Fund as REMICs for
federal income tax purposes (respectively, the "Subsidiary REMIC" and the
"Master REMIC"). Upon the issuance of any such series of Certificates, Morrison
& Foerster LLP, special tax counsel to Bank of America and BankAmerica Housing
Services, will have advised Bank of America and BankAmerica Housing Services, as
described above, that at the initial issuance of the Certificates of such
Series, the Subsidiary REMIC and the Master REMIC will each qualify as a REMIC
for federal income tax purposes, and that the Certificates in such Series will
be treated either as Regular Certificates or Residual Certificates of the
appropriate REMIC. Only REMIC Certificates issued by the Master REMIC will be
offered hereunder. Solely for the purpose of determining whether such Regular
Certificates will constitute qualifying real estate or real property assets for
certain categories of financial institutions or real estate investment trusts as
described above under "-- A. Tax Status of REMIC Certificates," both REMICs in a
two-tier REMIC structure will be treated as one. See the discussion below under
"-- C. Taxation of Regular Certificates."
If an entity electing to be treated as a REMIC 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 interests in the REMIC may be treated as debt or
equity interests therein. The Code, however, authorizes the Treasury Department
to issue Treasury 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 a 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 relief may be
accompanied by sanctions, such as the imposition of a corporate income 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. The Agreement with respect to
each REMIC will include provisions designed to maintain the related Trust Fund's
status as a REMIC. It is not anticipated that the status of any Trust Fund as a
REMIC will be terminated.
C. TAXATION OF REGULAR CERTIFICATES.
1. GENERAL. The Regular Certificates in any Series will constitute "regular
interests" in the related REMIC. Accordingly, the Regular Certificates will
generally be treated for federal income tax purposes as debt instruments that
are issued by the related Trust Fund on the date of issuance of the Regular
Certificates and not as ownership interests in the Trust Fund or the Trust
Fund's assets. Interest, original issue discount,
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and market discount accrued on a Regular Certificate will be treated as ordinary
income to the holder. Each holder must use the accrual method of accounting with
regard to Regular Certificates, regardless of the method of accounting otherwise
used by such holder.
2. ORIGINAL ISSUE DISCOUNT. Regular Certificates may be issued with
"original issue discount." Rules governing original issue discount are set forth
in Sections 1271-1273 and 1275 of the Code and the Treasury regulations issued
thereunder in January 1994 (the "OID Regulations"). The discussion herein is
based in part on the OID Regulations. Although the rules relating to original
issue discount contained in the Code were modified by the 1986 Act specifically
to address the tax treatment of securities, such as the Regular Certificates, on
which principal is required to be prepaid based on prepayments of the underlying
assets, regulations under that legislation have not yet been finalized.
Certificateholders also should be aware that the OID Regulations do not address
certain issues relevant to prepayable securities such as the Regular
Certificates.
In general, in the hands of the original holder of a Regular Certificate,
original issue discount, if any, is the difference between the "stated
redemption price at maturity" of the Regular Certificate and its "issue price."
The original issue discount with respect to a Regular Certificate will be
considered to be zero if it is less than 0.25% of the Regular Certificate's
stated redemption price at maturity multiplied by the number of complete years
from the date of issue of such Regular Certificate to its maturity date. The OID
Regulations, however, provide a special DE MINIMIS rule to apply to obligations
such as the Regular Certificates that have more than one principal payment or
that have interest payments that are not qualified stated interest as defined in
the OID Regulations, payable before maturity ("installment obligations"). Under
the special rule, original issue discount on an installment obligation is
generally considered to be zero if it is less than 0.25% of the principal amount
of the obligation multiplied by the weighted average maturity of the obligation
as defined in the OID Regulations. Because of the possibility of prepayments, it
is not clear whether or how the DE MINIMIS rules will apply to the Regular
Certificates. It is possible that the anticipated rate of prepayments assumed in
pricing the debt instrument (the "Assumed Prepayment Rate") will be required to
be used in determining the weighted average maturity of the Regular
Certificates. In the absence of authority to the contrary, and unless the
related Prospectus Supplement otherwise provides, it is expected that each Trust
Fund as to which a REMIC election is made will apply the DE MINIMIS rule
applicable to installment obligations by using the Assumed Prepayment Rate. The
OID Regulations provide a further special DE MINIMIS rule applicable to any
Regular Certificates that are "self-amortizing installment obligations," I.E.,
Regular Certificates that provide for equal payments composed of principal and
qualified stated interest payable unconditionally at least annually during its
entire term, with no significant additional payment required at maturity. Under
this special rule, original issue discount on a self-amortizing installment
obligation is generally considered to be zero if it is less than 0.167% of the
principal amount of the obligation multiplied by the number of complete years
from the date of issue of such a Regular Certificate to its maturity date.
Generally, the original holder of a Regular Certificate that includes a DE
MINIMIS amount of original issue discount includes that original issue discount
in income as principal payments are made. The amount included in income with
respect to each principal payment equals a pro rata portion of the entire amount
of DE MINIMIS original issue discount with respect to that Regular Certificate.
Any DE MINIMIS amount of original issue discount included in income by a holder
of a Regular Certificate is generally treated as a capital gain if the Regular
Certificate is a capital asset in the hands of the holder thereof. Pursuant to
the OID Regulations, a holder of a Regular Certificate may, however, elect to
include in gross income all interest that accrues on a Regular Certificate,
including any DE MINIMIS original issue discount and market discount, by using
the constant yield method described below with respect to original issue
discount.
The stated redemption price at maturity of a Regular Certificate generally
will be equal to the sum of all payments, whether denominated as principal or
interest, to be made with respect thereto other than "qualified stated
interest." Pursuant to the OID Regulations, qualified stated interest is stated
interest that is unconditionally payable at least annually at a single fixed
rate of interest (or, under certain circumstances, a variable rate tied to an
objective index) during the entire term of the Regular Certificate (including
short periods). It is possible that the Service could assert that the stated
rate of interest on the Certificates is not
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unconditionally payable or otherwise does not qualify as qualified stated
interest. Such position, if successful, would require all holders of
Certificates to accrue all income on the Certificates under the OID Regulations.
Unless otherwise noted in the applicable Prospectus Supplement, and unless the
related Prospectus Supplement otherwise provides, it is expected that each Trust
Fund as to which a REMIC election is made will treat all stated interest on the
Certificates as qualified stated interest. Under the OID Regulations, certain
variable interest rates payable on Regular Certificates, including rates based
upon the weighted average interest rate of Contracts in the related Contract
Pool, may not be treated as qualified stated interest. In such case, the OID
Regulations would treat interest under such rates as contingent interest which
generally must be included in income by the Regular Certificateholder when the
interest becomes fixed, as opposed to when it accrues. Until further guidance is
issued concerning the treatment of such interest payable on Regular
Certificates, unless otherwise noted in the applicable Prospectus Supplement,
the REMIC will treat such interest as being payable at a variable rate tied to a
single objective index of market rates. Prospective investors should consult
their tax advisors regarding the treatment of such interest under the OID
Regulations. In the absence of authority to the contrary and if otherwise
appropriate, and unless the related Prospectus Supplement otherwise provides, it
is expected that each Trust Fund as to which a REMIC election is made will
determine the stated redemption price at maturity of a Regular Certificate by
assuming that the anticipated rate of prepayment for all Contracts in the
related Contract Pool will occur in such a manner that the initial Pass-Through
Rate for a Certificate will not change. Accordingly, interest at the initial
Pass-Through Rate will constitute qualified stated interest payments for
purposes of applying the original issue discount provisions of the Code. In
general, the issue price of a Regular Certificate in a Class is the first price
at which a substantial amount of the Regular Certificates of such Class are sold
for money to the public (excluding bond houses, brokers or similar persons or
organizations acting in the capacity of underwriters, placement agents or
wholesalers). If a portion of the initial offering price of a Regular
Certificate is allocable to interest that has accrued prior to its date of
issue, the issue price of such a Regular Certificate includes that pre-issuance
accrued interest.
Where the interval between the issue date and the first Distribution Date on
a Regular Certificate is longer than the interval between subsequent
Distribution Dates, the greater of any original issue discount (disregarding the
rate in the first period) and any interest foregone during the first period is
treated as the amount by which the stated redemption price at maturity of the
Certificate exceeds its issue price for purposes of the DE MINIMIS rule
described above. The OID Regulations suggest that all interest on a long first
period Regular Certificate that is issued with non-DE MINIMIS original issue
discount, as determined under the foregoing rule, will be treated as original
issue discount. Where the interval between the issue date and the first
Distribution Date on a Regular Certificate is shorter than the interval between
subsequent Distribution Dates, interest due on the first Distribution Date in
excess of the amount that accrued during the first period would be added to the
Certificates' stated redemption price at maturity. Regular Certificateholders
should consult their own tax advisors to determine the issue price and stated
redemption price at maturity of a Regular Certificate.
If the Regular Certificates are determined to be issued with original issue
discount, a holder of a Regular Certificate must generally include the original
issue discount in ordinary gross income for federal income tax purposes as it
accrues in advance of the receipt of any cash attributable to such income. The
amount of original issue discount, if any, required to be included in a Regular
Certificateholder's ordinary gross income for federal income tax purposes in any
taxable year will be computed in accordance with Section 1272(a) of the Code and
the OID Regulations. Under such Section and the OID Regulations, original issue
discount accrues on a daily basis under a constant yield method that takes into
account the compounding of interest. The amount of original issue discount to be
included in income by a holder of a debt instrument, such as a Regular
Certificate, under which principal payments may be subject to acceleration
because of prepayments of other debt obligations securing such instruments, is
computed by taking into account the Assumed Prepayment Rate.
The amount of original issue discount included in income by a holder of a
Regular Certificate is the sum of the "daily portions" of the original issue
discount for each day during the taxable year on which the holder held the
Regular Certificate. The daily portions of original issue discount are
determined by allocating to
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each day in any "accrual period" a PRO RATA portion of the excess, if any, of
the sum of (i) the present value of all remaining payments to be made on the
Regular Certificate as of the close of the "accrual period" and (ii) the
payments during the "accrual period" of amounts included in the stated
redemption price of the Regular Certificate over the "adjusted issue price" of
the Regular Certificate at the beginning of the "accrual period." Generally, the
"accrual period" for the Regular Certificates corresponds to the intervals at
which amounts are paid or compounded with respect to such Regular Certificate,
beginning with their date of issuance and ending with the maturity date. The
"adjusted issue price" of a Regular Certificate at the beginning of any accrual
period is the sum of the issue price and accrued original issue discount for
each prior accrual period reduced by the amount of payments other than payments
of qualified stated interest made during each prior accrual period. The Code
requires the present value of the remaining payments to be determined on the
bases of (a) the original yield to maturity (determined on the basis of
compounding at the close of each accrual period and properly adjusted for the
length of the accrual period), (b) events, including actual prepayments, which
have occurred before the close of the accrual period, and (c) the assumption
that the remaining payments will be made in accordance with the original Assumed
Prepayment Rate. The effect of this method is to increase the portions of
original issue discount that a Regular Certificateholder must include in income
to take into account prepayments on Contracts held by the related Trust Fund
that occur at a rate that exceeds the Assumed Prepayment Rate and to decrease
(but not below zero for any period) the portions of original issue discount that
a Regular Certificateholder must include in income to take into account
prepayments made on Contracts that occur at a rate that is slower than the
Assumed Prepayment Rate. Although original issue discount will be reported to
Regular Certificateholders based on the Assumed Prepayment Rate, no
representation is made to Regular Certificateholders that the Contracts held by
the related Trust Fund will be prepaid at that rate or at any other rate.
A subsequent purchaser of a Regular Certificate also will be required to
include in such purchaser's ordinary gross income for federal income tax
purposes the original issue discount, if any, accruing with respect to such
Regular Certificate, unless the price paid equals or exceeds the sum of all
amounts payable on the Regular Certificate other than payments of qualified
stated interest. If the price exceeds the sum of the Regular Certificate's issue
price plus the aggregate amount of original issue discount accrued with respect
to the Regular Certificate, but does not equal or exceed the sum of all amounts
payable on the Regular Certificate other than payments of qualified stated
interest, the amount of original issue discount to be accrued will be reduced in
accordance with a formula set forth in Section 1272(a)(7)(B) of the Code.
Bank of America and BankAmerica Housing Services believe, upon the advice of
Morrison & Foerster LLP, special tax counsel to Bank of America and BankAmerica
Housing Services, that the holder of a Regular Certificate determined to be
issued with non-DE MINIMIS original issue discount will be required to include
the original issue discount in ordinary gross income for federal income tax
purposes computed in the manner described above. However, the OID Regulations
either do not address or are subject to varying interpretations with respect to
several issues concerning the computation of original issue discount for
obligations such as the Regular Certificates.
3. VARIABLE RATE REGULAR CERTIFICATES. Regular Certificates may bear
interest at a variable rate. Under the OID Regulations, if a variable rate
Regular Certificate provides for qualified stated interest payments computed on
the basis of certain qualified floating rates or objective rates, then any
original issue discount on such a Regular Certificate is computed and accrued
under the same methodology that applies to Regular Certificates paying qualified
stated interest at a fixed rate. See the discussion above under "-- 2. Original
Issue Discount." Accordingly, if the issue price of such a Regular Certificate
is equal to its stated redemption price at maturity, the Regular Certificate
will not have any original issue discount.
For purposes of applying the original issue discount provisions of the Code,
all or a portion of the interest payable with respect to a variable rate Regular
Certificate may not be treated as qualified stated interest in certain
circumstances, including the following: (i) if the variable rate of interest is
subject to one or more minimum or maximum rate floors or ceilings which are not
fixed throughout the term of the Regular Certificate and which are reasonably
expected as of the issue date to cause the rate in certain accrual periods to be
significantly higher or lower than the overall expected return on the Regular
Certificate determined without such floor or ceiling; (ii) if it is reasonably
expected that the average value of the variable rate during
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the first half of the term of the Regular Certificate will be either
significantly less than or significantly greater than the average value of the
rate during the final half of the term of the Regular Certificate; or (iii) if
interest is not payable in all circumstances. In these situations, as well as
others, it is unclear under the OID Regulations whether such interest payments
constitute qualified stated interest payments, or must be treated either as part
of a Regular Certificate's stated redemption price at maturity resulting in
original issue discount, or represent contingent payments which are recognized
as ordinary gross income for federal income tax purposes only as the interest
payments become fixed in each accrual period.
If a variable rate Regular Certificate is deemed to have been issued with
original issue discount, as described above, the amount of original issue
discount accrues on a daily basis under a constant yield method that takes into
account the compounding of interest; provided, however, that the interest
associated with such a Regular Certificate generally is assumed to remain
constant throughout the term of the Regular Certificate at a rate that, in the
case of a qualified floating rate, equals the value of such qualified floating
rate as of the issue date of the Regular Certificate, or, in the case of an
objective rate, at a fixed rate that reflects the yield that is reasonable
expected for the Regular Certificate. A holder of such a Regular Certificate
would then recognize original issue discount during each accrual period which is
calculated based upon such Regular Certificate's assumed yield to maturity,
adjusted to reflect the difference between the assumed and actual interest rate.
The OID Regulations either do not address or are subject to varying
interpretations with respect to several issues concerning the computation of
original issue discount with respect to the Regular Certificates, including
variable rate Regular Certificates. Additional information regarding the manner
of reporting original issue discount to the Service and to the holders of
variable rate Regular Certificates will be set forth in the Prospectus
Supplement relating to the issuance of such Regular Certificates.
4. PREMIUM. A holder of a Regular Certificate that purchases such Regular
Certificate at a cost (net of accrued interest) greater than its remaining
stated redemption price at maturity will be considered to have purchased such
Regular Certificate at a premium equal to the excess of such cost over such
remaining stated redemption price, and may, under Section 171 of the Code, if
the holder holds the Regular Certificate as a capital asset within the meaning
of Section 1221 of the Code, elect to amortize such premium under a constant
yield method over the life of the Regular Certificate. Although not free from
doubt, the Assumed Prepayment Rate should be taken into account in determining
the life of the Regular Certificate for this purpose. Such amortized premium is
generally treated as an offset to the amount of interest income from such
Regular Certificate, rather than as a separate interest deduction. An election
made by a holder under Section 171 of the Code would generally apply to the
premium on all debt instruments held for investment by the holder at any time
after the beginning of the taxable year in which such election is made, unless
the election is revoked with the Service's consent.
5. MARKET DISCOUNT. A purchaser of a Regular Certificate may also be
subject to the market discount rules. Market discount is generally the excess of
(i) in the case of a Regular Certificate issued with original issue discount,
the revised issue price, or (ii) in the case of a Regular Certificate issued
without original issue discount, its principal balance, over the holder's basis
in such Regular Certificate. Such purchaser will recognize gain upon receipt of
a principal distribution on the Regular Certificate, whether it is received on
the date on which such payment is scheduled to be made or as a prepayment. In
particular, the holder will be required to allocate that principal distribution
first to the portion of the market discount on such Regular Certificate that has
accrued, but has not previously been included in income, and will recognize
ordinary income to that extent. In general terms, market discount on a Regular
Certificate may be treated, at the holder's election, as accruing under either
(i) a constant yield method or (ii) in proportion to remaining accruals of
original issue discount (or, if there is no original issue discount, in
proportion to remaining accruals of interest at the applicable Pass-Through
Rate), in each case taking into account the Assumed Prepayment Rate. Such
purchaser also generally will be required to treat a portion of any gain on a
sale or exchange of the Regular Certificate as ordinary income to the extent of
the discount accrued, but unrecognized, to the date of disposition under one of
the foregoing methods. As an alternative to the inclusion of
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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. Such an
election may be revoked only with the consent of the Secretary of the Treasury.
In addition, deductions for a portion of a Regular Certificateholder's
interest expense on any debt incurred or continued to purchase or carry a
Regular Certificate purchased with market discount may be deferred. The deferred
portion of any interest deduction would not exceed the portion of the market
discount on such Regular Certificate that accrues during the taxable year in
which such interest would otherwise be deductible, and generally would be
deductible when such market discount is included in income, upon receipt of a
principal distribution on, or sale of, such Regular Certificate. The interest
deferral rule will not apply if the Certificateholder elects to include market
discount in income currently as it accrues, as described above. Each Trust Fund
for which a REMIC election is made will report annually to certain categories of
its Regular Certificateholders and the Service information necessary to compute
accruals of market discount.
Notwithstanding the above rules, market discount on a Regular Certificate
will be considered to be zero if such discount is less than 0.25% of the
remaining principal amount (or, in the case of a Regular Certificate issued with
original issue discount, the remaining stated redemption price at maturity) of
the Regular Certificate multiplied by its weighted average remaining maturity.
The weighted average remaining maturity of the Regular Certificate presumably
would be calculated in a manner similar to the weighted average maturity
described above under "-- 2. Original Issue Discount," taking into account
distributions (including distributions of prepayments) prior to the date of
acquisition of such Regular Certificate by the holder. If market discount on a
Regular Certificate is considered to be zero under this rule, the actual amount
of such discount must be allocated to the remaining principal distributions on
such Regular Certificate and when each such distribution is received, gain equal
to the discount allocated to such distribution will be recognized. Treasury
regulations implementing the market discount rules have not yet been issued, and
therefore investors should consult with their own tax advisors regarding the
application of these rules as well as the advisability of making any of the
elections with respect thereto.
6. EFFECTS OF DEFAULTS OR DELINQUENCIES. Certain Series of Certificates may
contain one or more Classes of Subordinate Certificates. In the event there are
defaults or delinquencies on Contracts in the related Trust Fund, amounts that
would otherwise be distributed on the Subordinate Certificates may instead be
distributed on the Senior Certificates. Holders of Subordinate Certificates
nevertheless will be required to report interest income with respect to such
Certificates (including original issue discount) as such income accrues without
giving effect to delays or reductions in distributions on such Subordinate
Certificates attributable to defaults and delinquencies on such Contracts,
except to the extent that it can be established that the undistributed amounts
are not collectible. As a result, the amount of income reported by a holder of a
Subordinate Certificate in any period could significantly exceed the amount of
cash distributed to such holder in that period. The holder will eventually be
allowed a loss (or will be allowed to report a lesser amount of income) to the
extent that the aggregate amount of distributions on the Subordinate Certificate
is reduced as a result of defaults or delinquencies on the related Contracts.
However, the timing of such losses or reductions in income is uncertain, and in
some circumstances losses could be capital losses that generally can be offset
only with capital gains. Holders of Subordinate Certificates should consult
their own tax advisors on these points.
7. SALES OF CERTIFICATES. If a Regular Certificate is sold or exchanged,
the seller will recognize gain or loss equal to the difference, if any, between
the amount realized (net of accrued interest) and its adjusted basis in such
Regular Certificate. A seller's adjusted basis generally will equal the cost of
such Regular Certificate to the seller, increased by any original issue discount
reported by such seller with respect to such Regular Certificate and reduced
(but not below zero) by distributions received by such seller and by any
amortized premium. Except as described above with respect to under "-- 5. Market
Discount" and with respect to the next three paragraphs, any such gain or loss
will be capital gain or loss provided the Regular Certificate is held as a
capital asset, and will be long term or short term depending upon whether the
Regular Certificate has been held for more than one year.
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Gain from the disposition of a Regular Certificate that might otherwise be
capital gain will be treated as ordinary income to the extent that such gain
does not exceed the excess, if any, of (i) the amount that would have been
includable in the seller's gross income had income accrued at a rate equal to
110% of "the applicable Federal rate" under Section 1274(d) of the Code
(generally, an average yield of United States Treasury obligations of different
ranges of maturities published monthly by the Service), determined as of the
date of purchase of such Regular Certificate, over (ii) the amount of income
actually includable in the gross income of the seller with respect to the
Regular Certificate.
Regular Certificates will be "evidences of indebtedness" within the meaning
of Section 582(c)(1) of the Code, and accordingly, gain or loss recognized from
a sale of a Regular Certificate by a bank or thrift institution to which such
section applies would be ordinary income or loss.
If Bank of America and BankAmerica Housing Services, or either of them, is
determined to have intended on the date of issue of the Regular Certificates to
call all or any portion of the Regular Certificates prior to their stated
maturity within the meaning of Section 1271(a)(2)(A) of the Code, any gain
realized upon a sale, exchange, retirement, or other disposition of a Regular
Certificate would be considered ordinary income to the extent it does not exceed
the unrecognized portion of the original issue discount, if any, with respect to
the Regular Certificate. The OID Regulations provide that the intention to call
rule will not be applied to mortgage-backed securities such as the Regular
Certificates. In addition, under the OID Regulations, a mandatory sinking fund
or call option is not evidence of an intention to call.
8. PASS-THROUGH OF EXPENSES OTHER THAN INTEREST. If a Trust Fund for which
a REMIC election is made is considered a "single-class REMIC" (as defined
below), a portion of such Trust Fund's servicing, administrative and other
non-interest expenses will be allocated as a separate item to those Regular
Certificateholders that are "pass-through interest holders" (as defined below).
Such a holder would be required to add its allocable share, if any, of such
expenses to its gross income and to treat the same amount as an item of
investment expense. An individual would generally be allowed a deduction for
such an expense item for regular tax purposes only as a miscellaneous itemized
deduction subject to the limitation under Section 67 of the Code, and may not be
allowed any deduction for such item for purposes of the alternative minimum tax.
Section 67 of the Code allows deductions for miscellaneous itemized deductions
only to the extent that in the aggregate they exceed 2% of an individual's
adjusted gross income. The Revenue Reconciliation Act of 1990 further limits the
itemized deductions allowed to certain individuals. If so specified in the
related Prospectus Supplement, the applicable Agreement will require each holder
to give the Trust Fund written notice immediately upon becoming a holder, if it
is a pass-through interest holder, or is holding a Regular Certificate on behalf
of a pass-through interest holder. The Trust Fund will report to each holder
that has given the Trust Fund such notice (and others if it is required) and to
the Service, each such holder's allocable share, if any, of the Trust Fund's
noninterest expenses. Generally, a "single-class REMIC" is defined as (i) a
REMIC that would be treated as an investment trust under Treasury regulations
but for its qualification as a REMIC or (ii) a REMIC that is substantially
similar to an investment trust but is structured with the principal purpose of
avoiding the allocation requirement imposed under Section 67 of the Code. The
term "pass-through interest holder" generally refers to individuals, entities
taxed as individuals and certain pass-through entities, but does not include
real estate investment trusts. Such investors should consult their own tax
advisors regarding consequences to them of the allocation of the Trust Fund's
non-interest expenses. In addition, the amount of itemized deductions otherwise
allowable for the taxable year of an individual whose adjusted gross income
exceeds certain thresholds will be reduced.
9. TAXATION OF CERTAIN FOREIGN INVESTORS. For purposes of this discussion,
a "Foreign Holder" is a Certificateholder who holds a Regular Certificate and
who is not (i) a citizen or resident of the United States, (ii) a corporation,
partnership, or other entity organized in or under the laws of the United States
or a political subdivision thereof or (iii) an estate or trust, the income of
which is included in gross income for United States tax purposes regardless of
its source. Unless the interest on a Regular Certificate is effectively
connected with the conduct by the Foreign Holder of a trade or business within
the United States, the Foreign Holder is not subject to federal income or
withholding tax on interest (or original issue discount, if any) on a Regular
Certificate (subject to possible backup withholding of tax, discussed below),
provided the Foreign Holder is not a controlled foreign corporation related to
Bank of America or BankAmerica Housing
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Services and does not own actually or constructively 10% or more of the voting
stock of Bank of America or BankAmerica Housing Services. To qualify for this
tax exemption, the Foreign Holder will be required to provide periodically a
statement signed under penalties of perjury certifying that the Foreign Holder
meets the requirements for treatment as a Foreign Holder and providing the
Foreign Holder's name and address. The statement, which may be made on a Form
W-8 or substantially similar substitute form, generally must be provided in the
year a payment occurs or in either of the two preceding years. The statement
must be provided either directly or through a clearing organization or financial
institution. This exemption may not apply to a Foreign Holder that owns directly
or indirectly both Regular Certificates and Residual Certificates. If the
interest on a Regular Certificate is effectively connected with the conduct by a
Foreign Holder of a trade or business within the United States, then the Foreign
Holder will be subject to tax at regular graduated rates. Foreign Holders should
consult their own advisors regarding the specific tax consequences of their
owning a Regular Certificate.
Any gain recognized by a Foreign Holder upon a sale, retirement or other
taxable disposition of a Regular Certificate generally will not be subject to
United States federal income tax unless either (i) the Foreign Holder is a
non-resident alien individual who holds the Regular Certificate as a capital
asset and who is present in the United States for 183 days or more in the
taxable year of the disposition and either the gain is attributable to an office
or other fixed place of business maintained in the United States by the
individual or the individual has a "tax home" in the United States, or (ii) the
gain is effectively connected with the conduct by the Foreign Holder of a trade
or business within the United States.
A Regular Certificate will not be included in the estate of a Foreign Holder
who does not own actually or constructively 10% or more of the voting stock of
Bank of America or BankAmerica Housing Services. Regular Certificateholders who
are non-U.S. Persons and persons related to such holders should not acquire any
Residual Certificates, and Residual Certificateholders and persons related to
Residual Certificateholders should not acquire any Regular Certificates without
consulting their tax advisors as to the possible adverse tax consequences of
doing so.
10. BACKUP WITHHOLDING. Under certain circumstances, a REMIC
Certificateholder may be subject to "backup withholding" at a 31% rate. Backup
withholding may apply to a REMIC Certificateholder who is a United States person
if the holder, among other circumstances, fails to furnish his Social Security
number or other taxpayer identification number to the Trustee. Backup
withholding may apply, under certain circumstances, to a REMIC Certificateholder
who is a foreign person if the REMIC Certificateholder fails to provide the
Trustee or the REMIC Certificateholder's securities broker with the statement
necessary to establish the exemption from federal income and withholding tax on
interest on the REMIC Certificates. Backup withholding, however, does not apply
to payments on a Certificate made to certain exempt recipients, such as
corporations and tax-exempt organizations, and to certain foreign persons. REMIC
Certificateholders should consult their tax advisors for additional information
concerning the potential application of backup withholding to payments received
by them with respect to a Certificate.
11. REPORTING REQUIREMENTS. The Servicer will report annually to the
Service, to holders of record of the Regular Certificates that are not excepted
from the reporting requirements and, to the extent required by the Code, to
other interested parties, information with respect to the interest paid or
accrued on the Regular Certificates, original issue discount, if any, accruing
on the Regular Certificates and information necessary to compute the accrual of
any market discount or the amortization of any premium on the Regular
Certificates.
D. TAXATION OF RESIDUAL CERTIFICATES. The discussion under this heading
applies only to a Series of Certificates with respect to which a REMIC election
is made and to Residual Certificates. Such Residual Certificates will be subject
to tax rules, described below, that differ from those that would apply if they
were treated for federal income tax purposes as direct ownership interests in
the related Trust Fund or as debt instruments issued by such Trust Fund.
1. GENERAL. Although a REMIC is a separate entity for federal income tax
purposes, a REMIC is not generally subject to federal income tax. Rather, the
taxable income of a REMIC is taken into account by the holders of REMIC residual
interests.
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In general, each original holder of a Residual Certificate will report on
its federal income tax return, as ordinary income, its share of the "daily
portion" of the taxable income of the Trust Fund for each day during the taxable
year on which such Residual Certificateholder held a Residual Certificate. The
"daily portion" of the taxable income of the Trust Fund is determined by
allocating to each day in any calendar quarter its ratable portion of the
taxable income or net loss of the Trust Fund for such quarter, and such Residual
Certificateholder's share of the "daily portion" is based on the portion of
outstanding Residual Certificates that such Residual Certificateholder owns on
such day. REMIC taxable income will be taxable to the Residual
Certificateholders without regard to the timing or amounts of cash distributions
by the REMIC. Ordinary income derived from Residual Certificates will be
"portfolio income" for purposes of the taxation of taxpayers subject to the
limitation on the deductibility of "passive losses." As residual interests, the
Residual Certificates will be subject to tax rules, described below, that differ
from those that would apply if the Residual Certificates were treated for
federal income tax purposes as direct ownership interests in the Certificates,
or as debt instruments issued by the REMIC. UNDER CERTAIN CIRCUMSTANCES, A
RESIDUAL CERTIFICATEHOLDER MAY BE REQUIRED TO RECOGNIZE FOR A GIVEN PERIOD
INCOME SUBSTANTIALLY IN EXCESS OF DISTRIBUTIONS MADE ON THE RESIDUAL
CERTIFICATES.
A subsequent Residual Certificateholder also will report on its federal
income tax return amounts representing a daily share of the taxable income of
the Trust Fund for each day that such Residual Certificateholder held such
Residual Certificate. Those daily amounts generally would equal the amounts,
described above, that would have been reported for the same days by a holder of
a Residual Certificate (an "Original Holder") that purchased such Residual
Certificate at its original issuance and held it continuously thereafter. As
discussed below, the taxable income of the Trust Fund will be calculated based
in part on the initial tax basis to the Trust Fund of its assets, which in turn
equals the sum of the issue prices of the Residual Certificates and each Class
of Regular Certificates. The legislative history of the 1986 Act indicates that
certain adjustments may be appropriate to reduce (or increase) the income of a
subsequent Residual Certificateholder that purchased such Residual Certificate
at a price greater than (or less than) the adjusted basis (as defined below in
"Distributions") such Residual Certificate would have in the hands of an
Original Holder. For the present, however, adjustments are apparently not
permitted or required.
2. DISTRIBUTIONS. A holder's adjusted basis in a Residual Certificate will
equal the purchase price of such Residual Certificate, increased by the amount
of the related Trust Fund's taxable income that is allocated to the holder of
such Residual Certificate, and decreased (but not below zero) by the amount of
distributions received thereon by such holder and the Trust Fund's net losses
allocated to such holder. Payments on a Residual Certificate (whether at their
scheduled times or as a result of prepayments) will generally not result in any
taxable income or loss to the holder of a Residual Certificate. If the amount of
such payment exceeds a holder's adjusted basis in its Residual Certificate,
however, the holder will recognize gain (treated as gain from the sale or
exchange of its Residual Certificate) to the extent of such excess. See "-- 10.
Sale or Exchange" below.
3. TAXABLE INCOME OF THE TRUST FUND. 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 the deductibility of interest and expenses related to
tax-exempt income will apply. In general, the Trust Fund's taxable income will
reflect a netting of (i) the gross income produced by the assets of the Trust
Fund, including the stated interest and any original issue discount or market
discount income on the Contracts in the related Contract Pool (net of any
amortized premium on such Contracts), income from the investment or reinvestment
of cash flows and, if applicable, reserve assets, and amortization of any issue
premium with respect to the Regular Certificates and (ii) deductions, including
stated interest and original issue discount expense on Regular Certificates that
would be permitted if the Regular Certificates were indebtedness of the Trust
Fund, servicing fees, and other administrative expenses of the Trust Fund
(except as described below under "-- 5. Expenses Other Than Interest"). If there
is more than one Class of Regular Certificates, deductions allowed to the Trust
Fund with respect to the Regular Certificates will generally be calculated
separately with respect to each Class based on the yield of that Class.
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For purposes of determining its taxable income, the Trust Fund will have an
initial aggregate tax basis in its assets equal to the sum of the issue prices
of the Regular Certificates and the Residual Certificates. Such aggregate basis
will be allocated first to cash and cash equivalents held by the Trust Fund and
then among the individual Contracts and other assets of the Trust Fund in
proportion to their respective fair market values. The issue price of a
Certificate of a Class (whether Regular Certificates or Residual Certificates)
that is publicly offered will be the initial offering price to the public
(excluding bond houses and brokers) at which a substantial amount of the
Certificates of that Class is sold, and if not publicly offered will be the fair
market value of that Certificate at the time of issuance. If a Residual
Certificate has a negative value, it is not clear whether its issue price would
be considered to be zero or such negative amount for purposes of determining the
REMIC's basis in its assets. The REMIC Regulations imply that residual interest
cannot have a negative basis or a negative issue price. However, the preamble to
the REMIC Regulations indicates that, while existing tax rules do not
accommodate such concepts, the Service is considering the tax treatment of these
types of residual interests, including the proper tax treatment of a payment
made by the transferor of such a residual interest to induce the transferee to
acquire that interest. Absent regulations or administrative guidance to the
contrary, and unless the related Prospectus Supplement otherwise provides, it is
not expected that any Trust Fund as to which a REMIC election is made will treat
a Class of Residual Certificates as having a value of less than zero for
purposes of determining the basis of the related REMIC in its assets.
If a Trust Fund acquires a Contract and the principal amount of such
Contract (or revised issue price in the case of a Contract issued with original
issue discount) exceeds the Trust Fund's basis in such Contract by more than a
DE MINIMIS amount (as described above in "C. Taxation of Regular Certificates --
5. Market Discount"), such discount would generally be includable in the Trust
Fund's income as it accrues, in advance of receipt of the cash attributable to
such income, under a constant yield method, similar to the method for accruing
original issue discount on Regular Certificates described above in "C. Taxation
of Regular Certificates -- 2. Original Issue Discount." The Trust Fund's
deductions for original issue discount expense with respect to Regular
Certificates also will be determined under those rules, except that the DE
MINIMIS rule that may apply to holders of Regular Certificates and the
adjustments for holders of Regular Certificates that purchase their Certificates
at a price greater than the adjusted issue price described therein will not
apply.
If the basis of the Trust Fund exceeds the remaining stated redemption price
at maturity of such a Contract, the Trust Fund will be considered to have
acquired such Contract at a premium equal to the amount of such excess. In the
event that any Contract in the Contract Pool is acquired by the Trust Fund at a
premium, the Trust Fund will be entitled to amortize such premium on a
yield-to-maturity basis. Although the matter is not free from doubt, the Trust
Fund intends to make this calculation using a reasonable prepayment assumption.
If a Class of Regular Certificates is issued at a price in excess of the
aggregate principal amount of such Class (the excess, the "Issue Premium"), the
portion of the Issue Premium that is considered to be amortized during a taxable
year will be treated as ordinary income of the Trust Fund for such taxable year.
Although the matter is not entirely certain, it is likely that the Issue Premium
would be amortized under a constant yield method in a manner analogous to the
method of accruing original issue discount described above under "C. Taxation of
Regular Certificates -- 2. Original Issue Discount."
The taxable income recognized by a holder of a Residual Certificate also may
be greater in earlier years because the REMIC will use a constant yield in
computing income from the Contracts and interest deductions with respect to
Regular Certificates, expressed as a percentage of the outstanding principal
amount of the Regular Certificates, may increase over time as earlier Classes
are paid. This method of taxation of Residual Certificates can produce a
significantly less favorable after-tax return for a Residual Certificate than if
it were taxed as a debt instrument.
A Residual Certificateholder will not be permitted to amortize the cost of
its Residual Certificate as an offset to its share of the taxable income of the
Trust Fund. However, that taxable income will not include cash received by the
Trust Fund that represents a recovery of the Trust Fund's basis in its assets,
and, as described above, the issue price of the Residual Certificates will be
added to the issue price of Regular Certificates in determining the Trust Fund's
initial basis in its assets. Such recovery of basis by the Trust Fund will have
the
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effect of amortization of the issue price of the Residual Certificates over the
life of the Trust Fund's assets. However, in view of the possible acceleration
of the income of holders of Residual Certificates described above, the period of
time over which such issue price is effectively amortized may be longer than the
economic life of the Residual Certificates.
THE METHOD OF TAXATION OF RESIDUAL CERTIFICATES DESCRIBED ABOVE CAN PRODUCE
A SIGNIFICANTLY LOWER AFTER-TAX YIELD FOR A RESIDUAL CERTIFICATE THAN WOULD BE
THE CASE IF (I) RESIDUAL CERTIFICATES WERE TAXABLE IN THE SAME MANNER AS DEBT
INSTRUMENTS ISSUED BY THE TRUST FUND OR (II) NO PORTION OF THE TAXABLE INCOME ON
THE RESIDUAL CERTIFICATES IN EACH PERIOD WERE TREATED AS "EXCESS INCLUSIONS" (AS
DEFINED BELOW). IN CERTAIN PERIODS, TAXABLE INCOME AND THE RESULTING TAX
LIABILITY ON A RESIDUAL CERTIFICATE ARE LIKELY TO EXCEED PAYMENTS RECEIVED
THEREON. IN ADDITION, A SUBSTANTIAL TAX MAY BE IMPOSED ON CERTAIN TRANSFERORS OF
THE RESIDUAL CERTIFICATES AND CERTAIN BENEFICIAL OWNERS OF THE RESIDUAL
CERTIFICATES THAT ARE "PASS-THRU" ENTITIES. INVESTORS SHOULD CONSULT THEIR TAX
ADVISORS BEFORE PURCHASING A RESIDUAL CERTIFICATE.
4. NET LOSSES OF THE TRUST FUND. The Trust Fund will have a net loss for a
calendar quarter if its deductions for that calendar quarter exceed its gross
income for that calendar quarter. The net loss allocable to any Residual
Certificate will not be deductible by the holder to the extent that such net
loss exceeds such holder's adjusted basis (as defined above in "-- 2.
Distributions") in such Residual Certificate at the end of the calendar quarter
in which such loss arises (or the time of disposition of the Residual
Certificate, if earlier), determined without taking into account the net loss
for such quarter. Any net loss that is not currently deductible by reason of
this limitation may be carried forward indefinitely, but may be used only to
offset taxable income of the same Trust Fund subsequently allocated to such
Residual Certificateholder. The ability of Residual Certificateholders that are
individuals or closely-held corporations to deduct net losses may be subject to
additional limitations under the Code.
5. EXPENSES OTHER THAN INTEREST. Except in the limited circumstance when
the Trust Fund is considered a "single-class REMIC" (as defined above in "C.
Taxation of Regular Certificates -- 8. Pass-Through of Expenses Other Than
Interest"), the Trust Fund's servicing, administrative and other noninterest
expenses will be allocated entirely to the Residual Certificateholders. In the
case where the Trust Fund is considered a single-class REMIC, such expenses will
be allocated proportionately among Regular and Residual Certificateholders. See
"C. Taxation of Regular Certificates -- 8. Pass-Through of Expenses Other Than
Interest." In either case, such expenses will be allocated as a separate item to
those holders that are "pass-through interest holders" (as defined above in "C.
Taxation of Regular Certificates -- 8. Pass-Through of Expenses Other Than
Interest"). Such a holder would be required to add its allocable share, if any,
of such expenses to its gross income and treat the same amount as an item of
investment expense. Limitations on the deductibility of such expenses are
described above in "C. Taxation of Regular Certificates -- 8. Pass-Through of
Expenses Other Than Interest." The related Agreement will require each holder to
give the Trust Fund written notice upon becoming a holder if it is a
pass-through interest holder, or is holding a Residual Certificate on behalf of
a pass-through interest holder. The Trust Fund will report quarterly to each
holder of a Residual Certificate during any calendar quarter that has given the
Trust Fund such notice (and others if it is required) and to the Service
annually such holder's allocable share, if any, of the Trust Fund's non-interest
expenses. Such investors should consult their tax advisors in determining the
consequences to them of the allocation of the Trust Fund's non-interest
expenses.
6. PROHIBITED TRANSACTIONS; SPECIAL TAXES. Income from certain transactions
by the REMIC, called prohibited transactions, will not be part of the
calculation of income or loss includable in the federal income tax returns of
Residual Certificateholders, 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 pursuant to a (a) substitution for a defective
mortgage within two years or for any qualified mortgage within three months of
the specified Startup Date, (b) repurchase of a defective mortgage, (c)
foreclosure, default, or imminent default of a qualified mortgage, (d)
bankruptcy or insolvency of the REMIC or (e) qualified (complete) liquidation,
(ii) the receipt of income from assets that are not the type of mortgage loans
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 (complete) liquidation. The
Trust Fund will be subject to a tax equal to 100% of the amount of any
contributions of property made to the Trust
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Fund after the Startup Day, except for certain cash contributions specified in
Section 860G(d) of the Code. An additional tax may be imposed on the Trust Fund,
at the highest marginal federal corporate income tax rate, on certain net income
from foreclosure property.
It is anticipated that the Trust Fund will not engage in any prohibited
transactions in which it would recognize a material amount of net income or
receive substantial contributions of property after the Startup Date. However,
if the Trust Fund is subject to the tax on prohibited transactions or
contributions, such tax would generally be borne by the Residual
Certificateholders.
7. EXCESS INCLUSIONS. A portion of the income of the Trust Fund allocable
to a Residual Certificateholder referred to in the Code as an "excess inclusion"
will, with an exception for certain thrift institutions, be subject to federal
income tax in all events. (Excess inclusions are defined below.) Thus, for
example, an excess inclusion (i) may not, except with respect to certain thrift
institutions, be offset by any unrelated losses or net operating loss carryovers
of a Residual Certificateholder, (ii) will be treated as "unrelated business
taxable income" within the meaning of Section 512 of the Code if the Residual
Certificateholder is a pension fund or any other organization that is subject to
tax only on its unrelated business taxable income and (iii) is not eligible for
any reduction in the rate of withholding tax in the case of a Residual
Certificateholder that is a foreign investor, as further discussed in "-- 13.
Foreign Investors" below. In addition, if a real estate investment trust,
regulated investment company, or certain pass-through entities own a Residual
Certificate, a portion of dividends paid by such entities would be treated as
excess inclusions in the hands of its shareholders with the same consequences as
excess inclusions attributed directly to a Residual Certificateholder.
Except as discussed in the following paragraph, with respect to any Residual
Certificateholder, the excess inclusion for any calendar quarter will equal the
excess, if any, of (i) the amount of the Trust Fund's taxable income for the
calendar quarter allocable to the Residual Certificateholder, over (ii) the sum
of the "daily accruals" (as defined below) for all days during the calendar
quarter on which the Residual Certificateholder held such Residual Certificate.
For this purpose, daily accruals with respect to a Residual Certificateholder
will be calculated by allocating to each day in such calendar quarter its
ratable portion of the product of (i) the "adjusted issue price" (as defined
below) of the Residual Certificate at the beginning of such calendar quarter,
and (ii) 120% of the "long-term Federal rate" (defined below), calculated on the
issue date of the Residual Certificate as if it were a debt instrument and based
on quarterly compounding. For this purpose, the "adjusted issue price" of a
Residual Certificate at the beginning of any calendar quarter will equal its
issue price, increased by the aggregate of the daily accruals for all prior
calendar quarters and the amount of any contributions made to the Trust Fund
with respect to the Residual Certificates after the Startup Date, and decreased
(but not below zero) by the aggregate amount of distributions made with respect
to the Residual Certificate before the beginning of such calendar quarter. The
"long-term Federal rate" is an average of current yields on Treasury securities
with a remaining term of greater than nine years, computed and published monthly
by the Service. As an exception to the general rule described above, the
Treasury has authority to issue regulations that would treat 100% of the income
accruing on a Residual Certificate as an excess inclusion, if the Residual
Certificates, in the aggregate, are considered not to have "significant value."
The REMIC Regulations, however, do not contain such a rule.
As discussed above, thrift organizations to which Section 593 of the Code
applies are excepted from the general rule that excess inclusions are, in all
events, subject to taxation. However, the REMIC Regulations prohibit thrift
institutions from offsetting their excess inclusions with unrelated losses and
net operating loss carryovers if such Residual Certificates do not have
"significant value." A Residual Certificate has significant value if (i) the
aggregate of the issue prices of the Residual Certificates in the REMIC is at
least 2% of the aggregate of the issue prices of all Residual and Regular
Certificates of the REMIC and (ii) the "anticipated weighted average life" of
the Residual Certificate (as defined below) is at least 20% of the "anticipated
life of the REMIC" (as defined below). The anticipated weighted average life of
the Residual Certificates is based on all anticipated payments to be received
with respect thereto (using the Assumed Prepayment Rate). The anticipated
weighted average life of the REMIC is the weighted average of the anticipated
weighted average lives of all Classes of Certificates in the REMIC (computed
using all anticipated payments on a Regular Certificate with nominal or no
principal). Finally, an ordering rule under the
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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
related Residual Certificates are expected to have "significant value."
8. EFFECT OF DEFAULTS AND DELINQUENCIES. The Residual Certificates of a
multiple-Class Series may be subordinate to one or more Classes of Regular
Certificates (for purposes of this paragraph, "Senior Certificates"), and, in
the event there are defaults or delinquencies on the Contracts in the related
Contract Pool, amounts that would otherwise be distributed on the Residual
Certificates may instead be distributed on the Senior Certificates. However, the
Trust Fund will generally be required to report income in respect of Contracts
(and deductions with respect to the Regular Certificates) without giving effect
to default and delinquencies, except to the extent it can be established that
amounts due on the Contracts are uncollectible. To the extent the income on a
delinquent or defaulted Contract is greater than the deduction allowed in
respect of interest on the Regular Certificate that relates to such Contract,
the Trust Fund may recognize net income without making corresponding
distributions of cash on the Residual Certificates, and holders of Residual
Certificates will be required to report their pro rata share of the net income
of the Trust Fund without regard to the timing and amount of cash distributed on
such Residual Certificates.
9. TAX ON TRANSFERS OF RESIDUAL CERTIFICATES TO CERTAIN ORGANIZATIONS. An
entity will not qualify as a REMIC unless there are reasonable arrangements
designed to ensure that residual interests in such entity are held by
"disqualified organizations" (as defined below). Restrictions on the transfer of
the Residual Certificates that are intended to meet this requirement will be
included in the related Agreement and are discussed more fully in "Restrictions
on Transfer of REMIC Residual Certificates." If, notwithstanding those
restrictions, a Residual Certificate is transferred to a "disqualified
organization," 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. Under the REMIC
Regulations, the anticipated excess inclusions must be determined based on (i)
events that have occurred up to the time of the transfer and (ii) the project
payments based on the Assumed Prepayment Rate. The REMIC Regulations also
provide that the present value of the anticipated excess inclusions is
determined by discounting the anticipated excess inclusions as of the date of
the transfer using the applicable Federal rate under Section 1274(d)(1) of the
Code for the month of the transfer that would apply to a hypothetical obligation
with a term beginning on the date of the transfer and ending on the date the
life of the REMIC is anticipated to expire (as determined under rules described
above in "-- 7. Excess Inclusions"). Such a tax would generally be imposed on
the transferor of the Residual Certificate, except that where such transfer is
through an agent for a disqualified organization, the tax would instead be
imposed on such agent. However, a transferor of a Residual Certificate (or an
agent for a disqualified organization) would in no event be liable for such tax
with respect to a transfer if the transferee furnishes to such transferor (or
such agent) an affidavit that the transferee is not a disqualified organization,
and as of the time of the transfer the transferor or the agent does not have
actual knowledge that such affidavit is false.
In addition, if a "pass-through entity" (as defined below) includes in
income excess inclusions with respect to a Residual Certificate, and a
disqualified organization is the record holder of an interest in such entity,
then a tax will be imposed on such entity equal to the product of (i) the amount
of excess inclusions on the Residual Certificate that are allocable to the
interest in the pass-through entity held by such disqualified organization and
(ii) the highest marginal federal income tax rate imposed on corporations.
However, a pass-through entity will in no event be liable for such tax with
respect to a record holder if the record holder furnishes the pass-through
entity with an affidavit that the record holder is not a disqualified
organization, and, as of the time the record holder becomes such a holder, the
pass-through entity does not have actual knowledge that such affidavit is false.
For these purposes, the term "disqualified organization" means (i) the
United States, any State or political subdivision thereof, any possession of the
United States, any foreign government, any international organization, or any
agency or instrumentality of the foregoing (other than an instrumentality that
is a corporation if all of its activities are subject to tax and, except for the
Federal Home Loan Mortgage
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Corporation, a majority of its board of directors is not selected by an such
governmental unit), (ii) an organization (other than a cooperative described in
Section 521 of the Code) which is exempt from federal income tax (including the
tax imposed by Section 511 of the Code on unrelated business taxable income) on
excess inclusions or (iii) any organization described in Section 1381(a)(2)(C)
of the Code. For these purposes, the term "pass-through entity" means any
regulated investment company, real estate investment trust, common trust fund,
partnership, trust, estate and certain other entities described in Section
860E(e)(6) of the Code. 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.
10. SALE OR EXCHANGE. If a Residual Certificate is sold or exchanged, the
seller will recognize gain or loss equal to the difference, if any, between the
amount realized and its adjusted basis in the Residual Certificate (as defined
above in "-- 2. Distributions") at the time of such sale or exchange (except
that the recognition of a loss may be limited under the "wash sale" rules
described below). In general, any such gain or loss will be capital gain or
loss, provided the Residual Certificate is held as a capital asset as defined in
Section 1221 of the Code. However, a Residual Certificate will be an "evidence
of indebtedness" within the meaning of Section 582(c)(1) of the Code, so that
gain or loss recognized from the sale of a Residual Certificate by a bank or
thrift institution to which such section applies would be ordinary income or
loss.
The Conference Committee Report to the 1986 Act provides that, except as
provided in Treasury Regulations, the wash sale rules of Section 1091 of the
Code will apply to dispositions of Residual Certificates where the seller of the
Residual Certificate, during the period beginning six months before the sale or
disposition of the Residual Certificate and ending six months after such sale or
disposition, acquires (or enters into any other transaction that results in the
application of Section 1091 of the Code) 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.
11. NONECONOMIC RESIDUAL INTERESTS. The REMIC Regulations would 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" (as defined below) to a Residual Holder is disregarded for all federal
income tax purposes if a significant purpose of the transfer is to enable the
transferor 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 the time of 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. The anticipated excess inclusions and the present value rate
are determined in the same manner as set forth above. 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, as a result of the investigation,
the transferor found that the transferee had historically paid its debts as they
came due and found no significant evidence to indicate that the transferee will
not continue to pay its debts as they come due in the future and (ii) the
transferee represents to the transferor that it understands that, as the holder
of a non-economic residual interest, the transferee may incur tax liabilities in
excess of any 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 Agreement with respect to each Series of REMIC Certificates will
require the transferee of a Residual Certificate to certify to the statements in
clause (ii) of the preceding sentence as part of the affidavit described below
under "Restrictions on Transfer of REMIC Residual Certificates."
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12. TERMINATION. The Trust Fund related to a Series of Certificates will
terminate shortly following the retirement of Certificates in such Series. If a
Residual Certificateholder's adjusted basis in its Residual Certificate exceeds
the amount of cash distributed to such Residual Certificateholder in final
liquidation of its interest, then, although the matter is not entirely free from
doubt, it would appear that the Residual Certificateholder is entitled to a loss
equal to the amount of such excess.
13. FOREIGN INVESTORS. Unless otherwise provided in the applicable
Prospectus Supplement, no record or beneficial ownership interest in a Residual
Certificate may be transferred to a person that is a Foreign Holder (as defined
above in "C. Taxation of Regular Certificates -- 9. Taxation of Certain Foreign
Investors"). See "Restrictions on Transfer of REMIC Residual Certificates"
below. With respect to permitted transfers, Residual Certificateholders that are
Foreign Holders should assume that payments made on the Residual Certificates
they hold will be subject to a 30% withholding tax, or such a lesser rate as may
be provided under any applicable tax treaty, except that the rate of withholding
on any payments made on Residual Certificates that are excess inclusions will
not be subject to reduction under any applicable tax treaties. See "-- 7. Excess
Inclusions" above. Under the REMIC Regulations, a transfer of a residual
interest that has tax avoidance potential is disregarded for all federal income
tax purposes if the transferee is a Foreign Holder. The REMIC Regulations state
that a residual interest has tax avoidance potential unless, at the time of the
transfer, the transferor reasonably expects that, for each excess inclusion, the
REMIC will distribute to the transferee residual interest holder an amount that
will equal at least 30% of the excess inclusion, and that each such amount will
be distributed at or after the time at which the excess inclusion accrues and
not later than the close of the calendar year following the calendar year of
accrual. See "-- 9. Tax on Transfers of Residual Certificates to Certain
Organizations" above for rules regarding the determination of anticipated excess
inclusions. The above rules do not apply to transfers of Residual Certificates
if the transferee's income from the Residual Certificate would be effectively
connected with a United States trade or business of the transferee. The REMIC
Regulations also provide that a transfer of a Residual Certificate from a
Foreign Holder to a United States person or to a Foreign Holder in whose hands
the income from the Residual Certificate would be effectively connected with a
United States trade or business of the transferee will be disregarded if the
transfer has the effect of allowing the transferor to avoid tax on accrued
excess inclusions.
14. MARK-TO-MARKET OF RESIDUAL CERTIFICATES. Prospective purchasers of a
Residual Certificate should be aware that, under proposed regulations (the
"Proposed Mark-to-Market Regulations"), a Residual Certificate acquired after
January 3, 1995 cannot be marked-to-market. The Proposed Mark-to-Market
Regulations change the temporary regulations which allowed a Residual
Certificate to be marked-to-market provided that it was not a "negative value"
residual interest and did not have the same economic effect as a "negative
value" residual interest. Prospective purchasers of a REMIC Residual Certificate
should consult their tax advisors regarding the possible application of the
Temporary Mark-to-Market Treasury Regulations and Proposed Mark-to-Market
Treasury Regulations to REMIC Residual Certificates.
15. ADDITIONAL TAXABLE INCOME OF RESIDUAL INTERESTS. Any payment received
by a holder of a Residual Certificate in connection with the acquisition of such
Residual Certificate will be taken into account in determining the income of
such holder for federal income tax purposes. Although it appears likely that any
such payment would be includable in income immediately upon its receipt or
accrual as ordinary income, the IRS might assert that such payment should be
included in income over time according to an amortization schedule or according
to some other method. Because of the uncertainty concerning the treatment of
such payments, holders of Residual Certificates should consult their tax
advisors concerning the treatment of such payments for income tax purposes.
E. OTHER MATTERS RELATING TO REMIC CERTIFICATES; ADMINISTRATIVE
MATTERS. Solely for the purposes of the administrative provisions of the Code,
each Trust Fund for which a REMIC election is made will be treated as a
partnership, and the Residual Certificateholders will be treated as the partners
thereof. The Trust Fund must maintain its books on a calendar year basis and
must file federal information returns in a manner similar to a partnership for
federal income tax purposes. Certain information on such returns will be
furnished to each Residual Certificateholder. The Trust Fund also will be
subject to the procedural and administrative rules of the Code applicable to
partnerships, including rules for determining any adjustments
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to among other things, items of REMIC income, gain, loss, deduction or credit by
the Service in a unified administrative proceeding. The holders of Residual
Certificates will generally be entitled to participate in audits of the Trust
Fund by the Service to the same extent as general partners in an audit of a
partnership, Regular Certificateholders will not be entitled to participate in
any such audits.
Each Residual Certificateholder is required to treat items on its return
consistently with their treatment on the Trust Fund's return, unless the
Residual Certificateholder either files a statement identifying the
inconsistency or establishes that the inconsistency resulted from incorrect
information received from the Trust Fund. The Service may assert a deficiency
resulting from a failure to comply with the consistency requirement without
instituting an administrative proceeding at the Trust Fund level. The Trust Fund
does not intend to register as a tax shelter pursuant to Section 6111 of the
Code because it is not anticipated that the Trust Fund will have a net loss for
any of the first five taxable years of its existence. Any person that holds a
Residual Certificate as a nominee for another person will be required to furnish
the Trust Fund, in a manner provided in Treasury Regulations, with the name and
address of such person, and other information.
Each Residual Certificateholder, by purchasing its Residual Certificate, (A)
shall be deemed to consent to the appointment of the Servicer as (i) the "tax
matters person" (within the meaning of Section 1.860F -- 4(d) of the REMIC
Regulations) for the Trust Fund and (ii) attorney-in-fact and agent for any
person that is the tax matters person if the Servicer is unable to serve as the
tax matters person, and (B) agrees to execute any documents required to give
effect to (A) above.
NON-REMIC CERTIFICATES
The discussion under this heading applies only to a Series of Certificates
with respect to which a REMIC election is not made ("Non-REMIC Certificates").
A. CHARACTERIZATION OF THE TRUST FUND. Upon the issuance of any Series of
Certificates with respect to which no REMIC election is made, Morrison &
Foerster LLP, special counsel to Bank of America and BankAmerica Housing
Services, will deliver its opinion generally to the effect that with respect to
each such Series of Certificates, under then existing law and assuming
compliance by the Seller(s), the Servicer and the Trustee of such Series with
all of the provisions of the related Agreement, and agreement or agreements, if
any, providing for a Credit Facility or a Liquidity Facility, together with any
agreement documenting the arrangement through which a Credit Facility or a
Liquidity Facility is held outside the related Trust Fund, the agreement or
agreements with any Underwriter, for federal income tax purposes, the Trust Fund
will be classified as a grantor trust and not as a corporation or an association
which is taxable as a corporation. Accordingly, each Non-REMIC Certificateholder
will be treated for federal income tax purposes as the owner of an undivided
interest in the Contracts and other assets included in the Trust Fund. As
further described below, each holder of a Non-REMIC Certificate must therefore
report on its federal income tax return the gross income from the portion of the
Contracts that is allocable to such Non-REMIC Certificate and may deduct its
share of the expenses paid by the Trust Fund that are allocable to such
Non-REMIC Certificate, at the same time and to the same extent as such items
would be reported by such holder if it had purchased and held directly such
interest in the Contracts and received directly its share of the payments on the
Contracts and paid directly its share of the expenses paid by the Trust Fund
when those amounts are received and paid by the Trust Fund. A Non-REMIC
Certificateholder who is an individual will be allowed deductions for such
expenses only to the extent that the sum of those expenses and certain other of
the Non-REMIC Certificateholder's miscellaneous itemized deductions exceeds 2%
of such individual's adjusted gross income. In addition, the amount of itemized
deductions otherwise allowable for the taxable year of an individual whose
adjusted gross income exceeds certain thresholds will be reduced. Other
potential limitations on deductibility are described above in "REMIC
Certificates -- C. Taxation of Regular Certificates -- 8. Pass-Through of
Expenses Other Than Interest." Although not clear, it appears that expenses paid
by the Trust Fund, and the gross income used to pay such expenses, should be
allocated among the classes of Non-REMIC Certificates in proportion to their
respective fair market values at issuance.
Under current Service interpretations of applicable Treasury Regulations,
Bank of America or BankAmerica Housing Services would be able to sell or
otherwise dispose of any subordinated Non-REMIC
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Certificates. Accordingly, Bank of America and BankAmerica Housing Services
expect to offer subordinated Non-REMIC Certificates for sale to investors. In
general, such subordination should not affect the federal income tax treatment
of either the subordinated or senior Certificates, and holders of subordinated
classes of Certificates should be able to recognize any losses allocated to such
class when and if losses are realized.
To the extent that any of the Contracts comprising a Contract Pool were
originated on or after March 21, 1984 and under circumstances giving rise to
original issue discount, Certificateholders will be required to report annually
an amount of additional interest income attributable to such discount in such
Contracts prior to receipt of cash related to such discount. See the discussion
above under "REMIC Certificates -- C. Taxation of Regular Certificates -- 2.
Original Issue Discount." Similarly, Code provisions concerning market discount
and amortizable premium will apply to the Contracts comprising a Contract Pool
to the extent that the loans were originated after July 18, 1984 and September
27, 1985, respectively. See the discussions above under "REMIC Certificates --
C. Taxation of Regular Certificates -- 5. Market Discount" and "REMIC
Certificates -- C. Taxation of Regular Certificates -- 4. Premium."
B. STATUS OF CERTIFICATES AS REAL PROPERTY LOANS. In general, the Non-REMIC
Certificates, other than "Premium Non-REMIC Certificates" (as defined below)
will be (i) "qualifying real property loans" within the meaning of Section
593(d) of the Code, (ii) "real estate assets" within the meaning of Section
856(c)(5)(A) of the Code and (iii) assets described in Section 7701(a)(19)(C) of
the Code to the extent the Trust Fund's assets qualify under those Sections of
the Code. Any amount includible in gross income with respect to the Non-REMIC
Certificates will be treated as "interest on obligations secured by mortgages on
real property or on interests in real property" within the meaning of Section
856(c)(3)(B) of the Code to the extent the income on the Trust Fund's assets
qualifies under that Code Section. The Treasury Regulations under Section 593 of
the Code define a "qualifying real property loan" to include a loan secured by a
mobile home unit "permanently fixed to real property." The Service has ruled
that obligations secured by permanently installed mobile home units qualify as
"real estate assets" under Section 856(c)(5)(A) of the Code. Assets described in
Section 7701(a)(19)(C) of the Code include loans secured by mobile homes not
used on a transient basis. However, whether Manufactured Homes would be viewed
as "permanently fixed" or permanently installed for purposes of Sections 593 or
856 of the Code would depend on the facts and circumstances of each case. The
Treasury Regulations under Section 593 of the Code provide, by way of example,
that a mobile home unit is permanently fixed to real property if, except for a
brief period in which the unit is transported to its site, such unit is placed
on a foundation at a site with wheels and axles removed, affixed to the ground
by means of straps, and connected to water, sewer, gas and electric facilities.
In this regard, investors should note that, unless stated otherwise in the
related Prospectus Supplement, most of the Contracts in the related Contract
Pool prohibit the Obligor from permanently attaching the related Manufactured
Home to its site if it were not so attached on the date of the Contract.
Non-REMIC Certificates that represent the right solely to interest payments on
the Contracts and Non-REMIC Certificates that are issued at prices that
substantially exceed the portion of the principal amount of the Contracts
allocable to such Non-REMIC Certificates (both types of Non-REMIC Certificates,
"Premium Non-REMIC Certificates") should qualify under the foregoing sections of
the Code to the same extent as other Certificates, but the matter is not free
from doubt. Prospective purchasers of Certificates who may be affected by the
foregoing Code provisions should consult their tax advisors regarding the status
of the Certificates under such provisions.
C. TAXATION OF NON-REMIC CERTIFICATES UNDER STRIPPED BOND RULES. Unless the
Prospectus Supplement indicates otherwise, the Non-REMIC Certificates will be
subject to the "stripped bond" rules of Section 1286 of the Code (or, if the
application of those rules to a particular Series of Non-REMIC Certificates is
uncertain, the Trust Fund will take the position that they apply). There is some
uncertainty as to how that section will be applied to securities such as the
Non-REMIC Certificates. Investors should consult their own tax advisors
regarding the treatment of the Non-REMIC Certificates under the stripped bond
rules.
Under the stripped bond rules, in each month the holder of a Non-REMIC
Certificate (whether a cash or accrual method taxpayer) will be required to
report interest income from the Non-REMIC Certificate equal to the income that
accrues on the Non-REMIC Certificate in such month, calculated, in accordance
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with the rules of the Code relating to original issue discount, under a constant
yield method. In general, the amount of such income reported in any month would
equal the product of such holder's adjusted basis in such Non-REMIC Certificate
at the beginning of such month (see " -- D. Sales of Certificates" below) and
the yield of such Non-REMIC Certificate to such holder. Such yield would be the
monthly rate (assuming monthly compounding) determined as of the date of
purchase that, if used in discounting the remaining payments on the portion of
the Contracts that is allocable to such Non-REMIC Certificate, would cause the
present value of those payments to equal the price at which the holder purchased
the Non-REMIC Certificate.
With respect to certain categories of debt instruments, the Code requires
the use of a reasonable prepayment assumption in accruing original issue
discount and provides a method of adjusting those accruals to account for
differences between the assumed prepayment rate and the actual rate. These rules
apply to "regular interests" in a REMIC and are described under "REMIC
Certificates -- C. Taxation of Regular Certificates -- 2. Original Issue
Discount." Regulations could be adopted applying these rules to the Non-REMIC
Certificates. It is unclear whether these rules would be applicable to the
Non-REMIC Certificates in the absence of such regulations or whether use of a
reasonable prepayment assumption may be required or permitted without reliance
on these rules. It is also uncertain, if a reasonable prepayment assumption is
used, whether the assumed prepayment rate would be determined based on
conditions at the time of the first sale of the Non-REMIC Certificates or, with
respect to any holder, at the time of purchase of the Non-REMIC Certificate by
that holder. Finally, if these rules were applied to the Non-REMIC Certificates,
and the principles used in calculating the amount of original issue discount
that accrues in any month would produce a negative amount of original issue
discount, it is unclear when such loss would be allowed.
In the case of a Non-REMIC Certificate acquired at a price equal to the
principal amount of the Contracts allocable to such Non-REMIC Certificate, the
use of a reasonable prepayment assumption would not have any significant effect
on the yield used in calculating accruals of interest income. In the case,
however, of a Non-REMIC Certificate acquired at a discount or premium (that is,
at a price less than or greater than such principal amount, respectively), the
use of a reasonable prepayment assumption would increase or decrease such yield,
and thus accelerate or decelerate the reporting of interest income,
respectively.
If the yield used by the holder of a Non-REMIC Certificate in calculating
the amount of interest that accrues in any month is determined based on
scheduled payments on the Contracts (that is, without using a reasonable
prepayment assumption) and such Non-REMIC Certificate was acquired at a discount
or premium, then such holder generally will recognize a net amount of ordinary
income or loss if a Contract prepays in full in an amount equal to the
difference between the portion of the prepaid principal amount of the Contract
that is allocable to the Non-REMIC Certificate and the portion of the adjusted
basis of the Non-REMIC Certificate (see "-- D. Sales of Certificates" below)
that is allocable to the Contract. In general, basis would be allocated among
the Contracts in proportion to their respective principal balances determined
immediately before such prepayment. It is not clear whether any other
adjustments would be required or permitted to take account of prepayments of the
Contracts.
Solely for purposes of reporting income on the Non-REMIC Certificates to the
Service and to certain holders, as required under the Code, it is anticipated
that the yield of the Non-REMIC Certificates will be calculated based on (i) a
representative initial offering price of the Non-REMIC Certificates to the
public and (ii) a reasonable Assumed Prepayment Rate, which will be the rate
used in pricing the initial offering of the Non-REMIC Certificates. (Such yield
may differ significantly from the yield to any particular holder that would be
used in calculating the interest income of such holder.) No representation is
made that the Contracts will in fact prepay at the Assumed Prepayment Rate or at
any other rate.
D. SALES OF CERTIFICATES. Upon sale or exchange of a Non-REMIC Certificate,
a Non-REMIC Certificateholder will recognize gain or loss equal to the
difference between the amount realized in the sale and its aggregate adjusted
basis in the Contracts represented by the Non-REMIC Certificate. Generally, the
aggregate adjusted basis will equal the Non-REMIC Certificateholder's cost for
the Non-REMIC Certificate increased by the amount of any previously reported
gain with respect to the Non-REMIC Certificate
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and decreased by the amount of any losses previously reported with respect to
the Non-REMIC Certificate and the amount of any distributions received thereon.
Except as provided above with respect to the original issue discount and market
discount rules, any such gain or loss would be capital gain or loss if the Non-
REMIC Certificate was held as a capital asset.
E. FOREIGN INVESTORS. Generally, interest or original issue discount paid
to or accruing for the benefit of a Non-REMIC Certificateholder who is a Foreign
Holder (as defined above in "REMIC Certificates -- C. Taxation of Regular
Certificates -- 9. Taxation of Certain Foreign Investors") will be treated as
"portfolio interest" and therefore will be exempt from the 30% withholding tax.
Such Non-REMIC Certificateholder will be entitled to receive interest payments
and original issue discount on the Non-REMIC Certificates free of United States
federal income tax, but only to the extent the Contracts were originated after
July 18, 1984 and provided that such Non-REMIC Certificateholder periodically
provides the Trustee (or other person who would otherwise be required to
withhold tax) with a statement certifying under penalty of perjury that such
Non-REMIC Certificateholder is not a United States person and providing the name
and address of such Non-REMIC Certificateholder. For additional information
concerning interest or original issue discount paid to a Foreign Holder and the
treatment of a sale or exchange of a Non-REMIC Certificate by a Foreign Holder,
which will generally have the same tax consequences as the sale of a Regular
Certificate, see the discussion above under "REMIC Certificates -- C. Taxation
of Regular Certificates -- 9. Taxation of Certain Foreign Investors."
OTHER TAX CONSEQUENCES
No advice has been received as to local income, franchise, personal
property, or other taxation in any state or locality, or as to the tax effect of
ownership of Certificates in any state or locality. Certificateholders are
advised to consult their own tax advisors with respect to any state or local
income, franchise, personal property, or other tax consequences arising out of
their ownership of Certificates.
RESTRICTIONS ON TRANSFER OF REMIC RESIDUAL CERTIFICATES
As discussed in "Certain Federal Income Tax Consequences -- D. Taxation of
Residual Certificates -- 9. Tax on Transfers of Residual Certificates to Certain
Organizations," in order for the Trust Fund to qualify as a REMIC, there must be
reasonable arrangements designed to ensure that the Residual Certificates are
not held by disqualified organizations. Further, transfers to persons that are
not United States persons raise special tax issues. Accordingly, unless the
related Prospectus Supplement provides otherwise, no record or beneficial
ownership interest in a Residual Certificate that is sold under this Prospectus
may be transferred unless, among other things, the Trustee receives (i) an
affidavit from the proposed transferee to the effect that it is not a
"disqualified organization" and is not purchasing on behalf of a disqualified
organization (see "Certain Federal Income Tax Consequences -- D. Taxation of
Residual Certificates -- 9. Tax on Transfers of Residual Certificates to Certain
Organizations"), (ii) a representation from the proposed transferee to the
effect that it is 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 whose
income from sources without the United States is includable in gross income for
United States federal income tax purposes regardless of its connection with the
conduct of a trade or business within the United States and (iii) a covenant of
the proposed transferee to the effect that the proposed transferee agrees to be
bound by and to abide by the transfer restrictions applicable to such REMIC
Residual Certificate.
TAX-EXEMPT INVESTORS
A qualified pension plan or other entity that is exempt from federal income
taxation pursuant to Section 501 of the Code (a "Tax-Exempt Investor")
nonetheless will be subject to federal income taxation to the extent that its
income is "unrelated business taxable income" ("UBTI") within the meaning of
Section 512 of the Code. All "excess inclusions" of a "REMIC" allocated to a
"Residual Certificate" held by a Tax-Exempt investor will be considered UBTI and
thus will be subject to federal income tax. See "Certain Federal Income Tax
Consequences -- Certificates as REMIC Residual Interests -- 7. Excess
Inclusions."
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LEGAL INVESTMENT
The Prospectus Supplement for each Series of Certificates will specify
which, if any, of the Classes of Certificates offered thereby constitute
"mortgage related securities" for purposes of the Secondary Mortgage Market
Enhancement Act of 1984 ("SMMEA"). Classes of Certificates that qualify as
"mortgage related securities" will be legal investments for persons, trusts,
corporations, partnerships, associations, business trusts and business entities
(including depository institutions, life insurance companies and pension funds)
created pursuant to or existing under the laws of the United States or of any
state (including the District of Columbia and Puerto Rico) whose authorized
investments are subject to state regulation to the same extent as, under
applicable law, obligations issued by or guaranteed as to principal and interest
by the United States or any such entities. Under SMMEA, if a state enacted
legislation prior to October 4, 1991 specifically limiting the legal investment
authority of any such entities with respect to "mortgage related securities,"
Certificates will constitute legal investments for entities subject to such
legislation only to the extent provided therein. Approximately twenty-one states
adopted such legislation prior to the October 4, 1991 deadline.
SMMEA also amended the legal investment authority of federally chartered
depository institutions as follows: federal savings and loan associations and
federal savings banks may invest in, sell or otherwise deal in Certificates
without limitations as to the percentage of their assets represented thereby,
federal credit unions may invest in mortgage related securities, and national
banks may purchase Certificates for their own account without regard to the
limitations generally applicable to investment securities set forth in 12 U.S.C.
Section 24 (Seventh), subject in each case to such regulations as the applicable
federal authority may prescribe. In this connection, federal credit unions
should review the National Credit Union Administration ("NCUA") Letter to Credit
Unions No. 96, as modified by Letter to Credit Unions No. 108, which includes
guidelines to assist federal credit unions in making investment decisions for
mortgage related securities, and the NCUAs regulation "Investment and Deposit
Activities" (12 C.F.R. Part 703), which sets forth certain restrictions on
investment by federal credit unions in mortgage related securities.
All depository institutions considering an investment in the Certificates
(whether or not the Class of Certificates under consideration for purchase
constitutes a "mortgage related security") should review the Federal Financial
Institutions Examination Council's Supervisory Policy Statement on the
Securities Activities (to the extent adopted by their respective regulators)
(the "Policy Statement"), setting forth, in relevant part, certain securities
trading and sales practices deemed unsuitable for an institution's investment
portfolio, and guidelines for (and restrictions on) investing in mortgage
derivative products, including "mortgage related securities," which are
"high-risk mortgage securities" as defined in the Policy Statement. According to
the Policy Statement, such "high-risk mortgage securities" include securities
such as certificates not entitled to distributions allocated to principal or
interest, or subordinated certificates. Under the Policy Statement, it is the
responsibility of each depository institution to determine, prior to purchase
(and at stated intervals thereafter), whether a particular mortgage derivative
product is a "high-risk mortgage security," and whether the purchase (or
retention) of such a product would be consistent with the Policy Statement.
The foregoing does not take into consideration the applicability of
statutes, rules, regulations, orders, guidelines or agreements generally
governing investments made by a particular investor, including, but not limited
to "prudent investor" provisions, percentage-of-assets limits and provisions
which may restrict or prohibit investment in securities which are not "interest
bearing" or "income paying."
There may be other restrictions on the ability of certain investors,
including depository institutions, either to purchase Certificates or to
purchase Certificates representing more than a specified percentage of the
investor's assets. Investors should consult their own legal advisors in
determining whether and to what extent the Certificates constitute legal
investments for such investors.
ERISA CONSIDERATIONS
The Employee Retirement Income Security Act of 1974, as amended ("ERISA"),
imposes certain restrictions on employee benefit plans subject to ERISA
("Plans") and on persons having certain specified relationships to a Plan
("Parties in Interest") with respect to such Plans, including, for this purpose,
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individual retirement arrangements described in Section 408 of the Code. Certain
employee benefit plans, such as governmental plans and church plans (if no
election has been made under Section 410(d) of the Code), are not subject to the
requirements of ERISA, and assets of such plans may be invested in Certificates
without regard to the ERISA considerations described below, subject to the
provisions of other applicable federal and state law. Any such plan which is
qualified under Section 401(a) of the Code and exempt from taxation under
Section 501(a) of the Code is, however, subject to the prohibited transaction
rules set forth in Section 503 of the Code.
Investments by Plans are subject to ERISA's general fiduciary requirements,
including the requirement of investment prudence and diversification and the
requirement that a Plan's investments be made in accordance with the documents
governing the Plan. A fiduciary which decides to invest the assets of a Plan in
Certificates should consider, among other factors, the sensitivity of the
investments to the rate of principal payments (including prepayments) on the
Contracts as discussed in "Prepayment and Yield Considerations" herein.
The United States Department of Labor (the "DOL") has issued regulations
concerning the definition of what constitutes the assets of a Plan (Labor Reg.
Section 2510.3-101). Under these regulations, the underlying assets and
properties of corporations, partnerships and certain other entities in which a
Plan makes an "equity" investment could be deemed for purposes of ERISA to be
assets of the investing Plan in certain circumstances. However, the regulations
provide that, generally, the assets of a corporation or partnership in which a
Plan invests will not be deemed for purposes of ERISA to be assets of such Plan
if the equity interest acquired by the investing Plan is a publicly offered
security. A publicly offered security, as defined in Labor Reg. Section
2510.3-101 is a security that is widely held, freely transferable and either
registered under the Exchange Act or sold to the Plan as part of a public
offering under the Securities Act that then becomes so registered.
In addition to the imposition of general fiduciary standards of investment
prudence and diversification, ERISA prohibits a broad range of transactions
involving Plan assets and Parties in Interest, and imposes additional
prohibitions where Parties in Interest are fiduciaries with respect to such
Plan. To the extent that the Contracts may be deemed Plan assets of each Plan
that purchases Certificates, an investment in the Certificates by a Plan might
be a prohibited transaction under ERISA Sections 406 and 407 and subject to an
excise tax under Section 4975 of the Code unless a statutory or administrative
exemption applies.
In Prohibited Transaction Exemption 83-1 ("PTE 83-1"), which amended
Prohibited Transaction Exemption 81-7, the DOL exempted from ERISA's prohibited
transaction rules certain transactions relating to the operation of residential
mortgage pool investment trusts and the purchase, sale and holding of "mortgage
pool pass-through certificates" in the initial issuance of such certificates.
PTE 83-1 permits, subject to certain conditions, transactions which might
otherwise be prohibited between Plans and Parties in Interest with respect to
those Plans related to the origination, maintenance and termination of mortgage
pools consisting of mortgage loans secured by first or second mortgages or deeds
of trust on single-family residential property, and the acquisition and holding
of certain mortgage pool pass-through certificates representing an interest in
such mortgage pools by Plans. If the general conditions (discussed below) of PTE
83-1 are satisfied, investments by a Plan in certificates that represent
interests in a mortgage pool consisting of single family loans will be exempt
from the prohibitions of ERISA Sections 406(a) and 407 (relating generally to
transactions with Parties in Interest who are not fiduciaries) if the Plan
purchases those certificates at no more than fair market value and will be
exempt from the prohibitions of ERISA Sections 406(b)(1) and (2) (relating
generally to transactions with fiduciaries) if, in addition, the purchase is
approved by an independent fiduciary, no sales commission is paid to the pool
sponsor, the Plan does not purchase more than 25% of all certificates of the
like class, and at least 50% of all such certificates are purchased by persons
independent of the pool sponsor or pool trustee. PTE 83-1 does not provide an
exemption for transactions involving subordinate certificates of the like class.
Accordingly, unless otherwise provided in the related Prospectus Supplement, no
transfer of a subordinate certificate may be made to a Plan.
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PTE 83-1 sets forth three general conditions which must be satisfied for any
transaction to be eligible for exemption: (i) the maintenance of a system of
insurance or other protection for the pooled mortgage loans and property
securing such loans, and for indemnifying certificateholders against reductions
in pass-through payments due to property damage or defaults in loan payments in
an amount not less than the greater of one percent of the aggregate principal
balance of all covered pooled mortgage loans or the principal balance of the
largest covered pooled mortgage loan; (ii) the existence of a pool trustee who
is not an affiliate of the pool sponsor; and (iii) a limitation on the amount of
the payment retained by the pool sponsor, together with other funds inuring to
its benefit, to not more than adequate consideration for selling the mortgage
loans plus reasonable compensation for services provided by the pool sponsor to
the mortgage pool.
Each Plan fiduciary who is responsible for making the investment decisions
whether to purchase or commit to purchase and to hold Certificates must make its
own determination as to whether the first and third general conditions, and the
specific conditions described briefly in the preceding paragraph, of PTE 83-1
have been satisfied, or as to the availability of any other prohibited
transaction exemptions. Each Plan fiduciary should also determine whether, under
the general fiduciary standards of investment prudence and diversification, an
investment in the Certificates is appropriate for the Plan, taking into account
the overall investment policy of the Plan and the composition of the Plan's
investment portfolio.
Several underwriters of asset-backed securities have applied for and
obtained ERISA prohibited transaction exemptions which are in some respects
broader than the exemptions described in the DOL regulation referred to above.
Such exemptions can only apply to asset-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. If such an exemption might be applicable to a Series of Certificates, the
related Prospectus Supplement will refer to such possibility.
Any Plan fiduciary which proposes to cause a Plan to purchase Certificates
should consult with their counsel concerning the impact of ERISA and the Code,
the applicability of PTE 83-1 and the potential consequences in their specific
circumstances, prior to making such investment. Moreover, each Plan fiduciary
should determine whether, under the general fiduciary standards of investment
procedure and diversification, an investment in the Certificates is appropriate
for the Plan, taking into account the overall investment policy of the Plan and
the composition of the Plan's investment portfolio.
CERTAIN LEGAL ASPECTS OF THE CONTRACTS
GENERAL
As a result of the assignment of Contracts in a Contract Pool to the
Trustee, the related Trust Fund will succeed collectively to all of the rights
(including the right to receive payment on such Contracts), and will assume the
obligations of the obligee, under such Contracts. Each Contract evidences both
(a) the obligation of the Obligor to repay the loan evidenced thereby, and (b)
the grant of a security interest in either the Manufactured Home, and, in the
case of a Land Home Contract or Land-in-Lieu Contract, the real estate on which
the related Manufactured Home is located, to secure repayment of such loan.
Certain aspects of both features of the Contracts are described more fully
below.
The following discussion focuses on issues relating generally to Bank of
America's, BankAmerica Housing Services' or any lender's interest in
manufactured housing contracts. See "-- Security Interests in the Manufactured
Homes" herein for a discussion of certain issues relating to the transfer to a
Trust Fund of Contracts and the related security interests in the Manufactured
Homes comprising the related Contract Pool.
SECURITY INTERESTS IN THE MANUFACTURED HOMES
The Manufactured Homes securing the Contracts in a Contract Pool may be
located in all 50 states and the District of Columbia. Security interests in
manufactured homes similar to the ones securing the Contracts ("manufactured
homes") generally may be perfected either by notation of the secured party's
lien on the certificate of title or by delivery of the required documents and
payment of a fee to the state motor vehicle authority, depending on state law.
In some nontitle states, perfection pursuant to the provisions of
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the UCC is required. Generally, with respect to manufactured housing contracts
individually originated or purchased by BankAmerica Housing Services (for itself
or as agent for any affiliate of BankAmerica Housing Services that purchases any
such contracts from BankAmerica Housing Services) effects such notation or
delivery of the required documents and fees, and obtains possession of the
certificate of title or a lien certificate, as appropriate, under the laws of
the state in which any manufactured home securing a manufactured housing
contract is registered. If BankAmerica Housing Services fails, due to clerical
errors or otherwise, to effect such notation or delivery, or files the security
interest under the wrong law (for example, under a motor vehicle title statute
rather than under the UCC, in a few states), BankAmerica Housing Services (for
itself, or as agent of the secured lender) may not have a first-priority
security interest in the manufactured home securing a contract. As manufactured
homes have become larger and often have been attached to their sites without any
apparent intention to move them, courts in many states have held that
manufactured homes, under certain circumstances, may become subject to real
estate title and recording laws. As a result, a security interest in a
manufactured home could be rendered subordinate to the interests of other
parties claiming an interest in the home under applicable state real estate law.
In order to perfect a security interest in a manufactured home under real estate
laws, the holder of the security interest must file either a "fixture filing"
under the provisions of the UCC or a real estate mortgage under the real estate
laws of the state where the home is located. These filings must be made in the
real estate records office of the county where the home is located. Unless
otherwise specified in the related Prospectus Supplement, most of the Contracts
in any Contract Pool will contain provisions prohibiting the Obligor from
permanently attaching the Manufactured Home to its site if it was not so
attached on the date of the Contract. As long as each Manufactured Home was not
so attached on the date of the Contract and the Obligor does not violate this
agreement, a security interest in the Manufactured Home will be governed by the
certificate of title laws or the UCC, and the notation of the security interest
on the certificate of title or the filing of a UCC financing statement will be
effective to maintain the priority of BankAmerica Housing Services' security
interest in the Manufactured Home. If any such Manufactured Home does become
attached after the date of the related Contract, the related Contract provides
that such attachment constitutes an "event of default" that, if unremedied,
gives rise to certain discrete remedies including acceleration of the unpaid
principal balance of the Contract plus accrued interest and repossession of the
Manufactured Home. Regardless of whether a full recovery is obtained from an
Obligor whose Manufactured Home becomes attached, Bank of America, BankAmerica
Housing Services or both will represent that, at the date of the initial
issuance of Certificates in any Series, it had obtained a perfected
first-priority security interest in each of the Manufactured Homes securing the
related Contracts sold by it. Such representation, however, will not be based
upon an inspection of the site of any Manufactured Home to determine if the
Manufactured Home had become permanently attached to its site. See "Description
of the Certificates -- Conveyance of Contracts" herein.
In addition, a federal circuit court decision may adversely affect a
Trustee's interest in the Contract Pool related to a Series of Certificates even
if the related Contracts constitute chattel paper. In OCTAGON GAS SYSTEMS, INC.
V. RIMMER, 995 F.2d 948 (10th Cir. 1993), the court's decision included language
to the effect that accounts sold by an entity which subsequently became bankrupt
remained property of the debtor's bankruptcy estate. Sales of chattel paper,
like sales of accounts, are governed by Article 9 of the UCC. If any affiliate
of Bank of America, BankAmerica Housing Services or both of them is subject to
the federal bankruptcy code, sells Contracts to Bank of America or BankAmerica
Housing Services and becomes a debtor under the federal bankruptcy code, and a
court were to follow the reasoning of the Tenth Circuit and apply such reasoning
to chattel paper, Certificateholders for such Series could experience a delay
in, or reduction of, distributions as to the Contracts that constitute chattel
paper and were sold to the related Trust Fund, directly or indirectly, by any of
them.
In the absence of fraud, forgery or permanent affixation of a manufactured
home to its site by the manufactured home owner, or administrative error by
state recording officials, the notation of the lien of BankAmerica Housing
Services on the certificate of title or delivery of the required documents and
fees (or if applicable, perfection under the UCC) will be sufficient to protect
BankAmerica Housing Services against the rights of subsequent purchasers of a
manufactured home or subsequent lenders who take a security interest in the
manufactured home. If there are any manufactured homes as to which the security
interest in
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favor of BankAmerica Housing Services is not perfected, such security interest
would be subordinate to the claims of, among others, subsequent purchasers for
value of and holders of perfected security interests in such manufactured homes.
In the event that the owner of a manufactured home moves it to a state other
than the state in which such manufactured home initially is registered, under
the laws of most states, the perfected security interest in the manufactured
home would continue for four months after such relocation and thereafter until
the owner registers the manufactured home in such state. If the owner were to
relocate a manufactured home to another state and were to re-register the
manufactured home in such state, and if steps are not taken to re-perfect an
existing security interest in such state, the security interest in the
manufactured home would cease to be perfected. A majority of states generally
require surrender of a certificate of title to re-register a manufactured home.
BankAmerica Housing Services must therefore surrender possession if it holds the
certificate of title to such manufactured home or, in the case of manufactured
homes registered in states which provide for notation of lien, BankAmerica
Housing Services would receive notice of surrender if its security interest in
the manufactured home is noted on the certificate of title. Accordingly,
BankAmerica Housing Services would have the opportunity to re-perfect its
security interest in the manufactured home in the state of relocation. In states
which do not require a certificate of title for registration of a manufactured
home, re-registration could defeat the perfection. In the ordinary course of
servicing manufactured housing contracts, BankAmerica Housing Services takes
steps to effect such re-perfection upon receipt of notice of re-registration or
information from the obligor as to relocation. Similarly, when an obligor under
a contract sells a manufactured home, BankAmerica Housing Services must
surrender possession of the certificate of title or BankAmerica Housing Services
will receive notice as a result of its lien noted thereon; accordingly,
BankAmerica Housing Services will have an opportunity to require satisfaction of
the related contract before release of the lien. Such protections generally
would not be available in the case of security interests in manufactured homes
located in nontitle states where perfection of such security interest is
achieved by appropriate filings under the UCC (as in effect in such state).
Under the laws of most states, liens for repairs performed on a manufactured
home and liens for personal property taxes take priority over a perfected
security interest in the manufactured home. Each of Bank of America and
BankAmerica Housing Services will warrant in the Agreement with respect to each
Series of Certificates that, as of the date of initial issuance of such Series
of Certificates, no Manufactured Home relating to a Contract it sold was, to its
knowledge, subject to any such lien. However, such warranty will not be based on
any lien searches or other review. See "Description of the Certificates --
Conveyance of Contracts" in the Prospectus Supplement related to a Series of
Certificates for a description of the remedies for a breach of the
representations and warranties made by Bank of America and BankAmerica Housing
Services under the related Agreement. In addition, such liens could arise after
the date of initial issuance of the Certificates. Notice may not be given to
Bank of America, BankAmerica Housing Services, the Servicer, the Trustee or
Certificateholders in the event such a lien arises.
ENFORCEMENT OF SECURITY INTERESTS IN MANUFACTURED HOMES
Unless otherwise specified in the applicable Prospectus Supplement, the
Servicer on behalf of the Trustee, to the extent required by the related
Agreement, may take action to enforce the Trustee's security interest with
respect to Contracts in default by repossession and resale of the Manufactured
Homes securing such defaulted Contracts. In general, as long as a manufactured
home has not become subject to the real estate law, a creditor can repossess a
manufactured home by voluntary surrender, by "self-help" repossession that is
"peaceful" (I.E., without breach of the peace) or, in the absence of voluntary
surrender and the ability to repossess without breach of the peace, by judicial
process. The holder of a manufactured housing contract generally must give the
obligor a number of days' notice prior to commencement of any repossession. The
UCC and consumer protection laws in most states place restrictions on
repossession sales, including requiring prior notice to the obligor and
commercial reasonableness in effecting such a sale. The law in most states also
requires that the obligor be given notice of any sales prior to resale of the
unit so that the obligor may redeem at or before such resale.
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Under the laws applicable in most states, a creditor is entitled to obtain a
deficiency judgment from an obligor for any deficiency on repossession and
resale of the manufactured home securing such obligor's contract. However, some
states impose prohibitions or limitations on deficiency judgments, and in many
cases the defaulting obligor would have no assets with which to pay a judgment.
Certain other statutory provisions, including federal and state bankruptcy
and insolvency laws, and general equitable principles may limit or delay
BankAmerica Housing Services' ability to repossess and resell any Manufactured
Home or enforce a deficiency judgment.
LAND HOME AND LAND-IN-LIEU CONTRACTS
Unless otherwise specified in the applicable Prospectus Supplement, the
related Contract Pool will not contain Land Home Contracts or Land-in-Lieu
Contracts. To the extent Land Home Contracts or Land-in-Lieu Contracts or both
are contained in any Contract Pool, the related Prospectus Supplement will
include a discussion of legal issues relating to the transfer of such contracts,
and the related security interest in the property on which the related
Manufactured Home is located, to the Trust, and to the enforcement of the rights
of secured parties with respect to such contracts.
CONSUMER PROTECTION LAWS
The so-called "Holder-in-Due-Course" rule of the Federal Trade Commission is
intended to defeat the ability of the transferor of a consumer credit contract
which is the seller of goods which gave rise to the transaction (and certain
related lenders and assignees) to transfer such contract free of notice of
claims by the obligor thereunder. The effect of this rule is to subject the
assignee of such a contract to all claims and defenses which the obligor could
assert against the seller of goods. Liability under this rule is limited to
amounts paid under such a contract; however, the obligor also may be able to
assert the rule to set off remaining amounts due as a defense against a claim
brought by the assignee against such obligor. Generally, this rule will apply to
any Contracts conveyed to the Trustee and to any claims made by the Servicer on
behalf of the Trustee, as Bank of America's or BankAmerica Housing Services'
assignee, as applicable. Numerous other federal and state consumer protection
laws impose requirements applicable to the origination and lending pursuant to
such Contracts, including the Truth in Lending Act, the Federal Trade Commission
Act, the Fair Credit Billing Act, the Fair Credit Reporting Act, the Equal
Credit Opportunity Act, the Fair Debt Collection Practices Act and the Uniform
Consumer Credit Code. In the case of some of these laws, the failure to comply
with their provisions may affect the enforceability of the related Contract or
create liability for the Trust Fund.
The Soldiers' and Sailors' Civil Relief Act of 1940, as amended (the "Relief
Act") could, under certain circumstances, cap the amount of interest that may be
charged on certain Contracts at 6% and may hinder the ability of the Servicer to
foreclose on such Contracts in a timely fashion. Under the terms of the Relief
Act, if so required by an obligor under a manufactured housing contract who
enters military service after the origination of such obligor's contract
(including an obligor who is a member of the National Guard or is in reserve
status at the time of the origination of the contract and is later called to
active duty), such obligor may not be charged interest above an annual rate of
6% during the period of such obligor's active duty status, unless a court orders
otherwise upon application of the lender. In addition, the Relief Act imposes
limitations which would impair the ability of any lender to foreclose on an
affected contract during the obligor's period of active duty status and within
three months thereafter. It is possible that application of the Relief Act to
certain of the Contracts could have an effect, for an indeterminate period of
time, on the ability of the Servicer to collect full amounts of interest or
foreclose on such Contract, and could result in delays in payment or losses to
the holders of the Certificates. Neither Bank of America nor BankAmerica Housing
Services will make any representation or warranty as to whether any Contract is
or could become subject to the Relief Act.
TRANSFERS OF MANUFACTURED HOMES; ENFORCEABILITY OF RESTRICTIONS ON TRANSFER
Unless otherwise specified in the related Prospectus Supplement, the
Contracts comprising any Contract Pool generally will prohibit the sale or
transfer of the related Manufactured Homes without the consent of the obligee
and permit the acceleration of the maturity of the Contracts by the obligee upon
any such sale or transfer to which BankAmerica Housing Services has not
consented. Under the Agreement for a Series of
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Certificates (unless otherwise specified in the related Prospectus Supplement),
BankAmerica Housing Services as Servicer will be required to consent to any such
transfer and to permit the assumption of the related Contract if the proposed
buyer meets the Servicer's underwriting standards and enters into an assumption
agreement, the Servicer determines that permitting such assumption will not
materially increase the risk of nonpayment of the Contract and such action will
not adversely affect or jeopardize any coverage under any insurance policy
required by such Agreement. If the Servicer determines that these conditions
have not been fulfilled, then it will be required to withhold its consent to the
transfer, but only to the extent permitted under the Contract and applicable law
and governmental regulations and only to the extent that such action will not
adversely affect or jeopardize any coverage under any insurance policy required
by the Agreement. In certain cases, a delinquent Obligor may attempt to transfer
a Manufactured Home in order to avoid a repossession proceeding with respect to
such Manufactured Home.
In the case of a transfer of a Manufactured Home after which the obligee
desires to accelerate the maturity of the related Contract, the obligee's
ability to do so will depend on the enforceability under state law of the clause
permitting acceleration on transfer. The Garn-St. Germain Depository
Institutions Act of 1982 preempts, subject to certain exceptions and conditions,
state laws prohibiting enforcement of such clauses applicable to manufactured
homes. To the extent such exceptions and conditions apply in some states, the
Servicer may be prohibited from enforcing such a clause in respect of certain
Manufactured Homes.
APPLICABILITY OF USURY LAWS
Title V of the Depository Institutions Deregulation and Monetary Controls
Act of 1980, as amended ("Title V"), provides that, subject to the following
conditions, state usury limitations shall not apply to any loan which is secured
by a first lien on certain kinds of manufactured housing. The Contracts related
to any Series of Certificates would be covered under Title V if, among other
things, they satisfy certain conditions governing the terms of any prepayments,
late charges and deferral fees and contain a requirement of a 30-day notice
period prior to instituting any action leading to repossession of the related
unit.
Title V authorized any state to reimpose limitations on interest rates and
finance charges by adopting before April 1, 1983 a law or constitutional
provision which expressly rejected application of the federal law. Fifteen
states adopted such a law prior to the April 1, 1983 deadline. In addition, even
where Title V was not so rejected, any state is authorized by the law to adopt a
provision limiting discount points or other charges on loans covered by Title V.
BankAmerica Housing Services or, where applicable, Bank of America will
represent, in the Agreement for a Series of Certificates (unless otherwise
specified in the related Prospectus Supplement), that the Contracts sold by it
comply with applicable usury laws.
RATINGS
It is a condition to the issuance of the Certificates of each Series offered
hereby that at the time of issuance they shall have been rated in one of the
four highest rating categories by the nationally recognized statistical rating
agency or agencies specified in the related Prospectus Supplement.
Ratings on manufactured housing contract pass-through certificates address
the likelihood of the receipt by certificateholders of their allocable share of
principal and interest on the underlying manufactured housing contract assets.
These ratings address structural and legal aspects associated with such
certificates, the extent to which the payment stream on such underlying assets
is adequate to make payments required by such certificates and the credit
quality of the credit enhancer or guarantor, if any. Ratings on the Certificates
do not, however, constitute a statement regarding the likelihood of principal
prepayments by Obligors under the Contracts in the related Contract Pool, the
degree by which prepayments made by such Obligors might differ from those
originally anticipated or whether the yield originally anticipated by investors
of any Series of Certificates may be adversely affected as a result of such
prepayments. As a result, investors of any Series of Certificates might suffer a
lower than anticipated yield.
A rating on any or all of the Certificates of any Series by certain other
rating agencies, if assigned at all, may be lower than the rating or ratings
assigned to such Certificates by the rating agency or agencies
70
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specified in the related Prospectus Supplement. 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. Each security rating
should be evaluated independently of any other security rating.
METHOD OF DISTRIBUTION
The Sellers may sell Certificates of each Series to or through underwriters
(the "Underwriters") by a negotiated firm commitment underwriting and public
reoffering by the Underwriters, and also may sell and place Certificates
directly to other purchasers or through agents. The Sellers intend that
Certificates be offered through such various 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 a
combination of such methods.
The distribution of the Certificates may be effected from time to time in
one or more transactions at a fixed price or prices, which may be changed, or at
market prices prevailing at the time of sale, at prices related to such
prevailing market prices or at negotiated prices.
If so specified in the Prospectus Supplement relating to a Series of
Certificates, the Sellers or any affiliate thereof may purchase some or all of
one or more Classes of Certificates of such Series from the Underwriter or
Underwriters at a price specified in such Prospectus Supplement. Such purchaser
may thereafter from time to time offer and sell, pursuant to this Prospectus,
some or all of such Certificates so purchased directly, through one or more
Underwriters to be designated at the time of the offering of such Certificates
or through broker-dealers acting as agent and/or principal. Such offering may be
restricted in the manner specified in such Prospectus Supplement. Such
transactions may be effected at market prices prevailing at the time of sale, at
negotiated prices or at fixed prices.
In connection with the sale of the Certificates, Underwriters may receive
compensation from the Sellers or from purchasers of Certificates for whom they
may act as agents in the form of discounts, concessions or commissions.
Underwriters may sell the Certificates of a Series to or through dealers and
such dealers may receive compensation in the form of discounts, concessions or
commissions from the Underwriters and/or commissions from the purchasers for
whom they may act as agents. Underwriters, dealers and agents that participate
in the distribution of the Certificates of a Series may be deemed to be
Underwriters, and any discounts or commissions received by them from the Sellers
and any profit on the resale of the Certificates by them may be deemed to be
underwriting discounts and commissions, under the Securities Act. Any such
Underwriters or agents will be identified, and any such compensation received
from the Sellers will be described, in the Prospectus Supplement.
Under agreements which may be entered into by Bank of America, BankAmerica
Housing Services or both of them, Underwriters and agents who participate in the
distribution of the Certificates may be entitled to indemnification by Bank of
America or BankAmerica Housing Services, as the case may be, against certain
liabilities, including liabilities under the Securities Act.
The Underwriters may, from time to time, buy and sell Certificates, but
there can be no assurance that an active secondary market will develop and there
is no assurance that any such market, if established, will continue.
USE OF PROCEEDS
Unless otherwise specified in the applicable Prospectus Supplement,
substantially all of the net proceeds to be received from the sale of the
Certificates will be used by the Sellers for general corporate purposes,
including the payment of expenses in connection with pooling the Contracts and
issuing the Certificates.
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LEGAL MATTERS
Certain legal matters relating to the Certificates, including legal matters
relating to material federal income tax consequences concerning the
Certificates, will be passed upon for Bank of America and BankAmerica Housing
Services by Morrison & Foerster LLP, Irvine, California.
OTHER CONSIDERATIONS
As federally insured depository institutions, Bank of America and BAFSB (of
which BankAmerica Housing Services is an unincorporated division) are subject to
conservatorship and receivership rules enacted pursuant to the Financial
Institutions Reform, Recovery and Enforcement Act of 1989, as amended
("FIRREA"). If a receiver or conservator were appointed for BAFSB, the receiver
or conservator could prevent the termination of BankAmerica Housing Services as
Servicer and the appointment of a successor Servicer if no event of default
under the applicable Agreements exists other than the receivership,
conservatorship or insolvency of the Servicer. In addition, the appointment of a
receiver or conservator for BAFSB could result in a delay or possibly a
reduction in payments on the Certificates to the extent BankAmerica Housing
Services received (but did not deposit with the Trustee) Contract collections
before the date of receivership or conservatorship.
Each of the Sellers believes that the transfer of Contracts sold by it to
any Trust Fund will constitute absolute and unconditional sales. However, in the
event of a conservatorship or receivership of Bank of America, BAFSB or both of
them, a conservator or receiver, as the case may be, could recharacterize the
sale of Contracts by Bank of America or BankAmerica Housing Services, or both of
them, as a borrowing secured by a pledge of the Contracts sold by it. Such an
attempt, even if unsuccessful, could result in delays in or reductions of
distributions on the Certificates offered hereby and by the related Prospectus
Supplement. If such an attempt were successful, the conservator or receiver, as
the case may be, could elect to accelerate payment of the Certificates and
liquidate the Contracts, with the holders of Certificates entitled to no more
than the then outstanding principal amount of such Certificates together with
interest at the applicable Pass-Through Rate to the date of payment. Thus, the
holders of Certificates could lose the right to future distributions of
interest, and might suffer reinvestment loss in a lower interest rate
environment.
The foregoing discussion does not purport to be comprehensive. Prospective
investors should consult their own legal advisors as to the possible
consequences of any insolvency, conservatorship, receivership or similar
proceeding instituted by or in respect of Bank of America or BAFSB.
Similar consequences could result from a bankruptcy proceeding instituted by
or in respect of any affiliate of Bank of America or BAFSB that sells Contracts
to Bank of America or BAFSB or both and becomes subject to a bankruptcy,
conservatorship, receivership or similar proceeding. Prospective investors
should consult their own legal advisors as to such matters.
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INDEX OF SIGNIFICANT DEFINITIONS
<TABLE>
<CAPTION>
PAGE IN
PROSPECTUS
ON WHICH TERM IS
TERM DEFINED
- ----------------------------------------------------------------------------------------------- -----------------
<S> <C>
1986 Act....................................................................................... 45
Agreement...................................................................................... 5
Assumed Prepayment Rate........................................................................ 46
Available Distribution Amount.................................................................. 15
BAFSB.......................................................................................... 19
BankAmerica Housing Services................................................................... 1, 4
Bank of America................................................................................ 1, 4
Bulk Sellers................................................................................... 16
Cede........................................................................................... 3, 10, 33
Certificate Account............................................................................ 30
Certificate Owners............................................................................. 3, 10, 33
Certificateholders............................................................................. 3, 34, 43
Certificate Balance............................................................................ 7
Certificates................................................................................... 1
Class.......................................................................................... 5
Code........................................................................................... 11
Collection Period.............................................................................. 7, 31
Commission..................................................................................... 3
Contract Files................................................................................. 30
Contract Pool.................................................................................. 4
Contract Rate.................................................................................. 4
Contract Schedule.............................................................................. 30
Contracts...................................................................................... 4
contracts...................................................................................... 13
Credit Facility................................................................................ 42
Credit Facility Provider....................................................................... 42
Cut-off Date................................................................................... 4
Definitive Certificates........................................................................ 29
Disqualified Organizations..................................................................... 45
Distribution Date.............................................................................. 6
DOL............................................................................................ 65
DTC............................................................................................ 3, 10, 33
DTC Rules...................................................................................... 34
Due Date....................................................................................... 17
ERISA.......................................................................................... 11, 64
Exchange Act................................................................................... 2
Foreign Holder................................................................................. 51
Fractional Interests........................................................................... 37
Global Certificates............................................................................ 10, 33
Indirect Participants.......................................................................... 33
Issue Premium.................................................................................. 54
Junior Certificates............................................................................ 40
Land Home Contract............................................................................. 18
Land-in-Lieu Contract.......................................................................... 19
Legal Investment............................................................................... 12
Liquidity Facility............................................................................. 42
Liquidity Facility Provider.................................................................... 42
Manufactured Home.............................................................................. 4
manufactured homes............................................................................. 66
manufactured housing contracts................................................................. 13
Master REMIC................................................................................... 45
</TABLE>
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<TABLE>
<CAPTION>
PAGE IN
PROSPECTUS
ON WHICH TERM IS
TERM DEFINED
- ----------------------------------------------------------------------------------------------- -----------------
<S> <C>
Monthly Servicing Fee.......................................................................... 36
Mortgage....................................................................................... 18
Non-REMIC Certificates......................................................................... 60
Obligor........................................................................................ 17
OID Regulations................................................................................ 46
Optional Termination........................................................................... 11
Original Holder................................................................................ 53
Participants................................................................................... 33
Parties in Interest............................................................................ 64
Pass-Through Rate.............................................................................. 9, 32
Percentage Interest............................................................................ 29
Plans.......................................................................................... 64
Pool Principal Balance......................................................................... 40
Pool Scheduled Principal Balance............................................................... 41
Prepayment Model............................................................................... 28
PTE 83-1....................................................................................... 65
Rate Period.................................................................................... 32
Rating......................................................................................... 12, 70
Registration Statement......................................................................... 3
Regular Certificates........................................................................... 43
REMIC.......................................................................................... 2, 43
REMIC Regulations.............................................................................. 43
Regular Principal.............................................................................. 7, 31
Relief Act..................................................................................... 15, 69
Repurchase Date................................................................................ 35
Reserve Fund................................................................................... 41
Residual Certificates.......................................................................... 43
Residual Interest.............................................................................. 9, 33
Retained Yield................................................................................. 6
Scheduled Payment.............................................................................. 17
Securities Act................................................................................. 3
Security Pacific Housing Services.............................................................. 14
Senior Certificates............................................................................ 39, 57
Service........................................................................................ 44
Servicer....................................................................................... 4
SMMEA.......................................................................................... 11, 64
SPFSC.......................................................................................... 4
Special Principal Distributions................................................................ 8, 32
SPHSI.......................................................................................... 19
Startup Day.................................................................................... 44
Step-Up Rate................................................................................... 17
Step-Up Rate Contracts......................................................................... 17
Subordinate Certificates....................................................................... 40
Subsidiary REMIC............................................................................... 45
Termination Auction............................................................................ 35
Title V........................................................................................ 70
Total Regular Principal Amount................................................................. 7, 31
Trust Fund..................................................................................... 6
Trustee........................................................................................ 5
UCC............................................................................................ 14
Underwriters................................................................................... 71
Weighted Average Contract Rate................................................................. 5
</TABLE>
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NO DEALER, SALESMAN OR PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR
TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS
SUPPLEMENT OR THE PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED. THIS
PROSPECTUS SUPPLEMENT AND THE PROSPECTUS DO NOT CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY IN ANY
STATE OR JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR
SOLICITATION IN SUCH STATE OR JURISDICTION. THE DELIVERY OF THIS PROSPECTUS
SUPPLEMENT OR ANY PROSPECTUS AT ANY TIME DOES NOT IMPLY THAT INFORMATION HEREIN
OR THEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
FORM OF PROSPECTUS SUPPLEMENT
Terms of Offered Certificates..................... S-3
Risk Factors...................................... S-13
The Contract Pool................................. S-13
The Sellers....................................... S-19
Prepayment and Yield Considerations............... S-22
Description of the Certificates................... S-27
Certain Federal Income Tax Consequences........... S-38
ERISA Considerations.............................. S-39
Ratings........................................... S-41
Legal Investment.................................. S-42
Method of Distribution............................ S-42
Use of Proceeds................................... S-43
Legal Matters..................................... S-43
Index of Significant Definitions.................. S-44
Appendix A -- Prepayment Experience of
Certain Pools.................................... A-1
PROSPECTUS
Incorporation of Certain Information by
Reference........................................ 2
Additional Information............................ 3
Reports to Certificateholders..................... 3
Summary of Terms.................................. 4
Risk Factors...................................... 13
The Contract Pools................................ 16
The Sellers....................................... 19
Prepayment and Yield Considerations............... 27
Description of the Certificates................... 29
Credit and Liquidity Enhancement.................. 39
Certain Federal Income Tax Consequences........... 42
Other Tax Consequences............................ 63
Restrictions on Transfer of REMIC Residual
Certificates..................................... 63
Tax-Exempt Investors.............................. 63
Legal Investment.................................. 64
ERISA Considerations.............................. 64
Certain Legal Aspects of the Contracts............ 66
Ratings........................................... 70
Method of Distribution............................ 71
Use of Proceeds................................... 71
Legal Matters..................................... 72
Other Considerations.............................. 72
</TABLE>
BANKAMERICA MANUFACTURED
HOUSING CONTRACT TRUST
$[ ] (APPROXIMATE)
[ ]% CLASS A
$[ ] (APPROXIMATE)
[ ]% CLASS B
SENIOR/SUBORDINATE
PASS-THROUGH CERTIFICATES,
SERIES 199[ ]-[ ]
---------------------
PROSPECTUS SUPPLEMENT
---------------------
[UNDERWRITER]
[ , 199 ]
- ---------------------------------------------
---------------------------------------------
- ---------------------------------------------
---------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following is an itemized list of the estimated expenses to be incurred
in connection with the offering of the securities being offered hereunder other
than underwriting discounts and commissions.
<TABLE>
<S> <C>
Registration Fee............................................... $172,414.00
Printing and Engraving......................................... 110,000.00
Trustee's Fees................................................. 8,500.00
Legal Fees and Expenses........................................ 150,000.00
Blue Sky Fees and Expenses..................................... 10,000.00
Accountants' Fees and Expenses................................. 25,000.00
Rating Agency Fees............................................. 112,500.00
----------
Total...................................................... $588,414.00
----------
----------
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
1. BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION
Article IX of the Bylaws of ("Bank of America") provides for the
indemnification of the directors, officers and employees of Bank of America, or
persons serving at the request of Bank of America as a director, officer,
employee or agent of another corporation or other business entity, to the full
extent provided by the Delaware General Corporation Law, as such law exists or
may hereafter be amended. This indemnification applies to any threatened,
pending or completed action, suit or proceeding, whether, civil, criminal,
administrative or investigative.
Indemnification may include all expenses (including attorneys' fees,
judgments, fines, ERISA excise taxes and amounts paid in settlement) reasonably
incurred by the indemnified person. However, Bank of America is not authorized
to indemnify against expenses, penalties or other payments incurred in
administrative proceeding or action instituted by a bank regulatory agency which
proceedings or action result in a final order against such person assessing
civil money penalties or requiring payments to Bank of America. Bank of America
is authorized to advance expenses incurred by an indemnified director, officer
or employee PROVIDED, if the Delaware General Corporation Law so requires, such
indemnified person shall first deliver an undertaking to Bank of America to
repay such expenses if its is ultimately determined that he or she is not
entitled to be indemnified.
The rights of indemnification and advancement of expenses provided by Bank
of America's Bylaws is not exclusive of any other rights to which a person
seeking indemnification or advancement of expenses may be entitled under any
statute, agreement, vote of stockholders or disinterested directors, or
otherwise.
Section 145 of the Delaware General Corporation Law contains detailed
provisions on indemnification of directors and officers against expenses,
judgments, fines and amounts paid in settlement, actually and reasonably
incurred in connection with legal proceedings.
Article IV of Bank of America's Bylaws and the Delaware General Corporation
Law also permit Bank of America to purchase insurance on behalf of its directors
and officers against liabilities arising out of their positions with Bank of
America, whether or not such liabilities would be within the foregoing
indemnification provisions. Pursuant to this authority, Bank of America
maintains such insurance on behalf of its directors and officers.
2. BANK OF AMERICA, FSB
As a federal savings association, the terms and conditions for Bank of
America, FSB to indemnify its directors, officers, and employees are prescribed
by Section 545.121 of Title 12 of the Code of Federal Regulations ("Section
545.121"), as follows:
II-1
<PAGE>
(a) For purposes of Section 545.121, the following definitions and rules of
construction apply:
(1) Definitions.
(i) Action. The term "action" means any judicial or administrative
proceeding, or threatened proceeding, whether civil, criminal, or
otherwise,, including any appeal or other proceeding for review;
(ii) Court. The term "court" includes, without limitation, any court
to which or in which any appeal or any proceeding for review is brought.
(iii) Final judgment. The term "final judgment" means a judgment,
decree or order which is not appealable or as to which the period for
appeal has expired with no appeal taken.
(iv) Settlement. The term "settlement," includes entry of a judgment
by consent or confession or a plea of guilty or nolo contenders.
(2) Use of References. References in Section 545.121 to any individual
or other person, including any association, shall include legal
representatives, successors, and assigns thereof.
(b) General. Subject to paragraphs (c) and (g) below, a federal savings bank
such as Bank of America, FSB shall indemnify any person against whom an action
is brought or threatened because that person is or was a director, officer, or
employee of the association, for:
(1) Any amount for which that person became liable under a judgment in
such action; and
(2) Reasonable costs and expenses, including reasonable attorney's fees,
actually paid or incurred by that person in defending or settling
such action, or in enforcing his or her rights under Section 545.121
if he or she attains a favorable judgment in such enforcement action.
(c) Requirements. Indemnification shall be made such person under paragraph
(b) above only if:
(1) Final judgment on the merits is in his or her favor; or
(2) In case of:
(i) Settlement;
(ii) Final Judgment against him or her, or
(iii) Final judgment in his or her favor, other than on the merits, if
a majority of the disinterested directors of a federal savings bank such
as Bank of America, FSB determine that he or she was acting in good faith
within the scope his or her employment or authority as he or she could
reasonably have perceived it under the circumstances and for a purpose he
or she could reasonably have believed under the circumstances was in the
best interests of the federal savings bank or its members.
However, no indemnification shall be made unless a federal savings
bank such as Bank of America, FSB gives the Office of Thrift Supervision
(the "OTS") at least 60 days' notice of its intention to make such
indemnification. Such notice shall state the facts on which the action
arose, the terms of any settlement, and any disposition of the action by
a court. Such notice, a copy thereof, and a certified copy of the
resolution containing the required determination by the board of
directors shall be sent to the OTS District Director, who shall promptly
acknowledge receipt thereof. The notice period shall run from the date of
such receipt. No such indemnification shall be made if the OTS Director
advises the federal savings bank in writing, within such notice period,
of its objection thereto.
(d) Insurance. A federal savings bank such as Bank of America, FSB may
obtain insurance to protect it and its directors, officers and employees from
potential losses arising from claims against any of them for
II-2
<PAGE>
alleged wrongful acts, or wrongful acts, committed in their capacity as
directors, officers, or employees. However, no federal savings bank may obtain
insurance which provides for payment of losses of any person incurred as a
consequence of his or her willful or criminal misconduct.
(e) Payment of Expenses. If a majority of directors of a federal savings
bank such as Bank of America, FSB concludes that, in connection with an action,
any person ultimately may become entitled to indemnification under this section,
the directors may authorize payment of reasonable costs and expenses, including
reasonable attorneys' fees, arising from the defense or settlement of such
action. Nothing in this paragraph (e) shall prevent the directors of a federal
savings bank such as Bank of America, FSB from imposing such conditions on a
payment of expenses as they deem warranted and in the interests of such federal
savings bank. Before making an advance payment of expenses under this paragraph
(e), a federal savings bank such as Bank of America, FSB shall obtain an
agreement that such federal savings bank will be repaid if the person, on whose
behalf payment is made, is later determined not to be entitled to such
indemnification.
(f) Exclusiveness of provisions. A federal savings bank such as Bank of
America, FSB shall not indemnify any person referred to in paragraph (b) above
or obtain insurance referred to in paragraph (d) above other than in accordance
with Section 545.121.
(g) Applicability of section 11(n) of the Federal Deposit Insurance Act. The
indemnification provided for in paragraph (b) of Section 545.121 is subject to
and qualified by 12 U.S.C. Section 1821(k). Under Section 1821(k), a director or
officer of an insured depository institution such as Bank of America, FSB may be
held personally liable for monetary damages in certain civil actions by, on
behalf of, or at the request or direction of the Federal Deposit Insurance
Corporation (the "FDIC"). Section 1821(k) provides that nothing therein shall
impair or affect any right of the FDIC under other applicable law.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENTS
(a) Exhibits
<TABLE>
<S> <C> <C>
1.1 -- Form of Underwriting Agreement.*
4.1 -- Form of Pooling and Servicing Agreement and certain other related agreements as
Exhibits thereto.*
5.1 -- Opinion of Morrison & Foerster LLP with respect to legality.
8.1 -- Opinion of Morrison & Foerster LLP with respect to certain tax matters.
8.2 -- Form of Opinion of Morrison & Foerster LLP regarding federal income tax matters
23.1 -- Consent of Morrison & Foerster LLP (included in its opinions filed as
Exhibits 5.1, 8.1 and 8.2).
24.1 -- Power of Attorney of David A. Coulter.*
24.2 -- Power of Attorney of Michael E. O'Neill.*
24.3 -- Power of Attorney of Joseph F. Alibrandi.*
24.4 -- Power of Attorney of Jill E. Barad.*
24.5 -- Power of Attorney of Peter B. Bedford.*
24.6 -- Power of Attorney of Andrew F. Brimmer.*
24.7 -- Power of Attorney of Richard A. Clarke.*
24.8 -- Power of Attorney of Timm F. Crull.*
24.9 -- Power of Attorney of Kathleen Feldstein.*
24.10 -- Power of Attorney of Donald E. Guinn.*
24.11 -- Power of Attorney of Philip M. Hawley.*
24.12 -- Power of Attorney of Frank L. Hope, Jr.*
24.13 -- Power of Attorney of Ignacio E. Lozano, Jr.*
24.14 -- Power of Attorney of Walter E. Massey.*
</TABLE>
II-3
<PAGE>
<TABLE>
<S> <C> <C>
24.15 -- Power of Attorney of John M. Richman.*
24.16 -- Power of Attorney of Richard M. Rosenberg.*
24.17 -- Power of Attorney of A. Michael Spence.*
24.18 -- Power of Attorney of David A. Coulter.*
24.19 -- Power of Attorney of Michael E. O'Neill.*
24.20 -- Power of Attorney of Kathleen J. Burke.*
24.21 -- Power of Attorney of Luke S. Helms.*
24.22 -- Power of Attorney of Jack L. Meyers.*
24.23 -- Power of Attorney of Michael J. Murray.*
24.24 -- Power of Attorney of Thomas E. Peterson.*
24.25 -- Power of Attorney of Michael E. Rossi.*
24.26 -- Power of Attorney of Martin A. Stein.*
</TABLE>
- ------------------------
* Previously filed as an Exhibit to the Registration Statement filed on April
4, 1996.
(b) Financial Statements
All financial statements, schedules and historical financial information
have been omitted as they are not applicable.
ITEM 17. UNDERTAKINGS
Each of the undersigned registrants hereby undertakes:
(a) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement; (i) to include any
prospectus required by Section 10(a)(3) of the Securities Act of 1933, as
amended (the "Securities Act"); (ii) to reflect in the prospectus any facts or
events arising after the effective date of the registration statement (or the
most recent post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth in the
registration statement; (iii) to include any material information with respect
to the plan of distribution not previously disclosed in the registration
statement or any material change in such information in the registration
statement; PROVIDED, that (a)(i) and (a)(ii) under this Item 17 shall not apply
if the information required to be included in a post-effective amendment thereby
is contained in periodic reports filed pursuant to Section 13 or Section 15(d)
of the Exchange Act, that are incorporated by reference in this registration
statement.
(b) That, for the purpose of determining any liability under the Securities
Act, each such post-effective amendment shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
hereof.
(c) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
(d) That, for purposes of determining any liability under the Securities
Act, each filing of the registrants' respective annual reports pursuant to
Section 13(a) or 15(d) of the Exchange Act (and, where applicable, each filing
of an employee benefit plan's annual report pursuant to Section 15(d) of the
Exchange Act) that is incorporated by reference in this registration statement
shall be deemed to be a new registration statement relating to the securities
offered herein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(e) To provide to the underwriters at the closing specified in the
underwriting agreements certificates in such denominations and registered in
such names as required by the underwriters to permit prompt delivery to each
purchaser.
II-4
<PAGE>
(f) That insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling persons
of the registrant pursuant to the provisions described under Item 15 above, or
otherwise, the registrants have been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public policy
as expressed in the Securities Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than the
payment by the registrants of expenses incurred or paid by a director, officer
or controlling person of either registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the registrants will,
unless in the opinion of their counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the final adjudication
of such issue.
(g) That, for purposes of determining any liability under the Securities
Act, the information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the registrants pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be apart of this Registration
Statement as of the time it was declared effective.
(h) That, for the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
II-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this Amendment
No. 1 to the Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized in San Francisco, State of California, on
May , 1996.
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION, as
Originator of the Trust and Registrant
By: /s/ RAYMOND R. PETERS
-------------------------------------
Raymond R. Peters
GROUP EXECUTIVE VICE PRESIDENT AND
TREASURER
POWER OF ATTORNEY
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Amendment No. 1 to the Registration Statement has been signed on May , 1996 by
the following persons or their respective attorneys-in-fact in the capacities
indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE
- ------------------------------------------------------ ---------------------------------------------------------
<C> <S>
/s/ DAVID C. COULTER*
------------------------------------------- President, Chief Executive Officer and Director
David C. Coulter (Principal Executive Officer)
/s/ MICHAEL E. O'NEILL*
------------------------------------------- Chief Financial Officer
Michael E. O'Neill (Principal Financial Officer)
/s/ JAMES H. WILLIAMS*
------------------------------------------- Chief Accounting Officer
James H. Williams (Principal Accounting Officer)
/s/ JOSEPH F. ALIBRANDI*
------------------------------------------- Director
Joseph F. Alibrandi
/s/ JILL E. BARAD*
------------------------------------------- Director
Jill E. Barad
/s/ PETER B. BEDFORD*
------------------------------------------- Director
Peter B. Bedford
/s/ ANDREW F. BRIMMER*
------------------------------------------- Director
Andrew F. Brimmer
/s/ RICHARD A. CLARKE*
------------------------------------------- Director
Richard A. Clarke
</TABLE>
II-6
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE
- ------------------------------------------------------ ---------------------------------------------------------
<C> <S>
/s/ TIMM F. CRULL*
------------------------------------------- Director
Timm F. Crull
/s/ KATHLEEN FELDSTEIN*
------------------------------------------- Director
Kathleen Feldstein
/s/ DONALD E. GUINN*
------------------------------------------- Director
Donald E. Guinn
/s/ PHILIP M. HAWLEY*
------------------------------------------- Director
Philip M. Hawley
/s/ FRANK L. HOPE, JR.*
------------------------------------------- Director
Frank L. Hope, Jr.
/s/ IGNACIO E. LOZANO, JR.*
------------------------------------------- Director
Ignacio E. Lozano, Jr.
/s/ WALTER E. MASSEY*
------------------------------------------- Director
Walter E. Massey
/s/ JOHN M. RICHMAN*
------------------------------------------- Director
John M. Richman
/s/ RICHARD M. ROSENBERG*
------------------------------------------- Director
Richard M. Rosenberg
/s/ A. MICHAEL SPENCE*
------------------------------------------- Director
A. Michael Spence
*By /s/ ANDREA SUDMANN
--------------------------------------
Andrea Sudmann, Esq.
Attorney-in-Fact
</TABLE>
II-7
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this Amendment
No. 1 to the Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized in San Francisco, State of California, on
May , 1996.
BANK OF AMERICA, FSB, as
Originator of the Trust and
Registrant
By: /s/ RAYMOND R. PETERS
------------------------------------
Raymond R. Peters
TREASURER
POWER OF ATTORNEY
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Amendment No. 1 to the Registration Statement has been signed on May , 1996 by
the following persons or their respective attorneys-in-fact in the capacities
indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE
- -------------------------------------------------------- --------------------------------------------------------
<C> <S>
/s/ DAVID C. COULTER*
-------------------------------------------- Chief Executive Officer and Director
David C. Coulter (Principal Executive Officer)
/s/ MICHAEL E. O'NEILL*
-------------------------------------------- Chief Financial Officer and Director
Michael E. O'Neill (Principal Financial Officer)
/s/ JAMES H. WILLIAMS*
-------------------------------------------- Controller (Principal Accounting Officer)
James H. Williams
/s/ KATHLEEN J. BURKE*
-------------------------------------------- Director
Kathleen J. Burke
/s/ LUKE S. HELMS*
-------------------------------------------- Director
Luke S. Helms
/s/ JACK L. MEYERS*
-------------------------------------------- Director
Jack L. Meyers
/s/ MICHAEL J. MURRAY*
-------------------------------------------- Director
Michael J. Murray
/s/ THOMAS E. PETERSON*
-------------------------------------------- Director
Thomas E. Peterson
</TABLE>
II-8
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE
- -------------------------------------------------------- --------------------------------------------------------
<C> <S>
/s/ MICHAEL E. ROSSI*
-------------------------------------------- Director
Michael E. Rossi
/s/ MARTIN A. STEIN*
-------------------------------------------- Director
Martin A. Stein
*By: /s/ ANDREA SUDMANN
----------------------------------------
Andrea Sudmann, Esq.
Attorney-in-Fact
</TABLE>
II-9
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBITS
- -----------
<C> <C> <S> <C>
1.1 -- Form of Underwriting Agreement.*
4.1 -- Form of Pooling and Servicing Agreement and certain other related agreements as
Exhibits thereto.*
5.1 -- Opinion of Morrison & Foerster LLP with respect to legality.
8.1 -- Opinion of Morrison & Foerster LLP with respect to certain tax matters.
8.2 -- Form of Opinion of Morrison & Foerster LLP regarding federal income tax matters.
23.1 -- Consent of Morrison & Foerster LLP (included in its opinions filed as Exhibits 5.1, 8.1
and 8.2).
24.1 -- Power of Attorney of David A. Coulter*
24.2 -- Power of Attorney of Michael E. O'Neill.*
24.3 -- Power of Attorney of Joseph F. Alibrandi.*
24.4 -- Power of Attorney of Jill E. Barad.*
24.5 -- Power of Attorney of Peter B. Bedford.*
24.6 -- Power of Attorney of Andrew F. Brimmer.*
24.7 -- Power of Attorney of Richard A. Clarke.*
24.8 -- Power of Attorney of Timm F. Crull.*
24.9 -- Power of Attorney of Kathleen Feldstein.*
24.10 -- Power of Attorney of Donald E. Guinn.*
24.11 -- Power of Attorney of Philip M. Hawley.*
24.12 -- Power of Attorney of Frank L. Hope, Jr.*
24.13 -- Power of Attorney of Ignacio E. Lozano, Jr..*
24.14 -- Power of Attorney of Walter E. Massey.*
24.15 -- Power of Attorney of John M. Richman.*
24.16 -- Power of Attorney of Richard M. Rosenberg.*
24.17 -- Power of Attorney of A. Michael Spence.*
24.18 -- Power of Attorney of David A. Coulter.*
24.19 -- Power of Attorney of Michael E. O'Neill.*
24.20 -- Power of Attorney of Kathleen J. Burke.*
24.21 -- Power of Attorney of Luke S. Helms.*
24.22 -- Power of Attorney of Jack L. Meyers.*
24.23 -- Power of Attorney of Michael J. Murray.*
24.24 -- Power of Attorney of Thomas E. Peterson.*
24.25 -- Power of Attorney of Michael E. Rossi.*
24.26 -- Power of Attorney of Martin A. Stein.*
</TABLE>
- ------------------------
* Previously filed with the Registration Statement filed on April 4, 1996.
<PAGE>
EXHIBIT 5.1
Morrison & Foerster LLP
Attorneys At Law
19900 MacArthur Boulevard
Irvine, California 92715-2445
May 16, 1996
Bank of America National Trust
and Savings Association
555 South Flower Street
Los Angeles, California 90071
BankAmerica Housing Services
10089 Willow Creek Road
San Diego, California 92131
Re: BankAmerica Manufactured Housing Contract Trust
Pass-Through Certificates (issuable in series)
Registration Statement on Form S-3
Ladies and Gentlemen:
We have acted as special counsel to Bank of America National Trust and
Savings Association ("Bank of America") and BankAmerica Housing Services, an
unincorporated division of Bank of America, FSB ("BankAmerica Housing Services,"
and collectively with Bank of America, the "Registrants"), in connection with
the registration statement (the "Registration Statement") on Form S-3 (No.
333-3200) filed with the Securities and Exchange Commission under the Securities
Act of 1933, as amended. The Registration Statement covers BankAmerica
Manufactured Housing Contract Trust, Pass-Through Certificates (the
"Certificates") to be issued by one or both of the Registrants in one or more
series (each, a "Series") of Certificates. Each Series of Certificates will be
issued pursuant to a Pooling and Servicing Agreement (a "Pooling and Servicing
Agreement") among one or both Registrants, in each case as Seller, BankAmerica
Housing Services, as Servicer (the "Servicer"), and a Trustee to be identified
in the prospectus supplement for such Series of Certificates (the "Trustee"). A
Form of the Pooling and Servicing Agreement is included as an exhibit to the
Registration Statement and is incorporated therein by reference. The
Certificates are to be sold from time to time as set forth in the Registration
Statement, any amendment thereto, the prospectus contained therein (the
"Prospectus") and supplements to the Prospectus (the "Prospectus Supplements").
Capitalized terms used and not otherwise defined herein have the respective
meanings ascribed to such terms in the Registration Statement.
In connection with this Opinion, we have examined such corporate records,
documents, instruments, certificates of public officials and of the Registrants
and such questions of law as we have deemed necessary for the purpose of
rendering the opinions set forth herein.
In such examination, we have assumed (i) the genuineness of all signatures
and the authenticity of all items submitted to us as originals and the
conformity with originals of all items submitted to us as copies, and (ii) that
the Pooling and Servicing Agreement will be executed and delivered substantially
in the form filed as an exhibit to the Registration Statement and that the
Certificates will be sold as described therein.
The opinions hereinafter expressed are subject to the following
qualifications and exceptions:
1. the effect of bankruptcy, insolvency, reorganization, arrangement,
moratorium or other similar laws relating to or affecting the rights of
creditors generally, including without limitation, laws relating to fraudulent
transfers or conveyances, preferences and equitable subordination; and
2. limitations imposed by general principles of equity upon the
availability of equitable remedies or the enforcement of provisions of the
Pooling and Servicing Agreement; and the effect of judicial decisions which have
held that certain provisions are unenforceable where their enforcement would
violate the implied covenant of good faith and fair dealing or would be
commercially unreasonable, or where their breach is not material.
<PAGE>
Bank of America National Trust
and Savings Association
BankAmerica Housing Services
May 16, 1996
Page Two
We express no opinion as to matters governed by laws of any jurisdiction
other than the laws of the State of California and the federal laws of the
United States of America.
Based upon and subject to the foregoing, we are of the opinion that:
1. When a Pooling and Servicing Agreement for a Series of Certificates has
been authorized by all necessary corporate action and has been duly executed and
delivered by each Registrant party thereto, the Servicer and the Trustee, it
will constitute valid and binding obligations of each Registrant party thereto
and the Servicer, enforceable against each of them in accordance with its terms.
2. When a Pooling and Servicing Agreement for a Series of Certificates has
been authorized by all necessary corporate action and has been duly executed and
delivered, and the Certificates of such Series have been duly authorized by all
necessary corporate action by each Registrant, the Servicer, and the Trustee,
and when the Certificates of such Series have been duly executed, authenticated
or countersigned, delivered and sold as described in the Registration Statement,
the Prospectus and Prospectus Supplement relating thereto, the Certificates of
such Series will be legally issued, fully paid and nonassessable, and the
holders of the Certificates of such Series will be entitled to the benefits
provided by the Pooling and Servicing Agreement pursuant to which the
Certificates of such Series were issued.
We consent to the use of this opinion as an exhibit to the Registration
Statement and further consent to the reference to us under the caption "Legal
Matters" in the Prospectus which is part of the Registration Statement and in
Prospectus Supplements related thereto.
Very truly yours,
/s/ Morrison & Foerster LLP
<PAGE>
EXHIBIT 8.1
Morrison & Foerster LLP
Attorneys At Law
19900 MacArthur Boulevard
Irvine, California 92715-2445
May 16, 1996
Bank of America National Trust
and Savings Association
555 South Flower Street
Los Angeles, California 90071
BankAmerica Housing Services
10089 Willow Creek Road
San Diego, California 92131
Re: BankAmerica Manufactured Housing Contract Trust
Pass-Through Certificates (issuable in series)
Registration Statement on Form S-3
Ladies and Gentlemen:
We have acted as your special tax counsel in connection with the proposed
issuance by Bank of America National Trust and Savings Association ("Bank of
America") or BankAmerica Housing Services, an unincorporated division of Bank of
America, FSB ("BankAmerica Housing Services," and collectively with Bank of
America, the "Registrants"), or both of them, in one or more series (each, a
'Series') of BankAmerica Manufactured Housing Contract Trust, Pass-Through
Certificates (the "Certificates"). Each Series of Certificates will be issued
pursuant to a Pooling and Servicing Agreement (a "Pooling and Servicing
Agreement") among one or both Registrants, in each case as a Contract Seller,
BankAmerica Housing Services, as Servicer, and a Trustee to be identified in the
Prospectus Supplement for such Series of Certificates (the "Trustee"). Each
Series of Certificates will be offered pursuant to a Registration Statement on
Form S-3 (Registration No. 333-3200) originally filed with the Securities and
Exchange Commission (the "Commission") on April 4, 1996, as amended (as so
amended, the "Registration Statement"). Capitalized terms used and not otherwise
defined herein have the respective meanings ascribed to such terms in the
Registration Statement.
We have advised the Registrants in connection with the description of the
material federal income tax consequences to holders of the Certificates that
appears under the headings "Summary of Terms -- Federal Income Tax Consequences"
and "Certain Federal Income Tax Consequences" in the Prospectus included in the
Registration Statement (the "Legal Descriptions"), and we confirm our opinion
that the Legal Descriptions are accurate in all material respects. While the
Legal Descriptions discuss material anticipated federal income tax consequences
of the purchase, ownership and disposition of the Certificates, they do not
purport to discuss all federal tax consequences of the proposed issuance of the
Certificates and our opinion is limited to those federal income tax consequences
specifically discussed therein.
This opinion is furnished to you solely for use in connection with the
Registration Statement. We hereby consent to the filing of this letter as an
exhibit to the Registration Statement and to the reference to our firm under the
heading "Certain Federal Income Tax Consequences" in the Prospectus forming a
part of the Registration Statement. In giving such consent, we do not admit and
we hereby disclaim that we come within the category of persons whose consent is
required under Section 7 of the Securities Act of 1933, as amended, or the rules
and regulations of the Commission thereunder, nor do we admit that we are
experts with respect to any part of such Registration Statement within the
meaning of the term "experts" as used in the Securities Act of 1933, as amended,
or the rules and regulations of the Commission thereunder.
Very truly yours,
/s/ Morrison & Foerster LLP
<PAGE>
EXHIBIT 8.2
Morrison & Foerster LLP
Attorneys At Law
19900 MacArthur Boulevard
Irvine, California 92715-2445
[Date]
Bank of America National Trust
and Savings Association
555 South Flower Street
Los Angeles, California 90071
BankAmerica Housing Services
10089 Willow Creek Road
San Diego, California 92131
Re: BankAmerica Manufactured Housing Contract Trust
[Senior/Subordinate] Pass-Through Certificates, Series 19[ ]-[ ]
Ladies and Gentlemen:
We are special tax counsel to Bank of America National Trust and Savings
Association ("Bank of America") and BankAmerica Housing Services, an
unincorporated division of Bank of America, FSB ("BankAmerica Housing Services,"
and collectively with Bank of America, the "Registrants") in connection with the
issuance and sale by the Registrants of approximately $ aggregate principal
amount of BankAmerica Manufactured Housing Contract Trust, [Senior/Subordinate]
Pass-Through Certificates, Series 19 - , Class [A] (the "Class [A]
Certificates") and $ aggregate principal amount of BankAmerica Manufactured
Housing Contract Trust, [Senior/Subordinate] Pass-Through Certificates, Series
199 - , Class [B] (the "Class [B] Certificates;" collectively with the Class
[A] Certificates, the "Certificates"). The Certificates are to be issued
pursuant to a Pooling and Servicing Agreement, dated as of , 19 (the
"Agreement") among the Registrants, BankAmerica Housing Services, as Servicer,
and , as Trustee. The Certificates will represent undivided interests in a
trust fund (the "Trust Fund") consisting primarily of a pool of manufactured
housing installment sales contracts and installment loan agreements (the
"Contracts") which [one or more of the] the Registrants will convey to the
Trustee, as trustee for the Trust Fund, pursuant to the Agreement.
In connection with this opinion, we have examined the following documents:
1. the Agreement;
2. the registration statement on Form S-3 (No. 333-3200) filed by the
Registrants relating to the Certificates, Amendment No. 1 thereto as filed
with the Securities and Exchange Commission (the "Commission") in accordance
with the provisions of the Securities Act of 1933, as amended, and the rules
and regulations of the Commission thereunder (collectively, the "Act"), and
evidence satisfactory to us that such registration statement, as so amended,
became effective under the Act on , 19 (as so amended and
declared effective, the "Registration Statement"); and
3. the base Prospectus and Prospectus Supplement relating to the Class [A] and
Class [B] Certificates as filed with the Commission on , 19
pursuant to Rule 424(b) under the Act (such Prospectus and Prospectus
Supplement being hereinafter collectively referred to as the "Prospectus").
In such examination, we have assumed the genuineness of all signatures and
the authenticity of all items submitted to us as originals and the conformity
with originals of all items submitted to us as copies. In making our examination
of documents executed by entities other than the Registrants, we have assumed
that
1
<PAGE>
Bank of America National Trust and Savings Association
BankAmerica Housing Services
Page Two
[Date]
each other entity has the power and authority to execute and deliver, and to
perform and observe the provisions of such documents, and the due authorization
by each such entity of all requisite action and the due execution and delivery
of such documents by each such entity. To the extent we have deemed necessary
and proper, we have relied upon the representations and warranties as to facts
of the Registrants contained in the Agreement.
The opinions expressed herein are based upon current statues, rules,
regulations, cases and official interpretive opinions, and cover certain items
that are not directly or definitively addressed by such authorities.
Based upon and subject to the foregoing, we are of the opinion that:
1. The statements contained in the Prospectus under the heading "Certain
Federal Income Tax Consequences," to the extent they constitute matters of law
or legal conclusions with respect thereto, are accurate in all material
respects, under the assumptions stated therein and under existing law.
2. Assuming (i) the making of a valid election, (ii) compliance with the
Agreement, and (iii) compliance with any changes in the law, including any
amendments to the Internal Revenue Code of 1986, as amended (the "Code") or
applicable Treasury Regulations thereunder, the Trust Fund will be classified
for federal income tax purposes as a "real estate mortgage investment conduit"
("REMIC") within the meaning of Code Section 860D.
We express no opinion as to matters governed by laws of any jurisdiction
other than the substantive laws of the State of California, the laws of the
State of New York and the federal laws of the United States of America.
This opinion is furnished to you solely for use in connection with the
issuance and sale of the Certificates. We hereby consent to the filing of this
letter as an exhibit to a Current Report on Form 8-K filed by you in connection
with the Trust Fund. In giving such consent, we do not admit and we hereby
disclaim that we come within the category of persons whose consent is required
under Section 7 of the Securities Act of 1933, as amended, or the rules and
regulations of the Commission thereunder, nor do we admit that we are experts
with respect to any part of the Registration Statement within the meaning of the
term "experts" as used in the Securities Act of 1933, as amended, or the rules
and regulations of the Commission thereunder.
Very truly yours,
/s/ Morrison & Foerster LLP
2
