<PAGE> 1
THIS DOCUMENT IS A COPY OF THE
PROSPECTUS SUPPLEMENT FILED ON
MARCH 6, 1997 PURSUANT TO A RULE 201
TEMPORARY HARDSHIP EXEMPTION.
Filed Pursuant to Rule 424(b)(5)
Registration No. 333-45467
PROSPECTUS SUPPLEMENT [WELLS FARGO LOGO]
(To Prospectus dated February 19, 1998)
$1,256,471,000 (APPROXIMATE)
MORGAN STANLEY CAPITAL I INC.
AS DEPOSITOR
WELLS FARGO BANK, NATIONAL ASSOCIATION
AS MASTER SERVICER AND SELLER
MORGAN STANLEY MORTGAGE CAPITAL INC.
AS SELLER
JOHN HANCOCK REAL ESTATE FINANCE, INC.
AS SELLER
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES SERIES 1998-WF1
------------
The Series 1998-WF1 Commercial Mortgage Pass-Through Certificates (the
"Certificates") will consist of 17 classes (each, a "Class": (i) the Class A-1
and Class A-2 Certificates (collectively, the "Class A Certificates"), (ii) the
Class X-1 and Class X-2 Certificates (collectively, the "Class X Certificates"
or the "Interest Only Certificates" and, together with the Class A
Certificates, the "Senior Certificates"), (iii) the Class B, Class C, Class D,
Class E, Class F, Class G, Class H, Class J, Class K, and Class L Certificates
(collectively, the "Subordinate Certificates" and, collectively with the
"Senior Certificates",the "REMIC Regular Certificates") and the Class R-I,
Class R-II and Class R-III Certificates (collectively, the "Residual
Certificates"). Only the Class A-1, Class A-2, Class X-2, Class B, Class C,
Class D,and Class E Certificates (collectively, the "Offered Certificates") are
offered hereby. It is a condition to their issuance that the respective Classes
of Offered Certificates be assigned ratings by Duff & Phelps Credit Rating Co.
("DCR") and/or by Standard & Poor's Ratings Services ("S&P" and, together with
DCR, the "Rating Agencies") as set forth in the table below. Each Class of
Offered Certificates will be issued with the aggregate principal balance (the
aggregate "Certificate Balance"), or aggregate notional amount (the aggregate
"Notional Amount") and will accrue interest (initially, in the case of the
Class X-2 Certificates) at the per annum rate (the "Pass-Through Rate"), set
forth in the table below.
The Certificates will evidence, in the aggregate, all of the beneficial
ownership interests in a trust (the "Trust Fund") to be established by Morgan
Stanley Capital I Inc. (the "Depositor") pursuant to a Pooling and Servicing
Agreement, to be dated as of March 1, 1998 (the "Pooling and Servicing
Agreement"), among the Depositor, Wells Fargo Bank, National Association, as
master servicer (the "Master Servicer"), CRIIMI MAE Services Limited
Partnership, as Special Servicer (the "Special Servicer"), LaSalle National
Bank, as trustee (the "Trustee") and ABN AMRO Bank N.V., as fiscal agent (the
"Fiscal Agent"). Distributions on the Certificates will be payable solely from
the assets transferred to the Trust Fund for the benefit of the holders of the
Certificates (the "Certificateholders"). The Certificates do not constitute
obligations of the Depositor, the Master Servicer, the Special Servicer, the
Trustee, the Fiscal Agent or any of their respective affiliates. Neither the
Certificates nor the Mortgage Loans (as defined below) will be insured or
guaranteed by any governmental agency or instrumentality or by the Depositor,
the Sellers (as defined herein), the Master Servicer, the Special Servicer, the
Trustee, the Fiscal Agent, any of their respective affiliates or any other
person.
SEE "RISK FACTORS AND OTHER SPECIAL CONSIDERATIONS" BEGINNING ON PAGE
S-37 HEREIN AND "RISK FACTORS" BEGINNING ON PAGE 13 IN THE PROSPECTUS FOR
CERTAIN FACTORS TO BE CONSIDERED IN PURCHASING THE OFFERED CERTIFICATES.
------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS SUPPLEMENT OR THE PROSPECTUS TO WHICH IT
RELATES. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
(cover continued on page S-3)
------------
<TABLE>
<CAPTION>
INITIAL AGGREGATE INITIAL FINAL SCHEDULED
CERTIFICATE BALANCE OR PASS-THROUGH DISTRIBUTION RATINGS
CLASS NOTIONAL AMOUNT (1) RATE (2) DATE (3) (DCR/S&P)(4)
- ---------- --------------------- ------------ --------------- ------------
<S> <C> <C> <C> <C>
Class A-1 $363,000,000 6.25% 07/15/07 AAA/AAA
Class A-2 $653,315,000 6.55% 12/15/07 AAA/AAA
Class X-2 $763,756,000 1.12% 03/15/03 AAA/AAAr
Class B $69,610,000 6.67% 12/15/07 AA/AA
Class C $69,610,000 6.77% 01/15/08 A/A
Class D $69,611,000 7.12% 01/15/08 BBB/BBB
Class E $31,325,000 7.30% 02/15/08 BBB-/NR
</TABLE>
- ------------
(Footnotes to table on page S-3)
The Offered Certificates will be purchased from the Depositor by Morgan
Stanley & Co. Incorporated, Bear, Stearns & Co. Inc. and Deutsche Morgan
Grenfell Inc. (collectively, the "Underwriters") and will be offered by the
Underwriters to the public from time to time in negotiated transactions or
otherwise at varying prices to be determined at the time of sale. Proceeds to
the Depositor from the sale of the Offered Certificates, before deducting
issuance expenses payable by the Depositor, will be approximately
$1,304,115,765 plus accrued interest. For further information with respect to
the plan of distribution and any discounts, commissions and profits on resale
that may be deemed underwriting discounts or commissions, see "Plan of
Distribution" herein.
The Offered Certificates are offered by the Underwriters when, as and if
issued by the Depositor, delivered to and accepted by the Underwriters and
subject to their right to reject orders in whole or in part. It is expected
that delivery of the Offered Certificates will be made in book-entry form
through the facilities of The Depository Trust Company ("DTC") in the United
States and may be made in book-payment form through Cedel Bank, S.A. ("CEDEL")
and the Euroclear System ("Euroclear"), as participants of DTC, in Europe,
against payment therefor on or about March 5, 1998 (the "Closing Date").
------------
MORGAN STANLEY DEAN WITTER
BEAR, STEARNS & CO. INC.
DEUTSCHE MORGAN GRENFELL INC.
The date of this Prospectus Supplement is February 26, 1998
<PAGE> 2
[GRAPHIC OMITTED]
S-2
<PAGE> 3
The footnotes to the table on the cover page are as follows:
(1) The initial aggregate Certificate Balance or Notional Amount of each class
of Offered Certificates is subject to a permitted variance of plus or
minus 5%, depending on the aggregate principal amount of the Mortgage
Loans actually transferred to the Trust Fund.
(2) The Pass-Through Rates for the Class A-1, Class A-2, Class B, Class C,
Class D and Class E Certificates for each Distribution Date (as defined
herein) will be equal to the fixed rates per annum set forth in the table;
provided, in each case, that such Pass-Through Rate will not exceed the
Weighted Average Net Mortgage Rate (as defined herein) for such
Distribution Date. The Pass-Through Rate for the Class X-2 Certificates
set forth in the table is the approximate initial Pass-Through Rate. The
Pass-Through Rate for the Class X-2 Certificates is variable and,
subsequent to the initial Distribution Date, will be determined as
described in "Description Of The Certificates--Pass-Through Rates" herein.
(3) The Final Scheduled Distribution Date for each Class of Offered
Certificates is the Distribution Date on which such Class is expected to
be paid in full, assuming that timely payments (and no prepayments) will
be made on the Mortgage Loans in accordance with their terms and otherwise
based on the Maturity Assumptions (as defined herein). The actual
performance and experiences of the Mortgage Loans will likely differ from
such assumptions. As described herein under "Ratings," the Final Rated
Distribution Date for those Classes of Offered Certificates entitled to
distributions of principal will be the Distribution Date in March 2030.
(4) See "Ratings." "NR" means not rated.
(continued from cover page)
Initially, the assets of the Trust Fund will consist primarily of a
segregated pool (the "Mortgage Pool") of 306 fixed-rate commercial and
multifamily mortgage loans (the "Mortgage Loans"). The Cut-Off Date is March 1,
1998 and, as of such date, the Mortgage Loans had an aggregate principal balance
(the "Initial Pool Balance") of $1,392,212,342, after application of all
payments of principal due on or before such date, whether or not received, and
subject to a variance of plus or minus 5%. The Mortgage Loans are further
described under "Description of the Mortgage Pool" herein and on Appendix I,
Appendix II and Appendix III hereto.
The Depositor will acquire the Mortgage Loans from the following sellers
(each, a "Seller") on the Closing Date: Wells Fargo Bank, National Association
("Wells Fargo") (175 Mortgage Loans, representing 53.0% of the Initial Pool
Balance); Morgan Stanley Mortgage Capital Inc. ("MSMC") (97 Mortgage Loans,
representing 36.0% of the Initial Pool Balance); and John Hancock Real Estate
Finance, Inc. ("JHREF") (34 Mortgage Loans, representing 11.0% of the Initial
Pool Balance).
Distributions on the Certificates will be made, to the extent of available
funds, on the 15th day of each month or, if any such 15th day is not a business
day, then on the next business day, beginning in April, 1998 (each, a
"Distribution Date"). As described herein, distributions of interest on each
Class of Offered Certificates will be made on each Distribution Date based on
the Pass-Through Rate then applicable to such Class and the aggregate
Certificate Balance or Notional Amount, as the case may be, of such Class
outstanding immediately prior to such Distribution Date. Distributions allocable
to principal of the respective Classes of Certificates with Certificate Balances
(the "Principal Balance Certificates") will be made in the amounts and in
accordance with the priorities described herein until the Certificate Balance of
each such Class is reduced to zero. The Class X Certificates will not have
Certificate Balances and will not entitle the holders thereof to receive
distributions of principal. As described herein, any prepayment premiums,
penalties or fees actually collected on the Mortgage Loans will be distributed
among certain of the Classes of Certificates in the amounts and in accordance
with the priorities described herein. See "Description of the
Certificates--Distributions" herein.
As and to the extent described herein, the Subordinate Certificates will
be subordinate to the Senior Certificates; and each Class of Subordinate
Certificates will further be subordinate to each other class of Subordinate
Certificates, if any, with an earlier alphabetical Class designation. The
Residual Certificates will be subordinate to
S-3
<PAGE> 4
the REMIC Regular Certificates. See "Description of the
Certificates--Distributions" and "--Distributions--Subordination; Allocation of
Losses and Certain Expenses" herein.
The yield to maturity of each Class of Offered Certificates will depend
on, among other things, the rate and timing of principal payments (including by
reason of prepayments, loan extensions, defaults and liquidations) and losses on
or in respect of the Mortgage Loans that result in a reduction of the aggregate
Certificate Balance or Notional Amount of such Class. The yield to maturity of
the Class X-2 Certificates will be highly sensitive to the rate and timing of
principal payments (including by reason of prepayments, defaults and
liquidations) and losses on or in respect of the Mortgage Loans, which rate and
timing of principal payments and losses may fluctuate significantly from time to
time. A rate of principal payments on the Mortgage Loans that is more rapid than
expected by investors will have a material negative effect on the yield to
maturity of the Class X-2 Certificates. Investors in the Class X-2 Certificates
should consider the associated risks, including the risk that a rapid rate of
principal prepayments on the Mortgage Loans could result in the failure of
investors in such Class of Certificates to recover fully their initial
investments. See "Yield, Prepayment and Maturity Considerations" herein and
"Yield Considerations," "Risk Factors--Average Life of Certificates;
Prepayments; Yields" in the Prospectus.
As described herein, three separate real estate mortgage investment
conduit ("REMIC") elections will be made with respect to the Trust Fund for
federal income tax purposes (the REMICs formed thereby being herein referred to
as "REMIC I", "REMIC II" and "REMIC III", respectively). The Offered
Certificates will constitute "regular interests" in REMIC III. See "Certain
Federal Income Tax Consequences" herein and in the Prospectus.
See "Index of Principal Definitions" in the Prospectus for the location of
meanings of capitalized terms used but not defined herein. See "Index of
Principal Definitions" herein for location of meanings of other capitalized
terms used herein.
There is currently no secondary market for the Offered Certificates. The
Underwriters currently intend to make a secondary market in the Offered
Certificates, but are not obligated 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. The Offered Certificates will not be listed on
any securities exchange.
THE ATTORNEY GENERAL OF THE STATE OF NEW YORK HAS NOT PASSED ON OR
ENDORSED THE MERITS OF THIS OFFERING. ANY REPRESENTATION TO THE CONTRARY IS
UNLAWFUL.
THIS PROSPECTUS SUPPLEMENT IS NOT INTENDED TO FURNISH LEGAL, REGULATORY,
TAX OR ACCOUNTING ADVICE TO ANY PROSPECTIVE PURCHASER OF THE OFFERED
CERTIFICATES. THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS SHOULD BE REVIEWED
BY EACH PROSPECTIVE PURCHASER AND ITS LEGAL, REGULATORY, TAX AND ACCOUNTING
ADVISORS. EACH PROSPECTIVE PURCHASER MUST RELY ON ITS OWN EXAMINATION OF THIS
PROSPECTUS SUPPLEMENT AND THE PROSPECTUS.
INVESTORS WHOSE INVESTMENT AUTHORITY IS SUBJECT TO LEGAL RESTRICTIONS
SHOULD CONSULT THEIR OWN LEGAL ADVISORS TO DETERMINE WHETHER AND TO WHAT EXTENT
THE OFFERED CERTIFICATES CONSTITUTE LEGAL INVESTMENTS FOR THEM.
THE UNDERWRITERS MAY SELL OFFERED CERTIFICATES TO THEIR AFFILIATES OR
ENTITIES OVER WHICH THEIR AFFILIATES HAVE DISCRETIONARY AUTHORITY IN ACCORDANCE
WITH APPLICABLE LAW.
-----------------
THE OFFERED CERTIFICATES OFFERED BY THIS PROSPECTUS SUPPLEMENT CONSTITUTE
PART OF A SEPARATE SERIES OF CERTIFICATES ISSUED BY THE DEPOSITOR AND ARE BEING
OFFERED PURSUANT TO ITS PROSPECTUS DATED FEBRUARY 19, 1998, OF WHICH THIS
PROSPECTUS SUPPLEMENT IS A PART AND WHICH ACCOMPANIES THIS
S-4
<PAGE> 5
PROSPECTUS SUPPLEMENT. THE PROSPECTUS CONTAINS IMPORTANT INFORMATION REGARDING
THIS OFFERING WHICH IS NOT CONTAINED HEREIN, AND PROSPECTIVE INVESTORS ARE URGED
TO READ THE PROSPECTUS AND THIS PROSPECTUS SUPPLEMENT IN FULL. SALES OF THE
OFFERED CERTIFICATES MAY NOT BE CONSUMMATED UNLESS THE PURCHASER HAS RECEIVED
BOTH THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS.
UNTIL MAY 27, 1998, ALL DEALERS EFFECTING TRANSACTIONS IN THE OFFERED
CERTIFICATES, WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED
TO DELIVER A PROSPECTUS SUPPLEMENT AND A 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.
-------------------
THE UNDERWRITERS MAY ENGAGE IN TRANSACTIONS THAT STABILIZE, MAINTAIN OR
OTHERWISE AFFECT THE PRICE OF THE OFFERED CERTIFICATES, INCLUDING MAKING A
SECONDARY MARKET IN THE OFFERED CERTIFICATES. SEE "PLAN OF DISTRIBUTION" HEREIN.
SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
-------------------
FORWARD-LOOKING STATEMENTS
IF AND WHEN INCLUDED IN THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING
PROSPECTUS OR IN DOCUMENTS INCORPORATED HEREIN OR THEREIN BY REFERENCE, THE
WORDS "EXPECTS," "INTENDS," "ANTICIPATES," "ESTIMATES" AND ANALOGOUS EXPRESSIONS
ARE INTENDED TO IDENTIFY FORWARD-LOOKING STATEMENTS. ANY SUCH STATEMENTS, WHICH
MAY INCLUDE STATEMENTS CONTAINED IN "RISK FACTORS AND OTHER SPECIAL
CONSIDERATIONS," INHERENTLY ARE SUBJECT TO A VARIETY OF RISKS AND UNCERTAINTIES
THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE PROJECTED. SUCH
RISKS AND UNCERTAINTIES INCLUDE, AMONG OTHERS, GENERAL ECONOMIC AND BUSINESS
CONDITIONS, COMPETITION, CHANGES IN FOREIGN POLITICAL, SOCIAL AND ECONOMIC
CONDITIONS, REGULATORY INITIATIVES AND COMPLIANCE WITH GOVERNMENTAL REGULATIONS,
CUSTOMER PREFERENCES AND VARIOUS AND OTHER MATTERS, MANY OF WHICH ARE BEYOND THE
DEPOSITOR'S CONTROL. THESE FORWARD-LOOKING STATEMENTS SPEAK ONLY AS OF THE DATE
OF THIS PROSPECTUS SUPPLEMENT. THE DEPOSITOR EXPRESSLY DISCLAIMS ANY OBLIGATION
OR UNDERTAKING TO RELEASE PUBLICLY ANY UPDATES OR REVISIONS TO ANY
FORWARD-LOOKING STATEMENT CONTAINED HEREIN TO REFLECT ANY CHANGE IN THE
DEPOSITOR'S EXPECTATIONS WITH REGARD THERETO OR ANY CHANGE IN EVENTS, CONDITIONS
OR CIRCUMSTANCES ON WHICH ANY SUCH STATEMENT IS BASED.
-------------------
S-5
<PAGE> 6
AVAILABLE INFORMATION
The Depositor has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement under the Securities Act of 1933, as
amended, with respect to the Offered Certificates. This Prospectus Supplement
and the related Prospectus, which form a part of the Registration Statement,
omit certain information contained in such Registration Statement pursuant to
the Rules and Regulations of the Commission. Such Registration Statement and
exhibits thereto can be inspected and copied at prescribed rates at the Public
Reference Room of the Commission at 450 Fifth Street, N.W., Washington, D.C.
20549 and the Commission's regional offices at Seven World Trade Center, Suite
1300, New York, New York 10048, and Citicorp Center, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661-2511. The Commission maintains a Web site at
http://www.sec.gov containing reports, proxy and information statements and
other information regarding registrants, including the Depositor, that file
electronically with the Commission.
---------------------------
REPORTS TO CERTIFICATEHOLDERS
The Trustee will mail monthly reports concerning the Certificates to all
Certificateholders of record.
---------------------------
No dealer, salesperson or other individual has been authorized to give any
information or to make any representations not contained in this Prospectus
Supplement or the Prospectus and, if given or made, such information or
representation must not be relied upon as having been authorized by the
Depositor or any Underwriter. 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 jurisdiction to any person to whom it is
unlawful to make such offer in such jurisdiction. Neither the delivery of this
Prospectus Supplement or the Prospectus nor any sale made hereunder shall, under
any circumstances, create an implication that the information herein or therein
is correct as of any time subsequent to the date hereof or that there has been
no change in the affairs of the Depositor since such date.
S-6
<PAGE> 7
[THIS PAGE INTENTIONALLY LEFT BLANK]
S-7
<PAGE> 8
TABLE OF CONTENTS
FORWARD-LOOKING STATEMENTS.................................................S-5
AVAILABLE INFORMATION......................................................S-6
REPORTS TO CERTIFICATEHOLDERS..............................................S-6
TRANSACTION OVERVIEW......................................................S-10
SUMMARY...................................................................S-11
RISK FACTORS AND OTHER SPECIAL CONSIDERATIONS.............................S-37
The Certificates....................................................S-37
The Mortgage Loans..................................................S-38
DESCRIPTION OF THE CERTIFICATES...........................................S-43
General.............................................................S-43
Certificate Balances And Notional Amounts...........................S-45
Pass-Through Rates..................................................S-46
Distributions.......................................................S-47
Optional Termination................................................S-55
Advances............................................................S-55
Reports to Certificateholders; Available Information................S-57
Example of Distributions............................................S-59
The Trustee and the Fiscal Agent....................................S-59
YIELD, PREPAYMENT AND MATURITY CONSIDERATIONS.............................S-60
General.............................................................S-60
Pass-Through Rates..................................................S-61
Rate and Timing of Principal Payments...............................S-61
Losses and Shortfalls...............................................S-62
Certain Relevant Factors............................................S-62
Weighted Average Life...............................................S-63
Class X-2 Certificates..............................................S-67
DESCRIPTION OF THE MORTGAGE POOL..........................................S-68
General.............................................................S-68
Certain Terms and Characteristics of the Mortgage Loans.............S-69
Assessments of Property Value and Condition.........................S-71
Additional Mortgage Loan Information................................S-72
Standard Hazard Insurance...........................................S-73
The Sellers.........................................................S-74
Assignment of The Mortgage Loans....................................S-74
Representations and Warranties......................................S-75
Repurchases And Other Remedies......................................S-76
Changes In Mortgage Pool Characteristics............................S-77
SERVICING OF THE MORTGAGE LOANS...........................................S-77
General.............................................................S-77
The Master Servicer.................................................S-79
The Special Servicer................................................S-80
Termination of Special Servicer.....................................S-81
The Operating Adviser...............................................S-81
S-8
<PAGE> 9
Mortgage Loan Modifications.........................................S-82
Sale of Defaulted Mortgage Loans and REO Properties.................S-83
Foreclosures........................................................S-83
CERTAIN FEDERAL INCOME TAX CONSEQUENCES...................................S-84
General.............................................................S-84
Original Issue Discount and Premium.................................S-85
Additional Considerations...........................................S-86
CERTAIN LEGAL ASPECTS OF MORTGAGE LOANS LOCATED IN CALIFORNIA.............S-87
ERISA CONSIDERATIONS......................................................S-87
Plan Assets.........................................................S-87
Special Exemption Applicable to Senior Certificates.................S-88
Insurance Company General Accounts..................................S-89
General Investment Considerations...................................S-90
LEGAL INVESTMENT..........................................................S-90
USE OF PROCEEDS...........................................................S-90
PLAN OF DISTRIBUTION......................................................S-90
LEGAL MATTERS.............................................................S-91
RATINGS...................................................................S-92
INDEX OF PRINCIPAL DEFINITIONS............................................S-93
SCHEDULE A - RATES USED IN DETERMINING STRIP RATES .....................A-1
APPENDIX I - MORTGAGE POOL INFORMATION (TABLES).........................I-1
APPENDIX II - CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS ............II-1
APPENDIX III - SIGNIFICANT LOAN SUMMARIES ..............................III-1
TERM SHEET ...............................................................T-1
S-9
<PAGE> 10
TRANSACTION OVERVIEW
Prospective investors are advised to carefully read, and should rely
solely on, the detailed information appearing elsewhere in this Prospectus
Supplement and in the Prospectus relating to the Offered Certificates in making
their investment decision. The following Transaction Overview does not include
all relevant information relating to the securities and underlying assets
described herein, particularly with respect to the risks and special
considerations involved with an investment in such securities and is qualified
in its entirety by reference to the detailed information appearing elsewhere in
this Prospectus Supplement and in the Prospectus. Prior to making an investment
decision, a prospective investor should carefully review this Prospectus
Supplement and the Prospectus in their entirety.
<TABLE>
<CAPTION>
====================================================================================
INITIAL
AGGREGATE
CERTIFICATE DESCRIPTION
BALANCE OR RATINGS WEIGHTED PRINCIPAL OF INITIAL
NOTIONAL (DCR/ S&P) AVG. WINDOW PASS-THROUGH PASS-THROUGH
CLASS AMOUNT(1) (2) LIFE (3) (3) RATE RATE (4)
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
A-1 $363,000,000 AAA/AAA 5.43 1-112 Fixed Rate 6.25%
- ------------------------------------------------------------------------------------
A-2 $653,315,000 AAA/AAA 9.62 112-117 Fixed Rate 6.55%
- ------------------------------------------------------------------------------------
Variable
Rate I/O
(Excess
Interest
X-1(b) $1,392,212,342 AAA/AAAr N/A N/A Strips) 0.73%
- ------------------------------------------------------------------------------------
Variable
rate I/O)
(Fixed
Interest
X-2 $763,756,000 AAA/AAAr N/A N/A Strips) 1.12%
- ------------------------------------------------------------------------------------
B $69,610,000 AA/AA 9.78 117-117 Fixed Rate 6.67%
- ------------------------------------------------------------------------------------
C $69,610,000 A/A 9.80 117-118 Fixed Rate 6.77%
- ------------------------------------------------------------------------------------
D $69,611,000 BBB/BBB 9.86 118-118 Fixed Rate 7.12%
- ------------------------------------------------------------------------------------
E $31,325,000 BBB-/NR 9.88 118-119 Fixed Rate 7.30%
- ------------------------------------------------------------------------------------
F(b) $24,364,000 BB+/BB+ 9.94 119-119 Fixed Rate 7.30%
- ------------------------------------------------------------------------------------
G(b) $38,286,000 NR/BB 10.34 119-142 Fixed Rate 6.25%
- ------------------------------------------------------------------------------------
H(b) $10,441,000 NR/BB- 12.60 142-160 Fixed Rate 6.25%
- ------------------------------------------------------------------------------------
J(b) $27,845,000 NR/B 14.51 160-178 Fixed Rate 6.25%
- ------------------------------------------------------------------------------------
K(b) $10,441,000 NR/B- 14.88 178-179 Fixed Rate 6.25%
- ------------------------------------------------------------------------------------
L(b) $24,364,342 NR/NR 17.48 179-238 Fixed Rate 6.25%
====================================================================================
</TABLE>
(1) In each case, subject to a variance of plus or minus 5%.
(2) See "Ratings" herein. "NR" means not rated.
(3) The weighted average life (expressed in years) and the period (expressed
in months following the Closing Date and commencing with the month of the
first Distribution Date) during which distributions of principal would be
received (the "Principal Window") set forth in the foregoing table is
based on the Maturity Assumptions (as defined herein) and a pricing speed
of 0% CPR (as defined in the Prospectus) applied to each Mortgage Loan
during any period that it permits voluntary prepayments of principal
without imposing a Prepayment Premium (as defined herein) in connection
therewith. See "Yield, Prepayment and Maturity Considerations" herein.
(4) The Pass-Through Rates for the Class A-1, Class A-2, Class B, Class C,
Class D, Class E, Class F, Class G, Class H, Class J, Class K and Class L
Certificates for each Distribution Date will be equal to the fixed rates
per annum set forth in the table; provided, in each case, that such
Pass-Through Rate will not exceed the Weighted Average Net Mortgage Rate
(as defined herein) for such Distribution Date. The initial Pass-Through
Rates for the Interest Only Certificates set forth in the table are the
approximate initial Pass-Through Rates. The Pass-Through Rates for the
Interest Only Certificates are variable and, subsequent to the initial
Distribution Date, will be determined as described in "Description of the
Certificates--Pass-Through Rates" herein.
- ----------
(a) Aggregate Notional Amount.
(b) Not offered hereby
S-10
<PAGE> 11
- --------------------------------------------------------------------------------
SUMMARY
The following summary is qualified in its entirety by reference to the
detailed information appearing elsewhere in this Prospectus Supplement and in
the accompanying Prospectus. Certain capitalized terms used in this Summary are
defined elsewhere in this Prospectus Supplement or in the Prospectus. An "Index
of Principal Definitions" is included at the end of each of this Prospectus
Supplement and the Prospectus.
Depositor.......................... Morgan Stanley Capital I Inc., a Delaware
corporation (the "Depositor"). The
Depositor's principal offices are located at
1585 Broadway, New York, New York 10036,
telephone (212) 761-4700.
The Certificates................... The Series 1998-WF1 Commercial Mortgage
Pass-Through Certificates (the
"Certificates") will be issued in 17 classes
(each, a "Class") designated as: (i) the
Class A-1 and Class A-2 Certificates
(collectively, the "Class A Certificates");
(ii) the Class X-1 and Class X-2
Certificates (collectively, the "Interest
Only Certificates" or the "Class X
Certificates" and, collectively with the
Class A Certificates, the "Senior
Certificates"); (iii) the Class B, Class C,
Class D, Class E, Class F, Class G, Class H,
Class J, Class K and Class L Certificates
(collectively, the "Subordinate
Certificates" and, collectively with the
Senior Certificates, the "REMIC Regular
Certificates"); and (iv) the Class R-I,
Class R-II and Class R-III Certificates
(collectively, the "Residual Certificates").
The Certificates will evidence beneficial
ownership interests in a trust fund (the
"Trust Fund") to be formed by the Depositor
pursuant to a Pooling and Servicing
Agreement, to be dated as of the Cut-Off
Date (the "Pooling and Servicing
Agreement"), among the Depositor, the Master
Servicer, the Special Servicer, the Trustee
and the Fiscal Agent. Initially, the assets
of the Trust Fund will consist primarily of
306 fixed-rate mortgage loans (each, a
"Mortgage Loan"). As of the Cut-Off Date,
the Mortgage Loans had an aggregate
principal balance (the "Initial Pool
Balance") of $1,392,212,342, after
application of all payments due on or before
such date, whether or not received. The
Trust Fund will also hold (i) any Mortgaged
Property acquired by foreclosure or deed in
lieu of foreclosure in respect of a Mortgage
Loan that becomes defaulted (any such
property upon acquisition, an "REO
Property") and (ii) certain other related
property, as described herein. The
Certificates collectively represent the
entire interest in the Trust Fund.
Only the Class A-1, Class A-2, Class X-2,
Class B, Class C, Class D and Class E
Certificates (collectively, the "Offered
Certificates") are offered hereby. The Class
X-1, Class F, Class G, Class H, Class J,
Class K, Class L, Class R-I, Class R-II and
Class R-III Certificates (collectively, the
"Private Certificates") have not been
registered under the Securities Act of 1933,
as amended, and are not offered hereby.
Accordingly, to the extent this Prospectus
Supplement contains information regarding
the terms of the Private
- --------------------------------------------------------------------------------
S-11
<PAGE> 12
- --------------------------------------------------------------------------------
Certificates, such information is provided
solely because of its potential relevance to
a prospective purchaser of an Offered
Certificate.
Sellers............................ Wells Fargo Bank, National Association
("Wells Fargo"), Morgan Stanley Mortgage
Capital Inc. ("MSMC") and John Hancock Real
Estate Finance, Inc. ("JHREF"). One hundred
seventy-five (175) of the Mortgage Loans, or
53.0% of the Initial Pool Balance (the
"Wells Fargo Loans"), were originated by
Wells Fargo. Ninety-seven (97) Mortgage
Loans, or 36.0% of the Initial Pool Balance
(the "Morgan Stanley Loans"), were
originated by one of the participants in
MSMC's commercial and multifamily mortgage
loan conduit program, were originated
directly by MSMC or were purchased in the
secondary market. MSMC is a New York
corporation and an affiliate of Morgan
Stanley & Co. Incorporated, which is acting
as an Underwriter. Thirty-four (34) of the
Mortgage Loans, or 11.0% of the Initial Pool
Balance (the "JHREF Loans"), were originated
by JHREF. Each Seller will sell its Mortgage
Loans on the Closing Date pursuant to an
agreement with the Depositor (each, a
"Mortgage Loan Purchase Agreement"), which
will be assigned in relevant part to the
Trustee. See "Description of the Mortgage
Pool--The Sellers" herein.
Master Servicer.................... Wells Fargo will be the Master Servicer of
the Mortgage Loans. The Master Servicer will
be required to make Advances (as defined
herein) with respect to the Mortgage Loans
as described herein. See "Servicing of the
Mortgage Loans--The Master Servicer" and
"Description of the Certificates--Advances"
herein.
Special Servicer................... CRIIMI MAE Services Limited Partnership, a
Maryland limited partnership. The Special
Servicer will be responsible for performing
certain servicing functions with respect to
Mortgage Loans that, in general, are in
default or as to which default is imminent,
and for the management of REO Properties.
The Special Servicer will be required to
seek approval of the Operating Adviser
before taking certain actions. See
"Servicing of the Mortgage Loans--The
Special Servicer" and "--The Operating
Adviser" herein.
Trustee............................ LaSalle National Bank, a national banking
association. See "Description of the
Certificates--The Trustee and the Fiscal
Agent" herein. The Trustee will be obligated
to make Advances with respect to the
Mortgage Loans in certain circumstances
where the Master Servicer was required, but
failed, to do so, as described under
"Description Of The Certificates--Advances"
herein.
Fiscal Agent....................... ABN AMRO Bank N.V., a Netherlands banking
corporation, and the indirect corporate
parent of the Trustee. See "Description of
the Certificates--The Trustee and the Fiscal
Agent" herein. The Fiscal Agent will be
obligated to make
- --------------------------------------------------------------------------------
S-12
<PAGE> 13
- --------------------------------------------------------------------------------
Advances with respect to the Mortgage Loans
in certain circumstances where the Trustee
was required, but failed, to do so, as
described under "Description Of The
Certificates--Advances" herein.
Operating Adviser.................. Holders of the majority interest in the most
subordinate Class of Principal Balance
Certificates (as defined herein) outstanding
at any time of determination or, if the
Certificate Balance of such Class of
Certificates is less than 50% (or 20% in the
case of the Class L Certificates) of the
initial Certificate Balance of such Class,
the next most subordinate Class of
Certificates (the "Controlling Class"), may
appoint an "Operating Adviser" as described
under "Servicing of the Mortgage Loans--The
Operating Adviser" herein. The Operating
Adviser will have the right to approve and
direct certain actions of the Special
Servicer and to appoint a replacement
Special Servicer subject to certain
conditions.
Cut-Off Date....................... The close of business on March 1, 1998.
Closing Date....................... On or about March 5, 1998.
Record Date........................ The record date for each Class of
Certificates for each Distribution Date will
be the close of business on the last day of
the month immediately preceding the month in
which such Distribution Date occurs or, if
such day is not a business day, the business
day immediately preceding such day.
Distribution Date.................. The 15th day of each month or, if such day
is not a business day, the next succeeding
business day, commencing April 15, 1998.
Determination Date................. The 10th day of the month in which such
Distribution Date occurs or, if such day is
not a business day, the immediately
preceding business day.
Collection Period.................. The "Collection Period" related to each
Distribution Date, (a) with respect to
Scheduled Payments, will begin on the day
after the Determination Date in the month
preceding the month of such Distribution
Date (or in the case of the first
Distribution Date, the Cut-Off Date) and
will end on the Determination Date in the
month in which the Distribution Date occurs,
and (b) with respect to all other
collections on the Mortgage Loans and REO
Properties, will begin on the day following
the last day of the previous Collection
Period for such collections (or, in the case
of the first Distribution Date, the Cut-Off
Date) and will end on the earlier of the
Determination Date in the month in which the
Distribution Date occurs and the fourth
business day prior to such Distribution
Date.
Registration and Denominations..... The Class A Certificates will initially be
issued in book-entry form in denominations
of $5,000 initial Certificate Balance and in
any whole dollar denomination in excess
thereof. The
- --------------------------------------------------------------------------------
S-13
<PAGE> 14
- --------------------------------------------------------------------------------
Class X-2, Class B, Class C, Class D and
Class E Certificates will initially be
issued in book-entry form in denominations
of $50,000 initial Certificate Balance or
Notional Amount, as applicable, and in any
whole dollar denomination in excess thereof.
Each Class of Offered Certificates will be
represented by one or more Certificates
registered in the name of Cede & Co., as
nominee of The Depository Trust Company
("DTC"). No person acquiring an interest in
an Offered Certificate (any such person, a
"Certificate Owner") will be entitled to
receive a fully registered physical
certificate (a "Definitive Certificate")
representing such interest, except under the
limited circumstances described herein and
in the Prospectus. See "Description of the
Certificates--General" herein and
"Description of the Certificates--Book-Entry
Registration and Definitive Certificates" in
the Prospectus.
Clearance and Settlement........... Certificateholders must hold their Offered
Certificates in book-entry form, delivery of
which will be made through the facilities of
DTC (in the United States) and may be made
through the facilities of Cedel Bank,
societe anonyme ("CEDEL") or Euroclear
System ("Euroclear") (in Europe). Transfers
within DTC, CEDEL or Euroclear, as the case
may be, will be in accordance with the usual
rules and operating procedures of the
relevant system. Crossmarket transfers
between persons holding directly or
indirectly through DTC, on the one hand, and
counterparties holding directly or
indirectly through CEDEL or Euroclear, on
the other, will be effected in DTC through
Citibank, N.A. or The Chase Manhattan Bank,
the relevant depositaries of CEDEL and
Euroclear, respectively.
Subordination...................... Credit enhancement for each Class of Offered
Certificates will be provided by those
Classes of Certificates that are subordinate
to such Certificates with respect to (a)
rights to receive distributions of interest
and principal, to the extent described
herein, and (b) the allocation of Realized
Losses (as defined herein) incurred on the
Mortgage Loans, and certain Expense Losses
(also as defined herein), to the extent
described herein. As described herein, the
Residual Certificates are subordinate to the
REMIC Regular Certificates; each Class of
Subordinate Certificates is subordinate to
the Senior Certificates and to each other
Class of Subordinate Certificates with an
earlier alphabetical Class designation (for
example, the Class L Certificates are
subordinate to the Class K Certificates);
and the respective Classes of Senior
Certificates rank pari passu in entitlement
to distributions of interest. The level of
credit enhancement available to any Class of
Offered Certificates will change over time
as a result of (i) the allocation, as
described herein, of principal payments, and
proceeds from liquidations of Mortgage Loans
or associated REO Properties or the sale of
defaulted Mortgage Loans and (ii) the
allocation of any Realized Losses and
Expense Losses to one or more Classes of
Subordinate Certificates in the order of
priority described herein. After the
aggregate Certificate Balance of the
- --------------------------------------------------------------------------------
S-14
<PAGE> 15
- --------------------------------------------------------------------------------
Subordinate Certificates has been reduced to
zero, Realized Losses and Expenses Losses
will be allocated pro rata among the Class
A-1 and Class A-2 Certificates and, with
respect to losses allocable to interest, the
Class X-1 and Class X-2 Certificates.
Description of the Certificates.... The Certificates will have the following
characteristics.
A. Certificate Balances and
Notional Amounts ............... Upon initial issuance, the Class A-1, Class
A-2, Class B, Class C, Class D, Class E,
Class F, Class G, Class H, Class J, Class K
and Class L Certificates (collectively, the
"Principal Balance Certificates") will have
the following aggregate Certificate Balances
(in each case, subject to a variance of plus
or minus 5%):
<TABLE>
<CAPTION>
Approximate
Initial Approximate
Aggregate Percentage
Certificate of Initial
Class Balance Pool Balance
----- ----------- -------------
<S> <C> <C>
Class A-1 $363,000,000 26.07%
Class A-2 653,315,000 46.93
Class B 69,610,000 5.00
Class C 69,610,000 5.00
Class D 69,611,000 5.00
Class E 31,325,000 2.25
Class F 24,364,000 1.75
Class G 38,286,000 2.75
Class H 10,441,000 0.75
Class J 27,845,000 2.00
Class K 10,441,000 0.75
Class L 24,364,342 1.75
</TABLE>
The "Certificate Balance" of any Principal
Balance Certificate outstanding at any time
will equal the then maximum amount that the
holder will be entitled to receive in
respect of principal out of future cash flow
on the Mortgage Loans and other assets
included in the Trust Fund. The initial
Certificate Balance of each Principal
Balance Certificate will be set forth on the
face thereof. On each Distribution Date, the
Certificate Balance of each Principal
Balance Certificate will be reduced by any
distributions of principal actually made on
such Certificate on such Distribution Date,
and will be further reduced by any Realized
Losses or Expense Losses allocated to such
Certificate on such Distribution Date. See
"Description of the
Certificates--Distributions" and
"--Distributions--Subordination; Allocation
of Losses and Certain Expenses" herein.
The Class X-1 Certificates, which are
Private Certificates, and the Class X-2
Certificates will not have Certificate
Balances; each such Class of Certificates
will instead represent the right to receive
distributions of interest accrued as
described herein on a notional principal
amount (a "Notional Amount"). The Notional
Amount of the Class X-l Certificates will be
equal to
- --------------------------------------------------------------------------------
S-15
<PAGE> 16
- --------------------------------------------------------------------------------
the aggregate of the Certificate Balances of
the respective Classes of Principal Balance
Certificates outstanding from time to time.
The Notional Amount of the Class X-2
Certificates at any time on or before the
Distribution Date occurring in March, 2003
will be an amount equal to the aggregate of
the Component Balance (as defined herein) of
the Class A-2B Component (as defined herein)
and the Certificate Balances of the Class B,
Class C, Class D and Class E Certificates
outstanding from time to time. After such
Distribution Date, the Notional Amount of
the Class X-2 Certificates will be equal to
zero. Accordingly, the Notional Amount of
the Class X-l Certificates will be reduced
on each Distribution Date by any
distributions of principal actually made on,
and any Realized Losses and Expense Losses
actually allocated to any Class of Principal
Balance Certificates. The Notional Amount of
the Class X-2 Certificates will be reduced
on each Distribution Date by any
distributions of principal actually made on,
and any Realized Losses and Expense Losses
actually allocated to (i) that portion of
the aggregate Certificate Balance of the
Class A-2 Certificates that corresponds to
the Class A-2B Component and (ii) the Class
B, Class C, Class D and Class E
Certificates. In general, holders of the
Class X-2 Certificates will not be entitled
to distributions of interest at any time
following the Distribution Date occurring in
March, 2003.
The Notional Amount of each Interest Only
Certificate is used solely for the purpose
of determining the amount of interest to be
distributed on such Certificate and does not
represent the right to receive any
distributions of principal.
The Residual Certificates will not have
Certificate Balances or Notional Amounts.
B. Pass-Through Rates.............. The Pass-Through Rates applicable to the
Class A-1, Class A-2, Class B, Class C,
Class D and Class E Certificates for each
Distribution Date will be equal to 6.25%,
6.55%, 6.67%, 6.77%, 7.12% and 7.30% per
annum, respectively; provided, however, that
each such Pass-Through Rate will not exceed
the Weighted Average Net Mortgage Rate for
such Distribution Date.
The Pass-Through Rate applicable to the
Class X-1 Certificates, which are Private
Certificates, for the initial Distribution
Date will equal approximately 0.73% per
annum. The Pass-Through Rate applicable to
the Class X-l Certificates for each
Distribution Date subsequent to the initial
Distribution Date will, in general, equal
the weighted average of the Class X-l Strip
Rates for the respective Classes of
Principal Balance Certificates (or, in the
case of the Class A-2 Certificates, the
Class A-2A and Class A-2B Components
thereof) for such Distribution Date
(weighted on the basis of the respective
Certificate Balances of such Classes of
Certificates or the Component Balances of
such Components
- --------------------------------------------------------------------------------
S-16
<PAGE> 17
- --------------------------------------------------------------------------------
outstanding immediately prior to such
Distribution Date). The "Class X-l Strip
Rate" in respect of any Class of Principal
Balance Certificates (or, in the case of the
Class A-2 Certificates, the Class A-2A
Component or the Class A-2B Component) for
any Distribution Date will, in general,
equal (i) the Weighted Average Net Mortgage
Rate for such Distribution Date minus (ii)
(x) in the case of the Class A-1, Class F,
Class G, Class H, Class J, Class K and Class
L Certificates and the Class A-2A Component,
the Pass-Through Rate for such Class of
Certificates or such Component and (y) in
the case of the Class A-2B Component and the
Class B, Class C, Class D and Class E
Certificates, (I) for any Distribution Date
occurring on or before March 15, 2003, the
rate per annum corresponding to such
Distribution Date as set forth on Schedule A
hereto and (II) for any Distribution Date
occurring after March 15, 2003, the
Pass-Through Rate for such Class of
Certificates or such Component (but in no
event will any Class X-1 Strip Rate be less
than zero).
The Pass Through Rate applicable to the
Class X-2 Certificates for the initial
Distribution Date will equal approximately
1.12% per annum. The Pass-Through Rate
applicable to the Class X-2 Certificates for
each Distribution Date subsequent to the
initial Distribution Date will, in general,
equal the weighted average of the Class X-2
Strip Rates for the Class A-2B Component and
the Class B, Class C, Class D and Class E
Certificates for such Distribution Date
(weighted on the basis of the respective
Certificate Balances of such Classes of
Certificates or the Component Balance of
such Component outstanding immediately prior
to such Distribution Date). The "Class X-2
Strip Rate" in respect of the Class A-2B
Component and the Class B, Class C, Class D
and Class E Certificates for any
Distribution Date will, in general, equal
(i) the lesser of (x) the rate per annum
corresponding to such Distribution Date as
set forth on Schedule A hereto and (y) the
Weighted Average Net Mortgage Rate for such
Distribution Date minus (ii) the
Pass-Through Rate for such Class of
Certificates or such Component for such
Distribution Date (but in no event will any
Class X-2 Strip Rate be less than zero).
Solely for purposes of calculating the
Pass-Through Rate applicable to the Class
X-l and Class X-2 Certificates for each
Distribution Date and the Notional Amount of
the Class X-2 Certificates, the aggregate
Certificate Balance of the Class A-2
Certificates will be deemed to consist of
two components (each a "Component"), each
having the same "Pass-Through Rate" as the
Class A-2 Certificates. One of the
Components (the "Class A-2A Component") will
have a balance (a "Component Balance")
initially equal to $129,715,000, which
amount will be deemed reduced by the amount
of all distributions of principal made to
the Class A-2 Certificates until such
Component Balance is reduced to zero. The
other Component (the "Class A-2B Component")
will have a Component Balance equal to
$523,600,000 which, following
- --------------------------------------------------------------------------------
S-17
<PAGE> 18
- --------------------------------------------------------------------------------
the reduction of the Component Balance of
the Class A-2A Component to zero, will be
deemed reduced by the amount of all
subsequent distributions in reduction of the
aggregate Certificate Balance of the Class
A-2 Certificates until the Component Balance
of the Class A-2B Component (and the
aggregate Certificate Balance of the Class
A-2 Certificates) has been reduced to zero.
The Pass-Through Rates applicable to the
Class F Certificates and each of the Class
G, Class H, Class J, Class K and Class L
Certificates will, at all times, be equal to
7.30% and 6.25% per annum, respectively;
provided, however, that each such
Pass-Through Rate will not exceed the
Weighted Average Net Mortgage Rate for such
Distribution Date.
The "Weighted Average Net Mortgage Rate" for
any Distribution Date is the weighted
average of the Net Mortgage Rates for the
Mortgage Loans (in the case of each Mortgage
Loan that is a Non-30/360 Mortgage Loan,
adjusted as described below), weighted on
the basis of their respective Scheduled
Principal Balances as of the close of
business on the preceding Distribution Date.
The "Net Mortgage Rate" with respect to any
Mortgage Loan will, in general, be a per
annum rate equal to the related Mortgage
Rate minus the related Administrative Cost
Rate; provided that, for purposes of
calculating the Pass-Through Rate for each
Class of REMIC Regular Certificates from
time to time, the Net Mortgage Rate for any
Mortgage Loan will be calculated without
regard to any modification, waiver or
amendment of the terms of such Mortgage Loan
subsequent to the Closing Date. In addition,
because the Certificates accrue interest on
the basis of a 360-day year consisting of
twelve 30-day months, when calculating the
Pass-Through Rate for each Class of
Certificates for each Distribution Date, the
Net Mortgage Rate of each Mortgage Loan that
accrues interest other than on the basis of
a 360-day year consisting of twelve 30-day
months (each a "Non-30/360 Loan") will be
appropriately adjusted to reflect such
difference.
C. Distributions of Interest
and Principal .................. As more particularly described herein, the
total of all payments and other collections
(or advances in lieu thereof) on or in
respect of the Mortgage Loans that are
available for distributions of interest on
and principal of the Certificates on any
Distribution Date is herein referred to as
the "Available Distribution Amount" for such
date. Prepayment Premiums actually collected
on the Mortgage Loans will not be part of
the Available Distribution Amount for any
Distribution Date and will not be applied to
distributions of interest on and principal
of the Certificates; instead, Prepayment
Premiums will be distributed to
Certificateholders separately, in the
amounts and in accordance with the
priorities described herein. See
"Description Of The
Certificates--Distributions--
- --------------------------------------------------------------------------------
S-18
<PAGE> 19
- --------------------------------------------------------------------------------
The Available Distribution Amount" and
"--Distributions--Distributions of
Prepayment Premiums" herein.
On each Distribution Date, for so long as
any Class of Offered Certificates remains
outstanding, and except as otherwise
described under "Description of the
Certificates--Optional Termination" herein,
the Available Distribution Amount for such
date will be distributed to the holders of
the respective Classes of Certificates for
the following purposes and in the following
order of priority:
(1) to the holders of the Class A-1, Class
A-2, Class X-1 and Class X-2
Certificates, all Distributable
Certificate Interest in respect of each
such Class of Certificates for such
Distribution Date, pro rata in
proportion to the Distributable
Certificate Interest payable in respect
of each such Class;
(2) to the holders of the Class A-1
Certificates, the Principal
Distribution Amount for such
Distribution Date, until the aggregate
Certificate Balance of the Class A-1
Certificates has been reduced to zero;
(3) upon payment in full of the aggregate
Certificate Balance of the Class A-1
Certificates, to the holders of the
Class A-2 Certificates, the Principal
Distribution Amount for such
Distribution Date (reduced by any
portion thereof distributed to the
holders of the Class A-1 Certificates),
until the aggregate Certificate Balance
of the Class A-2 Certificates has been
reduced to zero;
(4) to the holders of the Class A and Class
X Certificates, pro rata in proportion
to their respective entitlements to
reimbursement described in this clause
(4), to reimburse them for any Realized
Losses previously allocated to such
Classes of Certificates plus interest
on such Realized Losses, compounded
monthly, at one-twelfth the applicable
Pass-Through Rate;
(5) to the holders of the Class B
Certificates, all Distributable
Certificate Interest in respect of such
Class of Certificates for such
Distribution Date;
(6) upon payment in full of the aggregate
Certificate Balance of the Class A-2
Certificates, to the holders of the
Class B Certificates, the Principal
Distribution Amount for such
Distribution Date (reduced by any
portion thereof distributed to the
holders of the Class A Certificates),
until the aggregate Certificate Balance
of the Class B Certificates has been
reduced to zero;
(7) to the holders of the Class B
Certificates, to reimburse any Realized
Losses previously allocated to such
Class of Certificates, plus interest on
such Realized Losses,
- --------------------------------------------------------------------------------
S-19
<PAGE> 20
- --------------------------------------------------------------------------------
compounded monthly, at one-twelfth the
applicable Pass-Through Rate;
(8) to the holders of the Class C
Certificates, all Distributable
Certificate Interest in respect of such
Class of Certificates for such
Distribution Date;
(9) upon payment in full of the aggregate
Certificate Balance of the Class B
Certificates, to the holders of the
Class C Certificates, the Principal
Distribution Amount for such
Distribution Date (reduced by any
portion thereof distributed to the
holders of the Class A and Class B
Certificates), until the aggregate
Certificate Balance of the Class C
Certificates has been reduced to zero;
(10) to the holders of the Class C
Certificates, to reimburse them for any
Realized Losses previously allocated to
such Class of Certificates, plus
interest on such Realized Losses,
compounded monthly, at one-twelfth the
applicable Pass-Through Rate;
(11) to the holders of the Class D
Certificates, all Distributable
Certificate Interest in respect of such
Class of Certificates for such
Distribution Date;
(12) upon payment in full of the aggregate
Certificate Balance of the Class C
Certificates, to the holders of the
Class D Certificates, the Principal
Distribution Amount for such
Distribution Date (reduced by any
portion thereof distributed to the
holders of the Class A, Class B and
Class C Certificates), until the
aggregate Certificate Balance of the
Class D Certificates has been reduced
to zero;
(13) to the holders of the Class D
Certificates, to reimburse them for any
Realized Losses previously allocated to
such Class of Certificates, plus
interest on such Realized Losses,
compounded monthly, at one-twelfth the
applicable Pass-Through Rate;
(14) to the holders of the Class E
Certificates, all Distributable
Certificate Interest in respect of such
Class of Certificates for such
Distribution Date;
(15) upon payment in full of the aggregate
Certificate Balance of the Class D
Certificates, to the holders of the
Class E Certificates, the Principal
Distribution Amount for such
Distribution Date (reduced by any
portion thereof distributed to the
holders of the Class A, Class B, Class
C and Class D Certificates), until the
aggregate Certificate Balance of the
Class E Certificates has been reduced
to zero;
- --------------------------------------------------------------------------------
S-20
<PAGE> 21
- --------------------------------------------------------------------------------
(16) to the holders of the Class E
Certificates, to reimburse them for any
Realized Losses previously allocated to
such Class of Certificates, plus
interest on such Realized Losses,
compounded monthly, at one-twelfth the
applicable Pass-Through Rate; and
(17) to make payments to the holders of the
Private Certificates (other than the
Class X-1 Certificates) as contemplated
below.
Notwithstanding the foregoing, on each
Distribution Date occurring on or after the
date, if any, upon which the aggregate
Certificate Balance of all Classes of
Subordinate Certificates has been reduced to
zero or the aggregate Appraisal Reduction in
effect is greater than or equal to the
aggregate Certificate Balance of all Classes
of Subordinate Certificates, the Principal
Distribution Amount will be distributed,
first, to the Class A-1 and Class A-2
Certificates, pro rata, based on their
respective Certificate Balances, in
reduction of their respective Certificate
Balances, until the Certificate Balance of
each such Class is reduced to zero; and,
second, to the Class A-1 and Class A-2
Certificates, pro rata, based on their
respective Certificate Balances, for the
unreimbursed amount of Realized Losses and
Expense Losses previously allocated to such
Classes.
On each Distribution Date, following the
above-described distributions on the
Publicly Offered Certificates and the Class
X-1 Certificates, the Trustee will apply the
remaining portion, if any, of the Available
Distribution Amount for such date to make
payments to the holders of each of the
respective Classes of Private Certificates
(other than the Class X-1 Certificates and
Residual Certificates), in alphabetical
order of Class designation, in each case for
the following purposes and in the following
order of priority (i.e., payments under
clauses (1), (2) and (3) below, in that
order, to the holders of the Class F
Certificates, then payments under clauses
(1), (2) and (3) below, in that order, to
the holders of the Class G, Class H, Class
J, Class K and Class L Certificates):
(1) to pay interest to the holders of the
particular Class of Certificates, up to
an amount equal to all Distributable
Certificate Interest in respect of such
Class of Certificates for such
Distribution Date;
(2) if the aggregate Certificate Balance of
each other Class of Subordinate
Certificates, if any, with an earlier
alphabetical Class designation has been
reduced to zero, to pay principal to
the holders of the particular Class of
Certificates, up to an amount equal to
the lesser of (a) the then outstanding
aggregate Certificate Balance of such
Class of Certificates and (b) the
aggregate of the remaining Principal
Distribution Amount for such
Distribution Date; and
- --------------------------------------------------------------------------------
S-21
<PAGE> 22
- --------------------------------------------------------------------------------
(3) to reimburse the holders of the
particular Class of Certificates, up to
an amount equal to (a) all Realized
Losses and Expense Losses, if any,
previously allocated to such Class of
Certificates and for which no
reimbursement has previously been paid,
plus (b) all unpaid interest on such
amounts (compounded monthly) at
one-twelfth the respective Pass-Through
Rates of such Classes.
Any portion of the Available Distribution
Amount for any Distribution Date that is not
otherwise payable to the holders of REMIC
Regular Certificates as contemplated above,
will be paid to the holders of the Class R-I
Certificates.
The "Distributable Certificate Interest" in
respect of any Class of REMIC Regular
Certificates for any Distribution Date will
equal the sum of (a) Accrued Certificate
Interest in respect of such Class of
Certificates for such Distribution Date,
reduced (to not less than zero) by (i) any
Net Aggregate Prepayment Interest Shortfalls
(as defined herein), and (ii) Realized
Losses and Expense Losses, in each case
specifically allocated with respect to such
Distribution Date to reduce Distributable
Certificate Interest payable in respect of
such Class in accordance with the terms of
the Pooling and Servicing Agreement and (b)
the portion of Distributable Certificate
Interest for such Class remaining unpaid as
of the close of business on the preceding
Distribution Date, plus one month's interest
thereon at the applicable Pass-Through Rate
(such amount, "Unpaid Interest"). The
"Accrued Certificate Interest" in respect of
each Class of REMIC Regular Certificates for
each Distribution Date will equal the amount
of interest for the applicable Interest
Accrual Period accrued at the applicable
Pass-Through Rate on the aggregate
Certificate Balance or Notional Amount, as
the case may be, of such Class of
Certificates outstanding immediately prior
to such Distribution Date. Accrued
Certificate Interest will be calculated on
the basis of a 360-day year consisting of
twelve 30-day months.
The "Interest Accrual Period" for each Class
of REMIC Regular Certificates and each
Distribution Date will be the calendar month
immediately preceding the month in which
such Distribution Date occurs. See
"Description of the Certificates--
Distributions--Distributable Certificate
Interest" and "--Prepayment Interest
Shortfalls and Prepayment Interest Excesses"
herein.
The "Principal Distribution Amount" for any
Distribution Date will, in general, equal
the aggregate of the following:
(a) the principal portions of all Scheduled
Payments (other than the principal
portion of Balloon Payments (as defined
herein)) and any Assumed Scheduled
Payments due or deemed due, as the case
may be, in respect of the
- --------------------------------------------------------------------------------
S-22
<PAGE> 23
- --------------------------------------------------------------------------------
Mortgage Loans for their respective Due
Dates (as defined herein) occurring
during the related Collection Period;
and
(b) all payments (including Principal
Prepayments and the principal portion
of Balloon Payments) and other
collections (including Liquidation
Proceeds, Condemnation Proceeds,
Insurance Proceeds and REO Income (each
as defined herein) and proceeds of
Mortgage Loan repurchases) that were
received on or in respect of the
Mortgage Loans during the related
Collection Period and that were
identified and applied by the Master
Servicer as recoveries of principal
thereof, in each case net of any
portion of such payment or other
collection that represents a recovery
of the principal portion of any
Scheduled Payment (other than a Balloon
Payment) due, or the principal portion
of any Assumed Scheduled Payment deemed
due, in respect of the related Mortgage
Loan on a Due Date during or prior to
the related Collection Period and not
previously recovered.
The "Scheduled Payment" for of any Mortgage
Loan on any Due Date will, in general, be
the amount of the scheduled payment of
principal and interest due thereon on such
date (taking into account any waiver,
modification or amendment of the terms of
such Mortgage Loan subsequent to the Closing
Date, whether agreed to by the Special
Servicer or occurring in connection with a
bankruptcy proceeding involving the related
borrower).
An "Assumed Scheduled Payment" is an amount
deemed due in respect of (i) any Balloon
Mortgage Loan that is delinquent in respect
of its Balloon Payment beyond the first
Determination Date that follows its original
stated maturity date or (ii) any Mortgage
Loan as to which the related Mortgaged
Property has become an REO Property. The
Assumed Scheduled Payment deemed due on any
such Balloon Mortgage Loan on its original
stated maturity date and on each successive
Due Date that it remains or is deemed to
remain outstanding will equal the Scheduled
Payment that would have been due thereon on
such date if the related Balloon Payment had
not come due, but rather such Mortgage Loan
had continued to amortize in accordance with
its amortization schedule in effect
immediately prior to maturity. The Assumed
Scheduled Payment for any Mortgage Loan as
to which the related Mortgaged Property has
become an REO Property, deemed due on each
Due Date for so long as the REO Property
remains part of the Trust Fund, equals the
Scheduled Payment (or Assumed Scheduled
Payment) due on the last Due Date prior to
the acquisition of such REO Property.
Distributions of Prepayment
Premiums .......................... Any Prepayment Premium collected with
respect to a Mortgage Loan during any
particular Collection Period will be
- --------------------------------------------------------------------------------
S-23
<PAGE> 24
- --------------------------------------------------------------------------------
distributed on the following Distribution
Date as follows: The holders of the
respective Classes of Principal Balance
Certificates (other than the Class F, Class
G, Class H, Class J, Class K and Class L
Certificates) then entitled to distributions
of principal on such Distribution Date will
be entitled to an aggregate amount
(allocable among such Classes, if more than
one, as described below) equal to the lesser
of (a) such Prepayment Premium and (b) such
Prepayment Premium multiplied by a fraction,
the numerator of which is equal to the
excess, if any, of the Pass-Through Rate
applicable to the most senior of such
Classes of Principal Balance Certificates
then outstanding (or, in the case of two
Classes of Class A Certificates, the one
with the earlier payment priority), over the
relevant Discount Rate (as defined herein),
and the denominator of which is equal to the
excess, if any, of the Mortgage Rate of the
Mortgage Loan that prepaid, over the
relevant Discount Rate. If there is more
than one such Class of Principal Balance
Certificates entitled to distributions of
principal on such Distribution Date, the
aggregate amount described in the preceding
sentence will be allocated among such
Classes on a pro rata basis in accordance
with the relative amounts of such
distributions of principal. The portion of
the Prepayment Premium remaining after any
such payment to the holders of such
Principal Balance Certificates will be
distributed to the holders of the Class X-1
Certificates. See "Description of the
Certificates--Distributions--Distributions
of Prepayment Premiums" herein.
Appraisal Reductions............... Not later than the earliest of (i) the date
120 days after the occurrence of any
delinquency in payment with respect to a
Mortgage Loan if such delinquency remains
uncured, (ii) the date 90 days after the
related borrower files a bankruptcy petition
or a receiver is appointed in respect of the
related Mortgaged Property, provided such
petition or appointment is still in effect,
(iii) the effective date of any modification
to the maturity date, Mortgage Rate,
principal balance, amortization term or
payment frequency (each, a "Money Term") of
a Mortgage Loan, other than the extension of
the date that a Balloon Payment is due for a
period of less than six months and (iv) the
date 30 days following the date a Mortgaged
Property becomes an REO Property (each of
(i), (ii), (iii) and (iv), an "Appraisal
Event"), the Special Servicer is required to
have obtained an MAI appraisal (if the
Scheduled Principal Balance of the Mortgage
Loan is greater than $1,000,000) or an
internal valuation (if the Scheduled
Principal Balance of the Mortgage Loan is
equal to or less than $1,000,000) of the
related Mortgaged Property or REO Property,
as the case may be, unless such an appraisal
or valuation had previously been obtained
within the preceding twelve months. As a
result of such appraisal or internal
valuation, an "Appraisal Reduction" may be
created.
The Appraisal Reduction for any Mortgage
Loan, including a Mortgage Loan as to which
the related Mortgaged Property has become an
REO Property, will be an amount, calculated
as
- --------------------------------------------------------------------------------
S-24
<PAGE> 25
- --------------------------------------------------------------------------------
of the first Determination Date that is at
least fifteen days after the date on which
the appraisal is obtained or performed,
equal to the excess, if any, of (a) the sum
of (i) the Scheduled Principal Balance of
such Mortgage Loan, (ii) to the extent not
previously advanced by the Master Servicer,
the Trustee or the Fiscal Agent, all unpaid
interest on the Mortgage Loan, (iii) all
related unreimbursed Advances and interest
on Advances at the Advance Rate (as defined
herein) and (iv) all currently due and
unpaid real estate taxes and assessments
(net of any amounts escrowed for such
items), insurance premiums, and, if
applicable, ground rents in respect of the
related Mortgaged Property or REO Property,
as the case may be, over (b) 90% of the
appraised value (net of any prior mortgage
liens) of such Mortgaged Property or REO
Property as determined by such appraisal.
Notwithstanding the foregoing, if an
internal valuation of the Mortgaged Property
is performed as described in the preceding
paragraph, the Appraisal Reduction will
equal the greater of (a) the amount
calculated in the preceding sentence and (b)
25% of the Scheduled Principal Balance of
the Mortgage Loan. An Appraisal Reduction
will be reduced to zero as of the date the
related Mortgage Loan is brought current
under the then current terms of the Mortgage
Loan for at least three consecutive months,
paid in full, liquidated, repurchased or
otherwise disposed of.
The existence of an Appraisal Reduction will
proportionately reduce the Master Servicer's
obligation to make P&I Advances (as defined
herein) in respect of the related Mortgage
Loan, which will generally result in a
reduction in current distributions of
interest in respect of the then most
subordinate Class of Principal Balance
Certificates. See "Description of the
Certificates--Advances--P&I Advances"
herein.
Allocation of Realized Losses,
Expense Losses and Interest
Shortfalls......................... As and to the extent described herein,
Realized Losses of principal and interest on
the Mortgage Loans and certain Expense
Losses will generally be allocated with
respect to each Distribution Date to the
Class L, Class K, Class J, Class H, Class G,
Class F, Class E, Class D, Class C and Class
B Certificates, in that order, and then to
the Class A-1, Class A-2, and, solely with
respect to Realized Losses and Expense
Losses of interest, to the Class X-1 and
Class X-2 Certificates, pro rata, in each
case reducing amounts payable thereto.
Any shortfall in the amount of Distributable
Certificate Interest paid to the
Certificateholders of any Class of
Certificates on any Distribution Date will
result in unpaid interest for such Class
which, together with interest thereon
compounded monthly at one-twelfth the
applicable Pass-Through Rate, will be
included in Distributable Certificate
Interest in subsequent periods.
- --------------------------------------------------------------------------------
S-25
<PAGE> 26
- --------------------------------------------------------------------------------
Prepayment Interest Shortfalls and
Prepayment Interest Excesses....... As "Prepayment Interest Shortfall" is a
shortfall in the collection of a full
month's interest on any Mortgage Loan by
reason of a full or partial Principal
Prepayment (including early payment of a
Balloon Payment) made during any Collection
Period prior to the date when the Scheduled
Payment is payable on such Mortgage Loan
(the "Due Date") in such Collection Period,
which is the first day of each month. If a
full or partial Principal Prepayment is made
during any Collection Period but after the
Due Date for such Mortgage Loan occurring in
such Collection Period, then a "Prepayment
Interest Excess" will result. The amount of
Prepayment Interest Excess in any such case
will equal the interest that accrues on the
Mortgage Loan from such Due Date to the date
such payment was made. To the extent that
aggregate Prepayment Interest Shortfalls
exceed the aggregate Prepayment Interest
Excesses for the Collection Period related
to a Distribution Date, such amount will
reduce the Servicing Fee up to the amount of
such excess, but generally by not more than
an amount equal to the excess (if any) of
the Servicing Fee, over the portion thereof
payable to Sub-Servicers. See "Servicing of
the Mortgage Loans--The Master
Servicer--Master Servicer Compensation"
herein.
Any payment so made by the Master Servicer
to cover such shortfalls will constitute a
"Compensating Interest Payment." The
aggregate of all Prepayment Interest
Shortfalls incurred in respect of the
Mortgage Loans during any Collection Period
that are neither offset by Prepayment
Interest Excesses collected on the Mortgage
Loans during such Collection Period nor
covered by a Compensating Interest Payment
made by the Master Servicer, will constitute
the "Net Aggregate Prepayment Interest
Shortfall" for the related Distribution
Date.
Any Net Aggregate Prepayment Interest
Shortfall for a Distribution Date will be
allocated among the respective Classes of
REMIC Regular Certificates, on a pro rata
basis, in the ratio that the Accrued
Certificate Interest with respect to any
such Class of Certificates for such
Distribution Date, bears to the total of the
Accrued Certificate Interest with respect to
all Classes of REMIC Regular Certificates
for such Distribution Date. The
Distributable Certificate Interest in
respect of any Class of REMIC Regular
Certificates will be reduced to the extent
that any Net Aggregate Prepayment Interest
Shortfalls are allocated thereto. See
"Description of the Certificates--
Distributions--Distributable Certificate
Interest" herein.
Optional Termination............... The Depositor, the Master Servicer, the
Special Servicer and the holder of the
majority interest in the Class R-I
Certificates, each in turn, will have the
option to purchase, in whole but not in
part, the Mortgage Loans and any other
property remaining in the Trust Fund on any
Distribution Date on or after the
- --------------------------------------------------------------------------------
S-26
<PAGE> 27
- --------------------------------------------------------------------------------
Distribution Date on which the aggregate
Certificate Balance of all Classes of
Principal Balance Certificates then
outstanding is less than or equal to 1% of
the Initial Pool Balance. The purchase price
for any such purchase will be 100% of the
aggregate Principal Balance of the Mortgage
Loans (other than any Mortgage Loans as to
which the Master Servicer has determined
that all payments or recoveries with respect
thereto have been made), plus accrued and
unpaid interest at the Mortgage Rate (or the
Mortgage Rate less the Servicing Fee Rate if
the Master Servicer is the purchaser) to the
Due Date for each Mortgage Loan ending in
the Collection Period with respect to which
such purchase occurs, plus unreimbursed
Servicing Advances, with interest on any
Advances at the Advance Rate, and the fair
market value of any other property remaining
in the Trust Fund; provided, however, that
if Wells Fargo is the purchaser, the
purchase price will be the greater of the
foregoing amount and the fair market value
of the Mortgage Loans and any other property
remaining in the Trust Fund. See
"Description Of The Certificates--Optional
Termination" herein.
Administrative Cost Rate........... The administrative costs on each Mortgage
Loan in any month will equal the sum of the
related Servicing Fee, the Special Servicing
Standby Fee and the Trustee Fee for such
month (collectively, expressed as a per
annum rate, the "Administrative Cost Rate"),
which is set forth in Appendix II. The
Administrative Cost Rate will be payable on
the Scheduled Principal Balance of each
Mortgage Loan outstanding from time to time.
The portion of the Administrative Cost Rate
applicable to a Mortgage Loan in any month
will be determined using the same interest
accrual methodology that is applied with
respect to the Mortgage Rate on such
Mortgage Loan.
Advances........................... As and to the extent described herein, the
Master Servicer will be obligated to make
advances ("Advances") in respect of
delinquent payments of principal (other than
the principal portion of Balloon Payments)
and/or interest on the Mortgage Loans ("P&I
Advances") and to cover certain servicing
expenses ("Servicing Advances") in
accordance with the provisions set forth in
the Pooling and Servicing Agreement. See
"Description of the Certificates--Advances"
herein. If the Master Servicer fails to make
any Advance that it is obligated to make
pursuant to the Pooling and Servicing
Agreement, the Trustee will be required to
make such Advance; if the Trustee fails to
make any Advance that it is so obligated to
make pursuant to the Pooling and Servicing
Agreement, the Fiscal Agent will be required
to make such Advance.
Each of the Master Servicer, the Trustee and
the Fiscal Agent, as applicable, will be
obligated to make Advances only to the
extent that it determines, in its sole
discretion, exercised in good faith, that
such Advances are ultimately recoverable
- --------------------------------------------------------------------------------
S-27
<PAGE> 28
- --------------------------------------------------------------------------------
from future payments and other collections
on the related Mortgage Loan or REO
Property. Any such determination will be
conclusive and binding on the
Certificateholders.
The Master Servicer, the Trustee and the
Fiscal Agent will each be entitled, with
respect to any Advance made thereby, to
receive interest accrued on the amount of
such Advance for so long as it is
outstanding at a rate per annum (the
"Advance Rate") equal to the "prime rate" as
published in the "Money Rates" section of
The Wall Street Journal, as such "prime
rate" may change from time to time. Such
interest on any Advance will result in a
reduction in amounts payable on the
Certificates. See "Description of the
Certificates--Advances" herein.
Certain Yield, Maturity and
Prepayment Consideration........... The yield on the Offered Certificates of
each Class will depend on, among other
things, the Pass-Through Rate for such
Certificates.
The yield on any Principal Balance
Certificate that is purchased at a discount
or premium will also be affected by the rate
and timing of distributions in respect of
principal on such Certificate, which in turn
will be affected by (i) the rate and timing
of principal payments (including principal
prepayments) on the Mortgage Loans and (ii)
the extent to which such principal payments
are applied on any Distribution Date in
reduction of the Certificate Balance of such
Certificate. An investor that purchases any
Principal Balance Certificate at a discount
should consider the risk that a slower than
anticipated rate of principal payments on
such Certificate will result in an actual
yield that is lower than such investor's
expected yield. An investor that purchases
any Principal Balance Certificate at a
premium should consider the risk that a
faster than anticipated rate of principal
payments on such Certificate will result in
an actual yield that is lower than such
investor's expected yield. Insofar as an
investor's initial investment in any Offered
Certificate is returned in the form of
payments of principal thereon, there can be
no assurance that such amounts can be
reinvested in a comparable alternative
investment with a comparable yield. See
"Description of the
Certificates--Distributions--Application of
the Available Distribution Amount" and
"--Distributions--Principal Distribution
Amount" herein.
The Class X-2 Certificates are interest only
Certificates and are not entitled to any
distributions in respect of principal. The
yield to maturity of the Class X-2
Certificates will be especially sensitive to
the prepayment, repurchase, default and
recovery experience on the Mortgage Loans,
which prepayment, repurchase, default and
recovery experience may fluctuate
significantly from time to time. A rate of
principal payments and liquidations on the
Mortgage Loans that is more rapid than
expected by investors will have a material
negative
- --------------------------------------------------------------------------------
S-28
<PAGE> 29
- --------------------------------------------------------------------------------
effect on the yield to maturity of the Class
X-2 Certificates. Accordingly, investors in
the Class X-2 Certificates should fully
consider the associated risks, including the
risk that an extremely rapid rate of
prepayment of the Mortgage Loans could
result in the failure of such investors to
recoup their initial investments. See
"Yield, Prepayment and Maturity
Considerations--Class X-2 Certificates"
herein.
The actual rate of prepayment of principal
on the Mortgage Loans cannot be predicted.
The investment performance of the Offered
Certificates may vary materially and
adversely from the investment expectations
of investors due to prepayments on the
Mortgage Loans being higher or lower than
anticipated by investors. The actual yield
to the holder of an Offered Certificate may
not be equal to the yield anticipated at the
time of purchase of the Certificate or,
notwithstanding that the actual yield is
equal to the yield anticipated at that time,
the total return on investment expected by
the investor or the expected weighted
average life of the Certificate may not be
realized. For a discussion of certain
factors affecting prepayment of the Mortgage
Loans, including the effect of Prepayment
Premiums, see "Yield, Maturity and
Prepayment Considerations" herein. In
deciding whether to purchase any Offered
Certificates, an investor should make an
independent decision as to the appropriate
prepayment assumptions to be used.
Certificate Ratings................ It is a condition of the issuance of the
Offered Certificates that they receive the
following credit ratings from Duff & Phelps
Credit Rating Co. ("DCR") and/or Standard &
Poor's Rating Services ("S&P", and together
with DCR, the "Rating Agencies"):
<TABLE>
<CAPTION>
Class DCR S&P
----- --- ---
<S> <C> <C>
Class A-1.... AAA AAA
Class A-2.... AAA AAA
Class X-2.... AAA AAAr
Class B...... AA AA
Class C...... A A
Class D...... BBB BBB
Class E...... BBB- NR
"NR" = Not Rated
</TABLE>
In addition, it is a condition to the
issuance of the Private Certificates that
the Class X-1, Class F, Class G, Class H,
Class J and Class K Certificates be rated
"AAAr," "BB+," "BB," "BB-," "B" and "B-,"
respectively, by S&P and that the Class X-1
and Class F Certificates be rated "AAA" and
"BB+," respectively, by DCR. The Class L
Certificates and the REMIC Residual
Certificates will be unrated.
A securities rating addresses the likelihood
of the receipt by Certificateholders of
timely payment of interest and ultimate
payment of principal due on their
Certificates. The rating
- --------------------------------------------------------------------------------
S-29
<PAGE> 30
- --------------------------------------------------------------------------------
takes into consideration the characteristics
of the Mortgage Loans and the structural and
legal aspects associated with the
Certificates, including, if applicable,
ultimate distribution of all principal by
the Distribution Date in March 2030 (the
"Final Rated Distribution Date"). Each
security rating assigned to the Certificates
should be evaluated independently of any
other security rating.
The ratings on the Offered Certificates do
not represent any assessment of (i) the
likelihood or frequency of principal
prepayments on the Mortgage Loans or the
corresponding effect on yield to investors,
(ii) the degree to which such prepayments
might differ from those originally
anticipated or (iii) whether and to what
extent Prepayment Premiums will be received.
A security rating does not represent any
assessment of the yield to maturity that
investors may experience or the possibility
that the holders of Class X-2 Certificates
might not fully recover their investment in
the event of rapid prepayments of the
Mortgage Loans (including both voluntary and
involuntary prepayments). In general, the
ratings address credit risk and not
prepayment risk. As described herein, the
amounts payable with respect to the Class
X-2 Certificates consist only of interest.
If all of the Mortgage Loans were to prepay
in the initial month, with the result that
the holders of the Class X-2 Certificates
receive only a single month's interest and
thus suffer a nearly complete loss of their
investment, all amounts "due" to such
Certificateholders would nevertheless have
been paid, and such result will be
consistent with the "AAA/AAAr" ratings
received on the Class X-2 Certificates. The
aggregate Notional Amount upon which
interest in respect of the Class X-2
Certificates is calculated may be reduced by
Realized Losses, Expense Losses and
prepayments of principal, whether voluntary
or involuntary. The ratings do not address
the timing or magnitude of reductions of
such Notional Amounts, but only the
obligation to pay interest timely on the
Notional Amounts of such Certificates as so
reduced from time to time. Accordingly the
ratings of the Class X-2 Certificates should
be evaluated independently from similar
ratings on other types of securities.
A credit 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. See
"Ratings" and "Risk Factors and Other
Special Considerations" herein.
The Mortgage Pool.................. The Mortgage Pool will consist of 306
fixed-rate Mortgage Loans with an Initial
Pool Balance of approximately
$1,392,212,342, subject to a permitted
variance of plus or minus 5%. The Cut-Off
Date Balances of the Mortgage Loans (that
is, in each case, its principal balance
outstanding as of the Cut-Off Date, after
application of all payments of principal due
on or before such date, whether or not
received) range from $447,705 to
$59,807,596, and the Mortgage Loans have
- --------------------------------------------------------------------------------
S-30
<PAGE> 31
- --------------------------------------------------------------------------------
an average Cut-Off Date Balance of
$4,549,714. All numerical information
provided herein with respect to the Mortgage
Loans is provided on an approximate basis.
All weighted average information regarding
the Mortgage Loans reflects weighting of the
Mortgage Loans by Cut-Off Date Balance A
brief summary of the material terms of the
largest Mortgage Loans in the Mortgage Pool
is set forth on Appendix III attached
hereto.
For purposes of the presentation of certain
Mortgage Pool information herein, each
Mortgage Loan is deemed to be secured by a
Mortgage on one Mortgaged Property, whether
or not such Mortgaged Property consists of
more than one parcel of real property.
Substantially all of the Mortgage Loans are
non-recourse obligations of the related
borrowers, and prospective investors should
consider all of them to be non-recourse. No
Mortgage Loan will be insured or guaranteed
by any governmental entity or private
insurer, or by any other person.
Each Mortgage Loan is secured by a first
mortgage lien on the borrower's fee simple
(or, in six (6) cases, which represent 3.9%
of the Initial Pool Balance, leasehold or
partial leasehold and partial fee) estate in
an income producing real property (each, a
"Mortgaged Property"). Set forth below are
the number of Mortgage Loans, and the
approximate percentage of the Initial Pool
Balance represented by such Mortgage Loans,
that are secured by Mortgaged Properties
operated for each indicated purpose:
<TABLE>
<CAPTION>
Percentage
of Number of
Initial Pool Mortgage
Property Type Balance Loans
------------- ------------ ---------
<S> <C> <C>
Retail........ 26.0% 86
Multifamily... 25.1% 71
Hospitality... 16.0% 22
Industrial.... 14.2% 65
Office........ 12.8% 37
Mobile Home
Park.......... 3.1% 6
Self-Storage.. 1.6% 12
Mixed Use..... 1.3% 7
</TABLE>
Set forth below are the number of Mortgage
Loans, and the approximate percentage of the
Initial Pool Balance represented by such
Mortgage Loans, that are secured by
Mortgaged Properties located in the three
(3) states with the highest concentrations.
- --------------------------------------------------------------------------------
S-31
<PAGE> 32
- --------------------------------------------------------------------------------
Percentage
of Number of
Initial Pool Mortgage
State Balance Loans
----- ------------ ---------
California.... 35.2% 116
Texas......... 8.9% 37
Arizona....... 5.6% 10
The remaining Mortgaged Properties are
located throughout thirty-three (33) other
states. No other state has a concentration
of Mortgaged Properties that represents
security for more than 5.1% of the Initial
Pool Balance. See Appendix I hereto.
The Mortgage Pool includes six (6) groups of
Mortgage Loans, the largest of which groups
collectively represents 2.4% of the Initial
Pool Balance, under which an aggregate
amount of indebtedness is secured by
multiple Mortgaged Properties. For purposes
of the presentation of Mortgage Pool
information herein, such Mortgage Loans have
been treated as multiple
cross-collateralized and cross-defaulted
Mortgage Loans, each secured by one of the
related Mortgaged Properties and each having
a principal balance in an amount equal to an
allocated portion of the aggregate
indebtedness represented by such Mortgage
Loan.
There are five (5) groups of Mortgage Loans,
the largest of which groups collectively
represents 1.5% of the Initial Pool Balance,
that consist of several Mortgage Loans that
are cross-defaulted and cross-collateralized
with the other Mortgage Loan or Loans in
such group.
There are also several groups of Mortgage
Loans (other than those groups that are
either cross-defaulted and
cross-collateralized or treated as
cross-defaulted and cross-collateralized for
purposes of the presentation of Mortgage
Pool Information herein), the largest of
which groups represents 1.8% of the Initial
Pool Balance, where the borrowers are
affiliated entities related through common
ownership of partnership or other equity
interests and where, in general, the related
Mortgaged Properties are commonly managed.
Two hundred seventy-five (275) of the
Mortgage Loans, which represent 92.6% of the
Initial Pool Balance, provide for Scheduled
Payments based on amortization schedules
significantly longer than their terms to
maturity. One (1) of the Mortgage Loans,
which represents 2.2% of the Initial Pool
Balance, provides for Scheduled Payments of
interest only prior to its maturity. As a
result, such Mortgage Loans (collectively,
"Balloon Loans") will have substantial
principal amounts due and payable (each such
amount, together with scheduled interest, a
"Balloon Payment") on their respective
- --------------------------------------------------------------------------------
S-32
<PAGE> 33
- --------------------------------------------------------------------------------
maturity dates, unless prepaid prior
thereto. The remaining thirty (30) Mortgage
Loans, which represent 5.2% of the Initial
Pool Balance, are fully-amortizing. See
"Risk Factors and Other Special
Considerations--The Mortgage Loans--Balloon
Payments" and "Description of the Mortgage
Pool--Certain Terms and Characteristics of
the Mortgage Loans--Amortization" herein.
As of the Cut-Off Date, all of the Mortgage
Loans, prohibit voluntary Principal
Prepayments for a period (a "Lock-out
Period") ending on a date (generally ranging
from seventeen (17) months to one hundred
seventeen (117) months from the Cut-Off
Date) specified in the related Mortgage Note
and, in most such cases, thereafter require,
until a specified date (generally three to
twelve months) prior to maturity, that any
voluntary Principal Prepayment be
accompanied by an additional amount (a
"Prepayment Premium"), which is calculated
on the basis of (a) a yield maintenance
formula ("Yield Maintenance Premium"),
payable in the case of eight (8) Mortgage
Loans, or 13.4% of the Initial Pool Balance,
including one Mortgage Loan, representing
2.5% of the Initial Pool Balance, which
bases Yield Maintenance on defeasance
provisions, (b) the greater of a Yield
Maintenance Premium and one percent (1%) of
the amount prepaid ("Percentage Premium"),
payable in the case of two hundred eighty
(280) Mortgage Loans, or 82.4% of the
Initial Pool Balance; (c) a Percentage
Premium, generally declining over the
remainder of the life of the loan, payable
in the case of fourteen (14) Mortgage Loans
or 3.7% of the Initial Pool Balance or (d)
the greater of a Yield Maintenance Premium
and one percent (1%) of the amount prepaid,
then a Percentage Premium, declining over
the remainder of the life of the loan,
payable in the case of four (4) Mortgage
Loans representing 0.5% of the Initial Pool
Balance. See "Description Of The Mortgage
Pool--Certain Terms and Characteristics of
the Mortgage Loans--Prepayment Restrictions"
herein. However, three (3) Mortgage Loans,
representing 1.1% of the Initial Pool
Balance, permit, in each such case,
voluntary Principal Prepayments of up to 10%
of the original principal balance of the
Mortgage Loan in any calendar year without
the imposition of any Prepayment Premium,
notwithstanding any Lock-out Period that
would otherwise be in effect or any
Prepayment Premium that would otherwise be
imposed; one (1) Mortgage Loan, representing
approximately 0.1% of the Initial Pool
Balance, permits voluntary principal
payments of up to 10% of the original
principal balance of the Mortgage Loan in
any calendar year without the imposition of
any Prepayment Premium, after the first
three years following its origination; and
four (4) Mortgage Loans representing 0.5% of
the Initial Pool Balance permit prepayment
during the last five years of the loan term
without the imposition of any Prepayment
Penalty. The Master Servicer may not waive
the imposition of a Prepayment Premium or
reduce the amount thereof. The Special
Servicer may waive the imposition of a
Prepayment Premium, or reduce the amount
thereof, with
- --------------------------------------------------------------------------------
S-33
<PAGE> 34
- --------------------------------------------------------------------------------
respect to a Specially Serviced Mortgage
Loan if such waiver or reduction is
consistent with the Servicing Standard (as
described herein). Neither the Depositor nor
any Seller makes any representation as to
the enforceability of any Mortgage Note
provisions requiring the payment of a
Prepayment Premium or of the collectability
of any Prepayment Premium.
As of the Cut-Off Date, the Mortgage Loans
will have the following additional
characteristics:
(i) Mortgage Rates ranging from 6.760% per
annum to 9.830% per annum, and a
weighted average Mortgage Rate of
7.760% per annum;
(ii) remaining terms to scheduled maturity
ranging from 48 months to 238 months,
and a weighted average remaining term
to scheduled maturity of 118 months;
(iii) Loan-to-Value Ratios (that is, in each
case, the ratio of (a) the Cut-Off
Date Balance of such Mortgage Loan to
(b) the value of the related Mortgaged
Property based upon an appraisal
performed, or market valuation
estimate made, in connection with the
origination of the Mortgage Loan),
ranging from 16.5% to 85.9% and a
weighted average Loan-to-Value Ratio
of 68.4%; and
(iv) Debt Service Coverage Ratios
(calculated as described herein under
"Description Of The Mortgage
Pool--Additional Mortgage Loan
Information") ranging from 1.14x to
2.84x, and a weighted average Debt
Service Coverage Ratio of 1.54x.
On or prior to the Closing Date, the
Depositor will purchase the Mortgage Loans
and assign the Mortgage Loans, without
recourse, to the Trustee for the benefit of
the holders of the Certificates (the
"Certificateholders"). Each Seller will make
certain representations and warranties (or,
alternatively, assign to the Trustee certain
representations and warranties made to it by
a third party) regarding the characteristics
of the Mortgage Loans assigned by such
Seller and, as more particularly described
herein, will agree (or such third party has
agreed) to cure any breach thereof that
materially and adversely affects the
interests of the Certificateholders or, in
the absence of such a cure, to repurchase or
replace the affected Mortgage Loan. See
"Description of the Mortgage Pool--
Representations and Warranties" and
"--Repurchases and Other Remedies" herein.
The characteristics of the Mortgage Loans
are more particularly described herein under
"Description of the Mortgage Pool," in the
tables in Appendix I and in the Mortgage
Loan Schedule in Appendix II. A brief
summary of the material terms of the largest
Mortgage Loans in the Mortgage Pool is set
forth in Appendix III.
- --------------------------------------------------------------------------------
S-34
<PAGE> 35
- --------------------------------------------------------------------------------
Use of Proceeds.................... The Depositor will use substantially all of
the net proceeds from the sale of the
Offered Certificates to purchase the
Mortgage Loans and to pay certain expenses
in connection with the issuance of the
Certificates.
Federal Income
Tax Considerations................. Three separate "real estate mortgage
investment conduit" ("REMIC") elections will
be made with respect to the Trust Fund for
federal income tax purposes. The assets of
"REMIC I" will consist primarily of the
Mortgage Loans and any properties acquired
on behalf of the Certificateholders. The
assets of "REMIC II" will consist of the
separate uncertificated REMIC I regular
interests. The assets of "REMIC III" will
consist of the separate uncertificated REMIC
II regular interests. For federal income tax
purposes, (i) the REMIC Regular Certificates
will be the "regular interests" in, and
generally will be treated as debt
obligations of, REMIC III, and (ii) the
Class R-I Certificates will be the sole
class of residual interests in REMIC I, the
Class R-II Certificates will be the sole
class of residual interests in REMIC II and
the Class R-III Certificates will be the
sole class of residual interests in REMIC
III.
The Offered Certificates will be treated as
"real estate assets" under Section
856(c)(4)(A) of the Internal Revenue Code of
1986, as amended (the "Code"), generally in
the same proportion that the assets in the
Trust Fund would be so treated. In addition,
interest on the Offered Certificates will be
treated as "interest on obligations secured
by mortgages on real property" under Section
856(c)(3)(B) of the Code generally to the
extent that such Offered Certificates are
treated as "real estate assets" under
Section 856(c)(4)(A) of the Code. The
Offered Certificates also will be treated as
"qualified mortgages" under Section
860G(a)(3) of the Code. However, the
Certificates will generally be considered to
be assets described in Section
7701(a)(19)(C) of the Code only to the
extent that the Mortgage Loans are secured
by multifamily properties.
The Class X-2 Certificates will, and the
other Classes of Offered Certificates will
not, be treated as having been issued with
"original issue discount" for federal income
tax reporting purposes. The prepayment
assumption that will be used in determining
the rate of accrual of original issue
discount, market discount and amortizable
premium, if any, for federal income tax
purposes will be 0% CPR (the "Prepayment
Assumption"). However, the Depositor makes
no representation that the Mortgage Loans
will prepay at any particular rate.
If the method for computing original issue
discount described herein results in a
negative amount for any period with respect
to a Class X-2 Certificate, the amount of
original issue discount allocable to such
period will be zero and the holder of
- --------------------------------------------------------------------------------
S-35
<PAGE> 36
- --------------------------------------------------------------------------------
such a Certificate will be permitted to
offset such negative amount only against
future original issue discount (if any)
attributable to such Certificate. See
"Certain Federal Income Tax Consequences"
herein and in the Prospectus.
ERISA Considerations............... A fiduciary of an employee benefit plan or
other retirement plan or arrangement subject
to the Employee Retirement Income Security
Act of 1974, as amended ("ERISA") or Section
4975 of the Code, or an investor that is an
insurance company, should review carefully
with its legal advisors whether the
purchase, holding or sale of the Offered
Certificates could constitute or result in a
transaction that is prohibited or is not
otherwise permissible under ERISA or Section
4975 of the Code and, if prohibited, whether
any statutory or administrative exemption is
applicable to any such purchase, holding or
sale.
The United States Department of Labor has
issued individual prohibited transaction
exemptions to the Underwriters that
generally exempt from the application of
certain of the prohibited transaction
provisions of ERISA and Section 4975 of the
Code transactions relating to the purchase,
holding and sale of certain pass-through
certificates underwritten by the
Underwriters, such as the Senior
Certificates, and the servicing and
operation of asset pools, such as the
Mortgage Pool, provided that certain
conditions are satisfied. These exemptions
are not applicable to the Subordinate
Certificates; however, a class prohibited
transaction exemption granted with respect
to transactions involving insurance company
general accounts may be applicable to the
purchase and holding by insurance companies
of such Classes, provided that the
conditions of such exemption are satisfied.
See "ERISA Considerations" herein.
Legal Investment................... The Offered Certificates will not constitute
"mortgage related securities" for purposes
of the Secondary Mortgage Market Enhancement
Act of 1984 ("SMMEA"). The appropriate
characterization of a Class of Offered
Certificates under various legal investment
restrictions, and thus the ability of
investors subject to these restrictions to
purchase Offered Certificates, may be
subject to significant interpretive
uncertainties. All investors whose
investment authority is subject to legal
restrictions should consult their own legal
advisors to determine whether, and to what
extent, the Offered Certificates will
constitute legal investments for them.
- --------------------------------------------------------------------------------
S-36
<PAGE> 37
RISK FACTORS AND OTHER SPECIAL CONSIDERATIONS
Investors should consider, among other things, the following risks and
other important factors (as well as the risk factors set forth under "Risk
Factors" in the Prospectus) in connection with a purchase of Offered
Certificates:
The Certificates
Limited Liquidity
There is currently no secondary market for the Offered Certificates. The
Depositor has been advised by the Underwriters that they presently intend to
make a secondary market in the Offered Certificates; however, they have no
obligation to do so and any market making activity may be discontinued at any
time. Accordingly, there can be no assurance that a secondary market for the
Offered Certificates will develop or, if it does develop, that it will provide
holders of Offered Certificates with liquidity of investment or that it will
continue for the life of the Offered Certificates. The Offered Certificates will
not be listed on any securities exchange. See "Risk Factors--Limited Liquidity"
in the Prospectus.
Certain Yield Considerations
The yield on any Offered Certificate will depend on (x) the price at which
such Certificate is purchased by an investor and (y) the rate, timing and amount
of distributions on such Certificate. The rate, timing and amount of
distributions on any Offered Certificate will, in turn, depend on, among other
things, (a) the Pass-Through Rate for such Certificate, (b) the rate and timing
of principal payments (including principal prepayments) and other principal
collections on or in respect of the Mortgage Loans and the extent to which such
amounts are to be applied or otherwise result in a reduction of the Certificate
Balance or Notional Amount of such Certificate, (c) the rate, timing and
severity of Realized Losses on or in respect of the Mortgage Loans and of
Expense Losses and the extent to which such losses and expenses result in a
reduction of the Certificate Balance or Notional Amount of such Certificate, (d)
the timing and severity of any Net Aggregate Prepayment Interest Shortfalls and
the extent to which such shortfalls are allocated in reduction of the interest
payable on such Certificate, (e) the timing and severity of any Appraisal
Reductions and the extent to which such Appraisal Reductions result in a
reduction or deferral of amounts otherwise payable on such Certificate and (f)
the extent to which Prepayment Premiums are collected and, in turn, distributed
on such Certificate. Except for the Pass-Through Rates on the Principal Balance
Certificates (which are, in each case, generally fixed), it is impossible to
predict with certainty any of the factors described in the preceding sentence.
Accordingly, investors may find it difficult to analyze the effect that such
factors might have on the yield to maturity of any Class of Offered
Certificates. The yield to maturity of the Class X-2 Certificates will be highly
sensitive to the rate and timing of principal payments (including by reason of
prepayments, defaults and liquidations) on or in respect of the Mortgage Loans
and investors in the Class X-2 Certificates should fully consider the associated
risks, including the risk that the extremely rapid rate of amortization and
prepayment of the Mortgage Loans (and correspondingly, of the Notional Amount of
the Class X-2 Certificates) could result in the failure of such investors to
recoup their initial investment. See "Description of the Mortgage Pool",
"Description of the Certificates--Distributions" and "--Distributions--
Subordination; Allocation of Losses and Certain Expenses" and "Yield, Prepayment
and Maturity Considerations" herein. See also "Yield Considerations" and "Risk
Factors--Average Life of Certificates; Prepayments; Yields" in the Prospectus.
Limited Obligations
The Offered Certificates will represent beneficial ownership interests
solely in the assets of the Trust Fund and will not represent an interest in or
obligation of the Depositor, any Seller, the Master Servicer, the Special
Servicer, the Fiscal Agent, the Trustee or any of their respective affiliates or
any other person. Distributions on any Class of Offered Certificates will depend
solely on the amount and timing of payments and other collections in respect of
the Mortgage Loans. Although amounts, if any, otherwise distributable to the
holders of any Class of Subordinate Certificates on any Distribution Date will
be available, to the extent set forth herein, to make distributions on the
Senior Certificates and the Classes of Subordinate Certificates senior thereto,
if Realized Losses or Expense Losses occur, there can be no assurance that these
amounts, together with other payments and collections
S-37
<PAGE> 38
in respect of the Mortgage Loans, will be sufficient to make full and timely
distributions on any Class of Offered Certificates. See "Risk Factors--Limited
Assets" in the Prospectus.
Subordination of Class B, Class C, Class D and Class E Certificates
As described herein, the rights of holders of the Subordinate
Certificates, including the Class B, Class C, Class D and Class E Certificates,
to receive certain payments of principal and interest otherwise payable on their
Certificates will, in the case of each Class of Subordinate Certificates, be
subordinated to such rights of the holders of the Senior Certificates and the
holders of each other Class of Subordinate Certificates, if any, having an
earlier alphabetical Class designation, to the extent set forth herein. See
"Description of the Certificates--Distributions" herein. Realized Losses on the
Mortgage Loans and Expense Losses will be allocated to the Class L, Class K,
Class J, Class H, Class G, Class F, Class E, Class D, Class C and Class B
Certificates, in that order, reducing amounts payable to each such Class.
Potential Conflict of Interest in Connection with Specially Serviced Mortgage
Loans
The Special Servicer is given considerable latitude, subject to certain
rights of the Operating Adviser, in determining whether and in what manner to
liquidate or modify defaulted Mortgage Loans. As described under "Servicing of
the Mortgage Loans--The Operating Adviser," the Operating Adviser will, in the
absence of significant losses allocated to such Class, be controlled generally
by the holder of the majority interest in the most subordinated Class of
Principal Balance Certificates (that is, the Controlling Class as described
herein) outstanding from time to time, which holders may have interests in
conflict with those of the holders of the Offered Certificates. For instance,
the holders of Certificates of the Controlling Class might desire to mitigate
the potential for loss to that Class from a troubled Mortgage Loan by deferring
enforcement in the hope of maximizing future proceeds. However, the interests of
the Trust Fund may be better served by prompt action, since delay followed by a
market downturn could result in less proceeds to the Trust Fund than would have
been realized if earlier action had been taken. However, the Operating Adviser
is not permitted to direct the Special Servicer to take, and the Special
Servicer may not take, any action that will violate the Servicing Standard or
any other provision of the Pooling and Servicing Agreement.
The Mortgage Loans
Risks of Lending on Income-Producing Properties Generally
The Mortgaged Properties consist entirely of income-producing real estate.
Lending on the security of income-producing real estate is generally viewed as
exposing a lender to a greater risk of loss than lending on the security of
single-family residences. Multifamily and commercial real estate lending
typically involves larger loans than single-family lending. In addition, and
unlike the case of loans made on the security of single-family residences,
repayment of loans made on the security of income-producing real property
depends upon the ability of that property (i) to generate rental income
sufficient to pay operating expenses, to make necessary repairs, tenant
improvements and capital improvements and to pay debt service and (ii) in the
case of loans that do not fully amortize over their terms, to retain sufficient
value to permit the borrower to pay off the loan at maturity by sale or
refinancing. A number of factors, many beyond the control of the property owner,
can affect the ability of an income-producing real estate project to generate
sufficient net operating income to pay debt service and/or to maintain its
value. Among these factors are economic conditions generally and in the area of
the project, the age, quality and design of the project and the degree to which
it competes with other projects in the area, changes or continued weaknesses in
specific industry segments, increases in operating costs, the willingness and
ability of the owner to provide capable property management and maintenance and
the degree to which the project's revenue is dependent upon a single tenant or
user, a small group of tenants, or tenants concentrated in a particular business
or industry. If leases are not renewed or replaced, if tenants default, if
rental rates fall and/or if operating expenses increase, the borrower's ability
to repay the loan may be impaired and the resale value of the property, which is
substantially dependent upon the property's ability to generate income, may
decline. In addition, there are other factors, including changes in zoning or
tax laws, the availability of credit for financing, and changes in interest rate
levels that may adversely affect the value of a project (and thus the borrower's
ability to sell or refinance) without
S-38
<PAGE> 39
necessarily affecting the ability to generate current income. In addition,
particular types of income properties are exposed to particular risks, some of
which are summarized below.
Risks Particular to Retail, Office and Industrial Properties
Eighty-six (86) Mortgage Loans, representing 26.0% of the Initial Pool
Balance, are secured by Mortgages on retail properties; sixty-five (65) Mortgage
Loans, representing 14.2% of the Initial Pool Balance, are secured by Mortgages
on industrial properties; thirty-seven (37) Mortgage Loans, representing 12.8%
of the Initial Pool Balance, are secured by Mortgages on office properties; and
seven (7) Mortgage Loans, representing 1.3% of the Initial Pool Balance, are
secured by Mortgages on mixed use properties used for a combination of
commercial purposes. In addition to risks generally associated with real estate,
such properties can also be adversely affected by other factors. For instance,
retail properties can be affected significantly by adverse changes in consumer
spending patterns and competition from alternative forms of retailing (such as
direct mail, video shopping networks, telephone shopping and electronic
commerce) that reduce the need for retail space. In addition, significant
tenants at a retail property play an important part in generating customer
traffic and making a retail property a desirable location for other tenants.
Thus, a retail property may be adversely affected if an anchor or other
significant tenant ceases operations (which may occur at the expiration of a
lease term or the term of its covenant to operate, the tenant's bankruptcy, its
general cessation of business activities or for other reasons). In addition,
certain tenants at retail properties may be entitled to terminate their leases
if one or more anchor tenants cease operations.
Office properties generally require their owners to expend significant
amounts of cash to pay for general capital improvements, tenant improvements and
costs of re-leasing space. Office properties that are not equipped to
accommodate the needs of modern businesses may become functionally obsolete and
thus non-competitive. In addition, and like anchored shopping centers, the
success of an office property with a single or dominant tenant may depend
significantly on that tenant's continued occupancy.
Industrial properties may be adversely affected by reduced demand for
industrial space occasioned by a decline in a particular industry segment. Also,
an industrial property that suited the particular needs of its original tenant
may be difficult to re-let to another tenant or, like office properties, may
become functionally obsolete relative to newer properties.
Risks Particular to Multifamily Properties
Seventy-one (71) Mortgage Loans, representing 25.1% of the Initial Pool
Balance, are secured by Mortgages on multifamily properties. Multifamily
projects are part of a market that, in general, is characterized by low barriers
to entry. Thus, a particular apartment market with historically low vacancies
could experience substantial new construction, and a resultant oversupply of
units, in a relatively short period of time. Since multifamily apartment units
are typically leased on a short-term basis, the tenants who reside in a
particular project within such a market may easily move to newer projects with
better amenities. In addition, occupancy and rent levels may be adversely
affected by unfavorable economic conditions generally, local military base or
factory closings and national and local politics, including current or future
rent stabilization and rent control laws and agreements. Further, reduced
mortgage interest rates may encourage renters to purchase single-family housing.
Certain of the multifamily Mortgaged Properties have material concentrations of
students as tenants.
Risks Particular to Hospitality Properties
Twenty-two (22) Mortgage Loans (the "Hospitality Loans"), representing
16.0% of the Initial Pool Balance, are secured by Mortgages solely on hotel or
motel properties. Various factors, including location, quality and franchise
affiliation, if any, affect the economic viability of a hotel or motel. Adverse
economic conditions, either local, regional or national, may limit the amount
that can be charged for a room and may result in a reduction in occupancy
levels. The construction of competing hotels or motels can have similar effects.
Because hotel and motel rooms generally are rented for short periods of time,
hotels and motels tend to respond more quickly to adverse economic conditions
and competition that do other commercial properties. Furthermore, the financial
strength and compabilities of the owner and operator of a hotel or motel may
have an impact on such hotel or motel's quality of service and economic
viability.
S-39
<PAGE> 40
Certain of the Mortgaged Properties securing the Hospitality Loans are
franchisees of national hotel or motel chains. The viability of any hotel or
motel property which is affiliated with a franchise depends in part on the
continued existence and financial strength of the franchisor, the public
perception of the franchise service mark and the duration of the franchise
licensing agreements. The transferability of franchise license agreements may be
restricted and, in the event of a foreclosure on any Mortgaged Property, the
purchaser of such Mortgaged Property would not have the right to use the
franchise license without the franchisor's consent. Further, in the event of a
foreclosure on a Mortgaged Property, it is unlikely that the Trustee (or Master
Servicer) or purchaser of such Mortgaged Property would be entitled to the
rights under any liquor license. Conversely, a lender may be unable to remove a
franchisor that it desires to replace following a foreclosure.
Certain of the Mortgaged Properties securing the Hospitality Loans are not
franchisees of national hotel or motel chains and therefore do not have the
benefits typically associated with being part of such a chain (including, for
example, reservation systems and marketing).
Mortgage Loans Not Insured
The Mortgage Loans are not insured or guaranteed by any governmental
entity or any private mortgage insurer. As described herein, in certain limited
circumstances, a Seller may be obligated to repurchase or replace a Mortgage
Loan if its representations and warranties concerning such Mortgage Loan are
breached; however, there can be no assurance that any Seller will be in a
financial position to effect such repurchase or substitution. See "Description
of the Mortgage Pool--The Sellers", "--Representations and Warranties" and "--
Repurchases and Other Remedies" herein.
Non-Recourse Mortgage Loans
Substantially all of the Mortgage Loans are non-recourse loans as to which
recourse, in the event of a default, will be limited to the related Mortgaged
Property. In those cases where the loan documents permit recourse to the
borrower or a guarantor, the related Seller has not evaluated the financial
condition of such person. Consequently, payment on each Mortgage Loan prior to
maturity is (or should be considered by investors to be) dependent primarily on
the sufficiency of the cash flow of the related Mortgaged Property, and at
maturity (whether at scheduled maturity or, in the event of a default, upon the
acceleration of such maturity) upon the then market value of the related
Mortgaged Property or the ability of the related borrower to refinance the
Mortgaged Property.
Environmental Considerations
Contamination of real property may give rise to a lien on that property to
assure payment of the cost of clean-up or, in certain circumstances, may result
in liability to the lender for that cost. Such contamination may also reduce the
value of a property. An environmental site assessment (or in some cases an
update of a previous assessment) was performed with respect to each Mortgaged
Property in connection with the origination or acquisition thereof. Although the
reports of such environmental site assessments generally did not disclose the
presence or risk of environmental contamination that is considered material to
the interests of the holders of the Offered Certificates, no assurance can be
given that the environmental assessments revealed all existing or potential
environmental risks or that all adverse environmental conditions have been
completely remediated. Furthermore, certain of such environmental assessments
are more than a year old. See "Description of the Mortgage Pool--Assessments of
Property Value and Condition--Environmental Assessments" herein and "Certain
Legal Aspects of the Mortgage Loans and the Leases--Environmental Legislation"
in the Prospectus.
The Pooling and Servicing Agreement requires that the Special Servicer
obtain an environmental site assessment of a Mortgaged Property prior to
acquiring title thereto or assuming its operation. Such requirement effectively
precludes enforcement of the security of the related Mortgage Note until a
satisfactory environmental site assessment is obtained (or until any required
remedial action is thereafter taken); but will decrease the likelihood that the
Trust Fund will become liable for a material adverse environmental condition at
a Mortgaged Property. However, there can be no assurance that the requirements
of the Pooling and Servicing Agreement will effectively insulate the Trust Fund
from potential liability for a materially adverse environmental condition at any
Mortgaged
S-40
<PAGE> 41
Property. See "Risk Factors--Environmental Risks" and "Certain Legal Aspects of
the Mortgage Loans and the Leases--Environmental Legislation" in the Prospectus.
Balloon Payments
Two hundred seventy-five (275) of the Mortgage Loans, representing 92.6%
of the Initial Pool Balance, do not fully amortize over their respective terms
to maturity. One (1) of the Mortgage Loans, which represents 2.2% of the Initial
Pool Balance, provides for Scheduled Payments of interest only prior to its
maturity. Thus, each such Mortgage Loan will have a substantial payment (that
is, a "Balloon Payment") due at its stated maturity date, unless prepaid prior
thereto. With respect to the one hundred sixty-eight (168) Mortgage Loans with
Balloon Payments that accrue interest on the basis of the actual number of days
elapsed each month in a 360-day year, representing 62.7% of the Initial Pool
Balance, the amount of the Balloon Payment will be greater than would be the
case if such Mortgage Loans accrued interest on the basis of a 360-day year
consisting of twelve 30-day months as a result of the application of interest
and principal on such Mortgage Loans over time.
Loans with Balloon Payments involve a greater risk to a lender than
fully-amortizing loans because the ability of a borrower to make a Balloon
Payment typically will depend upon its ability either to fully refinance the
loan or to sell the related Mortgaged Property at a price sufficient to permit
the borrower to make the Balloon Payment. The ability of a borrower to effect a
refinancing or sale will be affected by a number of factors, including the value
of the related Mortgaged Property, the level of available mortgage rates at the
time of sale or refinancing, the borrower's equity in the Mortgaged Property,
the financial condition and operating history of the borrower and the Mortgaged
Property, tax laws, prevailing economic conditions and the availability of
credit for loans secured by multifamily or commercial, as the case may be, real
properties generally. None of the Sellers, the Master Servicer, the Special
Servicer or their respective affiliates is under any obligation to refinance any
Mortgage Loan. See "Description of the Mortgage Pool--Certain Terms and
Characteristics of the Mortgage Loans" herein and "Risk Factors--Balloon
Payments" and "--Obligor Default" in the Prospectus.
In order to maximize recoveries on defaulted Mortgage Loans, the Special
Servicer may modify and/or extend the maturity of Mortgage Loans that are in
material default or as to which a payment default (including the failure to make
a Balloon Payment) is imminent; subject, however, to the limitations described
under "Servicing of the Mortgage Loans--Mortgage Loan Modifications" herein.
There can be no assurance, however, that any such extension or modification will
increase the present value of recoveries in a given case. Any delay in
collection of a Balloon Payment that would otherwise be distributed in respect
of a Class of Principal Balance Certificates, whether such delay is due to
borrower default or to modification of the related Mortgage Loan, will likely
extend the weighted average life of such Class of Certificates. See "Yield,
Prepayment and Maturity Considerations" herein and "Yield Considerations" in the
Prospectus.
Geographic Concentration
One hundred sixteen (116) of the Mortgage Loans, representing 35.2% of the
Initial Pool Balance, are secured by liens on Mortgaged Properties located in
California. Concentrations of Mortgaged Properties (in each case representing
security for 8.9% or less of the Initial Pool Balance) also exist in several
other states. In general, a concentration of Mortgaged Properties in a
particular state or region increases the exposure of the Mortgage Pool to any
adverse economic or other developments or acts of nature that may occur in that
state or region. In recent periods, most regions of the United States (including
California and other regions in which the Mortgaged Properties are located) have
experienced downturns in the market value of real estate. In addition,
improvements on Mortgaged Properties located in California may be more
susceptible to certain types of special hazards not covered by insurance (such
as earthquakes) than properties located in other parts of the country. The
Mortgage Loans generally do not require any borrowers to maintain earthquake
insurance.
Cross-Collateralization; Related Parties
The Mortgage Pool includes six (6) groups of Mortgage Loans, the largest
of which groups collectively represents 2.4% of the Initial Pool Balance, under
which an aggregate amount of indebtedness is secured by multiple Mortgaged
Properties. For purposes of the presentation of Mortgage Pool Information
herein, such Mortgage Loans
S-41
<PAGE> 42
have been treated as multiple cross-collateralized and cross-defaulted Mortgage
Loans, each secured by one of the related Mortgaged Properties and each having a
principal balance in an amount equal to an allocated portion of the aggregate
indebtedness represented by such Mortgage Loan.
In addition, there are five (5) groups of Mortgage Loans, the largest of
which groups collectively represents 1.5% of the Initial Pool Balance, that
consist of several Mortgage Loans that are cross-defaulted and
cross-collateralized with the other Mortgage Loan or Loans in such group.
There are also several groups of Mortgage Loans (other than those groups
that are either cross-defaulted and cross-collateralized or treated as
cross-defaulted and cross-collateralized for purposes of the presentation of
Mortgage Pool Information herein), the largest of which group represents 1.8% of
the Initial Pool Balance, where the borrowers are affiliated entities related
through common ownership of partnership or other equity interests and where, in
general, the related Mortgaged Properties are commonly managed.
Adverse circumstances relating to a borrower or a respective affiliate and
affecting one of the related Mortgage Loans or Mortgaged Properties could arise
in connection with the other related Mortgage Loans or Mortgaged Properties. In
particular, the bankruptcy or insolvency of any such borrower or respective
affiliate could have an adverse effect on the operation of all of the related
Mortgaged Properties and on the ability of such related Mortgaged Properties to
produce sufficient cash flow to make required payments on the related Mortgage
Loans. For example, if a person that owns or directly or indirectly controls
several Mortgaged Property experiences financial difficulty at one Mortgaged
Property, it could defer maintenance at one or more other Mortgaged Properties
in order to satisfy current expenses with respect to the Mortgaged Property
experiencing financial difficulty, or it could attempt to avert foreclosure by
filing a bankruptcy petition that might have the effect of interrupting monthly
payments for an indefinite period on all the related Mortgage Loans. See
"Certain Legal Aspects of the Mortgage Loans and the Leases-Bankruptcy Laws" in
the Prospectus. In addition, a number of the borrowers under the Mortgage Loans
are limited or general partnerships. Under certain circumstances, the bankruptcy
of the general partner in a partnership may result in the dissolution of such
partnership. The dissolution of a borrower partnership, the winding-up of its
affairs and the distribution of its assets could result in an acceleration of
its payment obligations under the related Mortgage Loan.
Limitations of Appraisals and Market Valuations
In connection with the origination or acquisition of two hundred
seventy-six (276) of the Mortgage Loans, representing 91.7% of the Initial Pool
Balance, the related Mortgaged Property was appraised by an independent
appraiser who, generally, was a member of the Appraisal Institute. With respect
to the remaining thirty (30) Mortgage Loans representing 8.3% of the Initial
Pool Balance, a market valuation estimate was made by the related Seller based
on sales and rental information with respect to comparable properties and
third-party market studies. However, those appraisals and estimates represent
the analysis and opinion of the person performing the appraisal or valuation and
are not guarantees of, and may not be indicative of, present or future values.
There can be no assurance that another person would not have arrived at a
different valuation, even if such person used the same general approach to and
same method of valuing the property. Moreover, the values of the Mortgaged
Properties may have fluctuated significantly since the appraisal or market study
was performed. In addition, appraisals and market value estimates seek to
establish the amount a typically motivated buyer would pay a typically motivated
seller. Such amount could be significantly higher than the amount obtained from
the sale of a Mortgaged Property under a distress or liquidation sale.
Leasehold Considerations
Five (5) Mortgage Loans representing 3.3% of the Initial Pool Balance, are
secured solely by a Mortgage on the borrower's leasehold interest under a ground
lease. See "Description of the Mortgage Pool--Additional Mortgage Loan
Information" herein. Leasehold mortgage loans are subject to certain risks not
associated with mortgage loans secured by a lien on the fee estate of the
borrower. The most significant of these risks is that if the borrower's
leasehold were to be terminated upon a lease default, the leasehold mortgagee
would lose its security. However, in each of these cases, the related ground
lease requires the lessor to give the leasehold mortgagee notice of lessee
defaults and an opportunity to cure them, permits the leasehold estate to be
assigned to and by the
S-42
<PAGE> 43
leasehold mortgagee or the purchaser at a foreclosure sale, and contains certain
other protective provisions typically included in a "mortgageable" ground lease.
Risks of Secured Subordinate Financing
The Mortgaged Properties are unencumbered by secured subordinated debt
held by third parties. With respect to five (5) Mortgage Loans representing 6.6%
of the Initial Pool Balance, there is outstanding debt to third parties that is
unsecured or secured solely by ownership interests in the related borrower or an
affiliate thereof. With respect to three (3) of the Mortgage Loans representing
0.4% of the Initial Pool Balance, the related borrower may incur secured
subordinate debt, but only if the combined Debt Service Coverage Ratio does not
fall below 1.30x and the combined LTV does not exceed 70%. See "Description of
the Mortgage Pool--Certain Terms and Characteristics of the Mortgage
Loans--Subordinate Financing" herein. The existence of secured subordinate
indebtedness may increase the difficulty of refinancing the related Mortgage
Loan at maturity. Also, if the holder of the secured subordinated debt becomes a
debtor in a bankruptcy proceeding, foreclosure of the Mortgage Loan could be
delayed.
Risk of Changes in Concentrations
As payments in respect of principal (including in the form of voluntary
principal prepayments and liquidation proceeds) are received with respect to the
Mortgage Loans, the Mortgage Pool may exhibit increased concentration with
respect to the type of properties, property characteristics, number of borrowers
and affiliated borrowers and geographic location. Because principal on the
Principal Balance Certificates is payable in sequential order, the Classes
thereof that have a lower priority with respect to the payment of principal are
relatively more likely to be exposed to any risks associated with changes in
concentrations of borrower, loan or property characteristics.
DESCRIPTION OF THE CERTIFICATES
General
The Series 1998-WF1 Commercial Mortgage Pass-Through Certificates (the
"Certificates") will be issued on or about March 5, 1998 (the "Closing Date")
pursuant to a Pooling and Servicing Agreement to be dated as of the Cut-Off Date
(the "Pooling and Servicing Agreement"), among the Depositor, the Master
Servicer, the Special Servicer, the Trustee and the Fiscal Agent. Registered
holders of the Certificates are herein referred to as "Certificateholders". The
Certificates will represent in the aggregate the entire beneficial ownership
interest in a trust fund (the "Trust Fund") consisting primarily of: (i) the
Mortgage Loans and all payments under and proceeds of the Mortgage Loans
received after the Cut-Off Date (exclusive of principal prepayments received
prior to the Cut-Off Date and scheduled payments of principal and interest due
on or before the Cut-Off Date; (ii) any Mortgaged Property acquired on behalf of
the Certificateholders in respect of a defaulted Mortgage Loan through
foreclosure, deed in lieu of foreclosure or otherwise (any such Mortgaged
Property, upon acquisition, an "REO Property"); and (iii) certain rights of the
Depositor under, or assigned to the Depositor pursuant to, each of the Mortgage
Loan Purchase Agreements relating to Mortgage Loan document delivery
requirements and the representations and warranties of the related Seller
regarding its Mortgage Loans.
The Certificates will consist of 17 classes (each, a "Class") thereof, to
be designated as: (i) the Class A-1 Certificates and the Class A-2 Certificates
(collectively, the "Class A Certificates"); (ii) the Class X-1 and Class X-2
Certificates (collectively, the "Interest Only Certificates" or the "Class X
Certificates" and, collectively with the Class A Certificates, the "Senior
Certificates"); (iii) the Class B Certificates, the Class C Certificates, the
Class D Certificates, the Class E Certificates, the Class F Certificates, the
Class G Certificates, the Class H Certificates, the Class J Certificates, the
Class K Certificates and the Class L Certificates (collectively, the
"Subordinate Certificates" and, collectively with the Senior Certificates, the
"REMIC Regular Certificates"); and (iv) the Class R-I Certificates, the Class
R-II Certificates and the Class R-III Certificates (collectively, the "Residual
Certificates").
Only the Class A Certificates and the Class X-2, Class B, Class C, Class D
and Class E Certificates (collectively, the "Offered Certificates") are offered
hereby. The Class X-1, Class F, Class G, Class H, Class J, Class
S-43
<PAGE> 44
K and Class L Certificates and the Residual Certificates (collectively, the
"Private Certificates") have not been registered under the Securities Act of
1933, as amended, and are not offered hereby.
The Class A Certificates will be issued in book-entry form in
denominations of $5,000 initial Certificate Balance and in any whole dollar
denomination in excess thereof. The Class X-2, Class B, Class C, Class D and
Class E Certificates will be issued in book-entry form in denominations of
$50,000 initial Certificate Balance or Notional Amount, as applicable, and in
any whole dollar denomination in excess thereof.
Each Class of Offered Certificates will initially be represented by one or
more global Certificates registered in the name of the nominee of The Depository
Trust Company ("DTC"). The Depositor has been informed by DTC that DTC's nominee
initially will be Cede & Co. No person acquiring an interest in an Offered
Certificate (any such person, a "Certificate Owner") will be entitled to receive
a fully registered physical certificate (a "Definitive Certificate")
representing such interest, except as set forth in the Prospectus under
"Description of the Certificates--Book-Entry Registration and Definitive
Certificates". Unless and until Definitive Certificates are issued in respect of
any Class of Offered Certificates, all references to actions by holders of the
Offered Certificates will refer to actions taken by DTC upon instructions
received from the related Certificate Owners through DTC's participating
organizations ("Participants"), and all references herein to payments, notices,
reports and statements to holders of the Offered Certificates will refer to
payments, notices, reports and statements to DTC or Cede & Co., as the
registered holder of the Offered Certificates, for distribution to the related
Certificate Owners through DTC's Participants in accordance with DTC procedures.
Until Definitive Certificates are issued in respect of any Class of Offered
Certificates, interests in such Certificates will be transferred on the
book-entry records of DTC (and its Participants). See "Description of the
Certificates--Book-Entry Registration and Definitive Certificates" in the
Prospectus.
Certificateholders must hold their Offered Certificates in book-entry
form, and delivery of the Offered Certificates will be made through the
facilities of DTC (in the United States) and may be made through the facilities
of Cedel Bank, societe anonyme ("CEDEL") or Euroclear System ("Euroclear") (in
Europe). Transfers within DTC, CEDEL or Euroclear, as the case may be, will be
in accordance with the usual rules and operating procedures of the relevant
system. Crossmarket transfers between persons holding directly or indirectly
through DTC, on the one hand, and counterparties holding directly or indirectly
through CEDEL or Euroclear, on the other, will be effected in DTC through
Citibank, N.A. or The Chase Manhattan Bank, the relevant depositaries of CEDEL
and Euroclear, respectively.
Because of time-zone differences, credits of securities received in Cedel
or Euroclear as a result of a transaction with a DTC participant will be made
during subsequent securities settlement processing and dated the business day
following the DTC settlement date. Such credits or any transactions in such
securities settled during such processing will be reported to the relevant
Euroclear or Cedel participant on such business day. Cash received in Cedel or
Euroclear as a result of sales of securities by or through a Cedel participant
or a Euroclear participant to a DTC participant will be received with value on
the DTC settlement date but will be available in the relevant Cedel or Euroclear
cash account only as of the business day following settlement in DTC.
S-44
<PAGE> 45
Certificate Balances And Notional Amounts
Upon initial issuance, the Class A-1, Class A-2, Class B, Class C, Class
D, Class E, Class F, Class G, Class H, Class J, Class K and Class L Certificates
(collectively, the "Principal Balance Certificates") will have the following
aggregate Certificate Balances (in each case, subject to a variance of plus or
minus 5%):
Initial
Aggregate Approximate Approximate
Certificate Percent of Initial Percent of
Class Balance Pool Balance Credit Support
----- ------- ------------ --------------
Class A-1 $363,000,000 26.07% 27.00%
Class A-2 653,315,000 46.93 27.00
Class B 69,610,000 5.00 22.00
Class C 69,610,000 5.00 17.00
Class D 69,611,000 5.00 12.00
Class E 31,325,000 2.25 9.75
Class F 24,364,000 1.75 8.00
Class G 38,286,000 2.75 5.25
Class H 10,441,000 0.75 4.50
Class J 27,845,000 2.00 2.50
Class K 10,441,000 0.75 1.75
Class L 24,364,342 1.75 0.00
The "Certificate Balance" of any Principal Balance Certificate outstanding
at any time will equal the then maximum amount that the holder thereof will be
entitled to receive in respect of principal out of future cash flow on the
Mortgage Loans and other assets included in the Trust Fund. The initial
Certificate Balance of each Principal Balance Certificate will be set forth on
the face thereof. On each Distribution Date, the Certificate Balance of each
Principal Balance Certificate will be reduced by any distributions of principal
actually made on such Certificate on such Distribution Date, and will be further
reduced by any Realized Losses and Expense Losses allocated to such Certificate
on such Distribution Date. See "--Distributions" and "--Distributions--
Subordination; Allocation of Losses and Certain Expenses" below.
The Class X-1 Certificates, which are Private Certificates, and the Class
X-2 Certificates will not have Certificate Balances. Each such Class of
Certificates will represent the right to receive distributions of interest
accrued as described herein on a notional principal amount (a "Notional
Amount").
The Notional Amount of the Class X-1 Certificates will be equal to the
aggregate of the Certificate Balances of the respective Classes of Principal
Balance Certificates outstanding from time to time. The Notional Amount of the
Class X-2 Certificates at any time on or before the Distribution Date occurring
in March, 2003 will be an amount equal to the aggregate of the Component Balance
(as defined herein) of the Class A-2B Component (as defined herein) and the
Certificate Balances of the Class B, Class C, Class D and Class E Certificates
outstanding from time to time. After such Distribution Date, the Notional Amount
of the Class X-2 Certificates will be equal to zero. Accordingly, the Notional
Amount of the Class X-l Certificates will be reduced on each Distribution Date
by any distributions of principal actually made on, and any Realized Losses and
Expense Losses actually allocated to any Class of Principal Balance
Certificates. The Notional Amount of the Class X-2 Certificates will be reduced
on each Distribution Date by any distributions of principal actually made on,
and any Realized Losses and Expense Losses actually allocated to (i) that
portion of the aggregate Certificate Balance of the Class A-2 Certificates that
corresponds to the Class A-2B Component and (ii) holders of the Class B, Class
C, Class D and Class E Certificates. In general, holders of the Class X-2
Certificates will not be entitled to distributions of interest at any time
following the Distribution Date occurring in March, 2003. Accordingly, upon
initial issuance, the aggregate Notional Amount of the Class X-1 Certificates
and Class X-2 Certificates will be $1,392,212,342 and $763,756,000,
respectively, subject in each case to a permitted variance of plus or minus 5%.
The Notional Amount of each Interest Only Certificate is used solely for the
purpose of determining the amount of interest to be distributed on such
Certificate and does not represent the right to receive any distributions of
principal.
The Residual Certificates will not have Certificate Balances or Notional
Amounts.
S-45
<PAGE> 46
Pass-Through Rates
The rate per annum at which any Class of Certificates (other than the
Residual Certificates) accrues interest is referred to herein as its
"Pass-Through Rate."
The Pass-Through Rates applicable to the Class A-1, Class A-2, Class B,
Class C, Class D and Class E Certificates for each Distribution Date will, at
all times, be equal to 6.25%, 6.55%, 6.67%, 6.77%, 7.12%, and 7.30% per annum,
respectively; provided, however, that each such Pass-Through Rate will not
exceed the Weighted Average Net Mortgage Rate for such Distribution Date.
The Pass-Through Rate applicable to the Class X-1 Certificates, which are
Private Certificates, for the initial Distribution Date will equal approximately
0.73% per annum. The Pass-Through Rate applicable to the Class X-1 Certificates
for each Distribution Date subsequent to the initial Distribution Date will, in
general, equal the weighted average of the Class X-1 Strip Rates for the
respective Classes of Principal Balance Certificates (or, in the case of the
Class A-2 Certificates, the Class A-2A and Class A-2B Components thereof) for
such Distribution Date (weighted on the basis of the respective Certificate
Balances of such Classes of Certificates or the Component Balances of such
Components outstanding immediately prior to such Distribution Date). The "Class
X-1 Strip Rate" in respect of any Class of Principal Balance Certificates (or,
in the case of the Class A-2 Certificates, the Class A-2A Component or the Class
A-2B Component) for any Distribution Date will, in general, equal (i) the
Weighted Average Net Mortgage Rate for such Distribution Date minus (ii) (x) in
the case of the Class A-1, Class F, Class G, Class H, Class J, Class K and Class
L Certificates and the Class A-2A Component, the Pass-Through Rate for such
Class of Certificates or such Component and (y) in the case of the Class A-2B
Component and the Class B, Class C, Class D and Class E Certificates, (I) for
any Distribution Date occurring on or before March 15, 2003, the rate per annum
corresponding to such Distribution Date as set forth on Schedule A hereto and
(II) for any Distribution Date occurring after Mach 15, 2003, the Pass-Through
Rate for such Class of Certificates or such Component (but in no event will any
Class X-1 Strip Rate be less than zero).
The Pass-Through Rate applicable to the Class X-2 Certificates for the
initial Distribution Date will equal approximately 1.12% per annum. The
Pass-Through Rate applicable to the Class X-2 Certificates for each Distribution
Date subsequent to the initial Distribution Date will, in general, equal the
weighted average of the Class X-2 Strip Rates for the Class A-2B Component and
the Class B, Class C, Class D and Class E Certificates for such Distribution
Date (weighted on the basis of the respective Certificate Balances of such
Classes of Certificates or the Component Balance of such Component outstanding
immediately prior to such Distribution Date). The "Class X-2 Strip Rate" in
respect of the Class A-2B Component and the Class B, Class C, Class D and Class
E Certificates for any Distribution Date will, in general, equal (i) the lesser
of (x) the rate per annum corresponding to such Distribution Date as set forth
on Schedule A hereto and (y) the Weighted Average Net Mortgage Rate for such
Distribution Date minus (ii) the Pass-Through Rate for such Class of
Certificates or such Component for such Distribution Date (but in no event will
any Class X-2 Strip Rate be less than zero).
Solely for purposes of calculating the Pass-Through Rate applicable to the
Class X-l and Class X-2 Certificates for each Distribution Date and the Notional
Amount of the Class X-2 Certificates, the aggregate Certificate Balance of the
Class A-2 Certificates will be deemed to consist of two components (each a
"Component"), each having the same "Pass-Through Rate" as the Class A-2
Certificates. One of the Components (the "Class A-2A Component") will have a
balance (a "Component Balance") initially equal to $129,715,000, which amount
will be deemed reduced by the amount of all distributions of principal made to
the Class A-2 Certificates until such Component Balance is reduced to zero. The
other Component (the "Class A-2B Component") will have a Component Balance
initially equal to $523,600,000 which, following the reduction of the Component
Balance of the Class A-2A Component to zero, will be deemed reduced by the
amount of all subsequent distributions in reduction of the aggregate Certificate
Balance of the Class A-2 Certificates until the Component Balance of the Class
A-2B Component (and the aggregate Certificate Balance of the Class A-2
Certificates) has been reduced to zero.
The Pass-Through Rates applicable to the Class F Certificates and each of
the Class G, Class H, Class J, Class K and Class L Certificates for each
Distribution Date will, at all times, be equal to 7.30% and 6.25%, per annum,
respectively; provided, however, that each such Pass-Through Rate will not
exceed the Weighted Average Net Mortgage Rate for such Distribution Date.
S-46
<PAGE> 47
The "Weighted Average Net Mortgage Rate" for any Distribution Date is the
weighted average of the Net Mortgage Rates for the Mortgage Loans (in the case
of each Mortgage Loan that is a Non-30/360 Mortgage Loan, adjusted as described
below), weighted on the basis of their respective Scheduled Principal Balances
as of the close of business on the preceding Distribution Date.
The "Net Mortgage Rate" with respect to any Mortgage Loan will, in
general, be a per annum rate equal to the related Mortgage Rate minus the
related Administrative Cost Rate; provided that, for purposes of calculating the
Pass-Through Rate for each Class of REMIC Regular Certificates from time to
time, the Net Mortgage Rate for any Mortgage Loan will be calculated without
regard to any modification, waiver or amendment of the terms of such Mortgage
Loan subsequent to the Closing Date. In addition, because the Certificates
accrue interest on the basis of a 360-day year consisting of twelve 30-day
months, when calculating the Pass-Through Rate for each Class of Certificates
for each Distribution Date, the Net Mortgage Rate of each Mortgage Loan that
accrues interest other than on the basis of a 360-day year consisting of twelve
30-day months (each a "Non-30/360 Loan") will be appropriately adjusted to
reflect such difference.
The "Scheduled Principal Balance" of any Mortgage Loan will generally
equal the Cut-Off Date balance thereof, reduced (to not less than zero) on each
Distribution Date by (a) any payments or other collections of principal (or
advances in lieu thereof) on such Mortgage Loan that have been collected or
received during any preceding Collection Period, other than any Scheduled
Payments due in any subsequent Collection Period, and (b) the principal portion
of any Realized Loss incurred in respect of such Mortgage Loan during any
preceding Collection Period.
Distributions
General
Distributions on or with respect to the Certificates will be made by the
Trustee, to the extent of available funds, and in accordance with the manner and
priority set forth herein, on the 15th day of each month, or if any such 15th
day is not a business day, on the next succeeding business day (each, a
"Distribution Date"), commencing in April, 1998. Except as otherwise described
below, all such distributions will be made to the persons in whose names the
Certificates are registered at the close of business on the related Record Date
and, as to each such person, will be made by wire transfer in immediately
available funds to the account specified by the Certificateholder at a bank or
other entity having appropriate facilities therefor, if such Certificateholder
will have provided the Trustee with wiring instructions on or before the related
Record Date, or otherwise by check mailed to such Certificateholder. The final
distribution on any Certificate (determined without regard to any possible
future reimbursement of any Realized Losses or Expense Losses previously
allocated to such Certificate) will be made in a like manner, but only upon
presentation and surrender of such Certificate at the location that will be
specified in a notice of the pendency of such final distribution. Any
distribution that is to be made with respect to a Certificate in reimbursement
of a Realized Loss or Expense Loss previously allocated thereto, which
reimbursement is to occur after the date on which such Certificate is
surrendered as contemplated by the preceding sentence (the likelihood of any
such distribution being remote), will be made by check mailed to the
Certificateholder that surrendered such Certificate. All distributions made on
or with respect to a Class of Certificates will be allocated pro rata among such
Certificates based on their respective Percentage Interests in such Class.
The "Record Date" with respect to each Class of Offered Certificates for
each Distribution Date, will be the last business day of the calendar month
immediately preceding the month in which such Distribution Date occurs. The
"Percentage Interest" evidenced by any REMIC Regular Certificate in the Class to
which it belongs will be a fraction, expressed as a percentage, the numerator of
which is equal to the initial Certificate Balance or Notional Amount, as the
case may be, of such Certificate as set forth on the face thereof, and the
denominator of which is equal to the initial aggregate Certificate Balance or
Notional Amount, as the case may be, of such Class.
The Available Distribution Amount
With respect to any Distribution Date, distributions of interest on and
principal of the Certificates will be made from the Available Distribution
Amount for such Distribution Date. The "Available Distribution Amount" for
S-47
<PAGE> 48
any Distribution Date will, in general, equal (a) all amounts on deposit in the
Certificate Account (described below) as of the close of business on the related
Determination Date, exclusive of any portion thereof that represents one or more
of the following:
(i) Scheduled Payments collected but due on a Due Date subsequent to
the related Collection Period;
(ii) Prepayment Premiums (which are separately distributable on the
Certificates as hereinafter described);
(iii) amounts that are payable or reimbursable to any person other
than the Certificateholders (including, among other things, amounts
attributable to Expense Losses and amounts payable to the Master Servicer,
the Special Servicer, the Trustee and the Fiscal Agent as compensation or
in reimbursement of outstanding Advances); and
(iv) amounts deposited in the Certificate Account in error; plus
(b) to the extent not already included in clause (a), any P&I Advances
made and any Compensating Interest Payments paid with respect to such
Distribution Date.
Application of the Available Distribution Amount
On each Distribution Date, except as described under "--Optional
Termination" below, for so long as any Class of Offered Certificates remains
outstanding, the Trustee will apply the Available Distribution Amount for such
date for the following purposes and in the following order of priority:
(i) to the holders of the Class A-1, Class A-2, Class X-1 and Class X-2
Certificates, all Distributable Certificate Interest Certificates for such
Distribution Date, pro rata in proportion to the Distributable Certificate
Interest payable in respect of each such Class;
(ii) to the holders of the Class A-1 Certificates, the Principal
Distribution Amount for such Distribution Date, until the aggregate Certificate
Balance of the Class A-1 Certificates has been reduced to zero;
(iii) upon payment in full of the aggregate Certificate Balance of the
Class A-1 Certificates, to the holders of the Class A-2 Certificates, the
Principal Distribution Amount for such Distribution Date (reduced by any portion
thereof distributed to the holders of the Class A-1 Certificates), until the
aggregate Certificate Balance of the Class A-2 Certificates has been reduced to
zero;
(iv) to the holders of the Class A and Class X Certificates, pro rata in
proportion to their respective entitlements to reimbursement described in this
clause (iv), to reimburse any Realized Losses previously allocated to such
Classes of Certificates, plus interest on such Realized Losses, compounded
monthly, at one-twelfth the applicable Pass-Through Rate;
(v) to the holders of the Class B Certificates, all Distributable
Certificate Interest in respect of such Class of Certificates for such
Distribution Date;
(vi) upon payment in full of the aggregate Certificate Balance of the
Class A-2 Certificates, to the holders of the Class B Certificates, the
Principal Distribution Amount for such Distribution Date (reduced by any portion
thereof distributed to the holders of the Class A Certificates), until the
aggregate Certificate Balance of the Class B Certificates has been reduced to
zero;
(vii) to the holders of the Class B Certificates, to reimburse them for
any Realized Losses previously allocated to such Class of Certificates, plus
interest on such Realized Losses, compounded monthly, at one-twelfth the
applicable Pass-Through Rate;
S-48
<PAGE> 49
(viii) to the holders of the Class C Certificates, all Distributable
Certificate Interest in respect to such Class of Certificates for such
Distribution Date;
(ix) upon payment in full of the aggregate Certificate Balance of the
Class B Certificates, to the holders of the Class C Certificates, the Principal
Distribution Amount for such Distribution Date (reduced by any portion thereof
distributed to the holders of the Class A and Class B Certificates), until the
aggregate Certificate Balance of the Class C Certificates has been reduced to
zero;
(x) to the holders of the Class C Certificates, to reimburse them for any
Realized Losses previously allocated to such Class of Certificates, plus
interest on such Realized Losses, compounded monthly, at one-twelfth the
applicable Pass-Through Rate;
(xi) to the holders of the Class D, Certificates, all Distributable
Certificate Interest in respect to such Class of Certificates for such
Distribution Date;
(xii) upon payment in full of the aggregate Certificate Balance of the
Class C Certificates, to the holders of the Class D, Certificates, the Principal
Distribution Amount for such Distribution Date (reduced by any portion thereof
distributed to the holders of the Class A, Class B and Class C Certificates),
until the aggregate Certificate Balance of the Class D Certificates has been
reduced to zero;
(xiii) to the holders of the Class D Certificates, to reimburse them for
any Realized Losses previously allocated to such Class of Certificates, plus
interest on such Realized Losses, compounded monthly, at one-twelfth the
applicable Pass-Through Rate;
(xiv) to the holders of the Class E, Certificates, all Distributable
Certificate Interest in respect to such Class of Certificates for such
Distribution Date;
(xv) upon payment in full of the aggregate Certificate Balance of the
Class D Certificates, to the holders of the Class E, Certificates, the Principal
Distribution Amount for such Distribution Date (reduced by any portion thereof
distributed to the holders of the Class A, Class B, Class C and Class D
Certificates), until the aggregate Certificate Balance of the Class E
Certificates has been reduced to zero;
(xvi) to the holders of the Class E Certificates, to reimburse them for
any Realized Losses previously allocated to such Class of Certificates, plus
interest on such Realized Losses, compounded monthly, at one-twelfth the
applicable Pass-Through Rate; and
(xvii) to make payments to the holders of the Private Certificates (other
than the Class X-1 Certificates) as contemplated below.
Notwithstanding the foregoing, on each Distribution Date occurring on or
after the date, if any, upon which the aggregate Certificate Balance of all
Classes of Subordinate Certificates has been reduced to zero or the aggregate
Appraisal Reduction in effect is greater than or equal to the aggregate
Certificate Balance of all Classes of Subordinate Certificates, the Principal
Distribution Amount will be distributed, first, to the Class A-1 and Class A-2
Certificates, pro rata, based on their respective Certificate Balances, in
reduction of their respective Certificate Balances, until the Certificate
Balance of each such Class is reduced to zero; and, second, to the Class A-1 and
Class A-2 Certificates, pro rata, based on their respective Certificate
Balances, for the unreimbursed amount of Realized Losses and Expense Losses
previously allocated to such Classes.
On each Distribution Date, following the above-described distributions on
the Publicly Offered Certificates and the Class X-1 Certificates, the Trustee
will apply the remaining portion, if any, of the Available Distribution Amount
for such date to make payments to the holders of each of the respective Classes
of Private Certificates (other than the Class X-1 Certificates and Residual
Certificates), in alphabetical order of Class designation, in each case for the
following purposes and in the following order of priority (i.e., payments under
clauses (1), (2) and (3) below, in that order, to the holders of the Class F
Certificates, then payments under clauses (1), (2), and (3) below, in that
order, to the holders of the Class G, Class H, Class J, Class K and Class L
Certificates):
S-49
<PAGE> 50
(1) to pay interest to the holders of the particular Class of
Certificates, up to an amount equal to all Distributable Certificate
Interest in respect of such Class of Certificates for such
Distribution Date;
(2) if the aggregate Certificate Balance of each other Class of
Subordinate Certificates, if any, with an earlier alphabetical Class
designation has been reduced to zero, to pay principal to the
holders of the particular Class of Certificates, up to an amount
equal to the lesser of (a) the then outstanding aggregate
Certificate Balance of such Class of Certificates and (b) the
aggregate of the remaining Principal Distribution Amount for such
Distribution Date; and
(3) to reimburse the holders of the particular Class of Certificates, up
to an amount equal to (a) all Realized Losses and Expense Losses, if
any, previously allocated to such Class of Certificates and for
which no reimbursement has previously been paid, plus (b) all unpaid
interest on such amounts (compounded monthly) at one-twelfth the
respective Pass-Through Rates of such Classes.
Any portion of the Available Distribution Amount for any Distribution Date
that is not otherwise payable to the holders of REMIC Regular Certificates as
contemplated above, will be paid to the holders of the Class R-I Certificates.
Distributable Certificate Interest
The "Distributable Certificate Interest" in respect of any Class of REMIC
Regular Certificates for any Distribution Date will equal the sum of (a) Accrued
Certificate Interest in respect of such Class of Certificates for such
Distribution Date, reduced (to not less than zero) by (i) any Net Aggregate
Prepayment Interest Shortfalls and (ii) Realized Losses and Expense Losses, in
each case specifically allocated with respect to such Distribution Date to
reduce Distributable Certificate Interest payable in respect of such Class in
accordance with the terms of the Pooling and Servicing Agreement and (b) the
portion of Distributable Certificate Interest for such Class remaining unpaid as
of the close of business on the preceding Distribution Date, plus one month's
interest thereon at the applicable Pass-Through Rate (such amount, "Unpaid
Interest"). The "Accrued Certificate Interest" in respect of each Class of REMIC
Regular Certificates for each Distribution Date will equal the amount of
interest for the applicable Interest Accrual Period accrued at the applicable
Pass-Through Rate on the aggregate Certificate Balance or Notional Amount, as
the case may be, of such Class of Certificates outstanding immediately prior to
such Distribution Date. Accrued Certificate Interest will be calculated on the
basis of a 360-day year consisting of twelve 30-day months.
The "Interest Accrual Period" for each class of REMIC Regular Certificates
and each Distribution Date will be the calendar month immediately preceding the
month in which such Distribution Date occurs.
Principal Distribution Amount
The "Principal Distribution Amount" for any Distribution Date will, in
general, equal the aggregate of the following:
(a) the principal portions of all Scheduled Payments (other than the
principal portion of Balloon Payments) and any Assumed Scheduled
Payments due or deemed due, as the case may be, in respect of the
Mortgage Loans for their respective Due Dates occurring during the
related Collection Period; and
(b) all payments (including Principal Prepayments and the principal
portion of Balloon Payments) and other collections (including
Liquidation Proceeds, Condemnation Proceeds, Insurance Proceeds and
REO Income (each as defined herein) and proceeds of Mortgage Loan
repurchases) that were received on or in respect of the Mortgage
Loans during the related Collection Period and that were identified
and applied by the Master Servicer as recoveries of principal
thereof, in each case net of any portion of such payment or other
collection that represents a recovery of the principal portion of
any Scheduled Payment (other than a Balloon Payment) due, or the
principal portion of any Assumed Scheduled Payment deemed due, in
respect of the related Mortgage Loan on a Due Date during or prior
to the related Collection Period and not previously recovered.
S-50
<PAGE> 51
Payments and collections with respect to principal of the Mortgage Loans
include all voluntary and involuntary prepayments of principal made prior to
their scheduled Due Dates ("Principal Prepayments"), all amounts paid by an
insurer in connection with a Mortgage Loan, other than any amounts required to
be paid to the related borrower ("Insurance Proceeds"), proceeds from the sale
or liquidation of a Mortgage Loan or related REO Property, net of expenses and
any related Advances and interest thereon ("Liquidation Proceeds"), and income
received in connection with the operation of an REO Property, net of certain
expenses ("REO Income").
The "Scheduled Payment" for any Mortgage Loan on any Due Date will, in
general, be the amount of the scheduled payment of principal and interest due
thereon on such date (taking into account any waiver, modification or amendment
of the terms of such Mortgage Loan subsequent to the Closing Date, whether
agreed to by the Special Servicer or occurring in connection with a bankruptcy
proceeding involving the related borrower).
An "Assumed Scheduled Payment" is an amount deemed due in respect of (i)
any Balloon Mortgage Loan that is delinquent in respect of its Balloon Payment
beyond the first Determination Date that follows its original stated maturity
date or (ii) any Mortgage Loan as to which the related Mortgaged Property has
become an REO Property. The Assumed Scheduled Payment deemed due on any such
Balloon Mortgage Loan on its original stated maturity date and on each
successive Due Date that it remains or is deemed to remain outstanding will
equal the Scheduled Payment that would have been due thereon on such date if the
related Balloon Payment had not come due, but rather such Mortgage Loan had
continued to amortize in accordance with its amortization schedule in effect
immediately prior to maturity. The Assumed Scheduled Payment for any Mortgage
Loan as to which the related Mortgaged Property has become an REO Property,
deemed due on each Due Date for so long as the REO Property remains part of the
Trust Fund, equals the Scheduled Payment (or Assumed Scheduled Payment) due on
the last Due Date prior to the acquisition of such REO Property.
Distributions of Prepayment Premiums
Any Prepayment Premium collected with respect to a Mortgage Loan during
any particular Collection Period will be distributed on the following
Distribution Date as follows: The holders of the respective Classes of Principal
Balance Certificates (other than the Class F, Class G, Class H, Class J, Class K
and Class L Certificates) then entitled to distributions of principal on such
Distribution Date will be entitled to an aggregate amount (allocable among such
Classes, if more than one, as described below) equal to the lesser of (a) such
Prepayment Premium and (b) such Prepayment Premium multiplied by a fraction, the
numerator of which is equal to the excess, if any, of the Pass-Through Rate
applicable to the most senior of such Classes of Principal Balance Certificates
then outstanding (or, in the case of two Classes of Class A Certificates, the
one with the earlier payment priority), over the relevant Discount Rate (as
defined herein), and the denominator of which is equal to the excess, if any, of
the Mortgage Rate of the Mortgage Loan that prepaid, over the relevant Discount
Rate. If there is more than one such Class of Principal Balance Certificates
entitled to distributions of principal on such Distribution Date, the aggregate
amount described in the preceding sentence will be allocated among such Classes
on a pro rata basis in accordance with the relative amounts of such
distributions of principal. The portion of the Prepayment Premium remaining
after any such payment to the holders of such Principal Balance Certificates
will be distributed to the holders of the Class X-1 Certificates.
For purposes of the foregoing, the "Discount Rate" is the rate which, when
compounded monthly, is equivalent to the Treasury Rate when compounded
semi-annually. The "Treasury Rate" is the yield calculated by the linear
interpolation of the yields, as reported in Federal Reserve Statistical Release
H.15-Selected Interest Rates under the heading "U.S. government
securities/Treasury constant maturities" for the week ending prior to the date
of the relevant principal prepayment, of U.S. Treasury constant maturities with
a maturity date (one longer and one shorter) most nearly approximating the
maturity date of the Mortgage Loan prepaid. If Release H.15 is no longer
published, the Master Servicer will select a comparable publication to determine
the Treasury Rate.
Any Prepayment Premiums distributed to the holders of a Class of
Certificates may not be sufficient to fully compensate such Certificateholders
for any loss in yield attributable to the related Principal Prepayments.
S-51
<PAGE> 52
Treatment of REO Properties
Notwithstanding that any Mortgaged Property may be acquired as part of the
Trust Fund through foreclosure, deed in lieu of foreclosure or otherwise, the
related Mortgage Loan will, for purposes of, among other things, determining
Pass-Through Rates of, distributions on and allocations of Realized Losses and
Expense Losses to the Certificates, as well as the amount of Servicing Fees,
Trustee Fees and Special Servicing Fees payable under the Pooling and Servicing
Agreement, be treated as having remained outstanding until such REO Property is
liquidated. In connection therewith, operating revenues and other proceeds
derived from such REO Property (exclusive of related operating costs) will be
"applied" by the Master Servicer as principal, interest and other amounts "due"
on such Mortgage Loan; and, subject to the recoverability determination
described under "--Advances" below and the effect of any Appraisal Reductions
described under "--Appraisal Reductions" below, the Master Servicer will be
required to make P&I Advances in respect of such Mortgage Loan, in all cases as
if such Mortgage Loan had remained outstanding. References to "Mortgage Loan"
and "Mortgage Loans" in the definitions of "Weighted Average Net Mortgage Rate"
and "Principal Distribution Amount" are intended to include any Mortgage Loan or
Mortgage Loans as to which the related Mortgaged Property has become an REO
Property.
Appraisal Reductions
Not later than the earliest of (i) the date 120 days after the occurrence
of any delinquency in payment with respect to a Mortgage Loan if such
delinquency remains uncured, (ii) the date 90 days after the related borrower
files a bankruptcy petition or a receiver is appointed in respect of the related
Mortgaged Property, provided that such petition or appointment remains in
effect, (iii) the effective date of any modification to a Money Term of a
Mortgage Loan, other than an extension of the date that a Balloon Payment is due
for a period of less than six months, and (iv) the date 30 days following the
date a Mortgaged Property becomes an REO Property (each of (i), (ii), (iii) and
(iv), an "Appraisal Event"), the Special Servicer is required to have obtained
an MAI appraisal (if the Scheduled Principal Balance of the Mortgage Loan is
greater than $1,000,000) or an internal valuation (if the Scheduled Principal
Balance of the Mortgage Loan is equal to or less than $1,000,000) of the related
Mortgaged Property or REO Property, as the case may be, unless such an appraisal
or valuation had previously been obtained within the prior twelve months. As a
result of such appraisal or internal valuation, an "Appraisal Reduction" may be
created.
The Appraisal Reduction for any Mortgage Loan, including a Mortgage Loan
as to which the related Mortgaged Property has become an REO Property, will be
an amount, calculated as of the first Determination Date that is at least
fifteen days after the date on which the appraisal is obtained or the internal
valuation is performed, equal to the excess, if any, of (a) the sum of (i) the
Scheduled Principal Balance of such Mortgage Loan, (ii) to the extent not
previously advanced by the Master Servicer, the Trustee or the Fiscal Agent, all
accrued and unpaid interest on the Mortgage Loan, (iii) all related unreimbursed
Advances and interest on Advances at the Advance Rate (as defined herein) and
(iv) to the extent not previously advanced by the Master Servicer, the Trustee
or the Fiscal Agent, all currently due and unpaid real estate taxes and
assessments, insurance premiums, and, if applicable, ground rents in respect of
the related Mortgaged Property or REO Property, as the case may be (in each
case, net of any amounts escrowed for such item), over (b) 90% of the appraised
value (net of any prior mortgage liens) of such Mortgaged Property or REO
Property as determined by such appraisal. Notwithstanding the foregoing, if an
internal valuation of the Mortgaged Property is performed as described in the
preceding paragraph, the Appraisal Reduction will equal the greater of (a) the
amount calculated in the preceding sentence and (b) 25% of the Scheduled
Principal Balance of the Mortgage Loan. An Appraisal Reduction will be reduced
to zero as of the date the related Mortgage Loan is brought current under the
then current terms of the Mortgage Loan for at least three consecutive months,
paid in full, liquidated, repurchased or otherwise disposed of, or in certain
cases will be reduced by the amount of any Realized Loss of principal on the
related Mortgage Loan incurred prior to the liquidation or disposition thereof.
An appraisal for any Mortgage Loan that has not been brought current, for at
least three consecutive months, paid in full, liquidated, repurchased or
otherwise disposed of will be updated annually, with a corresponding adjustment
to the amount of the related Appraisal Reduction.
The existence of an Appraisal Reduction will proportionately reduce the
Master Servicer's, the Trustee's or the Fiscal Agent's, as the case may be,
obligation to make P&I Advances in respect of the related Mortgage Loan, which
will generally result in a reduction in current distributions of interest in
respect of the then most subordinate Class of Principal Balance Certificates.
See "--Advances--P&I Advances" below.
S-52
<PAGE> 53
Subordination; Allocation of Losses and Certain Expenses
As and to the extent described herein, the rights of holders of the
Subordinate Certificates to receive distributions of amounts collected or
advanced on the Mortgage Loans will be subordinated, to the extent described
herein, to the rights of holders of the Senior Certificates, and to the rights
of the holders of each other Class of Subordinate Certificates with an earlier
alphabetical Class designation. This subordination is intended to enhance the
likelihood of timely receipt by the holders of the Senior Certificates of the
full amount of all interest payable in respect of the Senior Certificates on
each Distribution Date, and the ultimate receipt by the holders of each Class of
Class A Certificates of principal in an amount equal to the entire Certificate
Balance of the Class A Certificates. Similarly, but to decreasing degrees (in
alphabetical order of Class designation), this subordination is also intended to
enhance the likelihood of timely receipt by the holders of the Subordinate
Certificates (other than the Class L Certificates, which do not have the benefit
of any effective subordination) of the full amount of interest payable in
respect of such Classes of Certificates on each Distribution Date, and the
ultimate receipt by such holders of principal equal to, in each case, the entire
Certificate Balance of such Class of Certificates. This subordination will be
accomplished by the application of the Available Distribution Amount on each
Distribution Date in accordance with the order of priority described above under
"--Application of the Available Distribution Amount" and by the allocation of
Realized Losses and Expense Losses as described below. No other form of credit
support will be available for the benefit of the holders of the Certificates.
Allocation to the Class A Certificates, for so long as they are
outstanding, of the entire Principal Distribution Amount for each Distribution
Date will generally have the effect of reducing the Certificate Balance of that
Class at a faster rate than would be the case if principal payments were
allocated pro rata to all Classes of Certificates with Certificate Balances.
Thus, as principal is distributed to the holders of the Class A Certificates,
the percentage interest in the Trust Fund evidenced by the Class A Certificates
will be decreased (with a corresponding increase in the percentage interest in
the Trust Fund evidenced by the Subordinate Certificates), thereby increasing,
relative to their respective Certificate Balances, the subordination afforded
the Class A Certificates by the Subordinate Certificates. Following retirement
of the Class A Certificates, the herein described successive allocation to the
Subordinate Certificates, in alphabetical order of Class designation, in each
case until such Class is paid in full, of the entire Principal Distribution
Amount for each Distribution Date will provide a similar benefit to each such
Class of Certificates as regards the relative amount of subordination afforded
thereto by the other Classes of Certificates with later alphabetical Class
designations.
Realized Losses of principal and interest on the Mortgage Loans and
Expense Losses for any Distribution Date (to the extent not previously
allocated) will be allocated to the Class L, Class K, Class J, Class H, Class G,
Class F, Class E, Class D, Class C and Class B Certificates, in that order, and
then to the Class A-1 and Class A-2 Certificates and, solely with respect to
Realized Losses and Expense Losses, of interest, to the Class X-1 and Class X-2
Certificates, pro rata, in each case reducing principal and interest otherwise
payable thereon.
"Realized Losses" are losses arising from the inability of the Master
Servicer or the Special Servicer to collect all amounts due and owing under any
defaulted Mortgage Loan, including by reason of any modifications to the terms
of a Mortgage Loan, bankruptcy of the related borrower or a casualty of any
nature at the related Mortgaged Property, to the extent not covered by
insurance. The Realized Loss, if any, in respect of a liquidated Mortgage Loan
(or related REO Property) will generally equal the excess, if any, of (a) the
outstanding principal balance of such Mortgage Loan as of the date of
liquidation, together with all accrued and unpaid interest thereon at the
related Mortgage Rate, over (b) the aggregate amount of Liquidation Proceeds, if
any, recovered in connection with such liquidation (net of any portion of such
liquidation proceeds that is payable or reimbursable in respect of related
liquidation and other servicing expenses). If the Mortgage Rate on any Mortgage
Loan is reduced or a portion of the debt due under any Mortgage Loan is
forgiven, whether in connection with a modification, waiver or amendment granted
or agreed to by the Special Servicer or in connection with a bankruptcy or
similar proceeding involving the related borrower, the resulting reduction in
interest paid and the principal amount so forgiven, as the case may be, also
will be treated as a Realized Loss.
"Expense Losses" include, among other things: (i) any interest paid to the
Master Servicer, Trustee, Fiscal Agent and/or Special Servicer in respect of
unreimbursed Advances; (ii) all Special Servicer Compensation payable to the
Special Servicer from amounts that are part of the Trust Fund; (iii) any of
certain other expenses of the Trust Fund, including, but not limited to, certain
reimbursements and indemnification payments to the Trustee and certain
S-53
<PAGE> 54
related persons, certain reimbursements and indemnification payments to the
Depositor, the Master Servicer, the Special Servicer and certain related
persons, certain taxes payable from the assets of the Trust Fund, the costs and
expenses of any tax audits with respect to the Trust Fund and certain other
tax-related expenses and the cost of various opinions of counsel required to be
obtained in connection with the servicing of the Mortgage Loans and
administration of the Trust Fund; and (iv) any other expense of the Trust Fund
not specifically included in the calculation of "Realized Loss" for which there
is no corresponding collection from the borrower.
Any shortfall in the amount of Distributable Certificate Interest paid to
the Certificateholders of any Class of Certificates on any Distribution Date
will result in Unpaid Interest for such Class which, together with interest
thereon compounded monthly at one-twelfth the applicable Pass-Through Rate, will
be included in Distributable Certificate Interest in subsequent periods.
Prepayment Interest Shortfalls and Prepayment Interest Excesses
For any Distribution Date, a "Prepayment Interest Shortfall" will arise
with respect to any Mortgage Loan if the related borrower makes a full or
partial Principal Prepayment or a Balloon Payment during the related Collection
Period, and the date such payment was made (or, in the case of a Balloon
Payment, the date through which interest thereon accrues) occurred prior to the
Due Date for such Mortgage Loan in such Collection Period. Such a shortfall
arises because the amount of interest (net of the Servicing Fee) that accrues on
the amount of such Principal Prepayment or Balloon Payment will be less than the
corresponding amount of interest accruing on the Certificates. In such a case,
the Prepayment Interest Shortfall will equal the excess of (a) the aggregate
amount of interest which would have accrued on the Scheduled Principal Balance
of such Mortgage Loan for the 30 days ending on such Due Date if such Principal
Prepayment or Balloon Payment had not been made over (b) the aggregate interest
that did so accrue through the date such payment was made.
In any other case in which a full or partial Principal Prepayment or a
Balloon Payment is made during any Collection Period after the Due Date for such
Mortgage Loan, "Prepayment Interest Excess" will arise since the amount of
interest which accrues on the amount of such Principal Prepayment or Balloon
Payment will exceed the corresponding amount of interest accruing on the
Certificates. The amount of the Prepayment Interest Excess in any such case will
equal the interest that accrues on the Mortgage Loan from such Due Date to the
date such payment was made (net of the Servicing Fee, the Special Servicing
Standby Fee and the Trustee Fee).
To the extent that the aggregate Prepayment Interest Shortfalls exceed the
aggregate Prepayment Interest Excesses for the Collection Period related to a
Distribution Date, the Servicing Fee will be reduced by the amount of such
excess, but generally by not more than an amount equal to the excess (if any) of
the Servicing Fee, minus the portion thereof payable to Sub-Servicers. See
"Servicing Of The Mortgage Loans--The Master Servicer--Master Servicer
Compensation" herein. Any payment so made by the Master Servicer to cover such
shortfalls will constitute a "Compensating Interest Payment". The aggregate of
all Prepayment Interest Shortfalls incurred in respect of the Mortgage Loans
during any Collection Period that are neither offset by Prepayment Interest
Excesses collected on the Mortgage Loans during such Collection Period nor
covered by a Compensating Interest Payment paid by the Master Servicer, shall
constitute the "Net Aggregate Prepayment Interest Shortfall" for the related
Distribution Date.
Any Net Aggregate Prepayment Interest Shortfall for a Distribution Date
will be allocated among the respective Classes of REMIC Regular Certificates, on
a pro rata basis, in each case according to the ratio that the Accrued
Certificate Interest with respect to such Class of Certificates for such
Distribution Date bears to the aggregate Accrued Certificate Interest with
respect to all Classes of REMIC Regular Certificates for such Distribution Date.
The Distributable Certificate Interest in respect of any Class of REMIC Regular
Certificates will be reduced to the extent any Net Aggregate Prepayment Interest
Shortfalls are allocated to such Class of Certificates. See "Servicing of the
Mortgage Loans--Servicing and Other Compensation and Payment of Expense" herein.
To the extent that the aggregate Prepayment Interest Excesses for any
Distribution Date exceed the aggregate Prepayment Interest Shortfalls for such
Distribution Date, the excess amount will be payable to the Master Servicer as
additional servicing compensation.
S-54
<PAGE> 55
Optional Termination
The Depositor, the Master Servicer, the Special Servicer and the holder of
the majority interest in the Class R-I Certificates, each in turn, will have the
option to purchase, in whole but not in part, the Mortgage Loans and any other
property remaining in the Trust Fund on any Distribution Date on or after the
Distribution Date on which the aggregate Certificate Balance of all Classes of
Principal Balance Certificates then outstanding is less than or equal to 1% of
the Initial Pool Balance. The purchase price for any such purchase will be 100%
of the aggregate unpaid principal balances of the Mortgage Loans (other than any
Mortgage Loans as to which the Master Servicer has determined that all payments
or recoveries with respect thereto have been made), plus accrued and unpaid
interest at the Mortgage Rate (or the Mortgage Rate less the Servicing Fee Rate
if the Master Servicer is the purchaser) to the Due Date for each Mortgage Loan
ending in the Collection Period with respect to which such purchase occurs, plus
unreimbursed Advances, with interest thereon at the Advance Rate, and the fair
market value of any other property remaining in the Trust Fund; provided,
however, that if Wells Fargo is the purchaser, the purchase price will be the
greater of the foregoing amount and the fair market value of the Mortgage Loans
and any other property remaining in the Trust Fund. The optional termination of
the Trust Fund must be conducted so as to constitute a "qualified liquidation"
of each REMIC under Section 860F of the Code. Upon any such termination, the
purchase price for the Mortgage Loans and the other property in the Trust Fund
will be applied to pay accrued and unpaid interest on and reduce the Certificate
Balance of all outstanding Classes to zero in the manner provided under
"Description of the Certificates--Distributions--Application of the Available
Distribution Amount" herein. Notice of any optional termination must be mailed
by the Trustee, to the Certificateholders and the Rating Agencies at least ten
days prior to the date set for optional termination.
Any such termination will have an adverse effect on the yield of the Class
X-2 Certificates and any other outstanding Offered Certificates purchased at a
premium. See "Yield, Prepayment And Maturity Considerations" herein.
Advances
P&I Advances
On the business day prior to each Distribution Date, the Master Servicer
will be obligated to make an advance (each, a "P&I Advance") in the amount of
any Scheduled Payments (net of the related Servicing Fees), other than any
Balloon Payment, on the Mortgage Loans that are delinquent as of the close of
business on the preceding Determination Date, but only to the extent that the
Master Servicer determines, in its sole discretion, exercised in good faith,
that the amount so advanced, plus interest expected to accrue thereon, will be
recoverable from subsequent payments or collections (including Insurance
Proceeds and Liquidation Proceeds) in respect of the related Mortgage Loan, and
only until the Mortgage Loan has been liquidated; provided, however, that the
amount of any P&I Advance required to be made by the Master Servicer with
respect to a Mortgage Loan as to which there has been an Appraisal Reduction
will be an amount equal to the product of (i) the amount required to be advanced
by the Master Servicer without giving effect to this proviso and (ii) a
fraction, the numerator of which is the Scheduled Principal Balance of such
Mortgage Loan as of the immediately preceding Determination Date less any
Appraisal Reduction in effect with respect to such Mortgage Loan and the
denominator of which is the Scheduled Principal Balance of the Mortgage Loan as
of such Determination Date; and provided, further, that with respect to
Scheduled Payments on any Mortgage Loan that has been modified for which the
Master Servicer is obligated to make a P&I Advance, the amount of any such P&I
Advance shall be adjusted in conformity with the modification.
With respect to any Mortgage Loan that is delinquent in respect of its
Balloon Payment (including any REO Property as to which the related Mortgage
Loan provided for a Balloon Payment), P&I Advances will include amounts equal to
the Scheduled Payment, less the related Servicing Fee, that would otherwise have
been due thereon on the related Due Date if such Mortgage Loan were not a
Balloon Loan in accordance with the interest rate provisions and the
amortization schedule in effect immediately prior to the date such Balloon
Payment was due.
P&I Advances (including interest accrued thereon at the Advance Rate) will
be reimbursable from recoveries on the related Mortgage Loans and, to the extent
the Master Servicer determines in its sole discretion, exercised in good faith,
that a P&I Advance will not be ultimately recoverable from related recoveries,
from any
S-55
<PAGE> 56
funds on deposit in the Certificate Account and Distribution Account. In no
event will the Master Servicer be required to make aggregate P&I Advances
(including interest accrued thereon at the Advance Rate) with respect to any
Mortgage Loan in an amount greater than the Scheduled Principal Balance (plus
all overdue amounts) thereof, less any Appraisal Reductions with respect
thereto. Interest on P&I Advances made by the Master Servicer will accrue at a
rate equal to the "Prime Rate" as reported in The Wall Street Journal from time
to time (the "Advance Rate"). The Master Servicer's right of reimbursement out
of recoveries will be prior to the right of the Certificateholders to receive
any amounts recovered with respect to any Mortgage Loan. If the Master Servicer
fails to make a required P&I Advance, the Trustee is required to make such P&I
Advance, and if the Trustee fails to make any required P&I Advance, the Fiscal
Agent is required to make such P&I Advance.
Servicing Advances
In general, customary, reasonable and necessary "out-of-pocket" costs and
expenses required to be incurred by the Master Servicer in connection with the
servicing of a Mortgage Loan after a default (whether or not a payment default),
delinquency or other unanticipated event, or in connection with the
administration of any REO Property, will constitute "Servicing Advances"
(Servicing Advances and P&I Advances, collectively, "Advances") and, in all
cases, will be reimbursable as described below. The Master Servicer will be
permitted to pay, or to direct the payment of, certain servicing expenses
directly out of the Certificate Account or Distribution Account and under
certain circumstances without regard to the relationship between the expense and
the funds from which it is being paid.
With respect to Mortgage Loans, the Master Servicer will be obligated to
make Servicing Advances for real estate taxes and insurance premiums not paid by
the related borrower on a timely basis and for collection or foreclosure costs
(including reasonable attorneys fees). With respect to REO Properties, the
Master Servicer will be obligated to make Servicing Advances, if necessary and
to the extent that funds from the operation of the related REO Property are
unavailable to pay any amounts due and payable, for (i) insurance premiums, (ii)
real estate taxes and assessments in respect of such REO Property that may
result in the imposition of a lien, (iii) any ground rents in respect of such
REO Property and (iv) costs and expenses necessary to maintain, manage or
operate such REO Property. Notwithstanding the foregoing, the Master Servicer
will be obligated to make such Servicing Advances only to the extent that the
Master Servicer determines that the amount so advanced will be recoverable from
subsequent payments or collections (including Insurance Proceeds, Liquidation
Proceeds and REO Income) in respect of such Mortgage Loan or REO Property.
Interest on Servicing Advances will accrue at the Advance Rate, and will be
reimbursable from recoveries or collections on the related Mortgage Loan or REO
Property. However, if the Master Servicer determines (as described below) that
any Servicing Advance previously made (and accrued interest thereon at the
Advance Rate) will not be ultimately recoverable from such related recoveries,
such advances will be reimbursable from any amounts on deposit in the
Certificate or Distribution Account. If the Master Servicer fails to make a
required Servicing Advance, the Trustee is required to make such Servicing
Advance, and if the Trustee fails to make any required Servicing Advance, the
Fiscal Agent is required to make such Servicing Advance.
Nonrecoverable Advances
The determination by the Master Servicer that any P&I Advance or Servicing
Advance, previously made or proposed to be made, would not be recoverable will
be made in the sole discretion of the Master Servicer, exercising good faith,
and is required to be accompanied by an officer's certificate delivered to the
Trustee and setting forth the reasons for such determination, with copies of
appraisals or internal valuations, if any, or other information that supports
such determination. The Master Servicer's determination of nonrecoverability
will be conclusive and binding upon the Certificateholders, the Trustee and the
Fiscal Agent. The Trustee and the Fiscal Agent shall be entitled to rely
conclusively on any determination by the Master Servicer of nonrecoverability
with respect to such Advance and shall have no obligation to make a separate
determination of recoverability.
S-56
<PAGE> 57
Reports to Certificateholders; Available Information
Trustee Reports
Based on information provided in monthly reports prepared by the Master
Servicer and the Special Servicer and delivered to the Trustee, the Trustee will
prepare and forward to each Certificateholder on each Distribution Date:
(a) A statement setting forth, to the extent applicable: (i) the
amount, if any, of such distributions to the holders of each Class of
Principal Balance Certificates applied to reduce the aggregate Certificate
Balance thereof; (ii) the amount of such distribution to holders of each
Class of REMIC Regular Certificates allocable to (A) interest and (B)
Prepayment Premiums; (iii) the number of outstanding Mortgage Loans and
the aggregate principal balance and Scheduled Principal Balance of the
Mortgage Loans at the close of business on such Distribution Date; (iv)
the number and aggregate principal balance of Mortgage Loans (a)
delinquent one month, (b) delinquent two months, (c) delinquent three or
more months or (d) as to which foreclosure proceedings have been
commenced; (v) with respect to any REO Property acquired during the
preceding calendar month, the principal balance and Scheduled Principal
Balance of the related Mortgage Loan as of the date of acquisition of the
REO Property; (vi) as of the related Determination Date (a) the book value
of any REO Property, (b) as to any REO Property sold during the related
Collection Period, the date of the related determination by the Special
Servicer or Master Servicer, as the case may be, that it has recovered all
payments which it expects to be finally recoverable and the amount of the
proceeds of such sale deposited into the Certificate Account, and (c) the
aggregate amount of other revenues collected by the Special Servicer with
respect to each REO Property during the related Collection Period and
credited to the Certificate Account, in each case identifying such REO
Property by the loan number of the related Mortgage Loan; (vii) the
aggregate Certificate Balance or Notional Amount of each Class of REMIC
Regular Certificates before and after giving effect to the distribution
made on such Distribution Date; (viii) the aggregate amount of Principal
Prepayments made during the related Collection Period; (ix) the
Pass-Through Rate applicable to each Class of REMIC Regular Certificates
for such Distribution Date; (x) the aggregate amount of servicing
compensation retained by or paid to the Master Servicer and the Special
Servicer; (xi) the amount of Unpaid Interest, Realized Losses or Expense
Losses, if any, incurred with respect to the Mortgage Loans; (xii) the
aggregate amount of Servicing Advances and P&I Advances outstanding that
have been made by the Master Servicer, the Special Servicer, the Trustee
and/or the Fiscal Agent, separately stated; (xiii) the amount of any
Appraisal Reductions effected during the related Collection Period on a
loan-by-loan basis and the total Appraisal Reductions in effect as of such
Distribution Date; and (xiv) such other information and in such form as
shall be specified in the Pooling and Servicing Agreement. In the case of
information furnished pursuant to subclauses (i) and (ii) above, the
amounts shall be expressed as a dollar amount per $1,000 of original
actual or notional principal amount of the Certificates for all
Certificates of each applicable Class.
(b) A report containing information regarding the Mortgage Loans as
of the end of the related Collection Period, which report will contain
substantially the categories of information regarding the Mortgage Loans
set forth in Appendix I and will be presented in a tabular format
substantially similar to the format utilized in Appendix I.
For those who have obtained an account number on the Trustee's ASAP
(Automatic Statements Accessed by Phone) System, the foregoing report may be
obtained from the Trustee via automated facsimile by placing a telephone call to
(312) 904-2200 and following the voice prompts to request "Statement Number
315." Account numbers on the Trustee's ASAP System may be obtained by calling
the same telephone number and following the voice prompts for obtaining account
numbers. In addition, if the Depositor so directs the Trustee and on terms
acceptable to the Trustee, the Trustee will make available through its
electronic bulletin board system, on a confidential basis, certain information
related to the Mortgage Loans. The bulletin board is located at (714) 282-3990.
An account number may be obtained by typing "NEW" upon logging into the bulletin
board.
On an annual basis, the Master Servicer is required to deliver to the
Trustee, who will deliver such report to the Underwriters, the
Certificateholders, the Depositor and anyone the Depositor or either Underwriter
reasonably designates, the Special Servicer and the Rating Agencies, a report
setting forth the Debt Service Coverage Ratio
S-57
<PAGE> 58
(and the calculation thereof) with respect to each Mortgage Loan for which the
Master Servicer obtains operating statements, and such other specified
information, including occupancy, to the extent available, and in such form as
shall be specified in the Pooling and Servicing Agreement.
On a monthly basis, the Trustee is required to deliver to the
Underwriters, the Rating Agencies, the Depositor, the Operating Adviser and
anyone the Depositor or any Underwriter reasonably designates, and upon request
to any Certificateholder, a report substantially in the form of the diskette
attached to the inside back cover of this Prospectus Supplement with the
information contained therein updated to the date of such report.
Special Servicer Reports
On or about each Determination Date, the Special Servicer will prepare, or
provide the Master Servicer with the information to prepare, reports with
respect to Specially Serviced Mortgage Loans as provided in the Pooling and
Servicing Agreement. Such reports generally will include a report showing
loan-by-loan detail on each Specially Serviced Mortgage Loan that is 60 days
delinquent, 90 days delinquent, or in the process of foreclosure, an REO status
report for each REO Property and a modification report showing loan-by-loan
detail for each modification closed during the most recent reporting period.
Such reports will be delivered, no later than the business day prior to each
Distribution Date, to the Underwriters, the Rating Agencies and the Depositor;
provided that certain limitations will be imposed on such recipients with
respect to the use and further dissemination of the information in such reports
to the extent described in the Pooling and Servicing Agreement.
Other Information
The Pooling and Servicing Agreement generally requires that the Master
Servicer make available, at its offices primarily responsible for servicing the
Mortgage Loans or at such other office as it may reasonably designate, during
normal business hours, upon reasonable advance notice for review by any holder
of a Certificate, each Rating Agency or the Depositor, originals or copies of,
among other things, the following items (except to the extent not permitted by
applicable law or under any of the Mortgage Loan documents): (i) the Pooling and
Servicing Agreement and any amendments thereto, (ii) all reports or statements
delivered to holders of the relevant Class of Certificates since the Closing
Date, (iii) all officer's certificates delivered to the Trustee since the
Closing Date, (iv) all accountants' reports delivered to the Trustee since the
Closing Date, (v) the most recent property inspection report prepared by or on
behalf of the Master Servicer or the Special Servicer in respect of each
Mortgaged Property, (vi) the most recent Mortgaged Property annual operating
statements and rent rolls, if any, collected by or on behalf of the Master
Servicer or the Special Servicer, (vii) any and all modifications, waivers and
amendments of the terms of a Mortgage Loan entered into by the Master Servicer
and/or the Special Servicer, and (viii) any and all officers' certificates and
other evidence delivered to the Trustee to support the Master Servicer's
determination that any Advance was or, if made, would not be recoverable. Copies
of any and all of the foregoing items and any Servicer Reports will be available
from the Master Servicer upon request; however, the Master Servicer will be
permitted to require payment of a sum sufficient to cover the reasonable costs
and expenses of providing such copies. Recipients of such information will
generally be required to acknowledge that such information may be used only in
connection with an evaluation of the Certificates by such recipient.
Book-Entry Certificates
Until such time, if any, as Definitive Certificates are issued in respect
of the Offered Certificates, the foregoing information and access will be
available to the related Certificate Owners only to the extent it is forwarded
by, or otherwise available through, DTC and its Participants. The manner in
which notices and other communications are conveyed by DTC to its Participants,
and by such Participants to the Certificate Owners, will be governed by
arrangements among them, subject to any statutory or regulatory requirements as
may be in effect from time to time. The Master Servicer, the Special Servicer,
the Trustee and the Depositor are required to recognize as Certificateholders
only those persons in whose names the Certificates are registered on the books
and records of the Trustee; however, any Certificate Owner that has delivered to
the Trustee a written certification, in the form prescribed by the Pooling and
Servicing Agreement regarding such Certificate Owner's beneficial ownership of
Offered Certificates will be recognized as Certificateholders for purposes of
obtaining the foregoing information and access.
S-58
<PAGE> 59
Example of Distributions
The following chart sets forth an example of distributions on the
Certificates for the first month of the Trust Fund's existence, assuming the
Certificates are issued in March, 1998:
The close of business on
March 1 (A) Cut-Off Date.
March 31 (B) Record Date for all Classes of
Certificates.
March 1 - April 9 (C) The Collection Period. The Master
Servicer receives Scheduled Payments
due on April 1 and any Principal
Prepayments made after the Cut-Off
Date and on or prior to April 9.
April 10 (D) Determination Date.
April 14 (E) Master Servicer Remittance Date.
April 15 (F) Distribution Date.
Succeeding monthly periods follow the pattern of (B) through (F) (except
as described below).
(A) The outstanding principal balance of the Mortgage Loans will be the
aggregate outstanding principal balance of the Mortgage Loans at the close of
business on March 1, 1998 (after deducting principal payments due on or before
such date, whether or not received). Principal payments due on or before such
date, and the accompanying interest payments, are not part of the Trust Fund.
(B) Distributions on the next Distribution Date will be made to those
persons that are Certificateholders of record on this date. Each subsequent
Record Date will be the last business day of the month preceding the related
Distribution Date.
(C) Any Scheduled Payments due and collected and Principal Prepayments
collected, after the Cut-Off Date and on or prior to April 9, 1998 will be
deposited in the Certificate Account. Each subsequent Collection Period (a) with
respect to Scheduled Payments, will begin on the day after the Determination
Date in the month preceding the month of each Distribution Date and will end on
the Determination Date in the month in which the Distribution Date occurs and
(b) with respect to all other collections on the Mortgage Loans and REO
Properties, will begin on the day following the last day of the previous
Collection Period for such collections, and will end on the earlier of the
Determination Date in the month in which the Distribution Date occurs and the
fourth business day prior to such Distribution Date.
(D) As of the close of business on the Determination Date, the Master
Servicer will have determined the amounts of principal and interest that will be
remitted with respect to the related Collection Period.
(E) The Master Servicer will remit to the Trustee on the business day
preceding the related Distribution Date all amounts held by the Master Servicer,
and any P&I Advances required to be made by the Master Servicer, that together
constitute the Available Distribution Amount for such Distribution Date.
(F) The Trustee will make distributions to Certificateholders on the 15th
day of each month or, if such day is not a business day, the next succeeding
business day.
The Trustee and the Fiscal Agent
The Trustee
LaSalle National Bank ("LaSalle") will act as Trustee. LaSalle is a
subsidiary of LaSalle National Corporation which is a subsidiary of the Fiscal
Agent. The Trustee is at all times required to be, and will be required
S-59
<PAGE> 60
to resign if it fails to be, (i) an institution insured by the FDIC, (ii) a
corporation, national bank or national banking association, organized and doing
business under the laws of the United States of America or any state thereof,
authorized under such laws to exercise corporate trust powers, having a combined
capital and surplus of not less than $50,000,000 and subject to supervision or
examination by federal or state authority and (iii) an institution whose
long-term senior unsecured debt (or that of its fiscal agent, if applicable) is
rated not less than "AA" by each of S&P and DCR (or such lower ratings as the
Rating Agencies would permit without an adverse effect on any of the
then-current ratings of the Certificates). The corporate trust office of the
Trustee responsible for administration of the Trust Fund (the "Corporate Trust
Office") is located at 135 South LaSalle Street, Suite 1625, Chicago, Illinois
60674-4107, Attention: Asset-Backed Securities Trust Services Group--Morgan
Stanley Capital I Inc., Commercial Mortgage Pass-Through Certificates, Series
1998-WF1. As of June 30, 1997, the Trustee had assets of approximately $15.4
billion. See "Description of the Agreements--The Trustee", "--Duties of the
Trustee", "--Certain Matters Regarding the Trustee" and "--Resignation and
Removal of the Trustee" in the Prospectus.
As compensation for the performance of its duties, the Trustee will be
paid a monthly fee (the "Trustee Fee").
The Fiscal Agent
ABN AMRO Bank N.V., a Netherlands banking corporation and the indirect
corporate parent of the Trustee, will act as Fiscal Agent for the Trust Fund and
will be obligated to make any Advance required to be made, and not made, by the
Master Servicer and the Trustee under the Pooling and Servicing Agreement,
provided that the Fiscal Agent will not be obligated to make any Advance that it
determines, in its sole discretion, exercised in good faith, to be a
Nonrecoverable Advance. The Fiscal Agent will be entitled to rely conclusively
on any determination by the Master Servicer, the Special Servicer (solely in the
case of Servicing Advances) or the Trustee that an Advance, if made, would be a
Nonrecoverable Advance. The Fiscal Agent will be entitled to reimbursement for
each Advance made by it in the same manner and to the same extent as, but prior
to, the Master Servicer and the Trustee. See "--Advances" above. The Fiscal
Agent will be entitled to various rights, protections and indemnities similar to
those afforded the Trustee. The Trustee will be responsible for payment of the
compensation of the Fiscal Agent. As of June 30, 1997, the Fiscal Agent had
consolidated assets of approximately $398 billion. In the event that LaSalle
shall, for any reason, cease to act as Trustee under the Pooling and Servicing
Agreement, ABN AMRO Bank N.V. likewise shall no longer serve in the capacity of
Fiscal Agent thereunder.
Final Scheduled Distribution Date; Final Rated Distribution Date
The Final Scheduled Distribution Date for each Class of Certificates is
the date on which such Class is expected to be paid in full, assuming timely
payments (and no Principal Prepayments) will be made on the Mortgage Loans in
accordance with their terms and otherwise based on the Maturity Assumptions (as
defined herein).
The Final Rated Distribution Date of each Class of Certificates is the
Distribution Date in March 2030. The Final Rated Distribution Date is the first
Distribution Date that follows by at least 24 months the end of the amortization
term of the Mortgage Loan that, as of the Cut-Off Date, has the longest
remaining amortization term.
The ratings assigned by the Rating Agencies to each Class of Principal
Balance Certificates reflects on assessment of the likelihood that the
Certificateholders of such Class will receive, on or before the Final Rated
Distribution Date, all principal distributions to which they are entitled.
YIELD, PREPAYMENT AND MATURITY CONSIDERATIONS
General
The yield to maturity on the Offered Certificates will be affected by the
price paid by the Certificateholder, the related Pass-Through Rates and the
rate, timing and amount of distributions on such Offered Certificates. The rate,
timing and amount of distributions on any such Certificate will in turn depend
on, among other things, (i) the Pass-Through Rate for such Certificate, (ii) the
rate and timing of principal payments (including Principal Prepayments) and
other principal collections on the Mortgage Loans and the extent to which such
amounts are to be
S-60
<PAGE> 61
applied in reduction of the Certificate Balance or Notional Amount of such
Certificate, (iii) the rate, timing and severity of Realized Losses and Expense
Losses and the extent to which such losses and expenses are allocable in
reduction of the Certificate Balance or Notional Amount of such Certificate, and
(iv) the timing and severity of any Net Aggregate Prepayment Interest Shortfalls
and the extent to which such shortfalls are allocable in reduction of the
Distributable Certificate Interest payable on such Certificate. In addition, the
effective yield to holders of the Certificates that bear interest will differ
from the yield otherwise produced by the applicable Pass-Through Rate and
purchase prices of such Certificates because interest distributions will not be
payable to such holders until at least the 15th day of the month following the
month of accrual (without any additional distribution of interest or earnings
thereon in respect of such delay).
Pass-Through Rates
The yield on the Class X-2 Certificates will depend on, among other
things, its Pass-Through Rate in effect with respect thereto from time to time.
The Pass-Through Rate for the Class X-2 Certificates will be variable and will
generally equal the weighted average of the Class X-2 Strip Rates for the Class
A-2B Component and the Class B, Class C, Class D and Class E Certificates from
time to time. Each Class X-2 Strip Rate may be affected by the Weighted Average
Net Mortgage Rate for the Mortgage Loans from time to time. Accordingly, the
yield on the Class X-2 Certificates will be sensitive to changes in the relative
composition of the Mortgage Pool as a result of scheduled amortization,
voluntary prepayments and any unscheduled collections of principal (and/or any
experience of Realized Losses) as a result of liquidations of Mortgage Loans
and, in general, the effect of any such changes on such Pass-Through Rates and
yields will be particularly adverse to the extent that Mortgage Loans with
relatively higher Mortgage Rates experience faster rates of such amortization,
voluntary prepayments and unscheduled collections (or Realized Losses) than
Mortgage Loans with relatively lower Mortgage Rates. In addition, the
Pass-Through Rate for the Class X-2 Certificates will vary with changes in the
Component Balance of the Class A-2B Component and the Certificate Balances of
Class B, Class C, Class D and Class E Certificates. The relative sizes of such
Component Balance and such Certificate Balances will be affected by the rate and
timing at which payments of principal are made, and Realized Losses and Expense
Losses are allocated, in reduction of such Component Balance and/or such
Certificate Balances.
Rate and Timing of Principal Payments
The yield to maturity on the Class X-2 Certificates will be extremely
sensitive to, and the yield to maturity on any other Class of Offered
Certificate purchased at a discount or premium will be affected by, the rate and
timing of principal payments made in reduction of the aggregate Certificate
Balance or Notional Amount of such Class of Certificates. As described herein,
the Principal Distribution Amount for each Distribution Date will be
distributable entirely in respect of the Class A-1 Certificates until the
Certificate Balance thereof is reduced to zero, and will thereafter be
distributable entirely in respect of each other Class of Principle Balance
Certificates, in descending (that is alphabetical), and, if applicable,
descending numerical, order of Class designation, in each case until the
Certificate Balance of such Class of Certificates is, in turn, reduced to zero.
Consequently, the rate and timing of principal payments that are distributed or
otherwise result in reduction of the aggregate Certificate Balance or Notional
Amount of each Class of Offered Certificates will be directly related to the
rate and timing of principal payments on or in respect of the Mortgage Loans,
which will in turn be affected by the amortization schedules thereof, the dates
on which Balloon Payments are due and the rate and timing of Principal
Prepayments and other unscheduled collections thereon (including for this
purpose, collections made in connection with liquidations of Mortgage Loans due
to defaults, casualties or condemnations affecting the Mortgaged Properties and
purchases of Mortgage Loans out of the Trust Fund). Prepayments and, assuming
the respective maturity dates therefor have not occurred, liquidations of the
Mortgage Loans will result in distributions on the Certificates of amounts that
would otherwise be distributed over the remaining terms of the Mortgage Loans
and will tend to shorten the weighted average lives of the Principal Balance
Certificates. Any early termination of the Trust Fund as described herein under
"Description Of The Certificates--Optional Termination" will also shorten the
weighted average lives of those Certificates then outstanding. Defaults on the
Mortgage Loans, particularly at or near their maturity dates, may result in
significant delays in payments of principal on the Mortgage Loans (and,
accordingly, on the Principle Balance Certificates) while work-outs are
negotiated or foreclosures are completed, and such delays will tend to lengthen
the weighted average lives of those Certificates. See "Servicing Of The Mortgage
Loans--Mortgage Loan Modifications."
S-61
<PAGE> 62
The extent to which the yield to maturity of any Offered Certificate may
vary from the anticipated yield will depend upon the degree to which such
Certificate is purchased at a discount or premium and when, and to what degree,
payments of principal on the Mortgage Loans in turn are distributed or otherwise
result in a reduction of the aggregate Certificate Balance or Notional Amount of
its Class. An investor should consider, in the case of any such Certificate
purchased at a discount, the risk that a slower than anticipated rate of
principal payments on the Mortgage Loans could result in an actual yield to such
investor that is lower than the anticipated yield and, in the case of a Class
X-2 Certificate or any other such Class of Certificates purchased at a premium,
the risk that a faster than anticipated rate of principal payments on the
Mortgage Loans could result in an actual yield to such investor that is lower
than the anticipated yield. In general, if a Certificate is purchased at a
discount or premium, the earlier a payment of principal on the Mortgage Loans is
distributed or otherwise results in reduction of the Certificate Balance or
Notional Amount of the related Class, the greater will be the effect on the
yield to maturity of such Certificate. As a result, the effect on an investor's
yield of principal payments on the Mortgage Loans occurring at a rate higher (or
lower) than the rate anticipated by the investor during any particular period
may not be fully offset by a subsequent like reduction (or increase) in the rate
of such principal payments. Investors in the Class X-2 Certificates should fully
consider the risk that a faster than anticipated rate of principal payments on
the Mortgage Loans could result in the failure of such investors to fully recoup
their initial investments. With respect to the Class A, Class B, Class C, Class
D and Class E Certificates, the allocation of a portion of collected Prepayment
Premiums to the Certificates as described herein is intended to mitigate those
risks; however, such allocation (if any) may be insufficient to offset fully the
adverse effects on yield that such prepayments may have. Because the rate of
principal payments on the Mortgage Loans will depend on future events and a
variety of factors (as described more fully below), no assurance can be given as
to such rate or the rate of Principal Prepayments in particular. The Depositor
is not aware of any relevant publicly available or authoritative statistics with
respect to the historical prepayment experience of a large group of mortgage
loans comparable to the Mortgage Loans.
Losses and Shortfalls
The yield to holders of the Offered Certificates will also depend on the
extent to which such holders are required to bear the effects of any losses or
shortfalls on the Mortgage Loans. Realized Losses and Expense Losses will
generally be applied to reduce the Certificate Balances of the Principal Balance
Certificates in the following order: first, to the Class L Certificates until
the Certificate Balance thereof has been reduced to zero; then to the other
respective Classes of Principal Balance Certificates, in ascending (that is,
from K to A) alphabetical order of Class designation, until the remaining
Certificate Balance of each such Class of Certificates has been reduced to zero.
Any Realized Losses and Expense Losses so allocated to the Class A-2, Class B,
Class C, Class D or Class E Certificates will cause a corresponding reduction of
the Class X-2 Notional Amount. Net Aggregate Prepayment Interest Shortfalls will
be borne by the holders of the respective Classes of REMIC Regular Certificates
on a pro rata basis as described herein. Shortfalls arising from delinquencies
and defaults (to the extent the Master Servicer determines that P&I Advances
would be nonrecoverable), Appraisal Reductions, Expense Losses and Realized
Losses generally will result in (among other things) a shortfall in current
distributions of interest payable to the most subordinate Class of Certificates
outstanding.
Certain Relevant Factors
The rate and timing of principal payments and defaults and the severity of
losses on the Mortgage Loans may be affected by a number of factors including,
without limitation, prevailing interest rates, the terms of the Mortgage Loans
(for example, provisions prohibiting Principal Prepayments for certain periods
and/or requiring the payment of Prepayment Premiums, and amortization terms that
require Balloon Payments), the demographics and relative economic vitality of
the areas in which the Mortgaged Properties are located and the general supply
and demand for rental units or comparable commercial space, as applicable, in
such areas, the quality of management of the Mortgaged Properties, the servicing
of the Mortgage Loans, possible changes in tax laws and other opportunities for
investment. See "Risk Factors and Other Special Considerations" herein and "Risk
Factors" in the Prospectus.
The rate of prepayment on the Mortgage Pool is likely to be affected by
prevailing market interest rates for mortgage loans of a comparable type, term
and risk level. When the prevailing market interest rate is below a mortgage
interest rate, the related borrower has an incentive to refinance its mortgage
loan. A requirement that a prepayment be accompanied by a Prepayment Premium may
not provide a sufficient economic disincentive to deter a borrower from
refinancing at a more favorable interest rate.
S-62
<PAGE> 63
Depending on prevailing market interest rates, the outlook for market
interest rates and economic conditions generally, some borrowers may sell or
refinance Mortgaged Properties in order to realize their equity therein, to meet
cash flow needs or to make other investments. In addition, some borrowers may be
motivated by federal and state tax laws (which are subject to change) to sell
Mortgaged Properties prior to the exhaustion of tax depreciation benefits.
The Depositor makes no representation as to the particular factors that
will affect the rate and timing of prepayments and defaults on the Mortgage
Loans, as to the relative importance of such factors, as to the percentage of
the principal balance of the Mortgage Loans that will be prepaid or as to
whether a default will have occurred as of any date or as to the overall rate of
prepayment or default on the Mortgage Loans.
Weighted Average Life
Weighted average life refers to the average amount of time from the date
of issuance of a security until each dollar of principal of such security will
be repaid to the investor. The weighted average life of any Certificate that
entitles the holders thereof to distributions of principal will be influenced
by, among other things, the rate at which principal on the Mortgage Loans is
paid or otherwise collected or advanced and applied to reduce the Certificate
Balance of such Certificate.
Prepayments on mortgage loans are commonly measured relative to a
prepayment standard or model. The prepayment model used in this Prospectus
Supplement is the "Constant Prepayment Rate" or "CPR" model. The CPR model
represents an assumed constant rate of prepayment each month (which is expressed
on a per annum basis) relative to the then outstanding principal balance of a
pool of mortgage loans for the life of such mortgage loans. CPR does not purport
to be either a historical description of the prepayment experience of any pool
of mortgage loans or a prediction of the anticipated rate of prepayment of any
mortgage loans, including the Mortgage Loans. The Depositor makes no
representation as to the appropriateness of using the CPR model for purposes of
analyzing an investment in the Certificates.
The following tables indicate the percent of the initial Certificate
Balance of each Class of Offered Certificates (other than the Class X-2
Certificates) after each of the dates shown and the corresponding weighted
average life of each such Class of the Certificates, if the Mortgage Pool were
to prepay at the indicated levels of CPR and sets forth the percentage of the
initial Certificate Balance of such Certificates that would be outstanding after
each of the dates shown. The tables below have also been prepared generally on
the basis of the assumptions (collectively, the "Maturity Assumptions") that (i)
the initial Certificate Balances and initial Pass-Through Rates of the
Certificates are as set forth herein, (ii) the settlement date for the sale of
the Certificates is March 5, 1998, (iii) distributions on the Certificates are
made on the 15th day of each month, commencing in April, 1998, (iv) there are no
delinquencies, defaults or Realized Losses with respect to the Mortgage Loans,
(v) Scheduled Payments on the Mortgage Loans are timely received on the first
day of each month, (vi) there are no Expense Losses, (vii) no Principal
Prepayment on any Mortgage Loan is made for so long as the Mortgage Loan is in a
Lock-out Period or while Principal Prepayments on such Mortgage Loans are
required to be accompanied by a Yield Maintenance Premium (notwithstanding any
provision of such Mortgage Loan that permits partial Principal Prepayments
without imposition of a Yield Maintenance Premium), and thereafter Principal
Prepayments are made on the Mortgage Loans at the indicated levels of CPR,
(viii) partial prepayments are permitted under the Mortgage Loans and are
applied to reduce the outstanding principal balance of the Mortgage Loans, (ix)
any Prepayment Premiums are allocated as described elsewhere in this Memorandum,
(x) no Prepayment Interest Shortfalls occur, and (xi) no Mortgage Loan is the
subject of a repurchase or substitution by the Seller and no optional
termination of the Trust Fund occurs.
The Mortgage Loans do not have all of the characteristics assumed above.
To the extent that the Mortgage Loans have characteristics that differ from
those assumed in preparing the tables, the Classes of Certificates analyzed in
the tables may mature earlier or later than indicated by the tables. The
Mortgage Loans generally do not permit partial prepayments and do not prepay at
any constant rate. Accordingly, it is highly unlikely that the Mortgage Loans
will prepay in a manner consistent with the Maturity Assumptions. Furthermore,
it is unlikely that the Mortgage Loans will experience no defaults or losses. In
addition, variations in the actual prepayment experience and the balance of the
Mortgage Loans that prepay may increase or decrease the percentages of initial
S-63
<PAGE> 64
Certificate Balances (and shorten or extend the weighted average lives) shown in
the following tables. Investors are urged to conduct their own analyses of the
rates at which the Mortgage Loans may be expected to prepay.
For the purposes of each table, the weighted average life of a Certificate
is determined by (A) multiplying the amount of each principal distribution
thereon by the number of years from the date of issuance of the Certificate to
the related Distribution Date, (B) summing the results and (C) dividing the sum
by the aggregate amount of the reductions in the Certificate Balance of such
Certificate.
Percent of Initial Certificate Balance Outstanding for the
Class A-1 Certificates at the Respective Percentages of CPR
Distribution Date 0% 3% 5% 7% 10% 15%
- ----------------- == == == == === ===
Initial 100% 100% 100% 100% 100% 100%
March, 1999 95 95 95 95 95 95
March, 2000 91 91 91 91 90 90
March, 2001 85 85 85 85 85 84
March, 2002 78 77 77 76 76 75
March, 2003 50 49 48 48 47 46
March, 2004 40 39 38 37 36 35
March, 2005 21 20 19 19 18 17
March, 2006 14 13 12 11 10 9
March, 2007 6 4 3 2 1 0
March, 2008 0 0 0 0 0 0
Weighted average life (years) 5.43 5.37 5.33 5.29 5.24 5.17
Percent of Initial Certificate Balance Outstanding for the
Class A-2 Certificates at the Respective Percentages of CPR
Distribution Date 0% 3% 5% 7% 10% 15%
- ----------------- == == == == === ===
Initial 100% 100% 100% 100% 100% 100%
March, 1999 100 100 100 100 100 100
March, 2000 100 100 100 100 100 100
March, 2001 100 100 100 100 100 100
March, 2002 100 100 100 100 100 100
March, 2003 100 100 100 100 100 100
March, 2004 100 100 100 100 100 100
March, 2005 100 100 100 100 100 100
March, 2006 100 100 100 100 100 100
March, 2007 100 100 100 100 100 100
March, 2008 0 0 0 0 0 0
Weighted average life (years) 9.62 9.61 9.61 9.60 9.60 9.59
S-64
<PAGE> 65
Percent of Initial Certificate Balance Outstanding for the
Class B Certificates at the Respective Percentages of CPR
Distribution Date 0% 3% 5% 7% 10% 15%
- ----------------- == == == == === ===
Initial 100% 100% 100% 100% 100% 100%
March, 1999 100 100 100 100 100 100
March, 2000 100 100 100 100 100 100
March, 2001 100 100 100 100 100 100
March, 2002 100 100 100 100 100 100
March, 2003 100 100 100 100 100 100
March, 2004 100 100 100 100 100 100
March, 2005 100 100 100 100 100 100
March, 2006 100 100 100 100 100 100
March, 2007 100 100 100 100 100 100
March, 2008 0 0 0 0 0 0
Weighted average life (years) 9.78 9.78 9.78 9.78 9.78 9.78
Percent of Initial Certificate Balance Outstanding for the
Class C Certificates at the Respective Percentages of CPR
Distribution Date 0% 3% 5% 7% 10% 15%
- ----------------- == == == == === ===
Initial 100% 100% 100% 100% 100% 100%
March, 1999 100 100 100 100 100 100
March, 2000 100 100 100 100 100 100
March, 2001 100 100 100 100 100 100
March, 2002 100 100 100 100 100 100
March, 2003 100 100 100 100 100 100
March, 2004 100 100 100 100 100 100
March, 2005 100 100 100 100 100 100
March, 2006 100 100 100 100 100 100
March, 2007 100 100 100 100 100 100
March, 2008 0 0 0 0 0 0
Weighted average life (years) 9.80 9.80 9.80 9.80 9.80 9.79
S-65
<PAGE> 66
Percent of Initial Certificate Balance Outstanding for the
Class D Certificates at the Respective Percentages of CPR
Distribution Date 0% 3% 5% 7% 10% 15%
- ----------------- == == == == === ===
Initial 100% 100% 100% 100% 100% 100%
March, 1999 100 100 100 100 100 100
March, 2000 100 100 100 100 100 100
March, 2001 100 100 100 100 100 100
March, 2002 100 100 100 100 100 100
March, 2003 100 100 100 100 100 100
March, 2004 100 100 100 100 100 100
March, 2005 100 100 100 100 100 100
March, 2006 100 100 100 100 100 100
March, 2007 100 100 100 100 100 100
March, 2008 0 0 0 0 0 0
Weighted average life (years) 9.86 9.86 9.86 9.86 9.86 9.86
Percent of Initial Certificate Balance Outstanding for the
Class E Certificates at the Respective Percentages of CPR
Distribution Date 0% 3% 5% 7% 10% 15%
- ----------------- == == == == === ===
Initial 100% 100% 100% 100% 100% 100%
March, 1999 100 100 100 100 100 100
March, 2000 100 100 100 100 100 100
March, 2001 100 100 100 100 100 100
March, 2002 100 100 100 100 100 100
March, 2003 100 100 100 100 100 100
March, 2004 100 100 100 100 100 100
March, 2005 100 100 100 100 100 100
March, 2006 100 100 100 100 100 100
March, 2007 100 100 100 100 100 100
March, 2008 0 0 0 0 0 0
Weighted average life (years) 9.88 9.88 9.88 9.87 9.87 9.87
S-66
<PAGE> 67
Class X-2 Certificates
The yield to maturity on the Class X-2 Certificates will be highly
sensitive to the rate and timing of principal payments (including both voluntary
and involuntary prepayments) on the Mortgage Loans. Accordingly, investors in
the Class X-2 Certificates should fully consider the associated risks, including
the risk that an extremely rapid rate of prepayment of the Mortgage Loans could
result in the failure of such investors to recoup their initial investments. In
addition, the yield to maturity on the Class X-2 Certificates may be adversely
affected if an optional termination of the Trust Fund occurs.
The following table indicates the approximate pre-tax yield to maturity on
the Class X-2 Certificates for the specified CPR percentages, stated on a
corporate bond equivalent ("CBE") basis. For purposes of preparing the table, it
was assumed that (i) the Maturity Assumptions (as defined above) apply and the
initial Notional Amount and initial Pass-Through Rate of the Class X-2
Certificates, expressed as a percentage of the Notional Amount thereof, are as
set forth herein, and (ii) the purchase prices (excluding accrued interest) for
the Class X-2 Certificates are as specified below.
Yield Sensitivity of the Class X-2 Certificates to Principal Prepayments
Pre-Tax Yields to Maturity (CBE)
Prepayment Assumption
Assumed Purchase
Price 0% CPR 3% CPR 5% CPR 7% CPR 10% CPR 15% CPR
----- ------ ------ ------ ------ ------- -------
4.25% 7.64% 7.64% 7.64% 7.64% 7.64% 7.64%
4.30% 7.13% 7.13% 7.13% 7.13% 7.13% 7.13%
4.35% 6.64% 6.64% 6.64% 6.64% 6.64% 6.64%
The pre-tax yields to maturity set forth in the preceding table were
calculated by determining the monthly discount rates that, when applied to the
assumed stream of cash flows to be paid on the Class X-2 Certificates (that is,
interest), would cause the discounted present value of such assumed cash flows
to equal the assumed purchase price thereof plus accrued interest, and by
converting such monthly rates to corporate bond equivalent rates. Such
calculations do not take into account variations that may occur in the interest
rates at which investors may be able to reinvest funds received by them as
distributions on the Class X-2 Certificates and consequently do not purport to
reflect the return on any investment in the Class X-2 Certificates when such
reinvestment rates are considered.
The characteristics of the Mortgage Loans differ in substantial respects
from those assumed in preparing the table above, and the table is presented for
illustrative purposes only. In particular, it is unlikely that the Mortgage Pool
will experience neither defaults nor losses, and neither the Mortgage Pool nor
any Mortgage Loan will prepay at any constant rate. Therefore, there can be no
assurance that the Mortgage Loans will prepay at any particular rate or that the
actual pre-tax yields on the Class X-2 Certificates will correspond to any of
the pre-tax yields shown herein. Accordingly, investors must make their own
decisions as to the appropriate assumptions (including prepayment assumptions)
to be used in deciding whether to purchase the Class X-2 Certificates.
S-67
<PAGE> 68
DESCRIPTION OF THE MORTGAGE POOL
General
The Mortgage Pool will consist of 306 fixed-rate mortgage loans (the
"Mortgage Loans"), with an Initial Pool Balance of $1,392,212,342 subject to a
permitted variance of plus or minus 5%. The Cut-Off Date Balances of the
Mortgage Loans range from $447,705 to $59,807,596, and the Mortgage Loans have
an average Cut-Off Date Balance of $4,549,714. Two hundred seventy-six (276) of
the Mortgage Loans, representing 94.8% of the Initial Pool Balance, are Balloon
Loans. All numerical information provided herein with respect to the Mortgage
Loans is provided on an approximate basis. For purposes of the presentation of
certain Mortgage Pool Information herein, each Mortgage Loan is deemed to be
secured by a mortgage on one Mortgaged Property, whether or not such Mortgaged
Property consists of more than one parcel of real property.
A brief summary of the material terms of the largest Mortgage Loans in the
Mortgage Pool is set forth on Appendix III attached hereto.
As of the Cut-Off Date, none of the Mortgage Loans were 30 days or more
delinquent, or had been 30 days or more delinquent during the 12 calendar months
preceding the Cut-Off Date.
Each Mortgage Loan is evidenced by a promissory note (a "Mortgage Note")
and secured by a mortgage, deed of trust or other similar security instrument (a
"Mortgage") that creates a first mortgage lien on a fee simple estate
income-producing real property (a "Mortgaged Property"), except that in six (6)
cases, representing 3.9% of the Initial Pool Balance, the Mortgage Loan is
secured by a Mortgage on a leasehold estate in the Mortgaged Property or on both
a leasehold interest in a portion of the Mortgaged Property and a fee simple
interest in the remainder of the Mortgaged Property.
Seventy-one (71) of the Mortgaged Properties, which represent security for
25.1% of the Initial Pool Balance, are multifamily apartment properties;
eighty-six (86) of the Mortgaged Properties, which represent security for 26.0%
of the Initial Pool Balance, are retail properties; twelve (12) of the Mortgaged
Properties, which represent security for 1.6% of the Initial Pool Balance, are
self-storage properties; sixty-five (65) of the Mortgaged Properties, which
represent security for 14.2% of the Initial Pool Balance, are industrial
properties; thirty-seven (37) of the Mortgaged Properties, which represent
security for 12.8% of the Initial Pool Balance, are office properties; six (6)
of the Mortgaged Properties, which represent security for 3.1% of the Initial
Pool Balance, are mobile home park properties; and twenty-two (22) of the
Mortgaged Properties, which represent security for 16.0% of the Initial Pool
Balance, are hospitality properties, sixteen (16) of which are affiliated with
national hotel/motel franchisors. The remaining Mortgaged Properties, which
represent security for 1.3% of the Initial Pool Balance, are generally
combinations of property types (for instance, retail/office and
office/multifamily) as indicated on Appendix II. The Mortgaged Properties are
located throughout thirty-six (36) states, with the largest concentration in
California (116 Mortgaged Properties, which represent security for 35.2% of the
Initial Pool Balance). No other state has a concentration of Mortgaged
Properties that represents security for more than 8.9% of the Initial Pool
Balance. See Appendix II for a more detailed description of the Mortgage Loans.
One hundred seventy-five (175) of the Mortgage Loans, or 53.0% of the
Initial Pool Balance (the "Wells Fargo Loans"), were originated by Wells Fargo.
Ninety-seven (97) of the Mortgage Loans or 36.0% of the Initial Pool Balance
(the "Morgan Stanley Loans"), were originated by one of the participants in
MSMC's commercial and multifamily mortgage loan conduit program, were originated
directly by MSMC or were purchased in the secondary market. Thirty-four (34) of
the Mortgage Loans, or 11.0% of the Initial Pool Balance (the "JHREF Loans"),
were originated by JHREF.
On or prior to the Closing Date, the Depositor will acquire the Mortgage
Loans from the Sellers, in each case pursuant to a mortgage loan purchase
agreement to be entered into between the Depositor and the particular Seller
(each, a "Mortgage Loan Purchase Agreement"). The Depositor will thereupon
assign its interests in the Mortgage Loans, without recourse, to the Trustee for
the benefit of the Certificateholders. See "--The Sellers" and "--Assignment of
Mortgage Loans" below.
S-68
<PAGE> 69
The Mortgage Loans were originated between 1996 and 1998.
Certain Terms and Characteristics of the Mortgage Loans
Mortgage Rates; Calculations of Interest
Mortgage Loans bear interest at Mortgage Rates that will remain fixed for
their remaining terms. One hundred twenty-nine (129) of the Mortgage Loans,
representing 34.9% of the Initial Pool Balance, accrue interest on the basis of
a 360-day year consisting of twelve 30-day months. One hundred seventy-six (176)
of the Mortgage Loans, representing 64.5% of the Initial Pool Balance, accrue
interest on the basis of the actual number of days elapsed each month in a
360-day year. One (1) Mortgage Loan, representing 0.6% of the Initial Pool
Balance, accrues interest on the basis of the actual number of days elapsed each
month in a 365-day year.
Due Dates
All of the Mortgage Loans have Due Dates (that is, the dates upon which
the related Scheduled Payments are due) that occur on the first day of each
month.
Amortization
Two hundred seventy-five (275) of the Mortgage Loans, which represent
92.6% of the Initial Pool Balance, provide for Scheduled Payments based on
amortization schedules significantly longer than their terms to maturity thereby
leaving Balloon Payments due and payable on their respective maturity dates,
unless prepaid prior thereto. One (1) of the Mortgage Loans, which represents
2.2% of the Initial Pool Balance, provides for Scheduled Payments of interest
only prior to its maturity. The amount of the Balloon Payments on those Mortgage
Loans that accrue interest on the basis of the actual number of days elapsed
each month in a 360-day year will be greater, and the actual amortization terms
will be longer, than would be the case if such Mortgage Loans accrued interest
on the basis of a 360-day year consisting of 30-day months as a result of the
application of interest and principal on such Mortgage Loans over time. See
"Risk Factors And Other Special Considerations--The Mortgage Loans--Balloon
Payments."
Prepayment Restrictions
As of the Cut-Off Date, all of the Mortgage Loans prohibit voluntary
Principal Prepayments for a period (a "Lock-out Period") ending on a date
(generally ranging from seventeen (17) months to one hundred seventeen (117)
months from the Cut-Off Date) specified in the related Mortgage Note and, in
most such cases, thereafter require, until a specified date (generally three to
twelve months) prior to maturity, that any voluntary Principal Prepayment be
accompanied by an additional amount (a "Prepayment Premium"), which is
calculated on the basis of (a) a yield maintenance formula ("Yield Maintenance
Premium"), payable in the case of eight (8) Mortgage Loans, or 13.4% of the
Initial Pool Balance, including one Mortgage Loan, representing 2.5% of the
Initial Pool Balance, which bases Yield Maintenance on defeasance provisions,
(b) the greater of a Yield Maintenance Premium and one percent (1%) of the
amount prepaid ("Percentage Premium"), payable in the case of two hundred eighty
(280) Mortgage Loans, or 82.4% of the Initial Pool Balance, (c) a Percentage
Premium, generally declining over the remainder of the life of the loan, payable
in the case of fourteen (14) Mortgage Loans, or 3.7% of the Initial Pool Balance
or (d) the greater of a Yield Maintenance Premium and one percent (1%) of the
amount prepaid, then a percentage premium declining over the remainder of the
life of the loan, payable in the case of four (4) Mortgage Loans representing
0.5% of the Initial Pool Balance. However, three (3) Mortgage Loans,
representing 1.1% of the Initial Pool Balance, permit, in each such case,
voluntary Principal Prepayments of up to 10% of the original principal balance
of the Mortgage Loan in any calendar year without the imposition of any
Prepayment Premium, notwithstanding any Lock-out Period that would otherwise be
in effect or any Prepayment Premium that would otherwise be imposed; one (1)
Mortgage Loan, representing approximately 0.1% of the Initial Pool Balance,
permits voluntary principal payments of up to 10% of the original principal
balance of the Mortgage Loan in any calendar year without the imposition of any
Prepayment Premium, after the first three years following its origination; and
four (4) Mortgage Loans representing 0.5% of the Initial Pool Balance permit
prepayment during the last five years of the loan term without the imposition of
any Prepayment Penalty. Prepayment Premiums, if and to the extent collected,
will be distributed
S-69
<PAGE> 70
to the holders of the Certificates as described herein under "Description Of The
Certificates--Distributions--Distributions of Prepayment Premiums." Neither
Depositor nor any Seller make any representation as to the collectability or
enforceability of any Prepayment Premium. The Master Servicer may not waive the
imposition of a Prepayment Premium or reduce the amount thereof. The Special
Servicer may waive the imposition of a Prepayment Premium, or reduce the amount
thereof with respect to a Specially Serviced Mortgage Loan, if such waiver or
reduction is consistent with the Servicing Standard.
Non-recourse Obligations
Substantially all of the Mortgage Loans are non-recourse obligations of
the related borrowers and, upon any such borrower's default in the payment of
any amount due under the related Mortgage Loan, the holder thereof may look only
to the related Mortgaged Property for satisfaction of the borrower's
obligations. In those cases where the loan documents permit recourse to the
borrower or a guarantor, the Depositor has not evaluated the financial condition
of any such person, and prospective investors should thus consider all of the
Mortgage Loans to be non-recourse. None of the Mortgage Loans is insured or
guaranteed by the United States, any government entity or instrumentality or any
other person.
"Due-on-Sale" and "Due-on-Encumbrance" Provisions
The Mortgages contain "due-on-sale" and "due-on-encumbrance" clauses that,
in general, permit the holder of the Mortgage to accelerate the maturity of the
related Mortgage Loan if the borrower sells or otherwise transfers or encumbers
the related Mortgaged Property or that prohibit the borrower from doing so
without the consent of the holder of the Mortgage. However, the Mortgage Loans
generally permit a one-time transfer of the related Mortgaged Property, subject
to approval of the proposed transferee by the holder of the Mortgage, payment of
an assumption fee (which may be waived by the Master Servicer or the Special
Servicer (as the case may be) or, if collected, will be paid to the Master
Servicer or the Special Servicer as additional servicing compensation) and
certain other conditions. In addition, certain Mortgage Loans permit the
borrower to transfer the related Mortgaged Property to an affiliate or
subsidiary of the borrower, or an entity of which the borrower is the
controlling beneficial owner, upon the satisfaction of certain limited
conditions as determined by the Master Servicer. The Master Servicer or the
Special Servicer, as the case may be, will determine, in a manner consistent
with the Servicing Standard, whether to exercise any right it may have under any
such clause to accelerate payment of the related Mortgage Loan upon, or to
withhold its consent to, any transfer or further encumbrance of the related
Mortgaged Property in accordance with the Pooling and Servicing Agreement.
Cross-Collateralization; Related Parties
The Mortgage Pool includes six (6) groups of Mortgage Loans, the largest
of which groups collectively represents 2.4% of the Initial Pool Balance, under
which an aggregate amount of indebtedness is secured by multiple Mortgaged
Properties. For purposes of the presentation of Mortgage Pool information
herein, such Mortgage Loans have been treated as multiple cross-collateralized
and cross-defaulted Mortgage Loans, each secured by one of the related Mortgaged
Properties and each having a principal balance in an amount equal to an
allocated portion of the aggregate indebtedness represented by such Mortgage
Loan.
In addition, five (5) groups of Mortgage Loans, the largest of which
groups collectively represents 1.5% of the Initial Pool Balance, are
cross-defaulted and cross-collateralized with the other Mortgage Loan or Loans
in such groups.
There are also several groups of Mortgage Loans other than those groups
that are either cross-defaulted and cross-collateralized, or those that are
treated as cross-defaulted and cross-collateralized for disclosure purposes, the
largest of which groups represents 1.8% of the Initial Pool Balance, where the
borrowers are affiliated entities related through common ownership of
partnership or other equity interests and where, in general, the related
Mortgaged Properties are commonly managed.
S-70
<PAGE> 71
Subordinate Financing
Generally the Mortgage Loans prohibit the borrower from incurring
subordinate indebtedness or require the consent of the holder of the Mortgage
prior to doing so. However, with respect to five (5) Mortgage Loans,
representing 6.6% of the Initial Pool Balance, there is outstanding debt to
third parties that is unsecured or secured solely by ownership interests in the
related borrower or an affiliate thereof. With respect to three (3) of the
Mortgage Loans, representing 0.4% of the Initial Pool Balance, the related
borrower may incur secured subordinate debt, but only if the combined debt
service coverage ratio does not fall below 1.30x and the combined loan-to-value
ratio does not exceed 70%. See "Certain Legal Aspects of the Mortgage Loans and
the Leases--Subordinate Financing" in the Prospectus.
Assessments of Property Value and Condition
Valuations and Market Studies
In connection with the origination or acquisition of two hundred
seventy-six (276) of the Mortgage Loans, representing 91.7% of the Initial Pool
Balance, the related Mortgaged Property was appraised by an independent
appraiser who, generally, was a member of the Appraisal Institute. With respect
to the remaining thirty (30) Mortgage Loans representing 8.3% of the Initial
Pool Balance, a market valuation estimate was made by the related Seller based
on sales and rental information with respect to comparable properties and
third-party market studies. In general, those appraisals and estimates represent
the analysis and opinion of the person performing the appraisal or valuation and
are not guarantees of, and may not be indicative of, present or future value.
There can be no assurance that another person would not have arrived at a
different valuation, even if such person used the same general approach to and
same method of valuing the property. Moreover, such appraisals and market
valuation estimates sought to establish the amount of typically motivated buyer
would pay a typically motivated seller. Such amount could be significantly
higher than the amount obtained from the sale of a Mortgaged Property under a
distress or liquidation sale. Information regarding the values of the Mortgaged
Property as of the Cut-Off Date is presented herein for illustrative purposes
only.
Environmental Assessments
An environmental site assessment was performed with respect to each
Mortgaged Property generally within the twelve-month period preceding the
origination of the related Mortgage Loan. In all cases, the environmental site
assessment was a "Phase I" environmental assessment, generally performed in
accordance with industry practice. In general, the environmental assessments
contained no recommendations for further significant environmental remediation
efforts. However, in certain cases, the assessment disclosed the existence of or
potential for adverse environmental conditions, generally the result of the
activities of identified tenants, adjacent property owners or previous owners of
the Mortgaged Property. In certain cases, the related borrowers were required to
establish operations and maintenance plans, monitor the Mortgaged Property,
abate or remediate the condition and/or provide additional security.
Property Condition Assessments
Most of the Mortgaged Properties were inspected, in connection with the
origination or acquisition of the related Mortgage Loan, by a representative of
the related Seller or by a third party professional engaged by such Seller.
Furthermore, in most cases, a licensed engineer or consultant inspected the
related Mortgaged Property, in connection with the origination of the related
Mortgage Loan, to assess the structure, exterior walls, roofing, interior
structure and mechanical and electrical systems. In certain cases, where
material deficiencies were observed, the related borrower was required to
establish reserves for replacement or repair or remediate the deficiency.
Seismic Review Process
A California law, the Alquist-Priolo Special Studies Zone Act, established
zones consisting of areas surrounding active California earthquake faults
("Alquist-Priolo Zones") and requires that cities and counties limit certain
real estate development projects within the zones unless geologic investigation
demonstrates that the sites are
S-71
<PAGE> 72
not threatened by future fault activity. In general, the underwriting guidelines
applicable to the origination of the Mortgage Loans required that prospective
borrowers seeking loans secured by properties located in an Alquist-Priolo Zone
obtain a seismic engineering report of the building and, based thereon and on
certain statistical information, an estimate of probable maximum loss ("PML"),
that is, an estimate of the loss that the property would sustain in a "worst
case" earthquake scenario. Generally, any proposed loan as to which the property
was estimated to have a PML in excess of 20% of the estimated replacement cost
of the improvements would be declined. No Mortgaged Property is located in an
Alquist-Priolo zone.
Additional Mortgage Loan Information
Each of the tables set forth in Appendix I sets forth certain
characteristics of the Mortgage Pool presented, where applicable, as of the
Cut-Off Date. For a detailed presentation of certain of the characteristics of
the Mortgage Loans and the Mortgaged Properties, on an individual basis, see
Appendix II hereto, and for a brief summary of the largest Mortgage Loans in the
Mortgage Pool, see Appendix III hereto. Certain additional information regarding
the Mortgage Loans is contained herein under "Risk Factors and Other Special
Considerations--The Mortgage Loans", elsewhere in this "Description of The
Mortgage Pool" section and under "Certain Legal Aspects of Mortgage Loans and
the Leases" in the Prospectus.
For purposes of the tables in Appendix I and for the information set forth
in Appendix II and Appendix III:
(1) References to "DSCR" are references to "Debt Service Coverage
Ratios." In general, debt service coverage ratios are used by income
property lenders to measure the ratio of (a) cash currently
generated by a property that is available for debt service to (b)
required debt service payments. However, debt service coverage
ratios only measure the current, or recent, ability of a property to
service mortgage debt. If a property does not possess a stable
operating expectancy (for instance, if it is subject to material
leases that are scheduled to expire during the loan term and that
provide for above-market rents and/or that may be difficult to
replace), a debt service coverage ratio may not be a reliable
indicator of a property's ability to service the mortgage debt over
the entire remaining loan term. For purposes of this Prospectus
Supplement, including for the tables in Appendix I and the
information set forth in Appendix II and Appendix III, the "Debt
Service Coverage Ratio" or "DSCR" for any Mortgage Loan (or group of
cross-collateralized Mortgage Loans) is the ratio of "Underwritable
Cash Flow" estimated to be produced by the related Mortgaged
Property or Properties to the annualized amount of debt service
payable under that Mortgage Loan (or that group of
cross-collateralized Mortgage Loans). "Underwritable Cash Flow" in
each case is an estimate of stabilized cash flow available for debt
service. In general, it is the estimated stabilized revenue derived
from the use and operation of a Mortgaged Property (consisting
primarily of rental income) less the sum of (a) estimated stabilized
operating expenses (such as utilities, administrative expenses,
repairs and maintenance, management fees and advertising), (b) fixed
expenses (such as insurance, real estate taxes and, if applicable,
ground lease payments) and (c) capital expenditures and reserves for
capital expenditures, including tenant improvement costs and leasing
commissions. Underwritable Cash Flow generally does not reflect
interest expenses and non-cash items such as depreciation and
amortization. In determining Underwritable Cash Flow for a Mortgaged
Property, the applicable Seller relied on rent rolls and other
generally unaudited financial information provided by the respective
borrowers and calculated stabilized estimates of cash flow that took
into consideration historical financial statements, material changes
in the operating position of the Mortgaged Property of which the
Seller was aware (e.g., new signed leases or end of "free rent"
periods and market data), and estimated capital expenditures,
leasing commission and tenant improvement reserves. The applicable
Seller made certain changes to operating statements and operating
information obtained from the respective borrowers, resulting in
either an increase or decrease in the estimate of Underwritable Cash
Flow derived therefrom, based upon the Seller's evaluation of such
operating statements and operating information and the assumptions
applied by the respective borrowers in preparing such statements and
information. In certain cases, partial year 1996 or 1997 operating
income data was annualized, with certain adjustments for items
deemed not appropriate to be annualized, or
S-72
<PAGE> 73
borrower supplied "trailing-12 months" income and/or expense
information was utilized. In certain instances, 1996 historical
expenses were inflated. For purposes of calculating Underwritable
Cash Flow for Mortgage Loans where leases have been executed by one
or more affiliates of the borrower, the rents under some of such
leases have been adjusted to reflect market rents for similar
properties. Several Mortgage Loans are secured by Mortgaged
Properties with newly constructed improvements and, accordingly,
there were no historical operating results or financial statements
available with respect to such Mortgaged Properties. In such cases,
items of revenue and expense used in calculating Underwritable Cash
Flow were generally derived from rent rolls, estimates set forth in
the related appraisal or from borrower-supplied information. No
assurance can be given with respect to the accuracy of the
information provided by any borrowers, or the adequacy of the
procedures used by the applicable Seller in determining the
presented operating information.
The Debt Service Coverage Ratios are presented herein for
illustrative purposes only and, as discussed above, are limited in
their usefulness in assessing the current, or predicting the future,
ability of a Mortgaged Property to generate sufficient cash flow to
repay the related Mortgage Loan. Accordingly, no assurance can be
given, and no representation is made, that the Debt Service Coverage
Ratios accurately reflect that ability.
(2) References in the tables to "Cut-Off Date Loan-to-Value" or "Cut-Off
Date LTV" are references to the ratio, expressed as a percentage, of
the Cut-Off Date Balance of a Mortgage Loan (or the aggregate
principal balance of a group of cross-collateralized Mortgage Loans)
to the value of the related Mortgaged Property or Properties as
determined by the most recent appraisal or market valuation (as
described above under "--Assessments of Property Value and
Condition--Valuations and Market Studies") of such Mortgaged
Property. References to "Balloon LTV" or "Balloon LTV Ratio" are
references to the ratio, expressed as a percentage of the principal
balance of a Balloon Loan (or the aggregate principal balance of a
group of cross-collateralized loans) anticipated to be outstanding
at the date on which the related Balloon Payment(s) are scheduled to
be due (calculated based on the Maturity Assumptions and a 0% CPR)
to the value of the related Mortgaged Property or Properties as
determined by the most recent appraisal or market valuation of such
Mortgaged Property or Properties available to the Depositor. No
representation is made that any such value would approximate either
the value that would be determined in a current appraisal of the
related Mortgaged Property or the amount that would be realized upon
a sale.
(3) References to "Years Built/Renovated" are references to the later of
the year in which a Mortgaged Property was originally constructed or
the most recent year in which such Mortgaged Property was
substantially renovated.
(4) References to "weighted averages" are references to averages
weighted on the basis of the Cut-Off Date Balances of the related
Mortgage Loans.
The sum in any column of any of the tables in Appendix I may not equal the
indicated total due to rounding.
Standard Hazard Insurance
To the extent permitted by the related Mortgage Loan and required by the
Servicing Standard, the Master Servicer will require each borrower to maintain a
fire and hazard insurance policy with extended coverage. The coverage of each
such policy will be in an amount (subject to a deductible customary in the
related geographic area) that is not less than the lesser of the full
replacement cost of the improvements that represent security for such Mortgage
Loan, with no deduction for depreciation, and the outstanding principal balance
owing on such Mortgage Loan, but in any event, unless otherwise specified in the
applicable Mortgage or Mortgage Note, in an amount sufficient to avoid the
application of any coinsurance clause. If, on the date of origination of a
Mortgage Loan, the related Mortgaged Property was in an area identified in the
Federal Register by the Federal Emergency Management Agency as having special
flood hazards (and such flood insurance has been made available), the Master
Servicer
S-73
<PAGE> 74
will cause to be maintained a flood insurance policy meeting the requirements of
the current guidelines of the Federal Insurance Administration in an amount
representing coverage of at least the lesser of (i) the outstanding principal
balance of the related Mortgage Loan and (ii) the maximum amount of such
insurance available for the related Mortgaged Property, but only to the extent
such Mortgage Loan permits the lender to require such coverage and such coverage
conforms to the Servicing Standard. If a borrower fails to maintain such hazard
insurance, the Master Servicer will be required to obtain such insurance and the
cost thereof will be a Servicing Advance, subject to a determination of
recoverability. The Special Servicer will be required to maintain fire insurance
with extended coverage and, if applicable, flood insurance on an REO Property in
an amount not less than the maximum amount obtainable with respect to such REO
Property and the cost thereof will be a Servicing Advance, subject to a
determination of recoverability. In addition, the Master Servicer may require
any borrower to maintain other forms of insurance as the Master Servicer may be
permitted to require under the related Mortgage, including, but not limited to,
loss of rents endorsements and comprehensive public liability insurance. The
Master Servicer will not require borrowers to maintain earthquake insurance
unless the related borrower is required under the terms of its Mortgage Loan to
maintain earthquake insurance. Any losses incurred with respect to Mortgage
Loans due to uninsured risks (including earthquakes, mudflows and floods) or
insufficient hazard insurance proceeds may adversely affect payments to
Certificateholders.
The Sellers
Wells Fargo Bank, National Association
A description of Wells Fargo is contained herein under "Servicing of the
Mortgage Loans--The Master Servicer" herein.
Morgan Stanley Mortgage Capital Inc.
MSMC is a subsidiary of Morgan Stanley & Co., Inc. formed as a New York
corporation to originate and acquire loans secured by mortgages on commercial
and multifamily real estate. Each of MSMC's Loans was originated by one of the
participants in MSMC's commercial and multifamily mortgage loan conduit program
was originated directly by MSMC or was purchased in the secondary market. All
loans were underwritten by MSMC underwriters. The principal offices of MSMC are
located at 1585 Broadway, New York, New York 10036. Its telephone number is
(212) 761-4700.
John Hancock Real Estate Finance, Inc.
JHREF is a wholly-owned subsidiary of John Hancock Subsidiaries, Inc.
which is a wholly-owned subsidiary of John Hancock Mutual Life Insurance
Company. JHREF was founded in 1982 and is headquartered in Boston,
Massachusetts.
JHREF presently has seven offices across the country and a loan servicing
center located in Atlanta, Georgia. Each of the JHREF Loans were underwritten at
JHREF's Boston headquarters and closed by JHREF. The principal offices of JHREF
are located at 200 Clarendon Street, 53rd Floor, Boston, Massachusetts 02117.
JHREF's telephone number is (617) 572-8716.
Assignment of The Mortgage Loans
On or prior to the Closing Date, each Seller will assign its Mortgage
Loans, without recourse, to the Depositor, and the Depositor will assign all the
Mortgage Loans, without recourse, to the Trustee for the benefit of the
Certificateholders. In connection with such assignments, each Seller is required
in accordance with the related Mortgage Loan Purchase Agreement to deliver the
following documents, among others, with respect to each Mortgage Loan so
assigned by it (such documents, collectively as to any Mortgage Loan, a
"Mortgage File") to the Trustee: (a) the original Mortgage Note, endorsed
(without recourse) in blank or to the order of Trustee; (b) the original or a
copy of the related Mortgage(s), together with originals or copies of any
intervening assignments of such document(s), in each case with evidence of
recording thereon (unless such document(s) have not been returned by the
applicable recorder's office); (c) the original or a copy of any related
assignment(s) of rents and leases (if any
S-74
<PAGE> 75
such item is a document separate from the Mortgage), together with originals or
copies of any intervening assignments of such document(s), in each case with
evidence of recording thereon (unless such document(s) have not been returned by
the applicable recorder's office); (d) an assignment of each related Mortgage in
blank or in favor of the Trustee, in recordable form; (e) an assignment of any
related assignment(s) of rents and leases (if any such item is a document
separate from the Mortgage) in blank or in favor of the Trustee, in recordable
form; (f) an original or copy of the related lender's title insurance policy
(or, if a title insurance policy has not yet been issued, a commitment for title
insurance "marked-up" at the closing of such Mortgage Loan); and (g) when
relevant, the related ground lease or a copy thereof. The Trustee will be
required to review the documents delivered by each Seller with respect to its
Mortgage Loans within 90 days following the Closing Date, and the Trustee will
hold the related documents in trust.
Within 45 days following the Closing Date, pursuant to the Pooling and
Servicing Agreement, the assignments with respect to each Mortgage Loan
described in clauses (d) and (e) of the preceding paragraph are to be completed
in the name of the Trustee (if delivered in blank) and submitted for recording
in the real property records of the appropriate jurisdictions.
Representations and Warranties
In each Mortgage Loan Purchase Agreement, the related Seller has
represented and warranted with respect to each of its Mortgage Loans, subject to
certain specified exceptions, as of the Closing Date or as of such other date
specifically provided in the representation and warranty, among other things,
generally to the effect that: (1) the information set forth in the schedule of
the mortgage loans attached to the related Mortgage Loan Purchase Agreement is
true and correct in all material respects; (2) such Seller owns the Mortgage
Loan free and clear of any and all pledges, liens and/or other encumbrances; (3)
no scheduled payment of principal and interest under the Mortgage Loan was 30
days or more past due as of the Cut-Off Date, and the Mortgage Loan has not been
30 days or more delinquent in the twelve-month period immediately preceding the
Cut-Off Date; (4) the related Mortgage constitutes a valid and, subject to
certain creditors' rights exceptions, enforceable first priority mortgage lien
(subject to certain permitted encumbrances) upon the related Mortgaged Property;
(5) the assignment of the related Mortgage in favor of the Trustee constitutes a
legal, valid and binding assignment; (6) the related assignment of leases
establishes and creates a valid and, subject to certain creditor's rights
exceptions, enforceable first priority lien in the related borrower's interest
in all leases of the Mortgaged Property; (7) the Mortgage has not been
satisfied, cancelled, rescinded or subordinated in whole or in material part,
and the related Mortgaged Property has not been released from the lien of such
Mortgage, in whole or in material part; (8) except as set forth in a property
inspection report prepared in connection with the origination of the Mortgage
Loan, the related Mortgaged Property is, to the Seller's knowledge, free and
clear of any damage that would materially and adversely affect its value as
security for the Mortgage Loan; (9) to the Seller's knowledge, there is no
proceeding pending for the condemnation of all or any material portion of any
Mortgaged Property; (10) the related Mortgaged Property is covered by an
American Land Title Association (or an equivalent form of) lender's title
insurance policy that insures that the related Mortgage is a valid, first
priority lien on such Mortgaged Property, subject only to the exceptions stated
therein; (11) the proceeds of the Mortgage Loan have been fully disbursed and
there is no obligation for future advances with respect thereto; (12) an
environmental site assessment was performed with respect to the Mortgaged
Property in connection with the origination of the related Mortgage Loan, a
report of each such assessment has been delivered to the Depositor, and such
Seller has no knowledge of any material and adverse environmental condition or
circumstance affecting such Mortgaged Property that was not disclosed in such
report; (13) each Mortgage Note, Mortgage and other agreement that evidences or
secures the Mortgage Loan is, subject to certain creditors' rights exceptions
and other exceptions of general application, the legal, valid and binding
obligation of the maker thereof, enforceable in accordance with its terms, and
to the knowledge of the Seller there is no valid defense, counterclaim or right
of offset or rescission available to the related borrower with respect to such
Mortgage Note, Mortgage or other agreement; (14) the related Mortgaged Property
is, and is required pursuant to the related Mortgage, to be insured by casualty
and liability insurance policies of a type specified in the related Mortgage
Loan Purchase Agreement; (15) to such Seller's knowledge, there are no
delinquent or unpaid taxes, assessments or other outstanding charges affecting
the related Mortgaged Property that are or may become a lien of priority equal
to or higher than the lien of the related Mortgage; (16) the related borrower is
not, to the Seller's knowledge, a debtor in any state or federal bankruptcy or
insolvency proceeding; (17) the related Mortgaged Property consists of the
related borrower's fee simple estate in real estate or, if the related Mortgage
encumbers the interest of a borrower as a lessee under a ground lease of the
Mortgaged Property (a) such ground lease or a memorandum thereof has been or
will be
S-75
<PAGE> 76
duly recorded and permits the interest of the lessee thereunder to be encumbered
by the related Mortgage; (b) the borrower's interest in such ground lease is
assignable to the Depositor and its successors and assigns upon notice to, but
without the consent of, the lessor thereunder; (c) such ground lease is in full
force and effect and, to the knowledge of the Seller, no material default has
occurred thereunder; (d) such ground lease, or an estoppel letter related
thereto, requires the lessor under such ground lease to give notice of any
default by the lessee to the holder of the Mortgage, and further provides that
no notice of termination given under such ground lease is effective against such
holder unless a copy has been delivered to such holder; (e) the holder of the
Mortgage is permitted a reasonable opportunity (including, where necessary,
sufficient time to gain possession of the interest of the lessee under such
ground lease) to cure any default under such ground lease, which is curable
after the receipt of notice of any such default, before the lessor thereunder
may terminate such ground lease; and (f) such ground lease has an original term
(including any extension options set forth therein) which extends not less than
ten years beyond the scheduled maturity date of the Mortgage Loan; (18) the
Mortgage Loan is not cross-collateralized with any loan other than one or more
other Mortgage Loans; (19) no Mortgage requires the holder thereof to release
all or any material portion of the related Mortgaged Property from the lien
thereof except, upon payment in full of the Mortgage Loan or, in certain cases,
upon (a) the satisfaction of certain legal and underwriting requirements and (b)
except where the portion of the Mortgaged Property permitted to be released was
not considered by the Seller in underwriting the Mortgage Loan, the payment of a
release price and prepayment consideration in connection therewith; and (20) to
such Seller's knowledge, there exists no material default, breach, violation or
event of acceleration (and no event which, with the passage of time or the
giving of notice, or both, would constitute any of the foregoing) under the
related Mortgage Note or Mortgage in any such case to the extent the same
materially and adversely affects the value of the Mortgage Loan and the related
Mortgaged Property.
Notwithstanding the foregoing, in lieu of making certain of the foregoing
representations and warranties with respect to fourteen (14) Mortgage Loans
(representing 3.9% of the Initial Pool Balance) sold by it to the Depositor,
MSMC will assign to the Trustee, for the benefit of the Certificateholders, its
right to require General American Life Insurance Company ("GAL") to either (i)
cure a material breach of the representations and warranties made by GAL to MSMC
in connection with GAL's sale of such Mortgage Loans to MSMC, which
representations and warranties are substantially similar to those listed above,
or (ii) repurchase such Mortgage Loans affected by any such breach.
Repurchases And Other Remedies
If any Mortgage Loan document required to be delivered to the Trustee by a
Seller as described under "--Assignment of the Mortgage Loans" above is not
delivered as and when required, contains information that does not conform to
the corresponding information in the Mortgage Loan schedule attached to the
related Mortgage Loan Purchase Agreement, is not properly executed or is
defective on its face (any such omission, nonconformity or other defect, a
"Document Defect"), or if there is a breach of any of the representations and
warranties required to be made by a Seller (which term, for purposes of this and
the following two paragraphs, includes in general, GAL) regarding the
characteristics of its Mortgage Loans and/or the related Mortgaged Properties as
described under "--Representations and Warranties" above, and in either case
such Document Defect or breach materially and adversely affects the interests of
the holders of the Certificates or, in the case of a breach of any of the
representations and warranties required to be made by a Seller, such breach
materially and adversely affects the value of the Mortgage Loans or the interest
of the Trust Fund in such Mortgage Loans (a "Material Document Defect" and a
"Material Breach", respectively), then the Seller will be obligated to cure such
Material Document Defect or Material Breach in all material respects within the
applicable Permitted Cure Period. If any such Material Document Defect or
Material Breach cannot be corrected or cured in all material respects within the
applicable Permitted Cure Period, the Seller will be obligated, not later than
the last day of such Permitted Cure Period, to (i) repurchase the affected
Mortgage Loan from the Purchaser or its assignee at a price (the "Purchase
Price") at least equal to the unpaid principal balance of such Mortgage Loan,
together with accrued but unpaid interest thereon to but not including the Due
Date in the Collection Period of the repurchase and any related unreimbursed
Servicing Advances, or (ii) if within the three-month period commencing on the
Closing Date (or within the two-year period commencing on the Closing Date if
the related Mortgage Loan is a "defective obligation" within the meaning of
Section 860(a)(4)(B) (ii) of the Code and Treasury Regulation Section
1.860G-2(f)), at its option, (A) replace such Mortgage Loan with a mortgage loan
having certain payment term comparable to the Mortgage Loan to be replaced
S-76
<PAGE> 77
(calculated as if it were to be repurchased instead of replaced), over the
unpaid principal balance of the applicable Qualifying Substitute Mortgage Loan
as of the date of substitution, after application of all payments due on or
before such date, whether or not received.
For purposes of the foregoing, the "Permitted Cure Period" applicable to
any Material Document Defect or Material Breach in respect of any Mortgage Loan
will generally be the 90-day period immediately following the earlier of the
discovery by the related Seller or receipt by the related Seller of notice of
such Material Document Defect or Material Breach, as the case may be. However,
if such Material Document Defect or Material Breach, as the case may be, cannot
be corrected or cured in all material respects within such 90-day period, but it
is reasonably likely that such Material Document Defect or Material Breach, as
the case may be, could be corrected or cured within 180 days of the earlier of
discovery by the related Seller and receipt by the related Seller of notice of
such Material Document Defect or Material Breach, as the case may be, and the
related Seller is diligently attempting to effect such correction or cure, then
the applicable Permitted Cure Period will, with the consent of the Trustee
(which consent may not be unreasonably withheld), be extended for an additional
90 days.
The foregoing obligations of each Seller to cure a Material Document
Defect or a Material Breach in respect of any of its Mortgage Loans or
repurchase or replace the defective Mortgage Loan, will constitute the sole
remedies of the Trustee and the Certificateholders with respect to such Material
Document Defect or Material Breach; and none of the Depositor, any of the other
Sellers or any other person or entity will be obligated to repurchase or replace
the affected Mortgage Loan if the related Seller defaults on its obligation to
do so.
Changes In Mortgage Pool Characteristics
The description in this Prospectus Supplement of the Mortgage Pool and the
Mortgaged Properties is based upon the Mortgage Pool as expected to be
constituted at the time the Offered Certificates are issued, as adjusted for the
scheduled principal payments due on or before the Cut-off Date. Prior to the
issuance of the Offered Certificates, a Mortgage Loan may be removed from the
Mortgage Pool if the Depositor deems such removal necessary or appropriate or if
it is prepaid. A limited number of other mortgage loans may be included in the
Mortgage Pool prior to the issuance of the Offered Certificates, unless
including such Mortgage Loans would materially alter the characteristics of the
Mortgage Pool as described herein. The information set forth herein is
representative of the characteristics of the Mortgage Pool as it will be
constituted at the time the Offered Certificates are issued, although the range
of Mortgage Rates and maturities and certain other characteristics of the
Mortgage Loans in the Mortgage Pool may vary.
SERVICING OF THE MORTGAGE LOANS
General
The Master Servicer and the Special Servicer, either directly or through
sub-servicers, will be required to service and administer the Mortgage Loans
with the higher of the following standards of care (the "Servicing Standard"):
(a) in the same manner in which and with the same care, skill, prudence
and diligence with which the Master Servicer or the Special Servicer, as the
case may be, services and administers similar mortgage loans for other
third-party portfolios, giving due consideration to customary and usual
standards of practice of prudent institutional commercial mortgage lenders
servicing their own mortgage loans and to the maximization of the net present
value of the mortgage loans; and
(b) the care, skill, prudence and diligence the Master Servicer or the
Special Servicer, as the case may be, uses for loans which it owns and which are
substantially the same as the Mortgage Loans, giving due consideration to the
maximization of the net present value of the mortgage loans.
Each of the Master Servicer and the Special Servicer is required to adhere
to the Servicing Standard without regard to any conflict of interest that it may
have, any fees or other compensation to which it is entitled and any
relationship with the borrower and without regard to the different payment
priorities among the Classes of
S-77
<PAGE> 78
Certificates. Each of the Master Servicer and the Special Servicer may become
the owner or pledgee of Certificates with the same rights as each would have if
it were not the Master Servicer or a Special Servicer, as the case may be. Any
such interest of the Master Servicer or the Special Servicer in the Certificates
will not be taken into account when evaluating whether actions of the Master
Servicer or the Special Servicer are consistent with their respective
obligations in accordance with the Servicing Standard, regardless of whether
such actions may have the effect of benefiting the Class or Classes of
Certificates owned by the Master Servicer or the Special Servicer. In addition,
the Master Servicer or the Special Servicer may, under certain limited
circumstances, lend money on an unsecured basis, accept deposits from, and
otherwise generally engage in any kind of business or dealings with, any
borrower as though the Master Servicer or the Special Servicer were not a party
to the transactions contemplated hereby.
Each of the Master Servicer and the Special Servicer is permitted to enter
into a servicing agreement with a servicer (a "Sub-Servicer"), and any such
Sub-Servicer will receive a fee for the services specified in such servicing
agreement. However, the Master Servicer or the Special Servicer, as the case may
be, will remain liable for its servicing obligations under the Pooling and
Servicing Agreement. The Master Servicer or the Special Servicer, as the case
may be, will be required to pay any servicing compensation due to any
Sub-Servicer out of its own funds.
The Master Servicer may resign from the obligations and duties imposed on
it under the Pooling and Servicing Agreement, upon 30 days notice to the
Trustee, provided that (a) a successor servicer is available and willing to
assume the obligations of the Master Servicer on substantially the same terms
and conditions, and for not more than equivalent compensation; (b) the Master
Servicer bears all costs associated with its resignation and the transfer of
servicing; and (c) the Rating Agencies have confirmed in writing that such
servicing transfer will not result in a withdrawal, downgrade or qualification
of the then current ratings on the Certificates. Furthermore, the Master
Servicer may resign as Master Servicer if it determines that the Master
Servicer's duties are no longer permissible under applicable law or are in
material conflict by reason of applicable law with any other activities carried
on by it. If the Master Servicer ceases to serve as such and shall not have been
replaced by a qualified successor, the Trustee will assume the Master Servicer's
duties and obligations under the Pooling and Servicing Agreement. If the Special
Servicer shall cease to serve as such and a qualified successor shall not have
been engaged, the Master Servicer will assume the Special Servicer's duties and
obligations and, in the absence of the Master Servicer to so assume such duties
and responsibilities, the Trustee will assume the duties and obligations of the
Special Servicer. The relationship of each of the Master Servicer and the
Special Servicer to the Trustee is intended to be that of an independent
contractor and not that of a joint venturer, partner or agent.
The Master Servicer will have no responsibility for the performance by the
Special Servicer of its duties under the Pooling and Servicing Agreement, and
the Special Servicer shall have no responsibility for the performance by the
Master Servicer of its duties under the Pooling and Servicing Agreement.
The Master Servicer initially will be responsible for the servicing and
administration of the entire Mortgage Pool. However, the Special Servicer will
be responsible for servicing and administering (i) any Mortgage Loan as to which
a Balloon Payment is past due, and the Master Servicer has determined that
payment is unlikely to be made on or before the second succeeding Due Date, or
any other payment is more than 60 days past due or has not been made on or
before the second Due Date following the date such payment was due; (ii) any
Mortgage Loan as to which, to the Master Servicer's knowledge, the borrower has
entered into or consented to bankruptcy, appointment of a receiver or
conservator or a similar insolvency or similar proceeding, or the borrower has
become the subject of a decree or order for such a proceeding and such
proceeding shall have remained undischarged or unstayed for a period of 60 days;
(iii) any Mortgage Loan as to which the Master Servicer shall have received
notice of the foreclosure or proposed foreclosure of any other lien on the
Mortgaged Property; (iv) any Mortgage Loan as to which the Master Servicer has
knowledge of a default (other than a failure by the related borrower to pay
principal or interest) which in the judgement of the Master Servicer materially
and adversely affects the interests of the Certificateholders and which has
occurred and remains unremedied for the applicable grace period specified in
such Mortgage Loan (or, if no grace period is specified, 60 days); (v) any
Mortgage Loan as to which the borrower admits in writing its inability to pay
its debts generally as they become due, files a petition to take advantage of
any applicable insolvency or reorganization statute, makes an assignment for the
benefit of its creditors or voluntarily suspends payment of its obligations; and
(vi) any Mortgage Loan as to which, in the judgment of the Master Servicer, a
default has occurred or in the judgment of the Master Servicer is imminent or is
likely to occur within 60 days (any of the foregoing events, a "Servicing
Transfer Event" and any Mortgage Loan as to which any of the foregoing events
has occurred, a "Specially Serviced Mortgage Loan").
S-78
<PAGE> 79
In the event of any of the foregoing with respect to any Mortgage Loan,
the Master Servicer will be required to transfer its principal servicing
responsibilities with respect thereto to the Special Servicer in accordance with
certain procedures set forth in the Pooling and Servicing Agreement.
Notwithstanding such transfer, the Master Servicer will continue to receive
payments on such Mortgage Loan (including amounts collected by the Special
Servicer), to make certain calculations with respect to such Mortgage Loan, and
to make remittances and prepare certain reports to the Trustee with respect to
such Mortgage Loan. If title to the related Mortgaged Property is acquired by
the Trust Fund (upon acquisition, an "REO Property"), whether through
foreclosure, deed-in-lieu of foreclosure or otherwise, the Special Servicer will
be responsible for the operation and management thereof. Mortgage Loans serviced
by the Special Servicer are referred to herein as "Specially Serviced Mortgage
Loans."
A Mortgage Loan will cease to be a Specially Serviced Mortgage Loan (and
will become a "Rehabilitated Mortgage Loan" as to which the Master Servicer will
re-assume all servicing responsibilities) when (i) three consecutive Scheduled
Payments have been made (in the case of any such Mortgage Loan that was
modified, based on the modified terms), (ii) no other Servicing Transfer Event
occurred and is continuing with respect to such Mortgage Loan and (iii) the
Trust Fund has been reimbursed for all costs incurred as a result of the
occurrence of a Servicing Transfer Event or such amounts have been forgiven.
The Master Servicer and the Special Servicer will, in general, each be
required to pay all ordinary expenses incurred by it in connection with its
servicing activities under the Pooling and Servicing Agreement and will not be
entitled to reimbursement therefor except as expressly provided in the Pooling
and Servicing Agreement. See "Description Of The Certificates--Advances--
Servicing Advances" herein.
The Master Servicer
Wells Fargo will be responsible for servicing the Mortgage Loans as Master
Servicer. Wells Fargo provides a full range of banking services to individual,
agribusiness, real estate, commercial and small business customers.
Founded in 1852, Wells Fargo & Company is the holding company for Wells
Fargo. For the years ended December 31, 1997 and 1996, Wells Fargo & Company
reported, on a consolidated basis, total assets of $97.5 billion and $108.9
billion, respectively, and total capital (Tier 1 and 2) of $9.2 billion and
$10.0 billion, respectively. For the years ended December 31, 1997 and 1996,
respectively, Wells Fargo & Company reported, on a consolidated basis, net
income of $1,155 million and $1,071 million, respectively. On April 1, 1996,
First Interstate Bancorp merged with and into Wells Fargo & Company. First
Interstate Bancorp was the holding company for 16 subsidiary banks located in 13
Western states. As of December 31, 1995 and 1994, First Interstate Bancorp
reported, on a consolidated basis, total assets of $58.1 billion and $55.8
billion, respectively, and total capital (Tier 1 and 2) of $4.7 billion and $4.1
billion, respectively. For the years ended December 31, 1995 and 1994, First
Interstate Bancorp reported, on a consolidated basis, net income of $885 million
and $734 million, respectively. Wells Fargo & Company files annual and quarterly
reports with the Securities and Exchange Commission.
As of December 31, 1997, Wells Fargo and its subsidiaries serviced a
portfolio of multifamily and commercial mortgage loans totaling approximately
$15.2 billion in aggregate outstanding principal amount, of which approximately
$3.0 billion is serviced for others.
Commercial and multi-family mortgage loans originated for securitization
by Wells Fargo and its subsidiaries are currently serviced by Wells Fargo.
The information set forth herein concerning Wells Fargo has been provided
by Wells Fargo. Accordingly, the Depositor makes no representations or warranty
as to the accuracy or completeness of such information. Wells Fargo has been
approved as a servicer by all nationally recognized statistical rating
organizations.
Master Servicer Compensation
The Master Servicer will be entitled to receive each month a servicing fee
(the "Servicing Fee") equal to the portion of a specified rate per annum (the
"Servicing Fee Rate") applicable to such month (determined in the
S-79
<PAGE> 80
same manner as the applicable Mortgage Rate is determined for each Mortgage Loan
for such month) of the Scheduled Principal Balance of each Mortgage Loan
(including REO Properties) immediately before the Due Date for such month as
compensation for servicing the Mortgage Loans. The Master Servicer will be
entitled to retain as additional servicing compensation all investment income
earned on amounts on deposit in the Certificate Account, and (in each case to
the extent not payable to the Special Servicer or any Sub-Servicer as provided
in the Pooling and Servicing Agreement) late payment charges, assumption fees,
modification fees, extension fees and default interest payable at a rate above
the Mortgage Rate. However, the amount of the related Servicing Fee (but not the
fees payable to the Special Servicer or to the Trustee) will be reduced on each
Distribution Date by the amount (if any) of Compensating Interest paid by the
Master Servicer on such Distribution Date, but generally not more than the
portion of the Servicing Fee calculated in respect of all the Mortgage Loans,
less the portion thereof payable to Sub-Servicers. Any Net Aggregate Prepayment
Interest Shortfall will be allocated as set forth under "Description Of The
Certificates--Distributions--Prepayment Interest Shortfalls and Prepayment
Interest Excesses" herein. If Prepayment Interest Excesses for all Mortgage
Loans exceed Prepayment Interest Shortfalls for all Mortgage Loans as of any
Distribution Date, such excess amount will be payable to the Master Servicer as
additional compensation.
The Special Servicer
The initial Special Servicer will be CRIIMI MAE Services Limited
Partnership, a Maryland limited partnership ("CRIIMI MAE"), the general partner
of which is CRIIMI MAE Services, Inc. The Special Servicer will oversee the
resolution of the Specially Serviced Mortgage Loans, act as disposition manager
of the REO Properties acquired on behalf of the Trust Fund through foreclosure
or deed in lieu of foreclosure, maintain insurance with respect to REO
Properties and provide monthly reports to the Master Servicer and the Trustee.
As of December 31, 1997, the Special Servicer was responsible for performing
certain servicing functions with respect to approximately 3,760 commercial and
multifamily loans with an aggregate principal balance of approximately $16.3
billion, the collateral for which is located in 49 states and Puerto Rico. It is
anticipated that the Special Servicer or an affiliate of the Special Servicer
will purchase all or a significant portion of certain Classes of the Subordinate
Certificates on or about the Closing Date. The Special Servicer's principal
offices are located at 11200 Rockville Pike, Rockville, Maryland 20852.
The information set forth herein concerning CRIIMI MAE has been provided
by CRIIMI MAE. Accordingly, the Depositor makes no representations or warranty
as to the accuracy or completeness of such information.
Special Servicer Compensation
The Special Servicer will be entitled to receive (i) a special servicing
fee (the "Special Servicing Fee") equal to, in any month, the portion of a rate
equal to 0.25% per annum applicable to such month (determined in the same manner
as the applicable Mortgage Rate is determined for each Mortgage Loan for such
month) of the outstanding Scheduled Principal Balance of each Specially Serviced
Mortgage Loan; and (ii) a fee (the "Liquidation Fee") equal to the product of
(x) 1.0%, (y) a fraction, the numerator of which is equal to the Liquidation
Proceeds received in connection with a final disposition of a Specially Serviced
Mortgage Loan or REO Property and the denominator of which is equal to the
unpaid principal balance of the related Mortgage Loan or REO Property and
accrued and unpaid interest thereon and (z) the related Liquidation Proceeds
(collectively, such fees payable to the Special Servicer, the "Special Servicer
Compensation"). The Special Servicer is also permitted to retain, in general,
certain assumption fees, modification fees and extension fees collected on
Specially Serviced Mortgage Loans, certain borrower-paid fees, investment income
earned on amounts on deposit in any accounts maintained for REO Property
collections and charges specified in the Pooling and Servicing Agreement. The
Special Servicing Fee and Liquidation Fee will be obligations of the Trust Fund
and will represent Expense Losses. The Special Servicing Compensation will be
payable in addition to the Servicing Fee payable to the Master Servicer.
The Special Servicer will also be entitled to a receive each month a
standby fee (the "Special Servicing Standby Fee") equal to the portion of a
specified rate per annum (the "Special Servicing Standby Fee Rate") applicable
to such month (determined in the same manner as the applicable Mortgage Rate is
determined for each Mortgage Loan for such month) of the Scheduled Principal
Balance of each Mortgage Loan (including REO Properties).
S-80
<PAGE> 81
As described herein under "--The Operating Adviser," the Operating Adviser
will have the right to approve certain actions of the Special Servicer, subject
to the limitations described herein.
Termination of Special Servicer
The Trustee may terminate the Special Servicer due to (i) any failure by
the Special Servicer to remit to the Trustee or the Master Servicer when due any
amount required to be so remitted under the terms of the Pooling and Servicing
Agreement; (ii) any failure on the part of the Special Servicer duly to observe
or perform in any material respect any other of the covenants or agreements on
the part of the Special Servicer contained in the Pooling and Servicing
Agreement which continues unremedied for a period of 90 days after the date on
which written notice of such failure, requiring the same to be remedied, shall
have been given to the Special Servicer by the Depositor or the Trustee;
provided, however, that to the extent that the Special Servicer certifies to the
Trustee and the Depositor that the Special Servicer is in good faith attempting
to remedy such failure and the Certificateholders shall not be materially and
adversely affected thereby, such cure period will be extended for up to an
additional 60 days; (iii) any breach by the Special Servicer of the
representations and warranties contained in the Pooling and Servicing Agreement
that materially and adversely affects the interest of any holder of any Class of
Certificateholders and that continues unremedied for a period of 120 days after
the date on which notice of such breach, requiring the same to be remedied,
shall have been given to the Special Servicer by the Depositor or the Trustee,
provided, however, that to the extent that the Special Servicer is in good faith
attempting to remedy such breach and the Certificateholders shall not be
materially and adversely affected thereby, such cure period may be extended for
up to an additional 60 days; (iv) the Trustee shall receive notice from any
Rating Agency to the effect that the continuation of the Special Servicer in
such capacity would result in the downgrade, qualification or withdrawal of any
rating then assigned by such Rating Agency to any Class of Certificates; (v) a
decree or order of a court or agency or supervisory authority having
jurisdiction in the premises in an involuntary case under any present or future
federal or state bankruptcy, insolvency or similar law for the appointment of a
conservator, receiver, liquidator, trustee or similar official in any
bankruptcy, insolvency, readjustment of debt, marshalling of assets and
liabilities or similar proceedings, or for the winding-up or liquidation of its
affairs, shall have been entered against the Special Servicer and such decree or
order shall have remained in force undischarged or unstayed for a period of 60
days; (vi) the Special Servicer shall consent to the appointment of a
conservator, receiver, liquidator, trustee or similar official in any
bankruptcy, insolvency, readjustment of debt, marshalling of assets and
liabilities or similar proceedings or relating to the Special Servicer or of or
relating to all or substantially all of its property; or (vii) the Special
Servicer shall admit in writing its inability to pay its debts generally as they
become due, file a petition to take advantage of any applicable bankruptcy,
insolvency or reorganization statute, make an assignment for the benefit of its
creditors, voluntarily suspend payment of its obligations, or take any corporate
action in furtherance of the foregoing. In addition to the above events of
termination, upon the direction of the Operating Adviser, subject to the
satisfaction of certain conditions, the Trustee will remove the Special Servicer
from its duties as Special Servicer at any time upon the appointment and
acceptance of such appointment by a successor Special Servicer appointed by the
Operating Adviser; provided that, prior to the effectiveness of any such
appointment the Trustee shall have received a letter from each Rating Agency to
the effect that such appointment would not result in a withdrawal, qualification
or downgrade in any rating then assigned to any Class of Certificates.
The Operating Adviser
An operating adviser (the "Operating Adviser") appointed by the holders of
a majority of the Controlling Class will have the right to approve and direct
certain actions of the Special Servicer; provided that the Operating Adviser
will have no right to direct the Special Servicer to violate any provision of
the Pooling and Servicing Agreement, including, without limitation, the
Servicing Standard. The Special Servicer will be required to seek the approval
of the Operating Adviser for, among other things, (i) any proposed modification
of a Money Term of a Mortgage Loan other than an extension of the original
maturity date for two years or less, (ii) any foreclosure or comparable
conversion of the ownership of a Mortgaged Property, (iii) any proposed sale of
a Specially Serviced Mortgage Loan (other than in connection with the
termination of the Trust Fund as described herein under "Description of the
Certificates--Optional Termination"), (iv) any proposal to bring an REO Property
into compliance with applicable environmental laws, and (v) any acceptance of
substitute or additional collateral for a Mortgage Loan. The Operating Adviser,
in its good faith business judgment, may reject the recommendations of the
Special Servicer in accordance with the terms of the Pooling and Servicing
Agreement. However, if the Operating Adviser has not approved or rejected a
proposed action of the Special Servicer within five business days of the date
S-81
<PAGE> 82
that the Operating Adviser received notice of such proposed action, or if the
Special Servicer believes that the Servicing Standard requires that the Special
Servicer take such action, the Special Servicer may take such action. In
addition, subject to the satisfaction of certain conditions, the Operating
Adviser will have the right to direct the Trustee to remove the Special Servicer
at any time upon the appointment and acceptance of such appointment by a
successor Special Servicer appointed by the Operating Adviser; provided that,
prior to the effectiveness of any such appointment the Trustee shall have
received a letter from each Rating Agency to the effect that such appointment
would not result in a withdrawal, qualification or downgrade in any rating then
assigned to any Class of Certificates.
The "Controlling Class" will be the most subordinate Class of Subordinate
Certificates outstanding at any time of determination; provided, however, that
the Certificate Balance of such Class of Certificates is not less than 50% (or
20% in the case of the Class L Certificates) of the initial Certificate Balance
of such Class, in which case the Controlling Class shall be the next most
subordinate Class of Certificates.
At any time, the holders of a majority of the Controlling Class may direct
the Trustee in writing to hold an election for an Operating Adviser, which
election will be held commencing as soon as practicable thereafter or upon (i)
the resignation or removal of the person acting as Operating Adviser or (ii)
upon a determination by the Trustee that the Controlling Class has changed.
After such receipt or determination, the Trustee is required to call a meeting
of such holders (which may be held by telephone) in the manner specified in the
Pooling and Servicing Agreement. The meeting will be held in accordance with the
procedures specified in the Pooling and Servicing Agreement. At the meeting,
each such holder will be entitled to nominate one person to act as Operating
Adviser.
Mortgage Loan Modifications
Subject to any restrictions applicable to REMICs, and to certain
limitations imposed by the Pooling and Servicing Agreement, the Master Servicer
may amend any term, other than a Money Term, of a Mortgage Loan that is not a
Specially Serviced Mortgage Loan and may extend the maturity date of any Balloon
Loan (other than a Specially Serviced Mortgage Loan) to a date not more than 60
days beyond the original maturity date. Subject to any restrictions applicable
to REMICs, and to the requirement that it obtain the approval of the Operating
Adviser to the amendment of any Money Term of a Mortgage Loan, the Special
Servicer will be permitted to enter into a modification, waiver or amendment of
the terms of any Specially Serviced Mortgage Loan, including any modification,
waiver or amendment to (i) reduce the amounts owing under any Specially Serviced
Mortgage Loan by forgiving principal, accrued interest and/or any Prepayment
Premium, (ii) reduce the amount of the Scheduled Payment on any Specially
Serviced Mortgage Loan, including by way of a reduction in the related Mortgage
Rate, (iii) forebear in the enforcement of any right granted under any Mortgage
Note or Mortgage relating to a Specially Serviced Mortgage Loan, (iv) extend the
maturity date of any Specially Serviced Mortgage Loan, and/or (v) accept a
principal prepayment during any Lock-out Period; provided in each case that (x)
the related borrower is in default with respect to the Specially Serviced
Mortgage Loan or, in the reasonable judgment of the Special Servicer, such
default is reasonably foreseeable and (y) in the reasonable judgment of the
Special Servicer, such modification, waiver or amendment would increase the
recovery to Certificateholders on a net present value basis documented to the
Trustee.
In no event, however, will the Special Servicer be permitted to (i) extend
the maturity date of a Specially Serviced Mortgage Loan beyond a date that is
two years prior to the Final Rated Distribution Date, (ii) extend the maturity
date of a Specially Serviced Mortgage Loan and provide for an interest rate
during such extension below the then prevailing interest rate for comparable
loans, as determined by the Special Servicer (such limitation of extensions made
at a below market rate shall not limit the ability of the Special Servicer to
extend the maturity date of any Specially Serviced Mortgage Loan at an interest
rate at or in excess of the prevailing rate for comparable loans at the time of
such modification), (iii) if the Specially Serviced Mortgage Loan is secured by
a ground lease, extend the maturity date of such Specially Serviced Mortgage
Loan beyond a date which is ten (10) years prior to the expiration of the term
of such ground lease, (iv) reduce the Mortgage Rate of a Specially Serviced
Mortgage Loan to a rate below the then prevailing interest rate for comparable
loans, as determined by the Special Servicer or (v) defer interest due on any
Specially Serviced Mortgage Loan in excess of 10% of the Scheduled Principal
Balance of such Specially Serviced Mortgage Loan or defer the collection of
interest on any Specially Serviced Mortgage Loan without accruing interest on
such deferred interest at a rate at least equal to the Mortgage Rate of such
Specially Serviced Mortgage Loan.
S-82
<PAGE> 83
Notwithstanding the foregoing, if a Mortgage Loan is a Balloon Loan that
has failed to make the Balloon Payment at its scheduled maturity, and such
Balloon Loan is not a Specially Serviced Mortgage Loan (other than by reason of
failure to make the Balloon Payment) and has not been delinquent in the
preceding 12 months (other than with respect to the Balloon Payment), then in
addition to the other alternatives specified above, the Special Servicer may
make up to three one-year extensions at the existing Mortgage Rate for such
Mortgage Loans.
Modifications of a Mortgage Loan that forgive principal or interest will
result in Realized Losses on such Mortgage Loan and such Realized Losses will be
allocated among the various Classes of Certificates in the manner described
under "Description Of The Certificates--Distributions--Subordination; Allocation
of Losses and Certain Expenses" herein.
The modification of a Mortgage Loan may tend to reduce prepayments by
avoiding liquidations and therefore may extend the weighted average life of the
Certificates beyond that which might otherwise be the case. See "Yield,
Prepayment And Maturity Considerations" herein.
Sale of Defaulted Mortgage Loans and REO Properties
The Special Servicer, with the written approval of the Operating Adviser,
may offer to sell for cash to any person, for an amount equal to the Purchase
Price, any REO Property or any Mortgage Loan that is in default or as to which
the Special Servicer has made a determination that default is imminent. The
Special Servicer is required to give the Operating Adviser and the Trustee not
less than five days' prior written notice of its intention to sell any such
defaulted Mortgage Loan or REO Property, to offer such defaulted Mortgage Loan
or REO Property for sale in a fair auction or other manner as is consistent with
the Servicing Standard, and to accept the highest cash bid received in such
auction or other procedure from any person other than an interested person (as
described in the Pooling and Servicing Agreement) for any defaulted Mortgage
Loan or REO Property in an amount, except as otherwise provided in the Pooling
and Servicing Agreement in the case of REO Property, at least equal to the
Purchase Price.
In the absence of any bid in the amount of the Purchase Price, the Special
Servicer may accept the highest cash bid, if the Special Servicer determines,
consistent with the Servicing Standard and with the approval of the Operating
Adviser, that such sale at such price is in the best interest of
Certificateholders; provided that the Special Servicer may not accept such bid
if made by the Trustee in its individual capacity, any of its affiliates, or any
interested person (as described in the Pooling and Servicing Agreement), except
in limited circumstances described in the Pooling and Servicing Agreement,
including the ability of the Special Servicer to purchase a defaulted Mortgage
Loan or REO Property only if it is the highest bidder and at least three offers
are received from independent third parties.
Foreclosures
The Special Servicer may at any time, with the approval of the Operating
Adviser and in accordance with the Pooling and Servicing Agreement institute
foreclosure proceedings, exercise any power of sale contained in any Mortgage,
obtain a deed in lieu of foreclosure or otherwise acquire title to a Mortgaged
Property by operation of law or otherwise, if such action is consistent with the
Servicing Standard and a default on the related Mortgage Loan has occurred but
subject, in all cases, to certain limitations concerning environmental matters
and, in certain cases, the receipt of an opinion of counsel relating to certain
REMIC requirements.
If any Mortgaged Property is acquired as described in the preceding
paragraph, the Special Servicer is required to sell the REO Property within two
years of acquisition, or any applicable extension period, unless the Special
Servicer has previously delivered to the Trustee an opinion of counsel to the
effect that the holding of the REO Property by the Trust Fund subsequent to two
years after its acquisition, or to the expiration of such extension period, will
not result in the failure of such REO Property to qualify as "foreclosure
property" under the REMIC provisions of the Code. In addition, the Special
Servicer is required to use its best efforts to sell any REO Property prior to
the Final Rated Distribution Date.
S-83
<PAGE> 84
In general, the Special Servicer will be obligated to, or may contract
with a third party to, operate and manage any Mortgaged Property acquired as REO
Property in a manner that would, to the extent commercially feasible, maximize
the Trust Fund's net after-tax proceeds from such property. After the Special
Servicer reviews the operation of such property and consults with the Trustee to
determine the Trust Fund's federal income tax reporting position with respect to
income it is anticipated that the Trust Fund would derive from such property,
the Special Servicer could determine that it would not be commercially feasible
to manage and operate such property in a manner that would avoid the imposition
of a tax on "net income from foreclosure property" within the meaning of the
REMIC provisions of the Code or a tax on "prohibited transactions" under Section
860F of the Code (either such tax referred to herein as an "REO Tax"). To the
extent that income the Trust Fund receives from an REO Property is subject to a
tax on (i) "net income from foreclosure property", such income would be subject
to federal tax at the highest marginal corporate tax rate (currently 35%) and
(ii) "prohibited transactions", such income would be subject to federal tax at a
100% rate. The determination as to whether income from an REO Property would be
subject to an REO Tax will depend on the specific facts and circumstances
relating to the management and operation of each REO Property, but is
particularly an issue as to Mortgaged Property operated as a hotel or skilled
health care facility. Generally, income from an REO Property that is directly
operated by the Special Servicer would be apportioned and classified as
"service" or "non-service" income. The "service" portion of such income could be
subject to federal tax either at the highest marginal corporate tax rate or at
the 100% rate on marginal corporate tax rate or, although it appears unlikely,
at the 100% rate applicable to "prohibited transactions." Any REO Tax imposed on
the Trust Fund's income from an REO Property would reduce the amount available
for distribution to Certificateholders. Certificateholders are advised to
consult their own tax advisors regarding the possible imposition of REO Taxes in
connection with the operation of commercial REO Properties by REMICs.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following discussion, when read in conjunction with the discussion of
"Certain Federal Income Tax Consequences" in the Prospectus, describes the
material federal income tax considerations for investors in the Offered
Certificates. However, these two discussions do not purport to deal with all
federal tax consequences applicable to all categories of investors some of which
may be subject to special rules, and do not address state and local tax
considerations. Prospective purchasers should consult their own tax advisers in
determining the federal, state, local and any other tax consequences to them of
the purchase, ownership and disposition of the Offered Certificates.
General
For United States federal income tax purposes, the Trust Fund will be a
"tiered REMIC structure" described in the Prospectus. See "Certain Federal
Income Tax Consequences--REMICs--Tiered REMIC Structures" in the Prospectus.
Three separate REMIC elections will be made with respect to the Trust Fund. Upon
the issuance of the Offered Certificates, Sidley & Austin, counsel to the
Depositor, will deliver its opinion generally to the effect that, assuming (i)
the making of proper elections, (ii) ongoing compliance with all provisions of
the Pooling and Servicing Agreement and (iii) continuing compliance with
applicable provisions of the Code, as it may be amended from time to time, and
applicable Treasury Regulations adopted thereunder, for federal income tax
purposes, each of REMIC I, REMIC II and REMIC III will qualify as a REMIC under
the Code. For federal income tax purposes, the Class R Certificate will
represent three separate classes of REMIC residual interests evidencing the sole
class of "residual interests" in each of REMIC I, REMIC II and REMIC III,
respectively; and the REMIC Regular Certificates will evidence the "regular
interests" in, and will be treated as debt instruments of, REMIC III. See
"Certain Federal Income Tax Consequences--REMICs" in the Prospectus. The Offered
Certificates will be REMIC Regular Certificates issued by REMIC III. See
"Certain Federal Income Tax Consequences--REMICs--Taxation of Owners of REMIC
Regular Certificates" in the Prospectus for a discussion of the principal
federal income tax consequences of the purchase, ownership and disposition of
the Offered Certificates. References in the Prospectus to the Master REMIC
should be read as references to REMIC III. Each of REMIC I and REMIC II will be
a Subsidiary REMIC as such term is used in the Prospectus.
The Offered Certificates will be "real estate assets" within the meaning
of Section 856(c)(4)(A) (formerly, Section 856(c)(5)(A)) and 856(c)(5)(B)
(formerly, Section 856(c)(6)(B)) of the Code in the same proportion that the
assets of the Trust Fund underlying such Certificates would be so treated. In
addition, interest (including original issue discount, if any) on the Offered
Certificates will be interest described in Section 856(c)(3)(B) of the Code to
S-84
<PAGE> 85
the extent that such Certificates are treated as "real estate assets" under
Section 856(c)(4)(A) of the Code. Moreover, the Offered Certificates will be
"qualified mortgages" under Section 860G(a)(3) of the Code if transferred to
another REMIC on its start-up day in exchange for regular or residual interests
therein. Offered Certificates also will qualify for treatment as "permitted
assets," within the meaning of Section 860L(c)(1)(G) of the Code, of a financial
asset securitization investment trust (a "FASIT") generally in the same
proportion as the assets of the Trust Fund would be so treated, and those
Offered Certificates held by certain financial institution will constitute
"evidence of indebtedness" within the meaning of Section 582(c)(1) of the Code.
The Offered Certificates will be treated as assets described in Section
7701(a)(19)(C)(v) of the Code generally only to the extent that the Mortgage
Loans secured by mortgages on multifamily, nursing home and congregate care
properties are a percentage of the principal balance of the Mortgage Pool. The
percentage of such Mortgage Loans included in the initial principal balance of
the Mortgage Pool is 25.1%. The Small Business Job Protection Act of 1996, as
part of the repeal of the bad debt reserve method for thrift institutions,
repealed the application of Section 593(d) to any taxable year beginning after
December 31, 1995. See "Description of the Mortgage Pool" herein and "Certain
Federal Income Tax Consequences--REMICs" in the Prospectus.
Original Issue Discount and Premium
The Class X-2 Certificates will, and the other Classes of Offered
Certificates will not, be treated as having been issued with "original issue
discount" ("OID") for federal income tax reporting purposes. Certain Classes of
Offered Certificates may be treated as issued with OID not exceeding a de
minimis amount, and certain other Classes of Offered Certificates may be issued
with premium, depending on the price at which such Classes of Certificates are
sold. The Prepayment assumption that will be used in determining the rate of
accrual of original issue discount and amortizable premium, if any, for federal
income tax purposes will be a 0% CPR (as described in the Prospectus) applied to
each Mortgage Loan during any period that voluntary principal prepayments may be
made thereon without a Yield Maintenance Premium being required. For a
description of CPR, see "Yield, Prepayment and Maturity Considerations" in this
Prospectus Supplement. However, the Depositor makes no representation that the
Mortgage Loans or any Class of Certificates will only prepay during any such
period or that they will prepay at any particular rate before or during any such
period.
The IRS has issued OID Regulations under Section 1271 to 1275 of the Code
generally addressing the treatment of debt instruments issued with original
issue discount. See "Certain Federal Income Tax Consequences--REMICs--Taxation
of Owners of REMIC Regular Certificates--Original Issue Discount and Premium" in
the Prospectus. Purchasers of the Offered Certificates should be aware that the
OID Regulations and Section 1272(a)(6) of the Code do not adequately address
certain issues relevant to prepayable securities such as the Offered
Certificates. Moreover, the OID Regulations include an antiabuse rule allowing
the Internal Revenue Service to apply or depart from the OID Regulations where
necessary or appropriate to ensure a reasonable tax result in light of
applicable statutory provisions. No assurance can be given that the Internal
Revenue Service will not take a different position as to matters respecting
accrual of original issue discount in respect of Offered Certificates. In
addition, there is considerable uncertainty concerning the application of
Section 1272(a)(6) of the Code and the OID Regulations to REMIC Regular
Certificates, such as the Class X Certificates, that are Super-Premium
Certificates. See "Certain Federal Income Tax Consequences--REMICs--Taxation of
Owners of REMIC Regular Certificates--Original Issue Discount and Premium" in
the Prospectus. Prospective purchasers of the Offered Certificates are advised
to consult their tax advisors concerning the tax treatment of such Certificates,
and the appropriate method of reporting interest and original issue discount
with respect to Offered Certificates.
In the method for computing original issue discount described in the
Prospectus results in a negative amount for any period with respect to a holder
of a Certificate, the amount of original issue discount allocable to such period
would be zero and such Certificateholder will be permitted to offset such
negative amount only against future original issue discount (if any)
attributable to such Certificate. Although the matter is not free from doubt, a
holder may be permitted to deduct a loss to the extent that his or her
respective remaining basis in such Certificate exceeds the maximum amount of
future payments to which such Certificateholder is entitled, assuming no further
prepayments of the Mortgage Loans. Any such loss might be treated as a capital
loss.
Certain Classes of Offered Certificates may be treated for federal income
tax purposes as having been issued at a premium. Whether any holder of any such
Class of Certificates will be treated as holding a Certificate
S-85
<PAGE> 86
with amoritizable bond premium will depend on such Certificateholder's purchase
price and the distributions remaining to be made on such Certificate at the time
of its acquisition by such Certificateholder. On December 31, 1997, the IRS
published in the Federal Register final regulations on the amortization of bond
premium. Those regulations (a) do not apply to regular interests in a REMIC such
as the Offered Certificates, and (b) state that they are intended to create no
inference concerning the amortization of premium of such instruments. Holders of
each such Class of Certificates should consult their tax advisors regarding the
possibility of making an election to amortize such premium. See "Certain Federal
Income Tax Consequences--REMICs--Taxation of Owners of REMIC Regular
Certificates--Premium" in the Prospectus.
To the extent that any Offered Certificate is purchased in this offering
or in the secondary market at not more than a de minimis discount, as defined in
the Prospectus, a holder who receives a payment that is included in the stated
redemption price at maturity (generally, the principal amount) of such
Certificate will recognize gain equal to the excess, if any, of the amount of
the payment over an allocable portion of the holder's adjusted basis in the
Offered Certificate. Such allocable portion of the holder's adjusted basis will
be based upon the proportion that such payment of stated redemption price bears
to the total remaining stated redemption price at maturity. Immediately before
such payment is made, of such Certificate. See "Certain Federal Income Tax
Consequences--REMICs--Taxation of Owners of REMIC Regular Certificates--Original
Issue Discount and Premium" and "--Sale Exchange or Redemption" in the
Prospectus.
The OID Regulations in some circumstances permit the holder of a debt
instrument to recognize original issue discount under a method that differs from
that of the issuer. Accordingly, it is possible that holders of Offered
Certificates issued with original issue discount may be able to select a method
for recognizing original issue discount that differs from that used by the
Trustee in preparing reports to Certificateholders and the IRS. Prospective
purchasers of Offered Certificates issued with original issue discount are
advised to consult their tax advisors concerning the treatment of such
Certificates.
Prepayment Premiums actually collected on the Mortgage Loans will be
distributed to the holders of each Class of Certificates entitled thereto as
described herein. It is not entirely clear under the Code when the amount of a
Prepayment Premium should be taxed to the holder of a Class of Certificates
entitled to a Prepayment Premium. For federal income tax information reporting
purposes. Prepayment Premiums will be treated as income to the holders of a
Class of Certificates entitled to Prepayment Premiums only after the Master
Servicer's actual receipt of a Prepayment Premium to which such Class of
Certificates is entitled under the terms of the Pooling and Servicing Agreement,
rather than including projected Prepayment Premiums in the determination of a
Certificateholder's projected constant yield to maturity. It appears that
Prepayment Premiums are treated as ordinary income rather than capital gain.
However, the timing and characterization of such income is not entirely clear
and Certificateholders should consult their tax advisors concerning the
treatment of Prepayment Premiums.
Additional Considerations
The Special Servicer is authorized under certain circumstances in which
doing so is consistent with maximizing the Trust Fund's net after-tax proceeds
from an REO Property, to incur taxes on the Trust Fund in connection with the
operation of such REO Property. Any such taxes imposed on the Trust Fund would
reduce the amount distributable to Certificateholders. See "Servicing of the
Mortgage Loans--Foreclosure" herein.
Federal income tax information reporting duties with respect to the
Offered Certificates and REMIC I, REMIC II and REMIC III will be the obligation
of the Trustee, and not of the Master Servicer. See "Certain Federal Income Tax
Consequences REMICs--Information Reporting and Backup Withholding" in the
Prospectus.
Fur further information regarding the tax consequences of investing in the
Offered Certificates, see "Certain Federal Income Tax Consequences--REMICs" and
"State Tax Considerations" in the Prospectus.
S-86
<PAGE> 87
CERTAIN LEGAL ASPECTS OF MORTGAGE LOANS
LOCATED IN CALIFORNIA
The following discussion summarizes certain legal aspects of mortgage
loans secured by real property in California (approximately 35.2% of the Initial
Pool Balance) which is general in nature. This summary does not purport to be
complete and is qualified in its entirety by reference to the applicable federal
and state laws governing the Mortgage Loans.
Mortgage Loans in California generally are secured by deeds of trust on
the related real estate. Foreclosure of a deed of trust in California may be
accomplished by a non-judicial trustee's sale under a specific provision in the
deed of trust or by judicial foreclosure. Public notice of either the trustee's
sale or the judgment of foreclosure is given for a statutory period of time
after which the mortgaged real estate may be sold by the Trustee, if foreclosed
pursuant to the Trustee's power of sale, or by court appointed sheriff under a
judicial foreclosure. Following a judicial foreclosure sale, the borrower or its
successor in interest may, for a period of up to one year, redeem the property.
California's "one action rule" requires the lender to exhaust the security
afforded under the deed of trust by foreclosure in an attempt to satisfy the
full debt before bringing a personal action (if otherwise permitted) against the
borrower for recovery of the debt except in certain cases involving
environmentally impaired real property. California case law has held that acts
such as an offset of an unpledged account or the application of rents from
secured property prior to foreclosure, under some circumstances, constitute
violations of such statutes. Violations of such statutes may result in the loss
of some or all of the security under the loan. Other statutory provisions in
California limit any deficiency judgment (if otherwise permitted) against the
borrower following a judicial sale to the excess of the outstanding debt over
the greater of (i) the fair market value of the property at the time of the
public sale or (ii) the amount of the winning bid in the foreclosure. Further,
under California law, once a property has been sold pursuant to a power-of-sale
clause contained in a deed of trust, the lender is precluded from seeking a
deficiency judgment from the borrower or, under certain circumstances,
guarantors. In certain circumstances, the lender may have a receiver appointed.
ERISA CONSIDERATIONS
ERISA and the Code impose certain restrictions on employee benefit and
other plans ("Plans") that are subject to ERISA and/or Section 4975 of the Code
and on persons that have certain specified relationships to such Plans ("parties
in interest" under ERISA or "disqualified persons" under Section 4975 of the
Code) (collectively, "Parties in Interest"). ERISA also imposes certain duties
on persons who are fiduciaries of Plans subject to ERISA and prohibits certain
transactions between a Plan and Parties in Interest with respect to such Plan.
Under ERISA, any person who exercises any authority or control respecting the
management or disposition of the assets of a Plan, and any person who provides
investment advice with respect to such assets for a fee, is a fiduciary of such
Plan.
Plan Assets
A final regulation (the "DOL Regulation") promulgated by the Department of
Labor (the "DOL") defining the term "plan assets" provides, generally, that when
a Plan makes an equity investment in another entity, the underlying assets of
that entity may be considered plan assets unless certain exceptions apply. There
can be no assurance, however, that any of the exceptions set forth in the DOL
Regulation will apply to the purchase or holding of Certificates. Accordingly, a
Plan's investment in Certificates may cause the Mortgage Loans or other assets
constituting, or underlying the assets of, the Trust Fund to be deemed plan
assets. If the Mortgage Loans or other Trust Fund assets constitute plan assets,
then any party exercising management or discretionary control regarding those
assets may be deemed to be a "fiduciary" with respect to those assets, and thus
subject to the fiduciary requirements and prohibited transaction provisions of
ERISA and Section 4975 of the Code with respect to the Mortgage Loans and other
Trust Fund assets. Certain affiliates of the Depositor, the Underwriters, the
Master Servicer and certain of their respective affiliates might be considered
or might become fiduciaries or other Parties in Interest with respect to
investing Plans. Moreover, the Trustee, the Master Servicer, the Special
Servicer, the Fiscal Agent, the Operating Adviser, any insurer, special hazard
insurer, primary insurer or any other issuer of a credit support instrument
relating to the primary assets in the Trust Fund or certain of their respective
affiliates might be considered fiduciaries or other Parties in Interest with
respect to investing Plans. In the absence of an applicable exemption,
"prohibited transactions" (within the meaning of ERISA and Section 4975 of the
Code) could arise if
S-87
<PAGE> 88
Certificates were acquired by, or with "plan assets" of, a Plan with respect to
which any such person is a Party in Interest.
In addition, an insurance company proposing to acquire or hold the
Subordinate Certificates or the Residual Certificates with assets of its general
account should consider the extent to which such acquisition or holding would be
subject to the requirements of ERISA and Section 4975 of the Code under John
Hancock Mutual Life Insurance Co. v. Harris Trust and Savings Bank, 510 U.S. 86
(1993), and Section 401(c) of ERISA, as amended by the Small Business Job
Protection Act of 1996, Public Law No. 104-188, and subsequent DOL and judicial
guidance. See "--Insurance Company General Accounts" below.
Special Exemption Applicable to Senior Certificates
With respect to the acquisition and holding of Senior Certificates, the
DOL has granted to the Underwriters individual prohibited transaction exemptions
(collectively, the "Exemptions"), which generally exempt from certain of the
prohibited transaction rules of ERISA and Section 4975 of the Code transactions
relating to (i) the initial purchase, the holding, and the subsequent resale by
Plans of Certificates evidencing interests in pass-through trusts and (ii)
transactions in connection with the servicing, management and operation of such
trusts, provided that the assets of such trusts consist of certain secured
receivables, loans and other obligations that meet the conditions and
requirements of the Exemption. The assets covered by the Exemption include
mortgage loans such as the Mortgage Loans and fractional undivided interests in
such Loans.
Among the conditions that must be satisfied for the Exemptions to apply
are the following:
(1) The acquisition of the Certificates by a Plan must be on terms
(including the price for the 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 Certificates acquired
by the Plan are not subordinated to the rights and interests evidenced by
other Certificates of the Trust Fund;
(3) The Certificates acquired by the Plan must have received a
rating at the time of such acquisition that is in one of the three highest
generic rating categories from S&P, Fitch IBCA, Inc., Moody's Investors
Service, Inc. or DCR;
(4) The sum of all payments made to the Underwriters in connection
with the Distribution of the Certificates must represent not more than
reasonable compensation for underwriting the Certificates; the sum of all
payments made to and retained by the Depositor pursuant to the assignment
of the Mortgage Loans to the Trust Fund must represent not more than the
fair market value of such Mortgage Loans; the sum of all payments made to
and retained by the Master Servicer, the Special Servicer, and any
sub-servicer must represent not more than reasonable compensation for such
person's services under the Pooling and Servicing Agreement or other
relevant servicing agreement and reimbursement of such person's reasonable
expenses in connection therewith; and
(5) The Plan investing in the Certificates must be an "accredited
investor" as defined in Rule 501(a)(1) of Regulation D of the Securities
and Exchange Commission under the 1933 Act.
Moreover, the Exemptions provide relief from certain self-dealing/conflict
of interest prohibited transactions only if, among other requirements, (i) the
investing Plan fiduciary (or its affiliates) is an obligor with respect to five
percent or less of the fair market value of the obligations contained in the
trust; (ii) the Plan's investment in certificates does not exceed 25 percent of
all of the certificates outstanding at the time of the acquisition; and (iii)
immediately after the acquisition, no more than 25 percent of the assets of the
Plan are invested in certificates representing an interest in one or more trusts
containing assets sold or serviced by the same entity.
The Depositor believes that the Exemptions will apply to the acquisition
and holding of Senior Certificates by Plans or persons acting on behalf of or
with "plan assets" of Plans, and that all conditions of the Exemptions,
S-88
<PAGE> 89
other than those within the control of the investing Plans (or Plan investors),
have been met. Upon request, the Underwriters will deliver to any fiduciary or
other person considering investing "plan assets" of any Plan in the Certificates
a list identifying each borrower that is the obligor under each Mortgage Loan
that constitutes more than five percent of the aggregate principal balance of
the assets of the Trust Fund.
Because the characteristics of the Subordinate Certificates do not meet
the requirements of the Exemptions, the purchase or holding of such Certificates
by, on behalf of or with "plan assets" of any Plan may result in a non-exempt
prohibited transaction or the imposition of excise taxes or civil penalties
under ERISA and/or Section 4975 of the Code. Accordingly, the Subordinate
Certificates may not be purchased by, transferred to or held by a Plan or any
person using "plan assets" of any Plan to effect such acquisition or holding.
Each person that acquires or holds any Subordinate Certificates shall be deemed
to have represented and warranted to the Depositor, the Trustee and the Master
Servicer that it satisfies the foregoing limitation, provided that an insurance
company investing solely assets of its general account may acquire and hold the
Subordinate Certificates subject to the limitations described in "--Insurance
Company General Accounts" below.
Insurance Company General Accounts
The Small Business Job Protection Act of 1996 added a new Section 401(c)
to ERISA ("Section 401(c)"), which provides certain exemptive relief from the
provisions of Part 4 of Title I of ERISA and Section 4975 of the Code, including
the prohibited transaction restrictions imposed by ERISA and the related excise
taxes imposed by the Code, for transactions involving an insurance company
general account. The DOL issued proposed regulations under Section 401(c) on
December 22, 1997, but the required final regulations have not been issued as of
the date hereof. Section 401(c) required the DOL to issue final regulations (the
"401(c) Regulations") no later than December 31, 1997 to provide guidance for
purposes of determining, in cases where insurance policies or annuity contracts
supported by an insurer's general account are issued to or for the benefit of a
Plan on or before December 31, 1998, which general account assets constitute
Plan Assets. Section 401(c) generally provides that, until the date which is 18
months after the 401(c) Regulations become final, no person shall be subject to
liability under Part 4 of Title I of ERISA and Section 4975 of the Code on the
basis of a claim that the assets of an insurance company general account
constitute "plan assets" of any Plan, except (i) as otherwise provided by the
DOL in the 401(c) Regulations to prevent avoidance of the Regulations or (ii) as
determined in an action brought by the DOL for certain breaches of fiduciary
duty which would also constitute a violation of federal or state criminal law.
Any assets of an insurance company general account which support insurance
policies or annuity contracts issued to Plans after December 31, 1998, or on or
before that date for which the insurer does not comply with the 401(c)
Regulations, may be treated as "plan assets" of such Plans. Because Section
401(c) does not relate to insurance company separate accounts, separate account
assets continue to be treated as "plan assets" of any Plan that is invested in
such separate account. Insurance companies contemplating the investment of
general account assets in the Subordinate Certificates or the Residual
Certificates should consult with their legal counsel with respect to the
applicability of Section 401(c), including the general account's ability to
continue to hold such Certificates after the date which is 18 months after the
date the 401(c) Regulations become final.
Accordingly, any insurance company that acquires or holds any Subordinate
Certificate shall be deemed to have represented and warranted to the Depositor,
the Trustee and the Master Servicer that (i) such acquisition and holding is
permissible under applicable law, will not constitute or result on a non-exempt
prohibited transaction under ERISA or Section 4975 of the Code, and will not
subject the Company, the Trustee or the Master Servicer to any obligation in
addition to those undertaken in the Pooling and Servicing Agreement, and (ii)
the statements made in either of the following two paragraphs is correct:
(a) The source of funds used to acquire and hold such Certificates
is an "insurance company general account" (as defined in DOL Prohibited
Transaction Class Exemption ("PTCE") 95-60) and the conditions set forth
in Sections I and III of PTCE 95-60 have been satisfied; or
(b) (1) The source of funds used to acquire and hold such
Certificates is an insurance company general account, (2) applicable
requirements of Section 401(c) and the 401(c) Regulations to be
promulgated thereunder have been satisfied and will continue to be
satisfied, and (3) the insurance company represents that it understands
that the operation of the general account after December 31, 1998 may
affect its ability to continue to hold such Certificates after the date
which is 18 months after the 401(c)
S-89
<PAGE> 90
Regulations become final, and if the assets of the general account then
include "plan assets" of any Plan, it will dispose of such Certificates
prior to the date which is 18 months after the 401(c) Regulations become
final, unless the continued holding of such Certificates is then
permissible under PTCE 95-60, another PTCE or an exception under Section
401(c).
General Investment Considerations
Prospective Plan investors should consult with their legal counsel
concerning the impact of ERISA and Section 4975 of the Code, the applicability
of the Exemption or other exemptive relief, and the potential consequences to
their specific circumstances, prior to making an investment in the Certificates.
Moreover, each Plan fiduciary should determine whether, under the general
fiduciary standards of ERISA regarding prudent investment procedure and
diversification, an investment in the Certificates is appropriate for the Plan,
taking into account the overall investment policy of the Plan and the
composition of the Plan's investment portfolio.
LEGAL INVESTMENT
The Offered Certificates will not constitute "mortgage related securities"
for purposes of the Secondary Mortgage Market Enhancement Act of 1984 ("SMMEA").
The appropriate characterization of a Class of Offered Certificates under
various legal investment restrictions, and thus the ability of investors subject
to these restrictions to purchase Offered Certificates, may be subject to
significant interpretive uncertainties. All investors whose investment authority
is subject to legal restrictions should consult their own legal advisors to
determine whether, and to what extent, the Offered Certificates will constitute
legal investments for them.
The Depositor makes no representations as to the proper characterization
of the Offered Certificates for legal investment or financial institution
regulatory purposes, or as to the ability of particular investors to purchase
the Offered Certificates under applicable legal investment restrictions. The
uncertainties referred to above (and any unfavorable future determinations
concerning legal investment or financial institution regulatory characteristics
of the Offered Certificates) may adversely affect the liquidity of the Offered
Certificates. See "Legal Investment" in the Prospectus.
USE OF PROCEEDS
The Depositor will apply the net proceeds of the offering of the
Certificates towards the simultaneous purchase of the Mortgage Loans from the
Sellers and to pay certain expenses in connection with the Issuance of the
Certificates.
PLAN OF DISTRIBUTION
The Depositor has entered into an underwriting agreement (the
"Underwriting Agreement") with Morgan Stanley & Co. Incorporated, an affiliate
of the Depositor, Bear, Stearns & Co. Inc. and Deutsche Morgan Grenfell Inc.
(collectively, the "Underwriters"). Subject to the terms and conditions set
forth in the Underwriting Agreement, the Depositor has agreed to sell to each
Underwriter, and each Underwriter has agreed severally to purchase from the
Depositor, the percentage of the respective aggregate Certificate Balance or
Notional Amount of each Class of Offered Certificates set forth below.
Class Class Class Class Class Class Class
Underwriter A-1 A-2 X-2 B C D E
- ----------- ----- ----- ----- ----- ----- ----- -----
Morgan Stanley & Co.
Incorporated 65% 65% 100% 100% 100% 100% 100%
Bear, Stearns & Co.,
Incorporated 25% 25% 0% 0% 0% 0% 0%
Deutsche Morgan Grenfell
Inc. 10% 10% 0% 0% 0% 0% 0%
--- --- --- --- --- --- ---
Total............ 100% 100% 100% 100% 100% 100% 100%
S-90
<PAGE> 91
The Underwriting Agreement provides that the obligations of the
Underwriters are subject to certain conditions precedent, and that the
Underwriters severally will be obligated to purchase all of the Offered
Certificates if any are purchased. In the event of a default by any Underwriter,
the Underwriting Agreement provides that the purchase commitment of the
non-defaulting Underwriters may be increased. Proceeds to the Depositor from the
sale of the Offered Certificates, before deducting expenses payable by the
Depositor, will be approximately $1,304,115,763, plus accrued interest.
The Underwriters have advised the Depositor that they propose to offer the
Offered Certificates from time to time for sale in one or more negotiated
transactions or otherwise at varying prices to be determined at the time of
sale. The Underwriters may effect such transactions by selling such Classes of
Offered Certificates to or through dealers and such dealers may receive
compensation in the form of underwriting discounts, concessions or commissions
from the Underwriters and any purchasers of such Classes of Offered Certificates
for whom they may act as agent.
The Offered Certificates are offered by the Underwriters when, as and if
issued by the Depositor, delivered to and accepted by the Underwriters and
subject to their right to reject orders in whole or in part. It is expected that
delivery of the Offered Certificates will be made in book-entry form through the
facilities of DTC against payment therefor on or about March 5, 1998, which is
the fifth business day following the date of pricing of the Certificates. Under
Rule 15c6-1 under the Securities Exchange Act of 1934, as amended, trade in the
secondary market generally are required to settle in three business days, unless
the parties to any such trade expressly agree otherwise. Accordingly, purchasers
who wish to trade Offered Certificates in the secondary market prior to such
delivery should specify a longer settlement cycle, or should refrain from
specifying a shorter settlement cycle, to the extent that failing to do so would
result in a settlement date that is earlier than the date of delivery of such
Offered Certificates.
The Underwriters and any dealers that participate with the Underwriters in
the distribution of the Offered Certificates may be deemed to be underwriters,
and any discounts or commissions received by them and any profit on the resale
of such Classes of Offered Certificates by them may be deemed to be underwriting
discounts or commissions, under the Securities Act of 1933, as amended.
The Depositor has agreed to indemnify the Underwriters against civil
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.
The Underwriters currently intend to make a secondary market in the
Offered Certificates, but they are not obligated to do so.
LEGAL MATTERS
The legality of the Offered Certificates and the material federal income
tax consequences of investing in the Offered Certificates will be passed upon
for the Depositor by Sidley & Austin, New York, New York. Certain legal matters
with respect to the Offered Certificates will be passed upon for the
Underwriters by Sidley & Austin, New York, New York. Certain legal matters will
be passed upon for Wells Fargo by Orrick, Herrington & Sutcliffe LLP, San
Francisco, California, for MSMC by Sidley & Austin, New York, New York, and for
JHREF by Cadwalader, Wickersham & Taft, New York, New York.
S-91
<PAGE> 92
RATINGS
It is a condition of the issuance of the Offered Certificates that they
receive the following credit ratings from DCR and S&P:
CLASS DCR S&P
- ----- --- ---
Class A-1........................................... AAA AAA
Class A-2........................................... AAA AAA
Class X-2........................................... AAA AAAr
Class B............................................. AA AA
Class C............................................. A A
Class D............................................. BBB BBB
Class E............................................. BBB- NR
"NR" = Not Rated
The ratings of the Offered Certificates address the likelihood of the
timely payment of interest and the ultimate payment of principal, if any, due on
the Offered Certificates by the Final Rated Distribution Date. The ratings on
the Offered Certificates should be evaluated independently from similar ratings
on other types of securities. A security rating is not a recommendation to buy,
sell or hold securities and may be subject to revision or withdrawal at any time
by the assigning rating agency.
The ratings of the Certificates do not represent any assessment of (i) the
likelihood or frequency of principal prepayments on the Mortgage Loans, (ii) the
degree to which such prepayments might differ from those originally anticipated
or (iii) whether and to what extent Prepayment Premiums will be received. A
security rating does not represent any assessment of the yield to maturity that
investors may experience or the possibility that the holders of the Class X-2
Certificates might not fully recover their investment in the event of rapid
prepayments of the Mortgage Loans (including both voluntary and involuntary
prepayments). In general, the ratings thus address credit risk and not
prepayment risk. As described herein, the amounts payable with respect to the
Class X-2 Certificates consist only of interest. If all of the Mortgage Loans
were to prepay in the initial month, with the result that holders of the Class
X-2 Certificates receive only a single month's interest and thus suffer a nearly
complete loss of their investment, all amounts "due" to such Certificateholders
would nevertheless have been paid, and such result will be consistent with the
"AAA/AAAr" ratings received on the Class X-2 Certificates. The aggregate
Notional Amount upon which interest in respect of the Class X-2 Certificates is
calculated will be reduced by the allocation of Realized Losses, Expense Losses
and prepayments of principal, whether voluntary or involuntary. The ratings do
not address the timing or magnitude of reductions of such Notional Amount, but
only the obligation to pay interest timely on such Notional Amount of such
Certificates as so reduced from time to time. Accordingly, the rating of Class
X-2 Certificates should be evaluated independently from similar ratings on other
types of securities.
There can be no assurance as to whether any rating agency not requested to
rate the Offered Certificates will nonetheless issue a rating to any Class
thereof and, if so, what such rating would be. A rating assigned to any Class of
Offered Certificates by a rating agency that has not been requested by the
Depositor to do so may be lower than the ratings assigned thereto at the request
of the Depositor.
S-92
<PAGE> 93
INDEX OF PRINCIPAL DEFINITIONS
Page(s) on which
Term is defined in the
Term Prospectus Supplement
- ---- ---------------------
Accrued Certificate Interest........................................S-22, S-50
Administrative Cost Rate..................................................S-27
Advance Rate........................................................S-28, S-56
Advances............................................................S-27, S-56
Appraisal Event.....................................................S-24, S-52
Appraisal Reduction.................................................S-24, S-52
Assumed Scheduled Payment...........................................S-23, S-51
Available Distribution Amount.......................................S-18, S-48
Balloon Loans.............................................................S-32
Balloon LTV...............................................................S-73
Balloon LTV Ratio.........................................................S-73
Balloon Payment.....................................................S-32, S-41
CEDEL...............................................................S-14, S-44
Certificate Balance.................................................S-15, S-45
Certificate Owner...................................................S-14, S-44
Certificateholders..................................................S-34, S-43
Certificates........................................................S-11, S-43
Class...............................................................S-11, S-43
Class A Certificates................................................S-11, S-43
Closing Date........................................................S-13, S-43
Code......................................................................S-35
Collection Period.........................................................S-13
Commission.................................................................S-6
Compensating Interest Payment.......................................S-26, S-54
Controlling Class...................................................S-13, S-82
Corporate Trust Office....................................................S-60
CRIIMI MAE................................................................S-80
Cut-Off Date..............................................................S-13
DCR.......................................................................S-29
Debt Service Coverage Ratios..............................................S-72
Definitive Certificate..............................................S-14, S-44
Depositor.................................................................S-11
Determination Date........................................................S-13
Discount Rate.............................................................S-51
Distributable Certificate Interest..................................S-22, S-50
Distribution Date....................................................S-3, S-13
Document Defect...........................................................S-76
DOL.......................................................................S-87
DOL Regulation............................................................S-87
DSCR......................................................................S-72
DTC.................................................................S-14, S-44
Due Date..................................................................S-26
ERISA.....................................................................S-36
Euroclear...........................................................S-14, S-44
Expense Losses............................................................S-54
FASIT.....................................................................S-85
Final Rated Distribution Date.............................................S-30
Fiscal Agent..............................................................S-12
S-93
<PAGE> 94
Hospitality Loans.........................................................S-39
Initial Pool Balance.................................................S-3, S-11
Insurance Proceeds........................................................S-51
Interest Accrual Period...................................................S-50
Interest Only Certificates..........................................S-11, S-43
JHREF..........................................................S-3, S-12, S-74
JHREF Loans.........................................................S-12, S-68
LaSalle...................................................................S-59
Liquidation Fee...........................................................S-80
Liquidation Proceeds......................................................S-51
Loan-to-Value.............................................................S-73
Lock-out Period.....................................................S-33, S-69
LTV.......................................................................S-73
Master Servicer...........................................................S-12
Material Breach...........................................................S-76
Material Document Defect..................................................S-76
Money Term................................................................S-24
Morgan Stanley Loans................................................S-12, S-68
Mortgage..................................................................S-68
Mortgage File.............................................................S-74
Mortgage Loan.............................................................S-11
Mortgage Loan Purchase Agreement....................................S-12, S-68
Mortgage Loans.......................................................S-3, S-68
Mortgage Note.............................................................S-68
Mortgage Pool..............................................................S-3
Mortgaged Property........................................................S-31
MSMC.................................................................S-3, S-12
Net Aggregate Prepayment Interest Shortfall.........................S-26, S-54
Net Mortgage Rate...................................................S-18, S-47
Non-30/360 Loan.....................................................S-18, S-47
Notional Amount.....................................................S-15, S-45
Offered Certificates................................................S-11, S-43
OID.......................................................................S-85
Operating Adviser...................................................S-13, S-82
P&I Advance...............................................................S-55
P&I Advances..............................................................S-27
Participants..............................................................S-44
Parties in Interest.......................................................S-87
Pass-Through Rate.........................................................S-46
Percentage Interest.......................................................S-47
Percentage Premium..................................................S-33, S-69
Permitted Cure Period.....................................................S-77
Plans.....................................................................S-87
Pooling and Servicing Agreement...........................................S-11
Prepayment Assumption.....................................................S-35
Prepayment Interest Excess..........................................S-26, S-54
Prepayment Interest Shortfall.......................................S-26, S-54
Prepayment Premium..................................................S-33, S-69
Principal Balance Certificates.................................S-3, S-15, S-45
Principal Distribution Amount.......................................S-22, S-50
Principal Prepayments.....................................................S-51
Principal Window..........................................................S-10
Private Certificates......................................................S-44
PTCE......................................................................S-89
Purchase Price............................................................S-76
Qualifying Substitute Mortgage Loan.......................................S-76
S-94
<PAGE> 95
Rating Agencies...........................................................S-29
Realized Losses...........................................................S-53
Record Date.........................................................S-13, S-47
Rehabilitated Mortgage Loan...............................................S-79
REMIC................................................................S-4, S-35
REMIC I..............................................................S-4, S-35
REMIC II.............................................................S-4, S-35
REMIC III............................................................S-4, S-35
REMIC Regular Certificates..........................................S-11, S-43
REO Income................................................................S-51
REO Property........................................................S-11, S-79
REO Tax...................................................................S-84
Residual Certificates...............................................S-11, S-43
S&P.......................................................................S-29
Scheduled Payment...................................................S-23, S-51
Scheduled Principal Balance...............................................S-47
Seller.....................................................................S-3
Sellers...................................................................S-12
Senior Certificates.................................................S-11, S-43
Servicing Advances..................................................S-27, S-56
Servicing Fee.............................................................S-79
Servicing Fee Rate........................................................S-79
Servicing Standard........................................................S-77
Servicing Transfer Event..................................................S-78
SMMEA...............................................................S-36, S-90
Special Servicer..........................................................S-12
Special Servicer Compensation.............................................S-80
Special Servicing Fee.....................................................S-80
Special Servicing Standby Fee.............................................S-80
Special Servicing Standby Fee Rate........................................S-80
Specially Serviced Mortgage Loan..........................................S-78
Specially Serviced Mortgage Loans.........................................S-79
Subordinate Certificates............................................S-11, S-43
Subordination.............................................................S-14
Sub-Servicer..............................................................S-78
Substitution Shortfall Amount.............................................S-76
Treasury Rate.............................................................S-51
Trust Fund..........................................................S-11, S-43
Trustee...................................................................S-12
Trustee Fee...............................................................S-60
Underwritable Cash Flow...................................................S-72
Underwriters..............................................................S-90
Underwriting Agreement....................................................S-90
Unpaid Interest.....................................................S-22, S-50
Weighted Average Net Mortgage Rate..................................S-18, S-47
Wells Fargo..........................................................S-3, S-12
Wells Fargo Loans...................................................S-12, S-68
Yield Maintenance Premium.................................................S-69
S-95
<PAGE> 96
SCHEDULE A
Set forth below is the rate per annum that corresponds to each
Distribution Date occurring on or before March 15, 2003, for purposes of
determining the Class X-1 Strip Rates and Class X-2 Strip Rates as described
under the heading "Description of the Certificates-Pass-Through Rates" in the
Prospectus Supplement of which this Schedule A forms a part:
Distribution
Distribution Date(1) Corresponding Rate Date(1) Corresponding Rate
- ----------------- ------------------ ------------ ------------------
03/15/98 0.000% 01/15/01 7.779%
04/15/98 7.779% 02/15/01 7.779%
05/15/98 7.630% 03/15/01 7.271%
06/15/98 7.779% 04/15/01 7.779%
07/15/98 7.630% 05/15/01 7.630%
08/15/98 7.779% 06/15/01 7.779%
09/15/98 7.779% 07/15/01 7.630%
10/15/98 7.630% 08/15/01 7.779%
11/15/98 7.779% 09/15/01 7.779%
12/15/98 7.630% 10/15/01 7.630%
01/15/99 7.779% 11/15/01 7.779%
02/15/99 7.779% 12/15/01 7.630%
03/15/99 7.271% 01/15/02 7.779%
04/15/99 7.779% 02/15/02 7.779%
05/15/99 7.630% 03/15/02 7.271%
06/15/99 7.779% 04/15/02 7.779%
07/15/99 7.630% 05/15/02 7.630%
08/15/99 7.779% 06/15/02 7.779%
09/15/99 7.779% 07/15/02 7.630%
10/15/99 7.630% 08/15/02 7.779%
11/15/99 7.779% 09/15/02 7.779%
12/15/99 7.630% 10/15/02 7.630%
01/15/00 7.779% 11/15/02 7.779%
02/15/00 7.779% 12/15/02 7.630%
03/15/00 7.449% 01/15/03 7.779%
04/15/00 7.779% 02/15/03 7.779%
05/15/00 7.630% 03/15/03 7.271%
06/15/00 7.779%
07/15/00 7.630%
08/15/00 7.779%
09/15/00 7.779%
10/15/00 7.630%
11/15/00 7.779%
12/15/00 7.630%
- ----------
(1) If the indicated date is not a business day, the Distribution Date will be
the next succeeding business day.
A-1
<PAGE> 97
APPENDIX I
MORTGAGE POOL INFORMATION
CUT-OFF DATE BALANCES
<TABLE>
<CAPTION>
===================================================================================================================================
Percent by Weighted Weighted
Number Aggregate Weighted Average Average Weighted
of Aggregate Cut-Off Date Average Remaining Weighted Cut-Off Average
Mortgage Cut-Off Date Balance Mortgage Term to Average Date Balloon
Cut-Off Date Balance ($) Loans Balance (%) Rate (%) Maturity (mos) DSCR (x) LTV (%) LTV (%)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 to 1,000,000 23 $ 19,649,788 1.41 7.964 137 1.55 61.0 36.1
1,000,001 to 2,000,000 77 117,632,266 8.45 7.834 131 1.70 61.8 44.0
2,000,001 to 3,000,000 59 147,695,302 10.61 7.996 130 1.53 65.3 48.2
3,000,001 to 4,000,000 38 135,863,003 9.76 7.918 127 1.47 69.3 54.2
4,000,001 to 5,000,000 35 155,065,293 11.14 7.822 124 1.57 68.2 55.5
5,000,001 to 6,000,000 23 127,520,849 9.16 7.762 127 1.54 66.8 48.9
6,000,001 to 7,000,000 6 39,378,420 2.83 7.998 115 1.47 74.4 65.0
7,000,001 to 8,000,000 11 83,426,085 5.99 7.784 107 1.53 69.8 59.0
8,000,001 to 9,000,000 5 42,781,072 3.07 7.410 127 1.71 67.3 56.4
9,000,001 to 10,000,000 3 28,174,241 2.02 7.838 96 1.43 72.1 63.8
10,000,001 to 11,000,000 3 30,985,826 2.23 7.783 103 1.36 76.8 67.7
11,000,001 to 12,000,000 4 45,188,406 3.25 7.631 108 1.29 77.5 69.4
12,000,001 to 13,000,000 7 88,880,320 6.38 7.369 101 1.60 68.9 61.1
13,000,001 and above 12 329,971,470 23.70 7.646 107 1.54 69.6 60.8
- -----------------------------------------------------------------------------------------------------------------------------------
Total or Weighted Average: 306 $1,392,212,342 100.00% 7.760% 118 1.54x 68.4% 55.8%
===================================================================================================================================
</TABLE>
Min: $447,705
Max: $59,807,596
Average: $4,549,714
I-1
<PAGE> 98
APPENDIX I
MORTGAGE POOL INFORMATION
STATES
<TABLE>
<CAPTION>
===================================================================================================================================
Percent by Weighted Weighted
Number Aggregate Weighted Average Average Weighted
of Aggregate Cut-Off Date Average Remaining Weighted Cut-Off Average
Mortgage Cut-Off Date Balance Mortgage Term to Average Date Balloon
State Loans Balance (%) Rate (%) Maturity (mos) DSCR (x) LTV (%) LTV (%)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
California 116 $ 489,991,258 35.20 7.556 117 1.58 66.6 54.2
Texas 37 123,657,492 8.88 7.683 122 1.56 68.3 53.5
Arizona 10 77,390,716 5.56 7.916 117 1.63 66.9 55.4
Ohio 15 71,510,028 5.14 7.735 124 1.49 74.7 60.7
Nevada 13 61,767,599 4.44 7.814 108 1.54 69.5 59.4
Pennsylvania 6 61,169,344 4.39 8.029 120 1.53 67.1 56.0
Utah 8 49,312,496 3.54 8.087 105 1.47 70.1 59.8
New York 5 43,214,365 3.10 8.358 115 1.54 66.0 59.3
Maryland 2 36,823,840 2.64 7.242 118 1.46 73.9 63.9
Massachusetts 3 35,544,078 2.55 7.895 116 1.43 72.8 60.1
Florida 13 34,989,799 2.51 8.102 122 1.59 66.6 53.2
Washington 9 31,672,744 2.27 8.009 139 1.44 62.5 46.8
Colorado 6 29,420,080 2.11 7.385 111 1.48 73.3 62.1
Indiana 7 26,324,319 1.89 8.091 111 1.41 72.0 59.1
Minnesota 2 24,434,874 1.76 7.969 61 1.49 66.3 56.7
Louisiana 4 23,468,222 1.69 7.671 117 1.34 71.9 61.4
North Carolina 6 19,618,815 1.41 8.339 149 1.34 71.5 43.5
Michigan 6 19,194,738 1.38 7.773 117 1.59 69.0 59.0
Virginia 2 18,165,963 1.30 6.890 118 1.50 76.8 66.9
New Jersey 5 16,382,734 1.18 8.075 117 1.41 68.7 57.1
Georgia 5 14,022,106 1.01 8.136 162 1.41 72.0 44.8
Oregon 2 12,989,607 0.93 8.017 115 1.92 63.3 49.2
Illinois 3 11,509,749 0.83 7.540 137 1.82 65.8 46.0
Vermont 2 10,037,801 0.72 8.423 115 1.49 64.5 51.8
Missouri 3 7,832,908 0.56 7.354 141 1.44 65.1 50.7
Connecticut 2 6,933,609 0.50 8.502 171 1.53 71.0 30.2
Idaho 4 5,788,743 0.42 7.820 115 1.53 65.6 53.0
New Hampshire 1 4,689,637 0.34 7.570 117 1.51 79.5 70.5
Mississippi 1 4,649,184 0.33 8.030 118 2.04 65.5 54.1
Iowa 1 4,112,076 0.30 9.830 111 1.36 70.9 57.6
South Carolina 2 4,087,775 0.29 8.265 115 1.42 73.4 66.3
Alabama 1 4,005,987 0.29 8.430 115 1.45 74.2 62.2
Tennessee 1 2,391,260 0.17 7.370 115 1.30 77.1 68.2
Delaware 1 2,117,250 0.15 8.256 114 1.37 74.6 67.4
Montana 1 2,090,058 0.15 8.060 77 1.44 73.1 68.0
Kentucky 1 901,087 0.06 8.520 172 1.39 63.5 27.2
- -----------------------------------------------------------------------------------------------------------------------------------
Total or Weighted Average: 306 1,392,212,342 100.00% 7.760% 118 1.54x 68.4% 55.8%
===================================================================================================================================
</TABLE>
I-2
<PAGE> 99
APPENDIX I
MORTGAGE POOL INFORMATION
PROPERTY TYPES
<TABLE>
<CAPTION>
===================================================================================================================================
Percent by Weighted Weighted
Number Aggregate Weighted Average Average Weighted
of Aggregate Cut-Off Date Average Remaining Weighted Cut-Off Average
Mortgage Cut-Off Date Balance Mortgage Term to Average Date Balloon
Property Type Loans Balance (%) Rate (%) Maturity (mos) DSCR (x) LTV (%) LTV (%)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Retail 86 $ 361,938,128 26.00 7.862 127 1.46 71.1 55.8
Multifamily 71 349,484,355 25.10 7.368 120 1.54 71.5 59.3
Hospitality 22 221,996,201 15.95 8.143 103 1.63 65.0 54.2
Industrial 65 198,161,481 14.23 7.729 117 1.62 62.8 48.3
Office 37 177,811,298 12.77 7.894 117 1.48 66.8 56.2
Mobile Home Park 6 42,567,077 3.06 7.400 103 1.49 77.0 68.9
Mixed Use 12 22,034,486 1.58 7.657 116 1.96 56.4 46.1
Self Storage 7 18,219,316 1.31 8.579 114 1.45 70.6 62.1
- -----------------------------------------------------------------------------------------------------------------------------------
Total or Weighted Average: 306 $1,392,212,342 100.00% 7.760% 118 1.54x 68.4% 55.8%
===================================================================================================================================
</TABLE>
I-3
<PAGE> 100
APPENDIX I
MORTGAGE POOL INFORMATION
MORTGAGE RATES
<TABLE>
<CAPTION>
===================================================================================================================================
Percent by Weighted Weighted
Number Aggregate Weighted Average Average Weighted
of Aggregate Cut-Off Date Average Remaining Weighted Cut-Off Average
Mortgage Cut-Off Date Balance Mortgage Term to Average Date Balloon
Mortgage Rate (%) Loans Balance (%) Rate (%) Maturity (mos) DSCR (x) LTV (%) LTV (%)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
6.501 to 7.000 13 $ 86,451,375 6.21 6.938 128 1.75 66.5 52.2
7.001 to 7.500 76 412,870,838 29.66 7.263 116 1.59 70.1 58.8
7.501 to 8.000 104 482,618,057 34.67 7.782 114 1.51 68.5 56.0
8.001 to 8.500 79 290,370,356 20.86 8.247 122 1.47 67.1 54.1
8.501 to 9.000 27 103,852,229 7.46 8.710 119 1.54 67.4 52.2
9.001 to 9.500 6 11,937,411 0.86 9.180 131 1.56 61.5 38.1
9.501 to 10.000 1 4,112,076 0.30 9.830 111 1.36 70.9 57.6
- -----------------------------------------------------------------------------------------------------------------------------------
Total or Weighted Average: 306 $1,392,212,342 100.00% 7.760% 118 1.54x 68.4% 55.8%
===================================================================================================================================
</TABLE>
Min: 6.760%
Max: 9.830%
Weighted Average: 7.760%
I-4
<PAGE> 101
APPENDIX I
MORTGAGE POOL INFORMATION
ORIGINAL TERMS TO STATED MATURITY
<TABLE>
<CAPTION>
===================================================================================================================================
Percent by Weighted Weighted
Number Aggregate Weighted Average Average Weighted
of Aggregate Cut-Off Date Average Remaining Weighted Cut-Off Average
Original Term to Mortgage Cut-Off Date Balance Mortgage Term to Average Date Balloon
Stated Maturity (mos) Loans Balance (%) Rate (%) Maturity (mos) DSCR (x) LTV (%) LTV (%)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 to 60 7 $ 79,138,167 5.68 7.567 56 1.67 63.5 59.8
61 to 120 250 1,184,236,961 85.06 7.767 113 1.54 69.3 59.3
121 to 144 4 9,949,852 0.71 7.934 131 1.33 62.9 37.4
145 to 180 23 55,438,851 3.98 7.811 177 1.52 65.3 34.3
181 to 240 22 63,448,511 4.56 7.798 225 1.53 61.9 5.4
- -----------------------------------------------------------------------------------------------------------------------------------
Total or Weighted Average: 306 $1,392,212,342 100.00% 7.760% 118 1.54x 68.4% 55.8%
===================================================================================================================================
</TABLE>
Min: 60
Max: 240
Weighted Average: 122
I-5
<PAGE> 102
APPENDIX I
MORTGAGE POOL INFORMATION
REMAINING TERMS TO STATED MATURITY
<TABLE>
<CAPTION>
===================================================================================================================================
Percent by Weighted Weighted
Number Aggregate Weighted Average Average Weighted
of Aggregate Cut-Off Date Average Remaining Weighted Cut-Off Average
Remaining Term to Mortgage Cut-Off Date Balance Mortgage Term to Average Date Balloon
Stated Maturity (mos) Loans Balance (%) Rate (%) Maturity (mos) DSCR (x) LTV (%) LTV (%)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 to 60 8 $ 92,065,492 6.61 7.586 56 1.73 60.1 56.5
61 to 84 11 60,373,980 4.34 7.451 78 1.44 75.7 69.9
85 to 120 239 1,112,329,206 79.90 7.786 116 1.53 69.3 59.0
121 to 180 26 63,995,154 4.60 7.814 171 1.49 65.0 34.4
181 to 240 22 63,448,511 4.56 7.798 225 1.53 61.9 5.4
- -----------------------------------------------------------------------------------------------------------------------------------
Total or Weighted Average: 306 $1,392,212,342 100.00% 7.760% 118 1.54x 68.4% 55.8%
===================================================================================================================================
</TABLE>
Min: 48
Max: 238
Weighted Average: 118
I-6
<PAGE> 103
APPENDIX I
MORTGAGE POOL INFORMATION
ORIGINAL AMORTIZATION TERMS
<TABLE>
<CAPTION>
===================================================================================================================================
Percent by Weighted Weighted
Number Aggregate Weighted Average Average Weighted
of Aggregate Cut-Off Date Average Remaining Weighted Cut-Off Average
Original Amortization Mortgage Cut-Off Date Balance Mortgage Term to Average Date Balloon
Term (mos) Loans Balance (%) Rate (%) Maturity (mos) DSCR (x) LTV (%) LTV (%)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Interest Only 1 $ 30,000,000 2.15 7.035 58 1.85 60.0 60.0
120 1 1,369,318 0.10 8.140 116 2.84 16.5 0.0
121 to 144 1 2,655,059 0.19 8.130 140 1.32 52.1 0.8
145 to 180 10 18,723,422 1.34 7.973 169 1.61 56.6 2.1
181 to 240 37 126,703,571 9.10 7.941 146 1.54 63.3 30.4
241 to 360 256 1,212,760,973 87.11 7.754 115 1.53 69.5 59.3
- -----------------------------------------------------------------------------------------------------------------------------------
Total or Weighted Average: 306 $1,392,212,342 100.00% 7.760% 118 1.54x 68.4% 55.8%
===================================================================================================================================
</TABLE>
Min (excl. I/O): 120
Max: 360
Weighted Average (excl. I/O): 322
I-7
<PAGE> 104
APPENDIX I
MORTGAGE POOL INFORMATION
DEBT SERVICE COVERAGE RATIOS
<TABLE>
<CAPTION>
===================================================================================================================================
Percent by Weighted Weighted
Number Aggregate Weighted Average Average Weighted
of Aggregate Cut-Off Date Average Remaining Weighted Cut-Off Average
Debt Service Mortgage Cut-Off Date Balance Mortgage Term to Average Date Balloon
Coverage Ratio (x) Loans Balance (%) Rate (%) Maturity (mos) DSCR (x) LTV (%) LTV (%)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1.00 to 1.14 1 $ 2,766,030 0.20 8.625 174 1.14 69.2 0.0
1.15 to 1.24 16 75,063,908 5.39 7.928 128 1.21 75.8 58.9
1.25 to 1.34 43 220,574,396 15.84 7.877 126 1.32 73.6 58.0
1.35 to 1.49 89 427,965,838 30.74 7.844 116 1.42 72.4 62.0
1.50 to 1.74 95 442,272,620 31.77 7.668 115 1.59 68.0 55.2
1.75 to 1.99 33 128,969,374 9.26 7.610 119 1.85 57.9 43.7
2.00 and above 29 94,600,177 6.79 7.583 110 2.24 49.0 40.3
- -----------------------------------------------------------------------------------------------------------------------------------
Total or Weighted Average: 306 $1,392,212,342 100.00% 7.760% 118 1.54x 68.4% 55.8%
===================================================================================================================================
</TABLE>
Min: 1.14x
Max: 2.84x
Weighted Average: 1.54x
I-8
<PAGE> 105
APPENDIX I
MORTGAGE POOL INFORMATION
CUT-OFF DATE LOAN-TO-VALUE RATIOS
<TABLE>
<CAPTION>
===================================================================================================================================
Percent by Weighted Weighted
Number Aggregate Weighted Average Average Weighted
of Aggregate Cut-Off Date Average Remaining Weighted Cut-Off Average
Cut-Off Date Loan-to- Mortgage Cut-Off Date Balance Mortgage Term to Average Date Balloon
Value Ratio (%) Loans Balance (%) Rate (%) Maturity (mos) DSCR (x) LTV (%) LTV (%)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
10.1 to 20.0 1 $ 1,369,318 0.10 8.140 116 2.84 16.5 0.0
30.1 to 40.0 9 32,023,205 2.30 7.478 98 2.35 39.0 32.4
40.1 to 50.0 18 47,917,410 3.44 7.756 144 1.96 46.7 27.4
50.1 to 60.0 52 175,950,699 12.64 7.655 116 1.79 56.5 43.0
60.1 to 70.0 86 401,692,069 28.85 7.955 115 1.55 66.4 53.5
70.1 to 80.0 133 700,325,467 50.30 7.690 119 1.41 74.9 62.6
80.1 to 90.0 7 32,934,175 2.37 7.693 116 1.39 80.9 71.1
- -----------------------------------------------------------------------------------------------------------------------------------
Total or Weighted Average: 306 $1,392,212,342 100.00% 7.760% 118 1.54x 68.4% 55.8%
===================================================================================================================================
</TABLE>
Min: 16.5%
Max: 85.9%
Weighted Average: 68.4%
I-9
<PAGE> 106
APPENDIX I
MORTGAGE POOL INFORMATION
BALLOON LOAN-TO-VALUE RATIOS
<TABLE>
<CAPTION>
===================================================================================================================================
Percent by Weighted Weighted
Number Aggregate Weighted Average Average Weighted
of Aggregate Cut-Off Date Average Remaining Weighted Cut-Off Average
Balloon Loan-to- Mortgage Cut-Off Date Balance Mortgage Term to Average Date Balloon
Value Ratio (%) Loans Balance (%) Rate (%) Maturity (mos) DSCR (x) LTV (%) LTV (%)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
0.0 21 $ 45,993,923 3.30 7.545 211 1.71 57.3 0.0
0.1 to 10.0 9 26,900,317 1.93 8.320 202 1.38 60.5 2.2
11.1 to 20.0 1 5,142,266 0.37 8.375 231 1.17 71.9 18.9
20.1 to 30.0 7 10,882,161 0.78 7.822 176 1.75 56.1 25.2
30.1 to 40.0 19 58,809,223 4.22 7.609 109 2.11 45.6 36.2
40.1 to 50.0 54 157,794,984 11.33 7.931 118 1.72 58.4 45.9
50.1 to 60.0 84 431,377,328 30.99 7.829 110 1.57 67.1 56.6
60.1 to 70.0 90 492,465,619 35.37 7.722 114 1.43 73.7 64.5
70.1 to 80.0 21 162,846,522 11.70 7.525 105 1.38 79.2 71.3
- -----------------------------------------------------------------------------------------------------------------------------------
Total or Weighted Average: 306 $1,392,212,342 100.00% 7.760% 118 1.54x 68.4% 55.8%
===================================================================================================================================
</TABLE>
Min: 0.0%
Max: 74.7%
Weighted Average: 55.8%
I-10
<PAGE> 107
APPENDIX I
MORTGAGE POOL INFORMATION
BALLOON LOANS
<TABLE>
<CAPTION>
===================================================================================================================================
Percent by Weighted Weighted
Number Aggregate Weighted Average Average Weighted
of Aggregate Cut-Off Date Average Remaining Weighted Cut-Off Average
Mortgage Cut-Off Date Balance Mortgage Term to Average Date Balloon
Balloon Loans Loans Balance (%) Rate (%) Maturity (mos) DSCR (x) LTV (%) LTV (%)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Yes 276 $1,319,318,103 94.76 7.756 113 1.54 69.0 58.8
No 30 72,894,240 5.24 7.831 207 1.59 58.5 0.8
- -----------------------------------------------------------------------------------------------------------------------------------
Total or Weighted Average: 306 $1,392,212,342 100.00% 7.760% 118 1.54x 68.4% 55.8%
===================================================================================================================================
</TABLE>
I-11
<PAGE> 108
APPENDIX I
MORTGAGE POOL INFORMATION
PREPAYMENT RESTRICTION ANALYSIS
<TABLE>
<CAPTION>
Percentage of Mortgage Pool by Prepayment Restriction
Assuming No Prepayments
- ----------------------------------------------------------------------------------------------------------------------------------
Prepayment Restriction Current 12 Mo. 24 Mo. 36 Mo. 48 Mo. 60 Mo. 72 Mo. 84 Mo. 96 Mo.
------- ------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Locked Out 100.00% 100.00% 92.43% 47.66% 39.02% 2.60% 1.39% 0.92% 0.32%
Yield Maintenance 0.00% 0.00% 7.23% 49.36% 58.01% 93.52% 94.45% 95.85% 96.49%
Penalty Points
5.00% and greater 0.00% 0.00% 0.34% 2.12% 0.35% 0.99% 0.30% 0.30% 0.29%
4.00% to 4.99% 0.00% 0.00% 0.00% 0.86% 1.94% 0.29% 0.87% 0.17% 0.16%
3.00% to 3.99% 0.00% 0.00% 0.00% 0.00% 0.69% 1.87% 1.10% 1.75% 1.02%
2.00% to 2.99% 0.00% 0.00% 0.00% 0.00% 0.00% 0.73% 0.88% 0.11% 0.72%
1.00% to 1.99% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.37% 0.91% 1.00%
Open 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.64% 0.00% 0.00%
===================================================================================================================================
TOTALS 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%
Mortgage Pool Balance
Outstanding (in millions) $1,392.21 $1,374.68 $1,355.72 $1,335.24 $1,306.12 $1,203.36 $1,167.05 $1,098.08 $1,070.77
--------- --------- --------- --------- --------- --------- --------- --------- ---------
% of Initial Pool Balance 100.00% 98.74% 97.38% 95.91% 93.82% 86.44% 83.83% 78.87% 76.91%
</TABLE>
- ----------------------------------------------------
Prepayment Restriction 108 Mo. 120 Mo.
------- -------
Locked Out 0.30% 0.00%
Yield Maintenance 80.91% 89.72%
Penalty Points
5.00% and greater 0.28% 0.00%
4.00% to 4.99% 0.14% 0.00%
3.00% to 3.99% 1.01% 4.57%
2.00% to 2.99% 0.00% 5.71%
1.00% to 1.99% 1.70% 0.00%
Open 15.65% 0.00%
====================================================
TOTALS 100.00% 100.00%
Mortgage Pool Balance
Outstanding (in millions) $1,038.63 $86.66
--------- ------
% of Initial Pool Balance 74.60% 6.22%
Notes: (1) Four of the Mortgage Loans (1.24% of the Cut-Off Date Balance)
allow 10% annual partial voluntary principal prepayment without
restrictions.
(2) For purposes of the table, the amortization schedules of the
Mortgage Loans are calculated as though all Mortgage Loans accrue
interest on the basis of a 360-day year consisting of twelve 30-day
months.
I-12
<PAGE> 109
APPENDIX II
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
LOAN INFORMATION
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
Aggregate Cut-Off
Loan Cut-Off Date Bal./ Mortgage Note
No. Seller(1) Property Name Date Balance Unit or SF(4) Rate Date
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------
1 WF Scottsdale Plaza Resort $59,807,596 $148,039 7.930% 11/26/97
- ------------------------------------------------------------------------------------------------------------
2 WF Encinitas Ranch Town Center $42,302,887 $86 7.380% 11/13/97
- ------------------------------------------------------------------------------------------------------------
3 MS Two Democracy Plaza $35,030,405 $135 7.190% 12/8/97
- ------------------------------------------------------------------------------------------------------------
4 WF Kahler Hotel (2I) $23,452,231 $36,455 7.960% 10/14/97
5 WF Olympia Park (2I) $9,320,479 $36,455 7.960% 10/14/97
- ------------------------------------------------------------------------------------------------------------
6 MS Clinton Square $31,406,616 $103 8.290% 9/25/97
- ------------------------------------------------------------------------------------------------------------
7 WF Metropolitan Corporate Center $30,000,000 $94 7.035% 12/18/97
- ------------------------------------------------------------------------------------------------------------
8 MS Holiday Inn Boston Logan Airport $27,876,504 $78,305 7.760% 10/31/97
- ------------------------------------------------------------------------------------------------------------
9 WF Sun Valley Village (2A) $10,469,203 $32,929 7.600% 10/21/97
10 WF Greenoaks Mobile Home Park (2A) $5,483,868 $32,929 7.600% 10/21/97
11 WF Madrone Mobile Estates (2A) $5,483,868 $32,929 7.600% 10/21/97
- ------------------------------------------------------------------------------------------------------------
12 WF The Willows Shopping Center $18,937,402 $76 7.020% 10/30/97
- ------------------------------------------------------------------------------------------------------------
13 MS Radisson Hotel/Pittsburgh ExpoMart $17,191,933 $53,391 8.660% 7/17/97
- ------------------------------------------------------------------------------------------------------------
14 WF Pinebrook Apartments $15,932,233 $44,256 7.830% 8/27/97
- ------------------------------------------------------------------------------------------------------------
15 MS Woodchase Apartments $14,050,452 $43,366 7.430% 9/29/97
- ------------------------------------------------------------------------------------------------------------
16 JHREF Gateway Center Apartments $13,983,212 $61,330 7.090% 1/14/98
- ------------------------------------------------------------------------------------------------------------
17 MS Sunset Creek (2B) $10,397,676 $29,169 7.270% 1/12/98
18 MS Creekwood Village (2B) $3,078,575 $29,169 7.270% 12/26/97
- ------------------------------------------------------------------------------------------------------------
19 WF Monterey Oaks Mobile Home Park $12,978,372 $37,728 6.940% 12/5/97
- ------------------------------------------------------------------------------------------------------------
20 WF Fairview Village Apartments $12,967,655 $23,074 6.970% 11/26/97
- ------------------------------------------------------------------------------------------------------------
21 WF Northgate Plaza $12,962,401 $137 7.670% 10/10/97
- ------------------------------------------------------------------------------------------------------------
22 WF La Valencia Hotel $12,927,325 $127,993 7.700% 9/30/97
- ------------------------------------------------------------------------------------------------------------
23 MS 200 W. Thomas (2II) $4,441,819 $66 8.160% 10/17/97
24 MS 100 W. Harrison (North Tower) (2II) $4,235,200 $66 8.160% 10/17/97
25 MS 100 W. Harrison (South Tower) (2II) $4,099,450 $66 8.160% 10/17/97
- ------------------------------------------------------------------------------------------------------------
26 WF Pebble Creek Apartments, Phase II-IV $12,476,623 $26,659 6.890% 12/29/97
- ------------------------------------------------------------------------------------------------------------
27 MS Courtyard by Marriott - Salt Lake City (2C) $6,754,810 $56,393 8.380% 11/13/97
28 MS Courtyard by Marriott - Provo (2C) $5,707,939 $56,393 8.380% 11/13/97
- ------------------------------------------------------------------------------------------------------------
29 MS Penn's Market II $12,443,307 $114 7.800% 7/24/97
- ------------------------------------------------------------------------------------------------------------
30 WF Budget Suites / Paradise $12,124,637 $33,680 7.630% 12/18/97
- ------------------------------------------------------------------------------------------------------------
31 MS Waterford at Clear Lake $11,479,075 $28,698 7.060% 12/26/97
- ------------------------------------------------------------------------------------------------------------
32 JHREF St. Mary's Square Shopping Center $11,287,284 $45 7.880% 1/12/98
- ------------------------------------------------------------------------------------------------------------
33 WF Trappe Center $11,245,654 $92 8.660% 6/6/97
</TABLE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------
Rem. Amort.
Loan Maturity Term Term Term(5) Balance Due Balloon Security
No. Date (mos) (mos) (mos) at Maturity LTV(4) Type
- ----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------
1 12/1/07 120 117 300 $49,345,703 55.9% Fee
- ----------------------------------------------------------------------------------
2 12/1/07 120 117 360 $37,338,170 70.4% Fee
- ----------------------------------------------------------------------------------
3 1/1/08 120 118 360 $30,225,062 63.8% Leasehold
- ----------------------------------------------------------------------------------
4 11/1/02 60 56 240 $21,662,524 59.1% Fee
5 11/1/02 60 56 240 $7,422,396 59.1% Fee
- ----------------------------------------------------------------------------------
6 10/1/07 120 115 360 $28,359,526 60.6% Fee
- ----------------------------------------------------------------------------------
7 1/2/03 60 58 N/A(3) $30,000,000 60.0% Fee
- ----------------------------------------------------------------------------------
8 11/1/07 120 116 300 $22,910,720 61.1% Fee
- ----------------------------------------------------------------------------------
9 11/1/07 120 116 360 $9,296,535 71.4% Fee
10 11/1/07 120 116 360 $4,869,613 71.4% Fee
11 11/1/07 120 116 360 $4,869,613 71.4% Fee
- ----------------------------------------------------------------------------------
12 11/1/07 120 116 360 $16,312,016 56.8% Fee
- ----------------------------------------------------------------------------------
13 8/1/07 120 113 300 $14,524,673 46.9% Fee
- ----------------------------------------------------------------------------------
14 9/1/07 120 114 360 $13,986,317 62.4% Fee
- ----------------------------------------------------------------------------------
15 10/1/07 120 115 360 $12,435,270 68.6% Fee
- ----------------------------------------------------------------------------------
16 2/1/08 120 119 360 $12,232,983 62.7% Fee
- ----------------------------------------------------------------------------------
17 1/1/05 84 82 360 $9,629,518 72.6% Fee
18 1/1/05 84 82 360 $2,851,136 72.6% Fee
- ----------------------------------------------------------------------------------
19 1/1/04 72 70 360 $12,040,411 70.8% Fee
- ----------------------------------------------------------------------------------
20 12/1/07 120 117 360 $11,147,725 63.7% Fee
- ----------------------------------------------------------------------------------
21 11/1/07 120 116 360 $11,529,923 64.8% Fee
- ----------------------------------------------------------------------------------
22 11/1/02 61 56 300 $11,932,769 36.2% Fee
- ----------------------------------------------------------------------------------
23 11/1/07 120 116 360 $4,001,176 61.5% Fee
24 11/1/07 120 116 360 $3,815,055 61.5% Fee
25 11/1/07 120 116 360 $3,692,772 61.5% Fee
- ----------------------------------------------------------------------------------
26 1/1/08 120 118 360 $10,866,299 67.7% Fee
- ----------------------------------------------------------------------------------
27 12/1/07 120 117 300 $5,643,651 59.7% Fee
28 12/1/07 120 117 300 $4,768,990 59.7% Fee
- ----------------------------------------------------------------------------------
29 8/1/07 120 113 360 $11,124,253 66.6% Fee
- ----------------------------------------------------------------------------------
30 1/1/08 120 118 324 $10,299,143 58.1% Fee
- ----------------------------------------------------------------------------------
31 1/1/05 84 82 360 $10,594,135 71.6% Fee
- ----------------------------------------------------------------------------------
32 2/1/08 120 119 360 $10,071,219 70.9% Fee
- ----------------------------------------------------------------------------------
33 7/1/07 120 112 360 $10,042,615 65.5% Fee
</TABLE>
II-1
<PAGE> 110
APPENDIX II
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
LOAN INFORMATION
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
Aggregate Cut-Off
Loan Cut-Off Date Bal./ Mortgage Note
No. Seller(1) Property Name Date Balance Unit or SF(4) Rate Date
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------
34 MS Clearwater Creek Apartments $11,176,392 $58,210 6.930% 1/7/98
- ------------------------------------------------------------------------------------------------------------
35 MS Surveyor-Beltline Office $10,118,946 $50 8.500% 6/26/97
- ------------------------------------------------------------------------------------------------------------
36 JHREF Chatham Village Apartments $9,577,924 $34,956 7.360% 11/26/97
- ------------------------------------------------------------------------------------------------------------
37 MS Bank One Tower & Branch $9,275,838 $69 8.210% 10/29/97
- ------------------------------------------------------------------------------------------------------------
38 WF Stanford Villa Apartments $8,977,651 $42,955 6.980% 11/18/97
- ------------------------------------------------------------------------------------------------------------
39 WF Copper Terrace Apartments $8,878,872 $52,850 7.200% 11/26/97
- ------------------------------------------------------------------------------------------------------------
40 MS Briarwood Apartments $8,714,519 $45,388 7.630% 10/31/97
- ------------------------------------------------------------------------------------------------------------
41 WF Golden Hills Plaza $8,131,336 $72 7.390% 11/17/97
- ------------------------------------------------------------------------------------------------------------
42 WF Federal Express $8,078,694 $97 7.900% 6/24/97
- ------------------------------------------------------------------------------------------------------------
43 MS Ashford Court Apartments $7,981,084 $18,057 7.220% 11/25/97
- ------------------------------------------------------------------------------------------------------------
44 WF Meyer Business Center $7,946,671 $50 7.760% 8/21/97
- ------------------------------------------------------------------------------------------------------------
45 MS Encinal Terminals $7,784,068 $21 7.600% 1/26/98
- ------------------------------------------------------------------------------------------------------------
46 JHREF Howard Johnson/Holiday Inn Express $7,758,221 $37,845 8.250% 9/9/97
- ------------------------------------------------------------------------------------------------------------
47 MS Courtyard by Marriott - Hillsboro $7,677,294 $49,531 8.590% 8/19/97
- ------------------------------------------------------------------------------------------------------------
48 WF Morning Ridge Apartments $7,665,585 $38,328 7.560% 8/21/97
- ------------------------------------------------------------------------------------------------------------
49 MS Lakes Town Ctr./Oakland Shpg. Ctr. $7,568,983 $39 8.240% 10/14/97
- ------------------------------------------------------------------------------------------------------------
50 JHREF Keeneland Crest Apartments, Phase II $7,379,524 $41,929 7.890% 10/7/97
- ------------------------------------------------------------------------------------------------------------
51 WF Naperville Plaza $7,337,651 $64 6.890% 12/17/97
- ------------------------------------------------------------------------------------------------------------
52 WF Smithridge Plaza Shopping Center $7,243,921 $69 8.420% 2/14/97
- ------------------------------------------------------------------------------------------------------------
53 WF Twin Oaks Apartment $7,083,084 $93,198 7.190% 11/25/97
- ------------------------------------------------------------------------------------------------------------
54 MS Ravine Bluff Apartments $6,920,078 $21,899 7.500% 8/15/97
- ------------------------------------------------------------------------------------------------------------
55 WF 300 Rose Ave. & 320 Hampton Dr. (2D) $4,781,495 $65 6.990% 12/22/97
56 WF 350-364 Hampton Drive (2D) $1,967,386 $65 6.990% 12/22/97
- ------------------------------------------------------------------------------------------------------------
57 MS Hamilton Fixtures $6,578,731 $20 8.800% 8/22/97
- ------------------------------------------------------------------------------------------------------------
58 JHREF Riviera Apartments $6,488,872 $47,364 7.440% 12/22/97
- ------------------------------------------------------------------------------------------------------------
59 MS Dorado Plaza Apartments $6,381,303 $31,591 7.620% 10/31/97
- ------------------------------------------------------------------------------------------------------------
60 WF Clarksville Commons $6,254,625 $57 8.260% 7/30/97
- ------------------------------------------------------------------------------------------------------------
61 JHREF 20101 South Santa Fe Avenue $5,982,542 $30 7.640% 10/14/97
- ------------------------------------------------------------------------------------------------------------
62 WF Mariners Mile Marine Center $5,979,838 $141 7.640% 11/24/97
- ------------------------------------------------------------------------------------------------------------
63 WF Monteray Shores Plaza Shopping Center $5,951,311 $73 8.370% 6/4/97
- ------------------------------------------------------------------------------------------------------------
64 WF Westland Shopping Center $5,884,070 $69 8.020% 10/24/97
- ------------------------------------------------------------------------------------------------------------
65 MS Seattle Air Cargo $5,747,343 $22 8.290% 10/17/97
- ------------------------------------------------------------------------------------------------------------
66 MS Red Bank Plaza (2III) $3,140,588 $38 8.750% 7/25/97
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------
Rem. Amort.
Loan Maturity Term Term Term(5) Balance Due Balloon Security
No. Date (mos) (mos) (mos) at Maturity LTV(4) Type
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------
34 2/1/08 120 119 360 $9,736,492 69.5% Fee
- ------------------------------------------------------------------------------------
35 7/1/07 120 112 300 $8,340,598 58.9% Fee
- ------------------------------------------------------------------------------------
36 12/1/07 120 117 360 $8,449,623 65.8% Fee
- ------------------------------------------------------------------------------------
37 11/1/07 120 116 360 $8,193,267 66.6% Fee
- ------------------------------------------------------------------------------------
38 12/1/07 120 117 360 $7,719,476 34.3% Fee
- ------------------------------------------------------------------------------------
39 12/1/07 120 117 360 $7,801,362 65.8% Fee
- ------------------------------------------------------------------------------------
40 11/1/07 120 116 360 $7,744,009 65.9% Fee
- ------------------------------------------------------------------------------------
41 12/1/12 180 177 360 $6,122,396 57.0% Fee
- ------------------------------------------------------------------------------------
42 7/1/07 120 112 300 $6,565,414 59.7% Fee
- ------------------------------------------------------------------------------------
43 12/1/07 120 117 360 $7,016,092 68.4% Fee
- ------------------------------------------------------------------------------------
44 9/1/07 120 114 300 $6,421,290 53.5% Fee
- ------------------------------------------------------------------------------------
45 2/1/08 120 119 252 $5,531,628 41.9% Fee/Leasehold
- ------------------------------------------------------------------------------------
46 10/1/07 120 115 300 $6,344,399 55.7% Fee
- ------------------------------------------------------------------------------------
47 9/1/07 120 114 240 $5,574,251 49.8% Fee
- ------------------------------------------------------------------------------------
48 9/1/07 120 114 360 $6,692,017 63.3% Fee
- ------------------------------------------------------------------------------------
49 11/1/07 120 116 300 $6,304,962 57.3% Fee
- ------------------------------------------------------------------------------------
50 11/1/04 84 80 360 $6,909,641 74.7% Fee
- ------------------------------------------------------------------------------------
51 1/1/08 120 118 360 $6,290,794 51.1% Fee
- ------------------------------------------------------------------------------------
52 3/1/02 60 48 360 $6,966,032 66.3% Fee
- ------------------------------------------------------------------------------------
53 12/1/07 120 117 360 $6,119,636 68.6% Fee
- ------------------------------------------------------------------------------------
54 9/1/07 120 114 360 $6,138,339 70.2% Fee
- ------------------------------------------------------------------------------------
55 1/1/18 240 238 240 $0 0.0% Fee
56 1/1/18 240 238 240 $0 0.0% Fee
- ------------------------------------------------------------------------------------
57 9/1/07 120 114 360 $6,009,522 69.9% Fee
- ------------------------------------------------------------------------------------
58 1/1/08 120 118 360 $5,731,778 63.7% Fee
- ------------------------------------------------------------------------------------
59 11/1/07 120 116 360 $5,669,267 70.9% Fee
- ------------------------------------------------------------------------------------
60 8/1/07 120 113 300 $5,121,390 55.1% Fee
- ------------------------------------------------------------------------------------
61 11/1/07 120 116 360 $5,317,568 66.1% Fee
- ------------------------------------------------------------------------------------
62 12/1/07 120 117 300 $4,892,878 52.6% Fee
- ------------------------------------------------------------------------------------
63 7/1/07 120 112 300 $4,890,743 59.6% Fee
- ------------------------------------------------------------------------------------
64 11/1/07 120 116 360 $5,177,887 64.7% Fee
- ------------------------------------------------------------------------------------
65 11/1/14 204 200 204 $186,417 1.5% Leasehold
- ------------------------------------------------------------------------------------
66 8/1/07 120 113 300 $2,659,571 63.0% Fee
</TABLE>
II-2
<PAGE> 111
APPENDIX II
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
LOAN INFORMATION
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
Aggregate Cut-Off
Loan Cut-Off Date Bal./ Mortgage Note
No. Seller(1) Property Name Date Balance Unit or SF(4) Rate Date
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
67 MS Red Bank Center (2III) $2,584,028 $38 8.750% 7/25/97
- ------------------------------------------------------------------------------------------------------------
68 MS Radisson Airport Inn $5,719,457 $45,035 9.000% 5/28/97
- ------------------------------------------------------------------------------------------------------------
69 WF Foxridge Apartments, Phases IV-V $5,689,340 $27,889 6.890% 12/29/97
- ------------------------------------------------------------------------------------------------------------
70 MS Woodside Terrace Apartments $5,685,074 $23,787 7.140% 12/11/97
- ------------------------------------------------------------------------------------------------------------
71 WF Ross Center $5,678,047 $113 7.960% 11/10/97
- ------------------------------------------------------------------------------------------------------------
72 WF The Electric Farm Industrial Park $5,586,333 $24 7.060% 11/24/97
- ------------------------------------------------------------------------------------------------------------
73 MS Homestead House - San Diego (2IV) $3,990,455 $42 8.900% 6/18/97
74 MS Homestead House - Huntington Beach (2IV) $1,576,476 $42 8.900% 6/18/97
- ------------------------------------------------------------------------------------------------------------
75 WF Coffee Creek Apartments $5,482,463 $16,317 7.180% 10/15/97
- ------------------------------------------------------------------------------------------------------------
76 WF Strouds of Santa Monica $5,472,104 $195 7.950% 6/24/97
- ------------------------------------------------------------------------------------------------------------
77 WF 1277 Orleans Dr. & 207 Java Dr. $5,461,548 $71 7.460% 8/29/97
- ------------------------------------------------------------------------------------------------------------
78 MS 34-02 Queens Boulevard $5,374,941 $29 8.530% 9/16/97
- ------------------------------------------------------------------------------------------------------------
79 WF 3 Waters Office Park $5,326,112 $85 7.690% 10/14/97
- ------------------------------------------------------------------------------------------------------------
80 WF Sears Plaza $5,312,313 $72 7.190% 11/17/97
- ------------------------------------------------------------------------------------------------------------
81 WF Smithridge Shopping Center $5,238,166 $99 7.460% 11/10/97
- ------------------------------------------------------------------------------------------------------------
82 MS Cobb Center $5,142,266 $57 8.375% 5/19/97
- ------------------------------------------------------------------------------------------------------------
83 MS Northern Hills Shopping Center (2E) $2,750,183 $30 7.960% 8/29/97
84 MS Perrin Oaks Shopping Center (2E) $2,333,519 $30 7.960% 8/29/97
- ------------------------------------------------------------------------------------------------------------
85 WF Blalock Woods Apartments $5,068,059 $16,950 7.120% 12/16/97
- ------------------------------------------------------------------------------------------------------------
86 JHREF Broadway Shoppes $5,063,848 $35 7.860% 11/19/97
- ------------------------------------------------------------------------------------------------------------
87 JHREF Cambridge Apartments $4,994,178 $31,020 7.440% 1/7/98
- ------------------------------------------------------------------------------------------------------------
88 MS Nellis-Bonanza Shopping Center $4,871,285 $61 8.310% 8/7/97
- ------------------------------------------------------------------------------------------------------------
89 JHREF Comfort Inn - Downtown New Orleans $4,835,356 $27,950 8.300% 11/18/97
- ------------------------------------------------------------------------------------------------------------
90 WF Sun Micro Systems $4,781,397 $93 7.390% 12/9/97
- ------------------------------------------------------------------------------------------------------------
91 MS Desco Plaza III $4,730,672 $94 8.030% 8/28/97
- ------------------------------------------------------------------------------------------------------------
92 JHREF Brook Village West $4,689,637 $27,915 7.570% 11/3/97
- ------------------------------------------------------------------------------------------------------------
93 JHREF Stoneleigh Place Apartments $4,686,020 $24,406 7.530% 10/30/97
- ------------------------------------------------------------------------------------------------------------
94 JHREF Simi Country Estates Mobile Home Park $4,660,000 $17,007 7.360% 2/11/98
- ------------------------------------------------------------------------------------------------------------
95 JHREF Ramada Hilltop $4,649,184 $28,699 8.030% 12/4/97
- ------------------------------------------------------------------------------------------------------------
96 JHREF Sun Shadow Square Shopping Center $4,587,160 $55 8.550% 9/30/97
- ------------------------------------------------------------------------------------------------------------
97 WF 5901 Westheimer Shopping Center $4,583,839 $96 7.370% 12/1/97
- ------------------------------------------------------------------------------------------------------------
98 MS Park Lane Villas Apartment Complex $4,573,574 $18,899 7.300% 9/24/97
- ------------------------------------------------------------------------------------------------------------
99 MS Redwood City Professional Center $4,487,063 $184 7.700% 10/30/97
</TABLE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------
Rem. Amort.
Loan Maturity Term Term Term(5) Balance Due Balloon Security
No. Date (mos) (mos) (mos) at Maturity LTV(4) Type
- ----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
67 8/1/07 120 113 300 $2,188,255 63.0% Fee
- ----------------------------------------------------------------------------------
68 6/1/07 120 111 240 $4,119,501 48.3% Fee
- ----------------------------------------------------------------------------------
69 1/1/08 120 118 360 $4,955,032 65.2% Fee
- ----------------------------------------------------------------------------------
70 1/1/08 120 118 300 $4,577,782 57.2% Fee
- ----------------------------------------------------------------------------------
71 12/1/07 120 117 276 $4,373,059 54.7% Fee
- ----------------------------------------------------------------------------------
72 12/1/02 60 57 360 $5,307,997 54.3% Fee
- ----------------------------------------------------------------------------------
73 7/1/15 216 208 216 $179,151 3.4% Fee
74 7/1/15 216 208 216 $70,776 3.4% Fee
- ----------------------------------------------------------------------------------
75 11/1/07 120 116 360 $4,818,005 54.3% Fee
- ----------------------------------------------------------------------------------
76 7/1/07 120 112 324 $4,623,078 62.8% Fee
- ----------------------------------------------------------------------------------
77 9/1/07 120 114 300 $4,379,771 37.4% Fee
- ----------------------------------------------------------------------------------
78 10/1/07 120 115 300 $4,517,288 41.1% Fee
- ----------------------------------------------------------------------------------
79 11/1/07 120 116 300 $4,286,391 55.1% Fee
- ----------------------------------------------------------------------------------
80 12/1/07 120 117 360 $4,589,727 48.3% Fee
- ----------------------------------------------------------------------------------
81 12/1/07 120 117 360 $4,632,614 65.2% Fee
- ----------------------------------------------------------------------------------
82 6/1/17 240 231 276 $1,349,725 18.9% Fee
- ----------------------------------------------------------------------------------
83 10/1/07 120 115 360 $2,464,736 70.1% Fee
84 10/1/07 120 115 360 $2,091,317 70.1% Fee
- ----------------------------------------------------------------------------------
85 1/1/13 180 178 180 $0 0.0% Fee
- ----------------------------------------------------------------------------------
86 12/1/14 204 201 204 $148,410 2.0% Fee
- ----------------------------------------------------------------------------------
87 2/1/08 120 119 360 $4,408,328 63.4% Fee
- ----------------------------------------------------------------------------------
88 9/1/07 120 114 300 $4,073,273 62.7% Fee
- ----------------------------------------------------------------------------------
89 12/1/07 120 117 300 $4,031,066 45.8% Fee
- ----------------------------------------------------------------------------------
90 1/1/08 120 118 240 $3,311,983 48.7% Fee
- ----------------------------------------------------------------------------------
91 9/1/07 120 114 360 $4,169,493 56.0% Fee
- ----------------------------------------------------------------------------------
92 12/1/07 120 117 360 $4,158,743 70.5% Fee
- ----------------------------------------------------------------------------------
93 11/1/07 120 116 360 $4,154,058 66.5% Fee
- ----------------------------------------------------------------------------------
94 3/1/08 120 120 360 $4,103,931 59.5% Fee
- ----------------------------------------------------------------------------------
95 1/1/08 120 118 300 $3,842,731 54.1% Fee
- ----------------------------------------------------------------------------------
96 10/1/04 84 79 360 $4,337,864 72.3% Fee
- ----------------------------------------------------------------------------------
97 12/1/07 120 117 300 $3,654,209 55.5% Fee
- ----------------------------------------------------------------------------------
98 10/1/07 120 115 300 $3,713,300 44.2% Fee
- ----------------------------------------------------------------------------------
99 11/1/07 120 116 360 $3,994,072 65.5% Fee
</TABLE>
II-3
<PAGE> 112
APPENDIX II
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
LOAN INFORMATION
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
Aggregate Cut-Off
Loan Cut-Off Date Bal./ Mortgage Note
No. Seller(1) Property Name Date Balance Unit or SF(4) Rate Date
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------
100 MS Centerpointe Apartments $4,485,594 $34,772 7.160% 10/24/97
- ------------------------------------------------------------------------------------------------------------
101 WF Vista del Coronado Apts $4,461,375 $20,006 8.020% 6/25/97
- ------------------------------------------------------------------------------------------------------------
102 MS Haltom Plaza $4,438,031 $22 8.030% 10/21/97
- ------------------------------------------------------------------------------------------------------------
103 WF Sycamore Square Shopping Center $4,429,932 $99 7.430% 11/10/97
- ------------------------------------------------------------------------------------------------------------
104 WF Brookstone Village Apartments $4,387,001 $35,379 7.870% 10/29/97
- ------------------------------------------------------------------------------------------------------------
105 MS Autumn Hills - Arbor Apartments $4,325,010 $15,337 7.300% 9/24/97
- ------------------------------------------------------------------------------------------------------------
106 MS Mansell Oaks Plaza Shopping Center $4,287,981 $99 7.840% 10/16/97
- ------------------------------------------------------------------------------------------------------------
107 MS Onyx One Building $4,277,862 $66 7.940% 9/17/97
- ------------------------------------------------------------------------------------------------------------
108 MS Jillian's Billiard Club $4,237,168 $44 8.300% 11/10/97
- ------------------------------------------------------------------------------------------------------------
109 MS Shoreline Apartments $4,225,584 $13,764 7.300% 9/24/97
- ------------------------------------------------------------------------------------------------------------
110 WF Harbor Plaza Shopping Center $4,219,894 $102 7.870% 9/30/97
- ------------------------------------------------------------------------------------------------------------
111 WF 16325-16407 South Main Street $4,185,547 $27 7.500% 11/7/97
- ------------------------------------------------------------------------------------------------------------
112 MS Holiday Inn - Merle Hay $4,112,076 $28,359 9.830% 5/8/97
- ------------------------------------------------------------------------------------------------------------
113 JHREF Crosswind Corners Shopping Center $4,089,776 $61 7.500% 12/2/97
- ------------------------------------------------------------------------------------------------------------
114 WF Narrows Creek Townhomes $4,085,373 $49,822 7.760% 9/12/97
- ------------------------------------------------------------------------------------------------------------
115 MS Costa Mesa Motor Inn $4,081,177 $17,367 8.590% 9/5/97
- ------------------------------------------------------------------------------------------------------------
116 JHREF Concord Square Apts. $4,042,595 $24,207 7.030% 12/3/97
- ------------------------------------------------------------------------------------------------------------
117 WF 1st Avenue (2V) $2,419,305 $38 8.110% 7/10/97
118 WF Rogmour Center (2V) $1,586,829 $38 8.110% 7/10/97
- ------------------------------------------------------------------------------------------------------------
119 MS Hampton Inn - Auburn $4,005,987 $38,519 8.430% 9/17/97
- ------------------------------------------------------------------------------------------------------------
120 WF First Place Office Center $3,996,947 $90 7.540% 9/29/97
- ------------------------------------------------------------------------------------------------------------
121 WF Lone Oak Shopping Center $3,993,488 $37 7.050% 12/5/97
- ------------------------------------------------------------------------------------------------------------
122 WF El Macero Shopping Center $3,990,617 $81 7.260% 11/21/97
- ------------------------------------------------------------------------------------------------------------
123 MS DeSoto Corporate Industrial $3,988,244 $50 7.590% 10/10/97
- ------------------------------------------------------------------------------------------------------------
124 WF San Antonio Center $3,927,599 $86 7.610% 9/19/97
- ------------------------------------------------------------------------------------------------------------
125 MS Sycamore Hills Apartments $3,900,000 $18,841 7.270% 2/13/98
- ------------------------------------------------------------------------------------------------------------
126 WF Eagle Rock I Apartments $3,893,387 $37,436 7.500% 12/10/97
- ------------------------------------------------------------------------------------------------------------
127 MS Kuebel Fuchs Office Building $3,878,691 $40 8.710% 8/27/97
- ------------------------------------------------------------------------------------------------------------
128 MS Marijon Dyeing & Finishing Co. $3,789,779 $36 8.030% 10/24/97
- ------------------------------------------------------------------------------------------------------------
129 JHREF Holiday Inn Daytona Beach $3,781,338 $25,042 8.210% 9/2/97
- ------------------------------------------------------------------------------------------------------------
130 JHREF Sani-Serve Industrial Building $3,776,810 $27 8.310% 8/21/97
- ------------------------------------------------------------------------------------------------------------
131 WF 1703-1735 Stewart Street $3,690,717 $50 6.990% 12/22/97
- ------------------------------------------------------------------------------------------------------------
132 MS Walnut Plaza Shopping Center $3,690,048 $32 8.030% 10/21/97
</TABLE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------
Rem. Amort.
Loan Maturity Term Term Term(5) Balance Due Balloon Security
No. Date (mos) (mos) (mos) at Maturity LTV(4) Type
- ----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------
100 11/1/07 120 116 360 $3,939,957 63.5% Fee
- ----------------------------------------------------------------------------------
101 7/1/07 120 112 300 $3,636,195 43.8% Fee
- ----------------------------------------------------------------------------------
102 11/1/12 180 176 360 $3,560,161 53.1% Fee
- ----------------------------------------------------------------------------------
103 12/1/07 120 117 360 $3,914,901 69.9% Fee
- ----------------------------------------------------------------------------------
104 11/1/17 240 236 276 $1,304,372 21.4% Fee
- ----------------------------------------------------------------------------------
105 10/1/07 120 115 300 $3,511,491 48.4% Fee
- ----------------------------------------------------------------------------------
106 11/1/07 120 116 360 $3,829,596 71.2% Fee
- ----------------------------------------------------------------------------------
107 10/1/07 120 115 300 $3,537,647 60.0% Fee
- ----------------------------------------------------------------------------------
108 12/1/07 120 117 300 $3,532,378 58.9% Fee
- ----------------------------------------------------------------------------------
109 10/1/07 120 115 300 $3,430,767 37.5% Fee
- ----------------------------------------------------------------------------------
110 10/1/07 120 115 300 $3,482,855 67.6% Fee
- ----------------------------------------------------------------------------------
111 12/1/07 120 117 300 $3,348,135 58.5% Fee
- ----------------------------------------------------------------------------------
112 6/1/07 120 111 264 $3,338,346 57.6% Fee
- ----------------------------------------------------------------------------------
113 1/1/08 120 118 300 $3,328,923 52.0% Fee
- ----------------------------------------------------------------------------------
114 10/1/07 120 115 360 $3,578,684 54.0% Fee
- ----------------------------------------------------------------------------------
115 10/1/07 120 115 300 $3,435,463 52.9% Fee
- ----------------------------------------------------------------------------------
116 1/1/08 120 118 360 $3,533,789 63.1% Fee
- ----------------------------------------------------------------------------------
117 8/1/07 120 113 360 $2,137,123 68.7% Fee
118 8/1/07 120 113 360 $1,401,746 68.7% Fee
- ----------------------------------------------------------------------------------
119 10/1/07 120 115 300 $3,357,739 62.2% Fee
- ----------------------------------------------------------------------------------
120 10/1/07 120 115 300 $3,208,064 47.9% Fee
- ----------------------------------------------------------------------------------
121 1/1/08 120 118 360 $3,436,523 62.5% Fee
- ----------------------------------------------------------------------------------
122 12/1/07 120 117 360 $3,511,669 62.7% Fee
- ----------------------------------------------------------------------------------
123 11/1/07 120 116 360 $3,540,656 56.7% Fee
- ----------------------------------------------------------------------------------
124 10/1/07 120 115 300 $3,158,060 50.3% Fee
- ----------------------------------------------------------------------------------
125 3/1/08 120 120 360 $3,426,678 63.5% Fee
- ----------------------------------------------------------------------------------
126 1/1/13 180 178 360 $3,049,764 59.8% Fee
- ----------------------------------------------------------------------------------
127 9/1/07 120 114 300 $3,277,980 59.6% Fee
- ----------------------------------------------------------------------------------
128 11/1/07 120 116 360 $3,399,723 72.3% Fee
- ----------------------------------------------------------------------------------
129 10/1/07 120 115 300 $3,150,533 46.4% Fee
- ----------------------------------------------------------------------------------
130 9/1/07 120 114 300 $3,092,909 56.3% Fee
- ----------------------------------------------------------------------------------
131 1/1/18 240 238 240 $0 0.0% Fee
- ----------------------------------------------------------------------------------
132 11/1/12 180 176 360 $2,960,134 59.2% Fee
</TABLE>
II-4
<PAGE> 113
APPENDIX II
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
LOAN INFORMATION
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
Aggregate Cut-Off
Loan Cut-Off Date Bal./ Mortgage Note
No. Seller(1) Property Name Date Balance Unit or SF(4) Rate Date
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------
133 WF Oak Glen Apartments $3,686,070 $24,574 7.490% 9/9/97
- ---------------------------------------------------------------------------------------------------------------
134 JHREF Philamer Apartments $3,645,732 $30,896 7.390% 1/5/98
- ---------------------------------------------------------------------------------------------------------------
135 JHREF University Carriage House and Essex House Apts. $3,635,777 $19,547 7.340% 12/12/97
- ---------------------------------------------------------------------------------------------------------------
136 WF The Merrill Lynch Building $3,612,199 $125 7.330% 12/1/97
- ---------------------------------------------------------------------------------------------------------------
137 MS Quality Inn - Toms River $3,589,041 $35,890 8.250% 11/25/97
- ---------------------------------------------------------------------------------------------------------------
138 MS St. Bernard Plaza $3,577,783 $20 8.010% 8/8/97
- ---------------------------------------------------------------------------------------------------------------
139 WF Southgate Mobile Home Park $3,491,766 $20,784 7.930% 12/8/97
- ---------------------------------------------------------------------------------------------------------------
140 JHREF Youngstown Shopping Center $3,488,941 $27 8.010% 10/1/97
- ---------------------------------------------------------------------------------------------------------------
141 MS 141 - 145 South Street $3,482,269 $31 9.000% 5/23/97
- ---------------------------------------------------------------------------------------------------------------
142 MS Staples - Norwalk $3,451,340 $144 8.000% 7/3/97
- ---------------------------------------------------------------------------------------------------------------
143 WF Elko Shopping Center $3,431,648 $29 8.010% 9/30/97
- ---------------------------------------------------------------------------------------------------------------
144 MS 1580 VFW Parkway $3,430,407 $31 8.490% 8/21/97
- ---------------------------------------------------------------------------------------------------------------
145 MS GE-Horizon Corporate Center $3,430,361 $84 7.750% 3/27/97
- ---------------------------------------------------------------------------------------------------------------
146 JHREF The Village Shopping Center $3,394,397 $84 7.680% 12/23/97
- ---------------------------------------------------------------------------------------------------------------
147 MS Reynolds Plaza $3,389,010 $58 8.500% 10/14/97
- ---------------------------------------------------------------------------------------------------------------
148 WF North Tower Apartments $3,332,197 $37,866 7.480% 7/31/97
- ---------------------------------------------------------------------------------------------------------------
149 JHREF K-Mart $3,292,258 $39 7.950% 12/31/97
- ---------------------------------------------------------------------------------------------------------------
150 MS Staples Plaza Shopping Center $3,278,986 $83 8.400% 8/28/97
- ---------------------------------------------------------------------------------------------------------------
151 JHREF The Collection at Laguna Beach $3,243,430 $191 8.000% 11/6/97
- ---------------------------------------------------------------------------------------------------------------
152 WF Lapham Drive $3,227,336 $14 8.460% 7/14/97
- ---------------------------------------------------------------------------------------------------------------
153 WF Washington Square Apartments $3,142,436 $56,115 7.540% 9/22/97
- ---------------------------------------------------------------------------------------------------------------
154 WF Center at Cypresswood $3,102,338 $97 9.390% 9/13/96
- ---------------------------------------------------------------------------------------------------------------
155 MS Westates Building $2,987,796 $52 8.260% 7/28/97
- ---------------------------------------------------------------------------------------------------------------
156 WF Almaden II Office Center $2,978,183 $47 8.200% 7/7/97
- ---------------------------------------------------------------------------------------------------------------
157 WF 7110 & 7210 Rosecrans Ave. $2,934,684 $21 7.890% 11/5/97
- ---------------------------------------------------------------------------------------------------------------
158 WF 280 Euclid Apartments $2,934,569 $34,524 7.560% 7/2/97
- ---------------------------------------------------------------------------------------------------------------
159 MS Fairfield Village Shopping Center $2,921,214 $38 8.240% 9/18/97
- ---------------------------------------------------------------------------------------------------------------
160 WF Rust Building (Seafirst) $2,881,396 $34 8.000% 8/26/97
- ---------------------------------------------------------------------------------------------------------------
161 MS 4412 Spicewood Springs Road $2,871,753 $50 8.500% 8/2/97
- ---------------------------------------------------------------------------------------------------------------
162 WF Shaw & Blackstone Retail Center $2,792,932 $81 7.410% 12/15/97
- ---------------------------------------------------------------------------------------------------------------
163 WF Shibui Apartments $2,789,335 $26,314 7.090% 12/4/97
- ---------------------------------------------------------------------------------------------------------------
164 WF Materials Research Group $2,783,215 $31 7.260% 9/25/97
- ---------------------------------------------------------------------------------------------------------------
165 MS Rite Industries $2,766,030 $20 8.625% 9/5/97
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------
Rem. Amort.
Loan Maturity Term Term Term(5) Balance Due Balloon Security
No. Date (mos) (mos) (mos) at Maturity LTV(4) Type
- ----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------
133 10/1/07 120 115 360 $3,210,706 66.1% Fee
- ----------------------------------------------------------------------------------
134 2/1/08 120 119 360 $3,214,020 70.0% Fee
- ----------------------------------------------------------------------------------
135 1/1/08 120 118 240 $2,513,999 47.2% Fee
- ----------------------------------------------------------------------------------
136 12/1/07 120 117 300 $2,928,780 61.0% Fee
- ----------------------------------------------------------------------------------
137 12/1/07 120 117 300 $2,987,925 54.3% Fee
- ----------------------------------------------------------------------------------
138 9/1/07 120 114 300 $2,967,244 59.3% Fee
- ----------------------------------------------------------------------------------
139 1/1/08 120 118 300 $2,877,884 58.7% Fee
- ----------------------------------------------------------------------------------
140 10/1/07 120 115 360 $3,130,436 65.2% Fee
- ----------------------------------------------------------------------------------
141 6/1/07 120 111 360 $3,130,042 60.2% Fee
- ----------------------------------------------------------------------------------
142 7/1/17 240 232 240 $0 0.0% Fee
- ----------------------------------------------------------------------------------
143 10/1/07 120 115 300 $2,787,042 49.8% Fee
- ----------------------------------------------------------------------------------
144 9/1/07 120 114 300 $2,882,324 53.4% Fee
- ----------------------------------------------------------------------------------
145 4/1/08 132 121 240 $2,229,195 41.3% Fee
- ----------------------------------------------------------------------------------
146 1/1/08 120 118 360 $3,016,132 60.3% Fee
- ----------------------------------------------------------------------------------
147 11/1/07 120 116 324 $2,949,430 56.7% Fee
- ----------------------------------------------------------------------------------
148 8/1/07 120 113 360 $2,906,350 66.8% Fee
- ----------------------------------------------------------------------------------
149 1/1/08 120 118 300 $2,714,999 60.6% Fee
- ----------------------------------------------------------------------------------
150 9/1/07 120 114 360 $2,969,562 72.0% Fee
- ----------------------------------------------------------------------------------
151 12/1/07 120 117 360 $2,906,008 62.5% Fee
- ----------------------------------------------------------------------------------
152 8/1/07 120 113 300 $2,654,971 57.7% Fee
- ----------------------------------------------------------------------------------
153 10/1/07 120 115 360 $2,788,364 50.5% Fee
- ----------------------------------------------------------------------------------
154 10/1/06 120 103 300 $2,629,243 58.4% Fee
- ----------------------------------------------------------------------------------
155 8/1/07 120 113 360 $2,699,163 60.0% Fee
- ----------------------------------------------------------------------------------
156 8/1/07 120 113 300 $2,435,126 31.9% Fee
- ----------------------------------------------------------------------------------
157 12/1/07 120 117 240 $2,072,128 48.2% Fee
- ----------------------------------------------------------------------------------
158 8/1/07 120 113 360 $2,563,826 52.6% Fee
- ----------------------------------------------------------------------------------
159 10/1/07 120 115 360 $2,634,832 66.7% Fee
- ----------------------------------------------------------------------------------
160 9/1/07 120 114 300 $2,342,136 40.4% Fee
- ----------------------------------------------------------------------------------
161 9/1/07 120 114 240 $2,029,821 37.6% Fee
- ----------------------------------------------------------------------------------
162 1/1/08 120 118 300 $2,298,792 48.4% Fee
- ----------------------------------------------------------------------------------
163 1/1/18 240 238 240 $0 0.0% Fee
- ----------------------------------------------------------------------------------
164 10/1/07 120 115 300 $2,217,654 39.0% Fee
- ----------------------------------------------------------------------------------
165 9/1/12 180 174 180 $0 0.0% Fee
- ----------------------------------------------------------------------------------
</TABLE>
II-5
<PAGE> 114
APPENDIX II
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
LOAN INFORMATION
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
Aggregate Cut-Off
Loan Cut-Off Date Bal./ Mortgage Note
No. Seller(1) Property Name Date Balance Unit or SF(4) Rate Date
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
166 WF Garden Court Warehouses $2,740,921 $39 7.750% 11/6/97
- -------------------------------------------------------------------------------------------------------------
167 WF Casa De Colinas - Phase I $2,695,414 $20,895 7.490% 12/17/97
- -------------------------------------------------------------------------------------------------------------
168 MS Council Rock Greens Office Complex $2,693,531 $80 9.190% 9/9/97
- -------------------------------------------------------------------------------------------------------------
169 WF Wayside Shopping Center $2,683,797 $63 7.610% 12/4/97
- -------------------------------------------------------------------------------------------------------------
170 WF Canoga Valley Center $2,680,397 $78 8.210% 7/28/97
- -------------------------------------------------------------------------------------------------------------
171 MS Best Buy Store $2,669,461 $58 8.230% 7/22/97
- -------------------------------------------------------------------------------------------------------------
172 MS Suncoast Plaza $2,655,059 $23 8.130% 10/13/97
- -------------------------------------------------------------------------------------------------------------
173 WF Public Storage - Hayward, CA $2,640,951 $3,535 7.540% 11/26/97
- -------------------------------------------------------------------------------------------------------------
174 MS Park Cedar Building $2,637,410 $49 8.960% 7/23/97
- -------------------------------------------------------------------------------------------------------------
175 WF Milestone Shopping Center $2,637,045 $119 7.900% 7/25/97
- -------------------------------------------------------------------------------------------------------------
176 WF Captains Self Storage $2,631,370 $3,675 8.410% 7/28/97
- -------------------------------------------------------------------------------------------------------------
177 WF West Lake Plaza Retail Center $2,626,490 $105 8.250% 9/2/97
- -------------------------------------------------------------------------------------------------------------
178 MS Fortune Park Building XIV $2,585,926 $49 7.940% 10/15/97
- -------------------------------------------------------------------------------------------------------------
179 WF The Palms Apartments $2,566,277 $10,518 7.590% 11/10/97
- -------------------------------------------------------------------------------------------------------------
180 MS South Loop $2,543,141 $28 8.030% 10/21/97
- -------------------------------------------------------------------------------------------------------------
181 JHREF Courthouse Square Shopping Ctr. $2,497,135 $57 7.640% 1/9/98
- -------------------------------------------------------------------------------------------------------------
182 WF Orchard Supply Hardware-Torrance $2,496,203 $63 7.400% 12/11/97
- -------------------------------------------------------------------------------------------------------------
183 MS East Towne Centre Retail Shops $2,492,546 $76 8.265% 9/12/97
- -------------------------------------------------------------------------------------------------------------
184 WF Brookside Retirement Residence $2,489,566 $37,721 8.110% 10/30/97
- -------------------------------------------------------------------------------------------------------------
185 WF Fed Ex (Van Owen) $2,483,335 $50 7.760% 8/15/97
- -------------------------------------------------------------------------------------------------------------
186 JHREF Airline Interiors Building $2,470,882 $52 7.620% 12/8/97
- -------------------------------------------------------------------------------------------------------------
187 WF Lindley Northwood Apartment $2,461,040 $20,509 7.220% 11/13/97
- -------------------------------------------------------------------------------------------------------------
188 WF Arbor Professional Center $2,454,507 $99 8.140% 8/28/97
- -------------------------------------------------------------------------------------------------------------
189 WF The Staples Building $2,394,727 $99 7.750% 12/3/97
- -------------------------------------------------------------------------------------------------------------
190 WF Cypress Point Business Center $2,392,014 $64 7.710% 12/1/97
- -------------------------------------------------------------------------------------------------------------
191 MS Golden Oaks Apartments $2,391,672 $25,996 7.590% 9/29/97
- -------------------------------------------------------------------------------------------------------------
192 MS Fountain Garden Apartments $2,391,260 $23,913 7.370% 9/17/97
- -------------------------------------------------------------------------------------------------------------
193 WF Sherman Arms Apts. $2,309,591 $31,211 7.660% 10/27/97
- -------------------------------------------------------------------------------------------------------------
194 MS Somerset Ramada Inn $2,294,567 $18,357 7.900% 12/31/97
- -------------------------------------------------------------------------------------------------------------
195 MS Best Western - Lawndale $2,286,846 $22,868 8.450% 8/7/97
- -------------------------------------------------------------------------------------------------------------
196 MS Anchorage Motor Inn $2,279,580 $25,613 9.010% 8/22/97
- -------------------------------------------------------------------------------------------------------------
197 MS Revere Industrial Center $2,222,912 $18 8.500% 8/8/97
- -------------------------------------------------------------------------------------------------------------
198 WF Auburn Town Center $2,195,159 $106 7.740% 12/15/97
</TABLE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------
Rem. Amort.
Loan Maturity Term Term Term(5) Balance Due Balloon Security
No. Date (mos) (mos) (mos) at Maturity LTV(4) Type
- ----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
166 12/1/07 120 117 300 $2,249,850 58.6% Fee
- ----------------------------------------------------------------------------------
167 1/1/13 180 178 360 $2,110,452 52.0% Fee
- ----------------------------------------------------------------------------------
168 10/1/07 120 115 360 $2,479,555 68.9% Fee
- ----------------------------------------------------------------------------------
169 1/1/13 180 178 180 $0 0.0% Fee
- ----------------------------------------------------------------------------------
170 8/1/04 84 77 300 $2,389,975 52.0% Fee
- ----------------------------------------------------------------------------------
171 8/1/17 240 233 240 $125,262 2.6% Fee
- ----------------------------------------------------------------------------------
172 11/1/09 144 140 144 $42,011 0.8% Leasehold
- ----------------------------------------------------------------------------------
173 12/1/07 120 117 300 $2,154,608 40.8% Fee
- ----------------------------------------------------------------------------------
174 8/1/07 120 113 324 $2,326,109 61.2% Fee
- ----------------------------------------------------------------------------------
175 8/1/07 120 113 360 $2,319,889 61.9% Fee
- ----------------------------------------------------------------------------------
176 8/1/07 120 113 300 $2,162,190 60.1% Fee
- ----------------------------------------------------------------------------------
177 10/1/07 120 115 300 $2,145,575 53.6% Fee
- ----------------------------------------------------------------------------------
178 11/1/07 120 116 270 $2,005,275 57.3% Fee
- ----------------------------------------------------------------------------------
179 12/1/07 120 117 300 $2,096,749 49.8% Fee
- ----------------------------------------------------------------------------------
180 11/1/12 180 176 360 $2,040,093 55.1% Fee
- ----------------------------------------------------------------------------------
181 2/1/13 180 179 360 $1,966,194 41.8% Fee
- ----------------------------------------------------------------------------------
182 1/1/16 216 214 360 $1,648,798 37.1% Fee
- ----------------------------------------------------------------------------------
183 10/1/07 120 115 360 $2,249,456 65.8% Fee
- ----------------------------------------------------------------------------------
184 11/1/07 120 116 300 $2,024,706 49.5% Fee
- ----------------------------------------------------------------------------------
185 9/1/04 84 78 300 $2,196,346 65.7% Fee
- ----------------------------------------------------------------------------------
186 1/1/10 144 142 360 $2,104,976 63.8% Fee
- ----------------------------------------------------------------------------------
187 12/1/17 240 237 240 $0 0.0% Fee
- ----------------------------------------------------------------------------------
188 9/1/07 120 114 300 $2,001,916 48.8% Fee
- ----------------------------------------------------------------------------------
189 1/1/13 180 178 300 $1,510,524 44.5% Fee
- ----------------------------------------------------------------------------------
190 12/1/07 120 117 300 $1,923,874 48.6% Fee
- ----------------------------------------------------------------------------------
191 10/1/07 120 115 360 $2,124,760 62.5% Fee
- ----------------------------------------------------------------------------------
192 10/1/07 120 115 360 $2,113,024 68.2% Fee
- ----------------------------------------------------------------------------------
193 11/1/07 120 116 300 $1,857,307 64.0% Fee
- ----------------------------------------------------------------------------------
194 1/1/08 120 118 300 $1,889,541 38.6% Fee
- ----------------------------------------------------------------------------------
195 9/1/07 120 114 300 $1,919,422 45.2% Fee
- ----------------------------------------------------------------------------------
196 9/1/07 120 114 240 $1,677,406 38.6% Fee
- ----------------------------------------------------------------------------------
197 9/1/15 216 210 216 $84,388 2.1% Fee
- ----------------------------------------------------------------------------------
198 1/1/13 180 178 300 $1,384,050 40.2% Fee
</TABLE>
II-6
<PAGE> 115
APPENDIX II
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
LOAN INFORMATION
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
Aggregate Cut-Off
Loan Cut-Off Date Bal./ Mortgage Note
No. Seller(1) Property Name Date Balance Unit or SF(4) Rate Date
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------
199 MS Eagle Country Market $2,188,274 $56 8.850% 8/14/97
- ------------------------------------------------------------------------------------------------------------
200 JHREF 44 South Bayles Avenue $2,144,322 $102 8.120% 10/7/97
- ------------------------------------------------------------------------------------------------------------
201 WF Westpark Towne Plaza Center $2,142,858 $105 7.720% 11/5/97
- ------------------------------------------------------------------------------------------------------------
202 WF Public Storage - Pittsburg, CA $2,142,658 $31 7.540% 11/26/97
- ------------------------------------------------------------------------------------------------------------
203 WF South Mojave Road Warehouse $2,138,620 $43 7.780% 9/18/97
- ------------------------------------------------------------------------------------------------------------
204 MS Sussex Plaza Shops $2,117,250 $69 8.256% 7/31/97
- ------------------------------------------------------------------------------------------------------------
205 MS Healthsouth Surgical Center $2,100,789 $93 8.870% 9/10/97
- ------------------------------------------------------------------------------------------------------------
206 MS Fargo Industrial $2,096,726 $12 8.020% 12/10/97
- ------------------------------------------------------------------------------------------------------------
207 WF Secure Self Storage $2,092,549 $3,919 7.300% 12/1/97
- ------------------------------------------------------------------------------------------------------------
208 WF Harvest Granger Apartments $2,090,058 $20,097 8.060% 7/29/97
- ------------------------------------------------------------------------------------------------------------
209 MS Smithfield Plaza Shops $2,022,324 $72 8.560% 7/30/97
- ------------------------------------------------------------------------------------------------------------
210 JHREF Warren Village Apartments and Retail Center $1,987,775 $41,412 8.300% 8/21/97
- ------------------------------------------------------------------------------------------------------------
211 WF East Sahara Industrial $1,986,900 $27 7.870% 8/25/97
- ------------------------------------------------------------------------------------------------------------
212 MS Carson Pirie Scott $1,983,823 $48 8.500% 9/17/97
- ------------------------------------------------------------------------------------------------------------
213 WF American Eagle Self Storage $1,983,507 $2,428 8.270% 6/20/97
- ------------------------------------------------------------------------------------------------------------
214 WF The Pavilions $1,962,622 $17 9.140% 7/29/97
- ------------------------------------------------------------------------------------------------------------
215 WF Southlake Marketplace-II $1,943,208 $97 7.880% 9/18/97
- ------------------------------------------------------------------------------------------------------------
216 WF Paxton/Bradley Industrial Park $1,943,193 $27 7.410% 12/1/97
- ------------------------------------------------------------------------------------------------------------
217 WF 15251-15261 Beach Boulevard $1,936,291 $119 8.410% 7/22/97
- ------------------------------------------------------------------------------------------------------------
218 WF Raintree Apartments $1,932,438 $11,503 7.370% 10/30/97
- ------------------------------------------------------------------------------------------------------------
219 WF Hitachi Building $1,926,046 $33 7.460% 10/22/97
- ------------------------------------------------------------------------------------------------------------
220 WF 344-362 Main St. $1,912,598 $52 6.990% 12/22/97
- ------------------------------------------------------------------------------------------------------------
221 WF National Self Storage of Pittsfield $1,895,812 $28 7.730% 12/11/97
- ------------------------------------------------------------------------------------------------------------
222 MS Comfort Inn - Seville $1,887,260 $28,595 8.750% 1/9/98
- ------------------------------------------------------------------------------------------------------------
223 WF Pine Knoll Apartments $1,854,739 $25,407 7.800% 9/2/97
- ------------------------------------------------------------------------------------------------------------
224 WF The Alaska Center $1,835,634 $47 7.790% 7/30/97
- ------------------------------------------------------------------------------------------------------------
225 WF Petco $1,810,638 $133 8.560% 6/9/97
- ------------------------------------------------------------------------------------------------------------
226 WF Gateway Park - Dublin $1,808,639 $54 8.170% 8/13/97
- ------------------------------------------------------------------------------------------------------------
227 MS Town Centre Shops $1,793,435 $66 8.256% 8/6/97
- ------------------------------------------------------------------------------------------------------------
228 WF Baird Avenue Apartments $1,791,597 $38,119 8.130% 7/17/97
- ------------------------------------------------------------------------------------------------------------
229 WF Morena Industrial Buildings $1,788,582 $46 8.070% 8/11/97
- ------------------------------------------------------------------------------------------------------------
230 WF Cirby Business Park $1,784,746 $39 8.100% 6/30/97
- ------------------------------------------------------------------------------------------------------------
231 WF Park Place Townhomes $1,751,184 $36,483 7.120% 12/15/97
- ------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------
Rem. Amort.
Loan Maturity Term Term Term(5) Balance Due Balloon Security
No. Date (mos) (mos) (mos) at Maturity LTV(4) Type
- ----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------
199 9/1/07 120 114 300 $1,856,123 67.3% Fee
- ----------------------------------------------------------------------------------
200 11/1/07 120 116 360 $1,927,616 67.1% Fee
- ----------------------------------------------------------------------------------
201 12/1/07 120 117 300 $1,723,921 55.6% Fee
- ----------------------------------------------------------------------------------
202 12/1/07 120 117 300 $1,748,079 40.7% Fee
- ----------------------------------------------------------------------------------
203 10/1/02 60 55 300 $1,993,086 67.6% Fee
- ----------------------------------------------------------------------------------
204 9/1/07 120 114 360 $1,911,343 67.4% Fee
- ----------------------------------------------------------------------------------
205 10/1/07 120 115 300 $1,781,505 64.3% Fee
- ----------------------------------------------------------------------------------
206 1/1/08 120 118 360 $1,878,814 62.1% Fee
- ----------------------------------------------------------------------------------
207 12/1/07 120 117 300 $1,695,127 53.1% Fee
- ----------------------------------------------------------------------------------
208 8/1/04 84 77 360 $1,943,588 68.0% Fee
- ----------------------------------------------------------------------------------
209 8/1/07 120 113 360 $1,838,987 69.1% Fee
- ----------------------------------------------------------------------------------
210 9/1/07 120 114 300 $1,627,447 64.0% Fee
- ----------------------------------------------------------------------------------
211 9/1/07 120 114 300 $1,609,901 46.7% Fee
- ----------------------------------------------------------------------------------
212 10/1/17 240 235 240 $97,063 3.6% Fee
- ----------------------------------------------------------------------------------
213 7/1/07 120 112 300 $1,626,241 45.8% Fee
- ----------------------------------------------------------------------------------
214 8/1/12 180 173 180 $0 0.0% Fee
- ----------------------------------------------------------------------------------
215 10/1/04 84 79 360 $1,800,374 69.2% Fee
- ----------------------------------------------------------------------------------
216 12/1/07 120 117 300 $1,550,741 51.7% Fee
- ----------------------------------------------------------------------------------
217 8/1/07 120 113 300 $1,591,046 62.4% Fee
- ----------------------------------------------------------------------------------
218 11/1/15 216 212 216 $0 0.0% Fee
- ----------------------------------------------------------------------------------
219 11/1/07 120 116 300 $1,569,282 57.2% Fee
- ----------------------------------------------------------------------------------
220 1/1/18 240 238 240 $0 0.0% Fee
- ----------------------------------------------------------------------------------
221 12/1/07 119 117 300 $1,528,345 42.1% Fee
- ----------------------------------------------------------------------------------
222 2/1/08 120 119 296 $1,577,318 60.7% Fee
- ----------------------------------------------------------------------------------
223 9/1/07 119 114 300 $1,502,899 55.7% Fee
- ----------------------------------------------------------------------------------
224 8/1/07 120 113 300 $1,486,082 47.9% Fee
- ----------------------------------------------------------------------------------
225 7/1/07 120 112 300 $1,494,471 59.2% Fee
- ----------------------------------------------------------------------------------
226 9/1/07 120 114 300 $1,476,204 56.3% Fee
- ----------------------------------------------------------------------------------
227 9/1/07 120 114 360 $1,619,019 66.1% Fee
- ----------------------------------------------------------------------------------
228 8/1/07 120 113 360 $1,583,242 71.0% Fee
- ----------------------------------------------------------------------------------
229 9/1/07 120 114 300 $1,456,320 49.5% Fee
- ----------------------------------------------------------------------------------
230 7/1/07 120 112 300 $1,457,422 46.0% Fee
- ----------------------------------------------------------------------------------
231 1/1/08 120 118 360 $1,509,372 57.5% Fee
- ----------------------------------------------------------------------------------
</TABLE>
II-7
<PAGE> 116
APPENDIX II
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
LOAN INFORMATION
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
Aggregate Cut-Off
Loan Cut-Off Date Bal./ Mortgage Note
No. Seller(1) Property Name Date Balance Unit or SF(4) Rate Date
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
232 WF Post & Paddock Place $1,735,776 $19 8.360% 6/13/97
- ------------------------------------------------------------------------------------------------------------
233 WF Parkway East Townhomes $1,695,966 $24,228 7.210% 11/6/97
- ------------------------------------------------------------------------------------------------------------
234 WF Auburn Hills Industrial $1,691,572 $28 7.830% 7/31/97
- ------------------------------------------------------------------------------------------------------------
235 WF 2221-2241 Calle De Luna $1,690,751 $77 7.870% 9/30/97
- ------------------------------------------------------------------------------------------------------------
236 MS Stewart-Lamb Shopping Center $1,690,463 $62 8.560% 8/7/97
- ------------------------------------------------------------------------------------------------------------
237 WF Arizona Rent-A-Storage $1,644,284 $22 7.450% 11/19/97
- ------------------------------------------------------------------------------------------------------------
238 WF Public Storage - Decatur, GA $1,644,183 $2,815 7.340% 11/26/97
- ------------------------------------------------------------------------------------------------------------
239 WF Hart Building $1,641,637 $61 8.030% 9/18/97
- ------------------------------------------------------------------------------------------------------------
240 WF 855 Howe Avenue $1,595,856 $61 7.220% 12/3/97
- ------------------------------------------------------------------------------------------------------------
241 MS Dunbarton Plaza $1,595,229 $66 8.265% 9/12/97
- ------------------------------------------------------------------------------------------------------------
242 JHREF 27 Seaview Boulevard $1,594,956 $48 8.020% 9/19/97
- ------------------------------------------------------------------------------------------------------------
243 WF Public Storage -La Puente, CA $1,594,359 $3,496 7.340% 11/26/97
- ------------------------------------------------------------------------------------------------------------
244 WF Firemans Fund Building $1,541,236 $34 7.200% 11/20/97
- ------------------------------------------------------------------------------------------------------------
245 JHREF Lighthouse Apartments $1,501,177 $26,807 7.900% 9/26/97
- ------------------------------------------------------------------------------------------------------------
246 WF Mulholland Office Plaza $1,495,009 $65 7.710% 12/1/97
- ------------------------------------------------------------------------------------------------------------
247 MS Cactus Village $1,494,626 $16 7.810% 12/15/97
- ------------------------------------------------------------------------------------------------------------
248 WF 625 Third Street $1,486,712 $37 7.760% 9/24/97
- ------------------------------------------------------------------------------------------------------------
249 WF Durango Apartments $1,449,013 $18,577 7.240% 10/30/97
- ------------------------------------------------------------------------------------------------------------
250 WF Michigan City Towne Centre $1,444,943 $79 7.810% 12/8/97
- ------------------------------------------------------------------------------------------------------------
251 WF Greg-Mill Center $1,444,570 $37 6.960% 11/14/97
- ------------------------------------------------------------------------------------------------------------
252 MS Valex Apartments $1,396,813 $38,800 7.410% 11/14/97
- ------------------------------------------------------------------------------------------------------------
253 WF City Center Business Park $1,396,583 $23 7.060% 11/24/97
- ------------------------------------------------------------------------------------------------------------
254 MS National Square Office Park $1,393,550 $35 8.570% 10/1/97
- ------------------------------------------------------------------------------------------------------------
255 WF Kearney Villa Flex Buildings $1,392,010 $50 7.570% 9/23/97
- ------------------------------------------------------------------------------------------------------------
256 WF Santa Monica & Beverly $1,369,318 $53 8.140% 10/31/97
- ------------------------------------------------------------------------------------------------------------
257 WF Micron Electronics Building $1,362,547 $30 7.870% 9/8/97
- ------------------------------------------------------------------------------------------------------------
258 WF Ashlan / Valentine Phase II Industrial $1,347,640 $33 7.310% 12/15/97
- ------------------------------------------------------------------------------------------------------------
259 WF Baxter Rutherford Warehouses $1,344,190 $38 7.920% 10/28/97
- ------------------------------------------------------------------------------------------------------------
260 WF Evergreen Claremont Self Storage $1,320,833 $1,945 7.250% 10/9/97
- ------------------------------------------------------------------------------------------------------------
261 WF 32nd Street Commerce Park $1,316,097 $17 8.160% 10/24/97
- ------------------------------------------------------------------------------------------------------------
262 WF Frys Superstition Springs Center $1,292,015 $98 8.270% 8/14/97
- ------------------------------------------------------------------------------------------------------------
263 WF The Schwab Building $1,286,601 $54 7.860% 8/27/97
- ------------------------------------------------------------------------------------------------------------
264 WF 90 Albright Way $1,276,600 $82 7.760% 8/21/97
</TABLE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------
Rem. Amort.
Loan Maturity Term Term Term(5) Balance Due Balloon Security
No. Date (mos) (mos) (mos) at Maturity LTV(4) Type
- ----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
232 7/1/07 120 112 300 $1,426,118 50.5% Fee
- ----------------------------------------------------------------------------------
233 12/1/07 120 117 360 $1,465,937 74.2% Fee
- ----------------------------------------------------------------------------------
234 8/1/07 120 113 360 $1,486,047 45.1% Fee
- ----------------------------------------------------------------------------------
235 10/1/07 120 115 300 $1,368,417 47.2% Fee
- ----------------------------------------------------------------------------------
236 9/1/07 120 114 300 $1,423,017 52.7% Fee
- ----------------------------------------------------------------------------------
237 12/1/07 120 117 300 $1,337,939 46.9% Fee
- ----------------------------------------------------------------------------------
238 12/1/07 120 117 300 $1,333,505 39.3% Fee
- ----------------------------------------------------------------------------------
239 10/1/07 120 115 300 $1,360,993 41.1% Fee
- ----------------------------------------------------------------------------------
240 1/1/08 120 118 300 $1,288,147 48.2% Fee
- ----------------------------------------------------------------------------------
241 10/1/07 120 115 360 $1,439,651 67.0% Fee
- ----------------------------------------------------------------------------------
242 10/1/07 120 115 360 $1,431,397 67.6% Fee
- ----------------------------------------------------------------------------------
243 12/1/07 120 117 300 $1,293,095 41.1% Fee
- ----------------------------------------------------------------------------------
244 12/1/17 240 237 240 $0 0.0% Fee
- ----------------------------------------------------------------------------------
245 10/1/07 120 115 300 $1,240,030 61.4% Fee
- ----------------------------------------------------------------------------------
246 12/1/07 120 117 300 $1,202,421 53.4% Fee
- ----------------------------------------------------------------------------------
247 12/1/07 120 117 288 $1,200,980 38.5% Leasehold
- ----------------------------------------------------------------------------------
248 10/1/07 120 115 240 $1,026,418 25.7% Fee
- ----------------------------------------------------------------------------------
249 11/1/17 240 236 240 $0 0.0% Fee
- ----------------------------------------------------------------------------------
250 1/1/18 240 238 240 $0 0.0% Fee
- ----------------------------------------------------------------------------------
251 12/1/07 120 117 300 $1,158,243 41.6% Fee
- ----------------------------------------------------------------------------------
252 12/1/07 120 117 360 $1,233,804 61.7% Fee
- ----------------------------------------------------------------------------------
253 12/1/02 60 57 360 $1,326,999 49.8% Fee
- ----------------------------------------------------------------------------------
254 11/1/07 121 116 300 $1,169,753 50.9% Fee
- ----------------------------------------------------------------------------------
255 10/1/07 120 115 300 $1,118,126 53.2% Fee
- ----------------------------------------------------------------------------------
256 11/1/07 120 116 120 $0 0.0% Fee
- ----------------------------------------------------------------------------------
257 10/1/07 120 115 300 $1,102,783 55.4% Fee
- ----------------------------------------------------------------------------------
258 1/1/08 120 118 360 $1,186,523 63.8% Fee
- ----------------------------------------------------------------------------------
259 11/1/07 120 116 300 $1,088,080 59.5% Fee
- ----------------------------------------------------------------------------------
260 11/1/07 120 116 360 $1,162,802 35.0% Fee
- ----------------------------------------------------------------------------------
261 11/1/12 180 176 240 $588,788 27.6% Fee
- ----------------------------------------------------------------------------------
262 9/1/07 120 114 300 $1,057,057 57.1% Fee
- ----------------------------------------------------------------------------------
263 9/1/07 120 114 240 $912,063 37.2% Fee
- ----------------------------------------------------------------------------------
264 9/1/04 84 78 180 $873,638 30.7% Fee
</TABLE>
II-8
<PAGE> 117
APPENDIX II
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
LOAN INFORMATION
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
Aggregate Cut-Off
Loan Cut-Off Date Bal./ Mortgage Note
No. Seller(1) Property Name Date Balance Unit or SF(4) Rate Date
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------
265 MS Tire Discounters - Middletown (2VI) $648,304 $107 8.180% 10/29/97
266 MS Tire Discounters - Cincinnati (2VI) $623,369 $107 8.180% 10/29/97
- ------------------------------------------------------------------------------------------------------------
267 WF The Liberty Building $1,267,541 $60 8.570% 8/18/97
- ------------------------------------------------------------------------------------------------------------
268 WF Hollywood Video-OH $1,251,649 $163 7.910% 12/9/97
- ------------------------------------------------------------------------------------------------------------
269 WF Public Storage - Garland TX $1,246,900 $2,407 7.540% 12/10/97
- ------------------------------------------------------------------------------------------------------------
270 WF Downey Plaza Apartments $1,197,932 $13,310 7.400% 12/2/97
- ------------------------------------------------------------------------------------------------------------
271 JHREF Quarry Office Building $1,197,509 $80 7.870% 11/18/97
- ------------------------------------------------------------------------------------------------------------
272 WF Public Storage - Sacramento $1,197,080 $2,093 7.680% 12/16/97
- ------------------------------------------------------------------------------------------------------------
273 WF 7373 Engineer Road $1,194,304 $29 7.300% 10/8/97
- ------------------------------------------------------------------------------------------------------------
274 WF Comcast Building $1,193,377 $40 7.780% 9/12/97
- ------------------------------------------------------------------------------------------------------------
275 MS Dallas Alley $1,184,624 $37 8.680% 9/29/97
- ------------------------------------------------------------------------------------------------------------
276 WF Royal Oaks Apartments $1,165,762 $20,817 7.170% 11/19/97
- ------------------------------------------------------------------------------------------------------------
277 WF 2441 Pullman/1701 Carnegie $1,142,556 $34 7.730% 8/20/97
- ------------------------------------------------------------------------------------------------------------
278 WF 9 Goodyear $1,096,421 $57 7.850% 11/7/97
- ------------------------------------------------------------------------------------------------------------
279 WF Villa Ventura Apartments $1,095,874 $21,917 7.690% 12/5/97
- ------------------------------------------------------------------------------------------------------------
280 WF Federal Express Branch Terminal $1,095,120 $35 7.730% 10/7/97
- ------------------------------------------------------------------------------------------------------------
281 WF Mercado Village $1,093,393 $78 7.600% 12/22/97
- ------------------------------------------------------------------------------------------------------------
282 WF Woodcrest Apartments $1,087,423 $33,982 7.220% 11/13/97
- ------------------------------------------------------------------------------------------------------------
283 WF 440 Broadway $1,050,923 $19,108 6.760% 11/21/97
- ------------------------------------------------------------------------------------------------------------
284 JHREF Villa Monterrey Apartments $1,040,577 $21,679 7.900% 9/26/97
- ------------------------------------------------------------------------------------------------------------
285 MS Town & Country Shopping Center $1,034,829 $29 8.140% 9/30/97
- ------------------------------------------------------------------------------------------------------------
286 WF 3925 W. Adams St $997,724 $22 7.530% 12/19/97
- ------------------------------------------------------------------------------------------------------------
287 WF Harbor View Business Park $992,809 $26 8.270% 8/1/97
- ------------------------------------------------------------------------------------------------------------
288 WF Randalls - Berkman $992,610 $33 7.390% 10/15/97
- ------------------------------------------------------------------------------------------------------------
289 WF 12234-36 Sherman Way $990,938 $16 7.570% 10/20/97
- ------------------------------------------------------------------------------------------------------------
290 WF Cranbrook Plaza Shopping Center $986,670 $27 9.070% 9/5/97
- ------------------------------------------------------------------------------------------------------------
291 WF Crossings at Maple Grove $982,642 $119 8.180% 8/4/97
- ------------------------------------------------------------------------------------------------------------
292 WF 1452-1548 Fayette Street $946,618 $27 7.280% 11/26/97
- ------------------------------------------------------------------------------------------------------------
293 WF United Furniture Warehouse $944,587 $38 7.580% 9/18/97
- ------------------------------------------------------------------------------------------------------------
294 JHREF Chateux Village/Sea Lord Apartments $940,101 $18,802 7.900% 9/26/97
- ------------------------------------------------------------------------------------------------------------
295 WF 17352 Daimler Street $918,785 $30 7.710% 8/19/97
- ------------------------------------------------------------------------------------------------------------
296 WF Champions Forest/Louetta $912,670 $38 9.070% 9/5/97
- ------------------------------------------------------------------------------------------------------------
297 WF Micro Instrument Co. $905,104 $38 7.940% 9/5/97
</TABLE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------
Rem. Amort.
Loan Maturity Term Term Term(5) Balance Due Balloon Security
No. Date (mos) (mos) (mos) at Maturity LTV(4) Type
- ----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------
265 11/1/07 120 116 360 $544,673 68.6% Fee
266 11/1/07 120 116 360 $600,054 68.6% Fee
- ----------------------------------------------------------------------------------
267 9/1/07 120 114 300 $1,044,333 50.9% Fee
- ----------------------------------------------------------------------------------
268 1/1/13 180 178 240 $549,494 32.3% Fee
- ----------------------------------------------------------------------------------
269 12/1/07 119 117 300 $1,018,782 48.5% Fee
- ----------------------------------------------------------------------------------
270 1/1/13 180 178 360 $934,280 35.7% Fee
- ----------------------------------------------------------------------------------
271 12/1/07 120 117 360 $1,069,648 58.6% Fee
- ----------------------------------------------------------------------------------
272 1/1/08 120 118 300 $979,535 56.0% Leasehold
- ----------------------------------------------------------------------------------
273 11/1/07 120 116 300 $968,509 38.7% Fee
- ----------------------------------------------------------------------------------
274 10/1/07 120 115 300 $963,695 29.7% Fee
- ----------------------------------------------------------------------------------
275 10/1/07 120 115 300 $999,581 62.5% Fee
- ----------------------------------------------------------------------------------
276 12/1/07 120 117 300 $940,683 47.0% Fee
- ----------------------------------------------------------------------------------
277 9/1/07 120 114 300 $940,194 49.5% Fee
- ----------------------------------------------------------------------------------
278 12/1/07 120 117 300 $884,989 59.6% Fee
- ----------------------------------------------------------------------------------
279 1/1/08 120 118 240 $767,084 51.1% Fee
- ----------------------------------------------------------------------------------
280 11/1/07 120 116 300 $882,237 58.8% Fee
- ----------------------------------------------------------------------------------
281 1/1/13 180 178 180 $0 0.0% Fee
- ----------------------------------------------------------------------------------
282 12/1/07 120 117 360 $955,943 65.9% Fee
- ----------------------------------------------------------------------------------
283 12/1/07 120 117 300 $837,431 29.0% Fee
- ----------------------------------------------------------------------------------
284 10/1/07 120 115 300 $859,557 50.7% Fee
- ----------------------------------------------------------------------------------
285 10/1/07 120 115 300 $860,539 66.2% Fee
- ----------------------------------------------------------------------------------
286 1/1/08 120 118 300 $797,813 55.0% Fee
- ----------------------------------------------------------------------------------
287 8/1/07 120 113 300 $813,120 47.6% Fee
- ----------------------------------------------------------------------------------
288 11/1/07 120 116 240 $676,280 42.3% Fee
- ----------------------------------------------------------------------------------
289 11/1/12 179 176 180 $9,250 0.4% Fee
- ----------------------------------------------------------------------------------
290 10/1/12 180 175 180 $0 0.0% Fee
- ----------------------------------------------------------------------------------
291 9/1/12 180 174 180 $0 0.0% Fee
- ----------------------------------------------------------------------------------
292 12/1/07 120 117 300 $766,376 50.4% Fee
- ----------------------------------------------------------------------------------
293 10/1/07 120 115 300 $758,930 41.0% Fee
- ----------------------------------------------------------------------------------
294 10/1/07 120 115 300 $776,560 57.7% Fee
- ----------------------------------------------------------------------------------
295 9/1/07 120 114 300 $741,493 40.6% Fee
- ----------------------------------------------------------------------------------
296 10/1/12 180 175 180 $0 0.0% Fee
- ----------------------------------------------------------------------------------
297 10/1/07 120 115 300 $733,822 49.1% Fee
</TABLE>
II-9
<PAGE> 118
APPENDIX II
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
LOAN INFORMATION
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
Aggregate Cut-Off
Loan Cut-Off Date Bal./ Mortgage Note
No. Seller(1) Property Name Date Balance Unit or SF(4) Rate Date
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------
298 WF Hollywood Video-Louisville,KY $901,087 $120 8.520% 6/23/97
- ------------------------------------------------------------------------------------------------------------
299 WF 710 Post Oak, L.C. $893,385 $18 8.980% 6/30/97
- ------------------------------------------------------------------------------------------------------------
300 WF 2030 N. Ivar Avenue $847,596 $52,975 7.790% 10/2/97
- ------------------------------------------------------------------------------------------------------------
301 WF Hollywood Video - GA $846,887 $113 7.910% 12/8/97
- ------------------------------------------------------------------------------------------------------------
302 WF Love Field Financial Center $838,070 $34 7.470% 12/3/97
- ------------------------------------------------------------------------------------------------------------
303 WF Diagonal Marketplace Shopping Center $797,981 $89 7.410% 12/2/97
- ------------------------------------------------------------------------------------------------------------
304 WF Rialto II Apartments $747,181 $10,378 7.200% 12/8/97
- ------------------------------------------------------------------------------------------------------------
305 WF 7 Studebaker $546,964 $34 7.780% 9/12/97
- ------------------------------------------------------------------------------------------------------------
306 WF Pioneer Business Center II $447,705 $46 8.270% 9/8/97
- ------------------------------------------------------------------------------------------------------------
Total/Weighted Average: $1,392,212,34 $22,299 7.760%
</TABLE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------
Rem. Amort.
Loan Maturity Term Term Term(5) Balance Due Balloon Security
No. Date (mos) (mos) (mos) at Maturity LTV(4) Type
- ----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------
298 7/1/12 180 172 240 $386,568 27.2% Fee
- ----------------------------------------------------------------------------------
299 7/1/07 120 112 300 $744,312 42.5% Fee
- ----------------------------------------------------------------------------------
300 11/1/07 120 116 360 $742,394 61.9% Fee
- ----------------------------------------------------------------------------------
301 1/1/13 180 178 240 $371,798 31.0% Fee
- ----------------------------------------------------------------------------------
302 1/1/08 120 118 300 $669,090 46.1% Fee
- ----------------------------------------------------------------------------------
303 1/1/08 120 118 300 $647,794 44.7% Fee
- ----------------------------------------------------------------------------------
304 1/1/18 240 238 240 $0 0.0% Fee
- ----------------------------------------------------------------------------------
305 10/1/07 120 115 300 $441,693 28.0% Fee
- ----------------------------------------------------------------------------------
306 10/1/07 120 115 300 $365,904 53.8% Fee
- ----------------------------------------------------------------------------------
122 118 322 55.8%
</TABLE>
II-10
<PAGE> 119
APPENDIX II
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
PROPERTY INFORMATION
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
Loan
No. Property Name Address City State
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------------------------
1 Scottsdale Plaza Resort 7200 Noth Scottsdale Road Scottsdale AZ
- -------------------------------------------------------------------------------------------------------------------------------
2 Encinitas Ranch Town Center 1002-1080 El Camino Real Encinitas CA
- -------------------------------------------------------------------------------------------------------------------------------
3 Two Democracy Plaza 6707 Democracy Blvd. Bethesda MD
- -------------------------------------------------------------------------------------------------------------------------------
4 Kahler Hotel (2I) 20 Second Street SW Rochester MN
5 Olympia Park (2I) 1895 Sidewinder Drive Park City UT
- -------------------------------------------------------------------------------------------------------------------------------
6 Clinton Square 75 S. Clinton Ave. Rochester NY
- -------------------------------------------------------------------------------------------------------------------------------
7 Metropolitan Corporate Center 3105-3195 Kifer Road Santa Clara CA
- -------------------------------------------------------------------------------------------------------------------------------
8 Holiday Inn Boston Logan Airport 225 William F. McClellan Hwy. Boston MA
- -------------------------------------------------------------------------------------------------------------------------------
9 Sun Valley Village (2A) 125 Sahara Drive Pacheco CA
10 Greenoaks Mobile Home Park (2A) 2929 North MacArthur Tracy CA
11 Madrone Mobile Estates (2A) 200 Burnett Avenue Morgan Hill CA
- -------------------------------------------------------------------------------------------------------------------------------
12 The Willows Shopping Center 1961 and 1975 Diamond Boulevard Concord CA
- -------------------------------------------------------------------------------------------------------------------------------
13 Radisson Hotel/Pittsburgh ExpoMart 101-105 Mall Boulevard Monroeville PA
- -------------------------------------------------------------------------------------------------------------------------------
14 Pinebrook Apartments 24501 - 24555 Los Alisos Blvd. Laguna Hills CA
- -------------------------------------------------------------------------------------------------------------------------------
15 Woodchase Apartments 530 East Patriot Boulevard Reno NV
- -------------------------------------------------------------------------------------------------------------------------------
16 Gateway Center Apartments 642-646 East College Avenue State College PA
- -------------------------------------------------------------------------------------------------------------------------------
17 Sunset Creek (2B) 5400 North Nevada Avenue Colorado Springs CO
18 Creekwood Village (2B) 7655 Park North Drive Beaumont TX
- -------------------------------------------------------------------------------------------------------------------------------
19 Monterey Oaks Mobile Home Park 6130 Monterey Road San Jose CA
- -------------------------------------------------------------------------------------------------------------------------------
20 Fairview Village Apartments 20000-20120 Lorain Rd. Fairview Park OH
- -------------------------------------------------------------------------------------------------------------------------------
21 Northgate Plaza SWC Thousand Oaks & Westlake Blvds. Westlake Village CA
- -------------------------------------------------------------------------------------------------------------------------------
22 La Valencia Hotel 1132 Prospect Street La Jolla CA
- -------------------------------------------------------------------------------------------------------------------------------
23 200 W. Thomas (2II) 200 West Thomas Seattle WA
24 100 W. Harrison (North Tower) (2II) 413 1st Ave W. (North Tower) Seattle WA
25 100 W. Harrison (South Tower) (2II) 401 1st Avenue W. Seattle WA
- -------------------------------------------------------------------------------------------------------------------------------
26 Pebble Creek Apartments, Phase II-IV 3301-H Circle Brook Drive, SW Roanoke VA
- -------------------------------------------------------------------------------------------------------------------------------
27 Courtyard by Marriott - Salt Lake City (2C) 130 West 400 South Salt Lake City UT
28 Courtyard by Marriott - Provo (2C) 1600 N. Freedom Blvd. Provo UT
- -------------------------------------------------------------------------------------------------------------------------------
29 Penn's Market II 5861 Lower York Road Buckingham Township PA
- -------------------------------------------------------------------------------------------------------------------------------
30 Budget Suites / Paradise 3684 Paradise Road Las Vegas NV
- -------------------------------------------------------------------------------------------------------------------------------
31 Waterford at Clear Lake 801 East Nasa Road 1 Webster TX
- -------------------------------------------------------------------------------------------------------------------------------
32 St. Mary's Square Shopping Center 1170-1292 Indiana Avenue St. Mary's OH
- -------------------------------------------------------------------------------------------------------------------------------
33 Trappe Center 130 W. Main Street Trappe PA
- -------------------------------------------------------------------------------------------------------------------------------
34 Clearwater Creek Apartments 826 S. Clearview Parkway Harahan LA
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------
Loan Property Year Built/
No. Zipcode Type Units/NSF Renovated
- ------------------------------------------------------------
<S> <C> <C> <C> <C>
- ------------------------------------------------------------
1 85253 Hospitality 404 1990
- ------------------------------------------------------------
2 92024 Retail 489,297 1997
- ------------------------------------------------------------
3 20817 Office 260,369 1990
- ------------------------------------------------------------
4 55901 Hospitality 699 1998
5 84060 Hospitality 200 1997
- ------------------------------------------------------------
6 14604 Office 305,371 1990
- ------------------------------------------------------------
7 95051 Industrial 320,047 1985
- ------------------------------------------------------------
8 02128 Hospitality 356 1995
- ------------------------------------------------------------
9 94553 Mobile Home Park 263 1972
10 95376 Mobile Home Park 215 1975
11 95037 Mobile Home Park 173 1970
- ------------------------------------------------------------
12 94520 Retail 248,193 1996
- ------------------------------------------------------------
13 15146 Hospitality 322 1996
- ------------------------------------------------------------
14 92653 Multifamily 360 1978
- ------------------------------------------------------------
15 89511 Multifamily 324 1986
- ------------------------------------------------------------
16 16801 Multifamily 228 1992
- ------------------------------------------------------------
17 80918 Multifamily 310 1993
18 77708 Multifamily 152 1984
- ------------------------------------------------------------
19 95138 Mobile Home Park 344 1992
- ------------------------------------------------------------
20 44126 Multifamily 562 1967
- ------------------------------------------------------------
21 91362 Retail 94,450 1997
- ------------------------------------------------------------
22 92037 Hospitality 101 1997
- ------------------------------------------------------------
23 98119 Office 63,166 1974
24 98119 Mixed Use 64,246 1972
25 98119 Office 66,299 1970
- ------------------------------------------------------------
26 24014 Multifamily 468 1978
- ------------------------------------------------------------
27 84101 Hospitality 121 1995
28 84604 Hospitality 100 1996
- ------------------------------------------------------------
29 18931 Retail 109,130 1995
- ------------------------------------------------------------
30 89109 Multifamily 360 1996
- ------------------------------------------------------------
31 77598 Multifamily 400 1996
- ------------------------------------------------------------
32 45885 Retail 253,314 1992
- ------------------------------------------------------------
33 19426 Retail 122,780 1996
- ------------------------------------------------------------
34 70123 Multifamily 192 1997
- ------------------------------------------------------------
</TABLE>
II-11
<PAGE> 120
APPENDIX II
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
PROPERTY INFORMATION
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
Loan
No. Property Name Address City State
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
35 Surveyor-Beltline Office 4002 Beltline Road Addison TX
- -------------------------------------------------------------------------------------------------------------------------------
36 Chatham Village Apartments 5035 Harwich Court Kettering OH
- -------------------------------------------------------------------------------------------------------------------------------
37 Bank One Tower & Branch 50&80 West Broadway Salt Lake City UT
- -------------------------------------------------------------------------------------------------------------------------------
38 Stanford Villa Apartments 3351 - 3355 - 3375 Alma Street Palo Alto CA
- -------------------------------------------------------------------------------------------------------------------------------
39 Copper Terrace Apartments 6500-6550 South Dayton Street Englewood CO
- -------------------------------------------------------------------------------------------------------------------------------
40 Briarwood Apartments 1322 Walnut Avenue Tustin CA
- -------------------------------------------------------------------------------------------------------------------------------
41 Golden Hills Plaza 941-1047 Alamo Drive Vacaville CA
- -------------------------------------------------------------------------------------------------------------------------------
42 Federal Express 4170 Del Rey Ave. & 4143 Glencoe Ave. Marina del Rey CA
- -------------------------------------------------------------------------------------------------------------------------------
43 Ashford Court Apartments 12777 Ashford Point Drive Houston TX
- -------------------------------------------------------------------------------------------------------------------------------
44 Meyer Business Center 14040 - 14190 E. Firestone Blvd. Santa Fe Springs CA
- -------------------------------------------------------------------------------------------------------------------------------
45 Encinal Terminals 1501,1515,1521,1523,1551 Buena Vista Avenue Alameda CA
- -------------------------------------------------------------------------------------------------------------------------------
46 Howard Johnson/Holiday Inn Express 1720 Shelburne Road (Route 7) So. Burlington VT
- -------------------------------------------------------------------------------------------------------------------------------
47 Courtyard by Marriott - Hillsboro 3050 NW Stucki PIace Hillsboro OR
- -------------------------------------------------------------------------------------------------------------------------------
48 Morning Ridge Apartments 30660 Milky Way Drive Temecula CA
- -------------------------------------------------------------------------------------------------------------------------------
49 Lakes Town Ctr./Oakland Shpg. Ctr. 4101-4397 North State Rd. 7 Lauderdale Lakes FL
- -------------------------------------------------------------------------------------------------------------------------------
50 Keeneland Crest Apartments, Phase II 5540 Ashview Drive Indianapolis IN
- -------------------------------------------------------------------------------------------------------------------------------
51 Naperville Plaza 8-192 West Gartner Road Naperville IL
- -------------------------------------------------------------------------------------------------------------------------------
52 Smithridge Plaza Shopping Center 5001-5093 S. McCarran Blvd. Reno NV
- -------------------------------------------------------------------------------------------------------------------------------
53 Twin Oaks Apartment 360 & 400 N. Hollywood Way Burbank CA
- -------------------------------------------------------------------------------------------------------------------------------
54 Ravine Bluff Apartments 5454 Ponderosa Drive Columbus OH
- -------------------------------------------------------------------------------------------------------------------------------
55 300 Rose Ave. & 320 Hampton Dr. (2D) 300 Rose Ave. & 320 Hampton Dr. Venice CA
56 350-364 Hampton Drive (2D) 350-364 Hampton Drive Venice CA
- -------------------------------------------------------------------------------------------------------------------------------
57 Hamilton Fixtures 3550 Symmes Road Hamilton OH
- -------------------------------------------------------------------------------------------------------------------------------
58 Riviera Apartments 1505 North Canyon Road Provo UT
- -------------------------------------------------------------------------------------------------------------------------------
59 Dorado Plaza Apartments 6225-6263 Acorn Street San Diego CA
- -------------------------------------------------------------------------------------------------------------------------------
60 Clarksville Commons 1050-1200 Highway 131 East Clarksville IN
- -------------------------------------------------------------------------------------------------------------------------------
61 20101 South Santa Fe Avenue 20101 South Santa Fe Avenue Rancho Dominguez CA
- -------------------------------------------------------------------------------------------------------------------------------
62 Mariners Mile Marine Center 2429 - 2507 West Coast Highway Newport Beach CA
- -------------------------------------------------------------------------------------------------------------------------------
63 Monteray Shores Plaza Shopping Center 819 Ocean Trail (Nc Hwy 12) Corolla NC
- -------------------------------------------------------------------------------------------------------------------------------
64 Westland Shopping Center 35500-35600 Central City Parkway Westland MI
- -------------------------------------------------------------------------------------------------------------------------------
65 Seattle Air Cargo 2330-2345 South 156th Street Seattle WA
- -------------------------------------------------------------------------------------------------------------------------------
66 Red Bank Plaza (2III) 4777 Red Bank Expressway Cincinnati OH
67 Red Bank Center (2III) 4770 Red Bank Expressway Cincinnati OH
- -------------------------------------------------------------------------------------------------------------------------------
68 Radisson Airport Inn 2177 West North Temple Salt Lake City UT
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------
Loan Property Year Built/
No. Zipcode Type Units/NSF Renovated
- ------------------------------------------------------------
<S> <C> <C> <C> <C>
35 75224 Office 202,824 1983
- ------------------------------------------------------------
36 45440 Multifamily 274 1972
- ------------------------------------------------------------
37 84101 Office 135,138 1991
- ------------------------------------------------------------
38 94306 Multifamily 209 1995
- ------------------------------------------------------------
39 80111 Multifamily 168 1996
- ------------------------------------------------------------
40 92680 Multifamily 192 1970
- ------------------------------------------------------------
41 94533 Retail 112,216 1986
- ------------------------------------------------------------
42 90292 Industrial 83,416 1988
- ------------------------------------------------------------
43 77082 Multifamily 442 1997
- ------------------------------------------------------------
44 90670 Industrial 158,885 1978
- ------------------------------------------------------------
45 94501 Industrial 378,800 1995
- ------------------------------------------------------------
46 05403 Hospitality 205 1990
- ------------------------------------------------------------
47 97124 Hospitality 155 1996
- ------------------------------------------------------------
48 92592 Multifamily 200 1989
- ------------------------------------------------------------
49 33319 Retail 196,238 1986
- ------------------------------------------------------------
50 46237 Multifamily 176 1996
- ------------------------------------------------------------
51 60540 Retail 115,147 1994
- ------------------------------------------------------------
52 89502 Retail 104,315 1983
- ------------------------------------------------------------
53 91505 Multifamily 76 1990
- ------------------------------------------------------------
54 43231 Multifamily 316 1980
- ------------------------------------------------------------
55 90291 Industrial 67,570 1994
56 90291 Industrial 36,740 1980
- ------------------------------------------------------------
57 45015 Industrial 330,688 1995
- ------------------------------------------------------------
58 84604 Multifamily 137 1969
- ------------------------------------------------------------
59 92115 Multifamily 202 1963
- ------------------------------------------------------------
60 47129 Retail 108,792 1996
- ------------------------------------------------------------
61 90221 Industrial 201,650 1990
- ------------------------------------------------------------
62 92663 Office 42,373 1995
- ------------------------------------------------------------
63 27927 Retail 80,977 1991
- ------------------------------------------------------------
64 48185 Retail 85,000 1996
- ------------------------------------------------------------
65 98158 Industrial 265,415 1989
- ------------------------------------------------------------
66 45227 Mixed Use 102,533 1989
67 45227 Mixed Use 48,162 1990
- ------------------------------------------------------------
68 84116 Hospitality 127 1989
- ------------------------------------------------------------
</TABLE>
II-12
<PAGE> 121
APPENDIX II
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
PROPERTY INFORMATION
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
Loan
No. Property Name Address City State
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
69 Foxridge Apartments, Phases IV-V 750 Hethwood Blvd Blacksburg VA
- -------------------------------------------------------------------------------------------------------------------------------
70 Woodside Terrace Apartments 2901 Parklane Street Canton OH
- -------------------------------------------------------------------------------------------------------------------------------
71 Ross Center 19151-19233 Ventura Boulevard Tarzana CA
- -------------------------------------------------------------------------------------------------------------------------------
72 The Electric Farm Industrial Park 1501 - 1609 East McFadden Avenue Santa Ana CA
- -------------------------------------------------------------------------------------------------------------------------------
73 Homestead House - San Diego (2IV) 6965 Consolidated Way San Diego CA
74 Homestead House - Huntington Beach (2IV) 8881 Warner Avenue Huntington Beach CA
- -------------------------------------------------------------------------------------------------------------------------------
75 Coffee Creek Apartments 6351 Hulen Bend Blvd. Fort Worth TX
- -------------------------------------------------------------------------------------------------------------------------------
76 Strouds of Santa Monica 3202 Wilshire Boulevard Santa Monica CA
- -------------------------------------------------------------------------------------------------------------------------------
77 1277 Orleans Dr. & 207 Java Dr. 1277 Orleans Drive & 207 Java Drive Sunnyvale CA
- -------------------------------------------------------------------------------------------------------------------------------
78 34-02 Queens Boulevard 34-02 Queens Boulevard Long Island City NY
- -------------------------------------------------------------------------------------------------------------------------------
79 3 Waters Office Park 3 Waters Park Dr. San Mateo CA
- -------------------------------------------------------------------------------------------------------------------------------
80 Sears Plaza 10174 & 10176 SE 82nd Avenue Portland OR
- -------------------------------------------------------------------------------------------------------------------------------
81 Smithridge Shopping Center 5000 Smithridge Dr. Reno NV
- -------------------------------------------------------------------------------------------------------------------------------
82 Cobb Center 2200 South Cobb Drive Smyrna GA
- -------------------------------------------------------------------------------------------------------------------------------
83 Northern Hills Shopping Center (2E) 12247 Nacogdoches Road San Antonio TX
84 Perrin Oaks Shopping Center (2E) 11811 Perrin Beitel Road San Antonio TX
- -------------------------------------------------------------------------------------------------------------------------------
85 Blalock Woods Apartments 1111 Blalock Houston TX
- -------------------------------------------------------------------------------------------------------------------------------
86 Broadway Shoppes 6541-6571, 6801 Broadway Road Cleveland OH
- -------------------------------------------------------------------------------------------------------------------------------
87 Cambridge Apartments 1425 North University Avenue Provo UT
- -------------------------------------------------------------------------------------------------------------------------------
88 Nellis-Bonanza Shopping Center NWC Bonanza Rd & Nellis Blvd Las Vegas NV
- -------------------------------------------------------------------------------------------------------------------------------
89 Comfort Inn - Downtown New Orleans 1315 Gravier Street New Orleans LA
- -------------------------------------------------------------------------------------------------------------------------------
90 Sun Micro Systems 1201 Cadillac Court Milpitas CA
- -------------------------------------------------------------------------------------------------------------------------------
91 Desco Plaza III 3675 Mt. Diablo Blvd. Lafayette CA
- -------------------------------------------------------------------------------------------------------------------------------
92 Brook Village West 103 Cluff Crossing Road Salem NH
- -------------------------------------------------------------------------------------------------------------------------------
93 Stoneleigh Place Apartments 2261West Buckingham Road Garland TX
- -------------------------------------------------------------------------------------------------------------------------------
94 Simi Country Estates Mobile Home Park 1550 Rory Lane Simi Valley CA
- -------------------------------------------------------------------------------------------------------------------------------
95 Ramada Hilltop 130 John R. Junkin Drive Natchez MS
- -------------------------------------------------------------------------------------------------------------------------------
96 Sun Shadow Square Shopping Center 10050 West Bell Road Sun City AZ
- -------------------------------------------------------------------------------------------------------------------------------
97 5901 Westheimer Shopping Center 5901 Westheimer Houston TX
- -------------------------------------------------------------------------------------------------------------------------------
98 Park Lane Villas Apartment Complex 1720 Woodward Austin TX
- -------------------------------------------------------------------------------------------------------------------------------
99 Redwood City Professional Center 801 Brewster Avenue Redwood City CA
- -------------------------------------------------------------------------------------------------------------------------------
100 Centerpointe Apartments 145 Rockrimmon Boulevard Colorado Springs CO
- -------------------------------------------------------------------------------------------------------------------------------
101 Vista del Coronado Apts 1250 Fifth Avenue Chula Vista CA
- -------------------------------------------------------------------------------------------------------------------------------
102 Haltom Plaza 3101-3189 Denton Highway Haltom TX
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------
Loan Property Year Built/
No. Zipcode Type Units/NSF Renovated
- ---------------------------------------------------------------------
<S> <C> <C> <C> <C>
69 24060-4300 Multifa 204 1977
- ---------------------------------------------------------------------
70 44709 Multifamily 239 1994
- ---------------------------------------------------------------------
71 91356 Retail 50,242 1963
- ---------------------------------------------------------------------
72 92705 Industrial 231,042 1969
- ---------------------------------------------------------------------
73 92121 Retail 96,793 1995
74 92647 Retail 34,308 1989
- ---------------------------------------------------------------------
75 76132 Multifamily 336 1985
- ---------------------------------------------------------------------
76 90403 Retail 28,000 1996
- ---------------------------------------------------------------------
77 94089 Industrial 77,024 1996
- ---------------------------------------------------------------------
78 11101 Industrial 183,000 1989
- ---------------------------------------------------------------------
79 94402 Office 62,346 1981
- ---------------------------------------------------------------------
80 97266 Retail 74,263 1996
- ---------------------------------------------------------------------
81 89502 Retail 53,172 1989
- ---------------------------------------------------------------------
82 30060 Retail 89,546 1996
- ---------------------------------------------------------------------
83 78217 Retail 106,337 1995
84 78217 Retail 61,203 1984
- ---------------------------------------------------------------------
85 77055-7453 Multifa 299 1997
- ---------------------------------------------------------------------
86 44105 Retail 146,284 1989
- ---------------------------------------------------------------------
87 84604 Multifamily 161 1992
- ---------------------------------------------------------------------
88 89110 Retail 79,653 1980
- ---------------------------------------------------------------------
89 70112 Hospitality 173 1997
- ---------------------------------------------------------------------
90 95035 Office 51,450 1984
- ---------------------------------------------------------------------
91 94549 Office 50,380 1989
- ---------------------------------------------------------------------
92 03079 Multifamily 168 1968
- ---------------------------------------------------------------------
93 75042 Multifamily 192 1979
- ---------------------------------------------------------------------
94 93063 Mobile Home Park 274 1996
- ---------------------------------------------------------------------
95 39120 Hospitality 162 1984
- ---------------------------------------------------------------------
96 85373 Retail 83,105 1986
- ---------------------------------------------------------------------
97 77057 Retail 47,938 1996
- ---------------------------------------------------------------------
98 78741 Multifamily 242 1993
- ---------------------------------------------------------------------
99 94063 Office 24,424 1990
- ---------------------------------------------------------------------
100 80919 Multifamily 129 1984
- ---------------------------------------------------------------------
101 91911 Multifamily 223 1969
- ---------------------------------------------------------------------
102 76117 Retail 197,410 1990
- ---------------------------------------------------------------------
</TABLE>
II-13
<PAGE> 122
APPENDIX II
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
PROPERTY INFORMATION
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Loan
No. Property Name Address City State
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
103 Sycamore Square Shopping Center 2845 Cochran Street & 2490 Sycamore Dr. Simi Valley CA
- -----------------------------------------------------------------------------------------------------------------------------------
104 Brookstone Village Apartments 420 Racine Drive Wilmington NC
- -----------------------------------------------------------------------------------------------------------------------------------
105 Autumn Hills - Arbor Apartments 1500 & 1600 Royal Crest Drive Austin TX
- -----------------------------------------------------------------------------------------------------------------------------------
106 Mansell Oaks Plaza Shopping Center 900 Mansell Road Roswell GA
- -----------------------------------------------------------------------------------------------------------------------------------
107 Onyx One Building 17225 El Camino Real Houston TX
- -----------------------------------------------------------------------------------------------------------------------------------
108 Jillian's Billiard Club 1-9 Lansdowne St/145 Ipswich St Boston MA
- -----------------------------------------------------------------------------------------------------------------------------------
109 Shoreline Apartments 1801 S. Lakeshore Drive Austin TX
- -----------------------------------------------------------------------------------------------------------------------------------
110 Harbor Plaza Shopping Center 16275-16377 Harbor Blvd. & 11940 Edinger Avenue Fountain Valley CA
- -----------------------------------------------------------------------------------------------------------------------------------
111 16325-16407 South Main Street 16325-16407 South Main St. Gardena CA
- -----------------------------------------------------------------------------------------------------------------------------------
112 Holiday Inn - Merle Hay 5500 Merle Hay Road Des Moines IA
- -----------------------------------------------------------------------------------------------------------------------------------
113 Crosswind Corners Shopping Center 15353-15477 Hall Road Macomb Township MI
- -----------------------------------------------------------------------------------------------------------------------------------
114 Narrows Creek Townhomes 1101 North Mountain View Ave Tacoma WA
- -----------------------------------------------------------------------------------------------------------------------------------
115 Costa Mesa Motor Inn 2277 Harbor Blvd. Costa Mesa CA
- -----------------------------------------------------------------------------------------------------------------------------------
116 Concord Square Apts. 18014 Sherman Way Reseda CA
- -----------------------------------------------------------------------------------------------------------------------------------
117 1st Avenue (2V) 1000 & 1050 NW 1st Ave Boca Raton FL
118 Rogmour Center (2V) 2920 & 2960 NW 2nd Avenue Boca Raton FL
- -----------------------------------------------------------------------------------------------------------------------------------
119 Hampton Inn - Auburn 2430 S. College Street (US 29) Auburn AL
- -----------------------------------------------------------------------------------------------------------------------------------
120 First Place Office Center 2202-2270 North First Street San Jose CA
- -----------------------------------------------------------------------------------------------------------------------------------
121 Lone Oak Shopping Center 1015 South W. W. White Road San Antonio TX
- -----------------------------------------------------------------------------------------------------------------------------------
122 El Macero Shopping Center 409-417 Mace Boulevard Davis CA
- -----------------------------------------------------------------------------------------------------------------------------------
123 DeSoto Corporate Industrial 9330 DeSoto Ave Chatsworth CA
- -----------------------------------------------------------------------------------------------------------------------------------
124 San Antonio Center 405 - 429 San Antonio Road Mountain View CA
- -----------------------------------------------------------------------------------------------------------------------------------
125 Sycamore Hills Apartments 506 N.W. 55th Terrace Kansas City MO
- -----------------------------------------------------------------------------------------------------------------------------------
126 Eagle Rock I Apartments 12423 E. Mansfield St. Spokane WA
- -----------------------------------------------------------------------------------------------------------------------------------
127 Kuebel Fuchs Office Building 3616 & 3636 I-10 Service Road Metairie LA
- -----------------------------------------------------------------------------------------------------------------------------------
128 Marijon Dyeing & Finishing Co. 219 Murray Hill Parkway East Rutherford NJ
- -----------------------------------------------------------------------------------------------------------------------------------
129 Holiday Inn Daytona Beach 2620 West International Speedway Blvd Daytona Beach FL
- -----------------------------------------------------------------------------------------------------------------------------------
130 Sani-Serve Industrial Building 2020 Production Drive Indianapolis IN
- -----------------------------------------------------------------------------------------------------------------------------------
131 1703-1735 Stewart Street 1703-1735 Stewart Street Santa Monica CA
- -----------------------------------------------------------------------------------------------------------------------------------
132 Walnut Plaza Shopping Center 3465 West Walnut Street Garland TX
- -----------------------------------------------------------------------------------------------------------------------------------
133 Oak Glen Apartments 4420 Saturn Road Garland TX
- -----------------------------------------------------------------------------------------------------------------------------------
134 Philamer Apartments 3232-3272 Greenfield Road Royal Oak MI
- -----------------------------------------------------------------------------------------------------------------------------------
135 University Carriage House and Essex House Apts. 1300 Oakland Avenue Indiana PA
- -----------------------------------------------------------------------------------------------------------------------------------
136 The Merrill Lynch Building 2001 Addison Street Berkeley CA
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------
Loan Property Year Built/
No. Zipcode Type Units/NSF Renovated
- ------------------------------------------------------------
<S> <C> <C> <C> <C>
103 93065 Retail 44,851 1991
- ------------------------------------------------------------
104 28403 Multifamily 124 1995
- ------------------------------------------------------------
105 78741 Multifamily 282 1992
- ------------------------------------------------------------
106 30076 Retail 43,190 1985
- ------------------------------------------------------------
107 77058 Office 64,435 1985
- ------------------------------------------------------------
108 02215 Retail 97,007 1995
- ------------------------------------------------------------
109 78741 Multifamily 307 1994
- ------------------------------------------------------------
110 92708 Retail 41,510 1985
- ------------------------------------------------------------
111 90248 Industrial 155,122 1994
- ------------------------------------------------------------
112 50322 Hospitality 145 1996
- ------------------------------------------------------------
113 48044 Retail 66,765 1987
- ------------------------------------------------------------
114 98406 Multifamily 82 1992
- ------------------------------------------------------------
115 92627 Hospitality 235 1973
- ------------------------------------------------------------
116 91335 Multifamily 167 1997
- ------------------------------------------------------------
117 33431 Industrial 60,200 1995
118 33431 Industrial 44,600 1995
- ------------------------------------------------------------
119 36830 Hospitality 104 1995
- ------------------------------------------------------------
120 95131 Office 44,563 1982
- ------------------------------------------------------------
121 78220 Retail 108,351 1996
- ------------------------------------------------------------
122 95616 Retail 49,368 1997
- ------------------------------------------------------------
123 91311 Industrial 79,195 1987
- ------------------------------------------------------------
124 94040 Retail 45,500 1990
- ------------------------------------------------------------
125 64118 Multifamily 207 1970
- ------------------------------------------------------------
126 99206 Multifamily 104 1997
- ------------------------------------------------------------
127 70001 Office 96,950 1995
- ------------------------------------------------------------
128 07073 Industrial 104,418 1985
- ------------------------------------------------------------
129 32114 Hospitality 151 1997
- ------------------------------------------------------------
130 46241 Industrial 140,000 1997
- ------------------------------------------------------------
131 90404 Industrial 73,367 1978
- ------------------------------------------------------------
132 75042 Retail 116,099 1992
- ------------------------------------------------------------
133 75041 Multifamily 150 1984
- ------------------------------------------------------------
134 48072 Multifamily 118 1995
- ------------------------------------------------------------
135 15701 Multifamily 186 1969
- ------------------------------------------------------------
136 94704 Office 28,930 1984
</TABLE>
II-14
<PAGE> 123
APPENDIX II
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
PROPERTY INFORMATION
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
Loan
No. Property Name Address City State
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------------------
137 Quality Inn - Toms River 815 Route 37 West Toms River NJ
- ----------------------------------------------------------------------------------------------------------------------------------
138 St. Bernard Plaza 8601 W. Judge Perez Drive Chalmette LA
- ----------------------------------------------------------------------------------------------------------------------------------
139 Southgate Mobile Home Park 2151 Pinion Road Elko NV
- ----------------------------------------------------------------------------------------------------------------------------------
140 Youngstown Shopping Center 1009-1455 East 10th Street Jeffersonville IN
- ----------------------------------------------------------------------------------------------------------------------------------
141 141 - 145 South Street 141-145 South Street West Hartford CT
- ----------------------------------------------------------------------------------------------------------------------------------
142 Staples - Norwalk 51 Richards Avenue Norwalk CT
- ----------------------------------------------------------------------------------------------------------------------------------
143 Elko Shopping Center 2070 - 2200 East Idaho Street Elko NV
- ----------------------------------------------------------------------------------------------------------------------------------
144 1580 VFW Parkway 1580 Veterans of Foreign Wars Parkway West Roxbury MA
- ----------------------------------------------------------------------------------------------------------------------------------
145 GE-Horizon Corporate Center 14000 Horizon Way Mount Laurel Township NJ
- ----------------------------------------------------------------------------------------------------------------------------------
146 The Village Shopping Center 627 Silver Spur Road Rolling Hills Estates CA
- ----------------------------------------------------------------------------------------------------------------------------------
147 Reynolds Plaza 1061 East Indiantown Road Jupiter FL
- ----------------------------------------------------------------------------------------------------------------------------------
148 North Tower Apartments 7440 Sepulveda Boulevard Van Nuys CA
- ----------------------------------------------------------------------------------------------------------------------------------
149 K-Mart 2220 East Irlo Bronson Memorial Highway Kissimmee FL
- ----------------------------------------------------------------------------------------------------------------------------------
150 Staples Plaza Shopping Center Route 70 & Cropwell Rd. Evesham Township NJ
- ----------------------------------------------------------------------------------------------------------------------------------
151 The Collection at Laguna Beach 540 South Coast Hwy Laguna Beach CA
- ----------------------------------------------------------------------------------------------------------------------------------
152 Lapham Drive 2200 Lapham Avenue Modesto CA
- ----------------------------------------------------------------------------------------------------------------------------------
153 Washington Square Apartments 1375 Montecito Avenue Mountain View CA
- ----------------------------------------------------------------------------------------------------------------------------------
154 Center at Cypresswood 19724-19760 State Hwy 249 Houston TX
- ----------------------------------------------------------------------------------------------------------------------------------
155 Westates Building 851 Burlway Road Burlingame CA
- ----------------------------------------------------------------------------------------------------------------------------------
156 Almaden II Office Center 3150 Almaden Expressway San Jose CA
- ----------------------------------------------------------------------------------------------------------------------------------
157 7110 & 7210 Rosecrans Ave. 7110 & 7210 Rosecrans Ave. Paramount CA
- ----------------------------------------------------------------------------------------------------------------------------------
158 280 Euclid Apartments 280 Euclid Avenue Pasadena CA
- ----------------------------------------------------------------------------------------------------------------------------------
159 Fairfield Village Shopping Center 8187 West Fairfield Drive Pensacola FL
- ----------------------------------------------------------------------------------------------------------------------------------
160 Rust Building (Seafirst) 950 Pacific Avenue Tacoma WA
- ----------------------------------------------------------------------------------------------------------------------------------
161 4412 Spicewood Springs Road 4412 Spicewood Springs Road Austin TX
- ----------------------------------------------------------------------------------------------------------------------------------
162 Shaw & Blackstone Retail Center 46 - 88 E. Shaw Ave. Fresno CA
- ----------------------------------------------------------------------------------------------------------------------------------
163 Shibui Apartments 2270 West Sepulveda Boulevard Torrance CA
- ----------------------------------------------------------------------------------------------------------------------------------
164 Materials Research Group 2120 West Guadalupe Road Gilbert AZ
- ----------------------------------------------------------------------------------------------------------------------------------
165 Rite Industries 1124 Elon Place High Point NC
- ----------------------------------------------------------------------------------------------------------------------------------
166 Garden Court Warehouses 311-361 Laurelwood And 3205-3297 Edward Drive Santa Clara CA
- ----------------------------------------------------------------------------------------------------------------------------------
167 Casa De Colinas - Phase I 2162 W. Speedway Tucson AZ
- ----------------------------------------------------------------------------------------------------------------------------------
168 Council Rock Greens Office Complex 2280-2300 East Avenue Rochester NY
- ----------------------------------------------------------------------------------------------------------------------------------
169 Wayside Shopping Center 900 South Wayside Drive Houston TX
- ----------------------------------------------------------------------------------------------------------------------------------
170 Canoga Valley Center 22301-22323 Sherman Way Canoga Park CA
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------
Loan Property Year Built/
No. Zipcode Type Units/NSF Renovated
- ------------------------------------------------------------
<S> <C> <C> <C> <C>
- ------------------------------------------------------------
137 08755 Hospitality 100 1989
- ------------------------------------------------------------
138 70043 Retail 179,237 1969
- ------------------------------------------------------------
139 89801 Mobile Home Park 168 1988
- ------------------------------------------------------------
140 47130 Retail 130,000 1996
- ------------------------------------------------------------
141 06110 Industrial 113,510 1989
- ------------------------------------------------------------
142 06850 Retail 24,000 1996
- ------------------------------------------------------------
143 89802 Retail 118,155 1996
- ------------------------------------------------------------
144 02132 Retail 109,421 1996
- ------------------------------------------------------------
145 08054 Office 40,991 1996
- ------------------------------------------------------------
146 90274 Retail 40,558 1994
- ------------------------------------------------------------
147 33477 Office 58,456 1994
- ------------------------------------------------------------
148 91405 Multifamily 88 1985
- ------------------------------------------------------------
149 34744 Retail 84,146 1985
- ------------------------------------------------------------
150 08530 Retail 39,579 1996
- ------------------------------------------------------------
151 92651 Retail 17,004 1986
- ------------------------------------------------------------
152 95354 Industrial 234,572 1957
- ------------------------------------------------------------
153 94043 Multifamily 56 1964
- ------------------------------------------------------------
154 77070 Retail 32,043 1996
- ------------------------------------------------------------
155 94010 Mixed Use 57,597 1988
- ------------------------------------------------------------
156 95118 Office 63,215 1982
- ------------------------------------------------------------
157 90723 Industrial 141,568 1963
- ------------------------------------------------------------
158 91101 Multifamily 85 1972
- ------------------------------------------------------------
159 32506 Retail 76,366 1986
- ------------------------------------------------------------
160 98402 Office 83,908 1985
- ------------------------------------------------------------
161 78759 Office 57,691 1982
- ------------------------------------------------------------
162 93710 Retail 34,419 1991
- ------------------------------------------------------------
163 90501 Multifamily 106 1964
- ------------------------------------------------------------
164 85233 Industrial 90,257 1995
- ------------------------------------------------------------
165 27260 Industrial 135,503 1993
- ------------------------------------------------------------
166 95054 Industrial 71,000 1977
- ------------------------------------------------------------
167 85745 Multifamily 129 1997
- ------------------------------------------------------------
168 14610 Mixed Use 33,831 1989
- ------------------------------------------------------------
169 77023 Retail 42,450 1993
- ------------------------------------------------------------
170 91303 Retail 34,241 1978
</TABLE>
II-15
<PAGE> 124
APPENDIX II
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
PROPERTY INFORMATION
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Loan
No. Property Name Address City State
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
171 Best Buy Store 1701 Crossing Drive Wyomissing PA
- ------------------------------------------------------------------------------------------------------------------------------------
172 Suncoast Plaza 1900 34th Street North St Petersburg FL
- ------------------------------------------------------------------------------------------------------------------------------------
173 Public Storage - Hayward, CA 1969 Whipple Road Hayward CA
- ------------------------------------------------------------------------------------------------------------------------------------
174 Park Cedar Building 10100 Park Cedar Drive Pineville NC
- ------------------------------------------------------------------------------------------------------------------------------------
175 Milestone Shopping Center 62 and 188 Founders Parkway Castle Rock CO
- ------------------------------------------------------------------------------------------------------------------------------------
176 Captains Self Storage 630 S. Mountain Ave. Ontario CA
- ------------------------------------------------------------------------------------------------------------------------------------
177 West Lake Plaza Retail Center 7530-7576 F.M. 1960 East Atascoita TX
- ------------------------------------------------------------------------------------------------------------------------------------
178 Fortune Park Building XIV 4902 Vincennes Circle Indianapolis IN
- ------------------------------------------------------------------------------------------------------------------------------------
179 The Palms Apartments 3823 Red Bluff Road Pasadena TX
- ------------------------------------------------------------------------------------------------------------------------------------
180 South Loop 2905 Thornton Lane Temple TX
- ------------------------------------------------------------------------------------------------------------------------------------
181 Courthouse Square Shopping Ctr. 1700 West Hillsboro Blvd. Deerfield Beach FL
- ------------------------------------------------------------------------------------------------------------------------------------
182 Orchard Supply Hardware-Torrance 4340 Pacific Coast Highway Torrance CA
- ------------------------------------------------------------------------------------------------------------------------------------
183 East Towne Centre Retail Shops Sunset Blvd / US-378 Lexington SC
- ------------------------------------------------------------------------------------------------------------------------------------
184 Brookside Retirement Residence 1199 South Dora Street Ukiah CA
- ------------------------------------------------------------------------------------------------------------------------------------
185 Fed Ex (Van Owen) 21300 Vanowen Street Canoga Park CA
- ------------------------------------------------------------------------------------------------------------------------------------
186 Airline Interiors Building 9940 Mesa Rim Road San Diego CA
- ------------------------------------------------------------------------------------------------------------------------------------
187 Lindley Northwood Apartment 10511 Lindley Avenue Northridge CA
- ------------------------------------------------------------------------------------------------------------------------------------
188 Arbor Professional Center 20045 & 20065 Stevens Creek Blvd Cupertino CA
- ------------------------------------------------------------------------------------------------------------------------------------
189 The Staples Building 1225 Airport Park Boulevard Ukiah CA
- ------------------------------------------------------------------------------------------------------------------------------------
190 Cypress Point Business Center 6415 Katella Avenue Cypress CA
- ------------------------------------------------------------------------------------------------------------------------------------
191 Golden Oaks Apartments 1600 Bird Road Branson MO
- ------------------------------------------------------------------------------------------------------------------------------------
192 Fountain Garden Apartments 3725 Foutain Avenue East Ridge TN
- ------------------------------------------------------------------------------------------------------------------------------------
193 Sherman Arms Apts. 17760-66 Sherman Way Reseda CA
- ------------------------------------------------------------------------------------------------------------------------------------
194 Somerset Ramada Inn 60 Cottontail Lane Franklin Township NJ
- ------------------------------------------------------------------------------------------------------------------------------------
195 Best Western - Lawndale 15000 Hawthorne Boulevard Lawndale CA
- ------------------------------------------------------------------------------------------------------------------------------------
196 Anchorage Motor Inn 108 Dorset St. South Burlington VT
- ------------------------------------------------------------------------------------------------------------------------------------
197 Revere Industrial Center 3710 - 3860 Revere Street Denver CO
- ------------------------------------------------------------------------------------------------------------------------------------
198 Auburn Town Center 342 - 370 Elm Ave(at Auburn Ravine Rd) Auburn CA
- ------------------------------------------------------------------------------------------------------------------------------------
199 Eagle Country Market 125 E. Backbone Road Princeton IL
- ------------------------------------------------------------------------------------------------------------------------------------
200 44 South Bayles Avenue 44 South Bayles Avenue Port Washington NY
- ------------------------------------------------------------------------------------------------------------------------------------
201 Westpark Towne Plaza Center 143 - 205 N. Milwaukee Street, 8359-8405 Emerald Boise ID
- ------------------------------------------------------------------------------------------------------------------------------------
202 Public Storage - Pittsburg, CA 2100-2106 Loveridge Rd. Pittsburg CA
- ------------------------------------------------------------------------------------------------------------------------------------
203 South Mojave Road Warehouse 6255 - 6285 South Mojave Road Las Vegas NV
- ------------------------------------------------------------------------------------------------------------------------------------
204 Sussex Plaza Shops 771 North Dual Highway Seaford DE
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------
Loan Property Year Built/
No. Zipcode Type Units/NSF Renovated
- ------------------------------------------------------------------
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------
171 19610 Retail 45,850 1995
- ------------------------------------------------------------------
172 33713 Retail 114,491 1965
- ------------------------------------------------------------------
173 94544-7928 Self Storage 747 1973
- ------------------------------------------------------------------
174 28134 Industrial 53,998 1986
- ------------------------------------------------------------------
175 80104 Retail 22,251 1997
- ------------------------------------------------------------------
176 91762 Self Storage 716 1984
- ------------------------------------------------------------------
177 77346 Retail 24,914 1996
- ------------------------------------------------------------------
178 46204 Industrial 53,189 1989
- ------------------------------------------------------------------
179 77503 Multifamily 244 1989
- ------------------------------------------------------------------
180 76501 Retail 92,222 1992
- ------------------------------------------------------------------
181 33442 Retail 43,750 1981
- ------------------------------------------------------------------
182 90505 Retail 39,930 1995
- ------------------------------------------------------------------
183 29072 Retail 32,600 1996
- ------------------------------------------------------------------
184 95482 Multifamily 66 1990
- ------------------------------------------------------------------
185 91303 Industrial 49,950 1974
- ------------------------------------------------------------------
186 92121 Industrial 47,452 1990
- ------------------------------------------------------------------
187 91326 Multifamily 120 1975
- ------------------------------------------------------------------
188 95014 Office 24,876 1987
- ------------------------------------------------------------------
189 95482 Retail 24,174 1997
- ------------------------------------------------------------------
190 90630 Office 37,437 1982
- ------------------------------------------------------------------
191 65616 Multifamily 92 1995
- ------------------------------------------------------------------
192 37412 Multifamily 100 1995
- ------------------------------------------------------------------
193 91335 Multifamily 74 1976
- ------------------------------------------------------------------
194 08873 Hospitality 125 1993
- ------------------------------------------------------------------
195 90260 Hospitality 100 1983
- ------------------------------------------------------------------
196 05401 Hospitality 89 1994
- ------------------------------------------------------------------
197 80239 Industrial 122,742 1978
- ------------------------------------------------------------------
198 95603 Retail 20,700 1979
- ------------------------------------------------------------------
199 61356 Retail 38,826 1992
- ------------------------------------------------------------------
200 11050 Office 20,975 1984
- ------------------------------------------------------------------
201 83704 Retail 20,364 1989
- ------------------------------------------------------------------
202 94565-5020 Self Storage 69,347 1986
- ------------------------------------------------------------------
203 89120 Industrial 50,100 1989
- ------------------------------------------------------------------
204 19973 Retail 30,900 1996
</TABLE>
II-16
<PAGE> 125
APPENDIX II
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
PROPERTY INFORMATION
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Loan
No. Property Name Address City State
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
205 Healthsouth Surgical Center 2131 Fountain Drive Snellville GA
- ------------------------------------------------------------------------------------------------------------------------------------
206 Fargo Industrial 26801 Fargo Avenue Bedford Heights OH
- ------------------------------------------------------------------------------------------------------------------------------------
207 Secure Self Storage 4370 Rewana Road Reno NV
- ------------------------------------------------------------------------------------------------------------------------------------
208 Harvest Granger Apartments 3536-3544 Monad Rd./ 3282-3298 Granger Ave. Billings MT
- ------------------------------------------------------------------------------------------------------------------------------------
209 Smithfield Plaza Shops North Side of US Hwy #301 Smithfield NC
- ------------------------------------------------------------------------------------------------------------------------------------
210 Warren Village Apartments and Retail Center 6380 - 6400 Fourteen Mile Road Warren MI
- ------------------------------------------------------------------------------------------------------------------------------------
211 East Sahara Industrial 4405 & 4425 East Sahara Ave. Las Vegas NV
- ------------------------------------------------------------------------------------------------------------------------------------
212 Carson Pirie Scott 140 Industrial Drive Elmhurst IL
- ------------------------------------------------------------------------------------------------------------------------------------
213 American Eagle Self Storage 8810 Cuyamaca Street Santee CA
- ------------------------------------------------------------------------------------------------------------------------------------
214 The Pavilions 953 East Sahara Avenue Las Vegas NV
- ------------------------------------------------------------------------------------------------------------------------------------
215 Southlake Marketplace-II 2001 West Southlake Blvd Southlake TX
- ------------------------------------------------------------------------------------------------------------------------------------
216 Paxton/Bradley Industrial Park 13350 Paxton St. & 11212-11256 Bradley Ave. Pacoima CA
- ------------------------------------------------------------------------------------------------------------------------------------
217 15251-15261 Beach Boulevard 15251-15261 Beach Boulevard Westminister CA
- ------------------------------------------------------------------------------------------------------------------------------------
218 Raintree Apartments 2228 Valley View Boulevard San Angelo TX
- ------------------------------------------------------------------------------------------------------------------------------------
219 Hitachi Building 1790 Dornoch Court San Diego CA
- ------------------------------------------------------------------------------------------------------------------------------------
220 344-362 Main St. 344-362 Main St. Venice CA
- ------------------------------------------------------------------------------------------------------------------------------------
221 National Self Storage of Pittsfield 3500 Carpenter Road ypsilanti MI
- ------------------------------------------------------------------------------------------------------------------------------------
222 Comfort Inn - Seville 4949 Park Avenue West Seville OH
- ------------------------------------------------------------------------------------------------------------------------------------
223 Pine Knoll Apartments 2435-2509 Avant Ferry Road Raleigh NC
- ------------------------------------------------------------------------------------------------------------------------------------
224 The Alaska Center 1020 Main Street Boise ID
- ------------------------------------------------------------------------------------------------------------------------------------
225 Petco 5215 Lakewood Blvd Lakewood CA
- ------------------------------------------------------------------------------------------------------------------------------------
226 Gateway Park - Dublin 6401 Golden Gate Drive Dublin CA
- ------------------------------------------------------------------------------------------------------------------------------------
227 Town Centre Shops US Rout #13 and Route 756 Pocomoke City MD
- ------------------------------------------------------------------------------------------------------------------------------------
228 Baird Avenue Apartments 7235 & 7259 Baird Avenue Reseda CA
- ------------------------------------------------------------------------------------------------------------------------------------
229 Morena Industrial Buildings 4090 & 4140 Morena Blvd. San Diego CA
- ------------------------------------------------------------------------------------------------------------------------------------
230 Cirby Business Park 198 Cirby Way & 601 Commerce Dr. Roseville CA
- ------------------------------------------------------------------------------------------------------------------------------------
231 Park Place Townhomes 7820-54 Knott/7011-29 El Dorado/7821-55 El CoCO Buena Park CA
- ------------------------------------------------------------------------------------------------------------------------------------
232 Post & Paddock Place 1000 Post & Paddock Lane Grand Prairie TX
- ------------------------------------------------------------------------------------------------------------------------------------
233 Parkway East Townhomes 1541 Parkway Lane Arlington TX
- ------------------------------------------------------------------------------------------------------------------------------------
234 Auburn Hills Industrial 1116-1195 Centre Road Auburn Hills MI
- ------------------------------------------------------------------------------------------------------------------------------------
235 2221-2241 Calle De Luna 2221-2241 Calle De Luna Santa Clara CA
- ------------------------------------------------------------------------------------------------------------------------------------
236 Stewart-Lamb Shopping Center 4341 Stewart Avenue Las Vegas NV
- ------------------------------------------------------------------------------------------------------------------------------------
237 Arizona Rent-A-Storage 9240 N. 67th Avenue Peoria AZ
- ------------------------------------------------------------------------------------------------------------------------------------
238 Public Storage - Decatur, GA 3375 North Druid Hills Road Decatur GA
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------
Loan Property Year Built/
No. Zipcode Type Units/NSF Renovated
- ------------------------------------------------------------------
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------
205 30278 Office 22,606 1986
- ------------------------------------------------------------------
206 44146 Industrial 175,779 1967
- ------------------------------------------------------------------
207 89502 Self Storage 534 1988
- ------------------------------------------------------------------
208 59102-6053 Multifamily 104 1994
- ------------------------------------------------------------------
209 27577 Retail 28,150 1997
- ------------------------------------------------------------------
210 48092 Multifamily 48 1997
- ------------------------------------------------------------------
211 89121 Industrial 72,784 1990
- ------------------------------------------------------------------
212 60126 Industrial 41,542 1997
- ------------------------------------------------------------------
213 92071 Self Storage 817 1984
- ------------------------------------------------------------------
214 89104 Retail 116,457 1990
- ------------------------------------------------------------------
215 76092 Retail 19,954 1996
- ------------------------------------------------------------------
216 91331 Industrial 71,424 1976
- ------------------------------------------------------------------
217 92683 Retail 16,210 1986
- ------------------------------------------------------------------
218 76904 Multifamily 168 1995
- ------------------------------------------------------------------
219 92173 Industrial 57,600 1989
- ------------------------------------------------------------------
220 90291 Industrial 36,618 1994
- ------------------------------------------------------------------
221 48197 Self Storage 68,553 1995
- ------------------------------------------------------------------
222 44273 Hospitality 66 1989
- ------------------------------------------------------------------
223 27606 Multifamily 73 1984
- ------------------------------------------------------------------
224 83702 Office 38,989 1984
- ------------------------------------------------------------------
225 90712 Retail 13,564 1996
- ------------------------------------------------------------------
226 94568 Industrial 33,365 1980
- ------------------------------------------------------------------
227 21851 Retail 27,000 1997
- ------------------------------------------------------------------
228 91335 Multifamily 47 1986
- ------------------------------------------------------------------
229 92117 Industrial 38,858 1975
- ------------------------------------------------------------------
230 95678 Industrial 46,105 1988
- ------------------------------------------------------------------
231 90620 Multifamily 48 1995
- ------------------------------------------------------------------
232 75050 Industrial 93,592 1987
- ------------------------------------------------------------------
233 76010 Multifamily 70 1995
- ------------------------------------------------------------------
234 48326 Industrial 60,320 1987
- ------------------------------------------------------------------
235 95054 Industrial 22,000 1984
- ------------------------------------------------------------------
236 89110 Retail 27,410 1989
- ------------------------------------------------------------------
237 85302 Self Storage 75,300 1984
- ------------------------------------------------------------------
238 30033-2719 Self Storage 584 1980
</TABLE>
II-17
<PAGE> 126
APPENDIX II
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
PROPERTY INFORMATION
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Loan
No. Property Name Address City State
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
239 Hart Building 1110 K Street & 1115 11th Street Sacramento CA
- ------------------------------------------------------------------------------------------------------------------------------------
240 855 Howe Avenue 855 Howe Ave. Sacramento CA
- ------------------------------------------------------------------------------------------------------------------------------------
241 Dunbarton Plaza 11347-11391 Dunbarton Boulevard Barnwell SC
- ------------------------------------------------------------------------------------------------------------------------------------
242 27 Seaview Boulevard 27 Seaview Boulevard Port Washington NY
- ------------------------------------------------------------------------------------------------------------------------------------
243 Public Storage -La Puente, CA 18711 E. Valley Boulevard La Puente CA
- ------------------------------------------------------------------------------------------------------------------------------------
244 Firemans Fund Building 727 Craig Road Creve Coeur MO
- ------------------------------------------------------------------------------------------------------------------------------------
245 Lighthouse Apartments 801-829 Lighthouse Drive North Palm Beach FL
- ------------------------------------------------------------------------------------------------------------------------------------
246 Mulholland Office Plaza 22231 Mulholland Hwy Calabasas CA
- ------------------------------------------------------------------------------------------------------------------------------------
247 Cactus Village 12047 North 32nd Street Phoenix AZ
- ------------------------------------------------------------------------------------------------------------------------------------
248 625 Third Street 625 Third Street San Francisco CA
- ------------------------------------------------------------------------------------------------------------------------------------
249 Durango Apartments 13050 Doty Avenue Hawthorne CA
- ------------------------------------------------------------------------------------------------------------------------------------
250 Michigan City Towne Centre 5172-5186 South Franklin Street (Hwy. 421) Michigan City IN
- ------------------------------------------------------------------------------------------------------------------------------------
251 Greg-Mill Center 280 Greg Street Reno NV
- ------------------------------------------------------------------------------------------------------------------------------------
252 Valex Apartments 905 South Ridge Road Delray Beach FL
- ------------------------------------------------------------------------------------------------------------------------------------
253 City Center Business Park 122- 132 East Dyer Road Santa Ana CA
- ------------------------------------------------------------------------------------------------------------------------------------
254 National Square Office Park 501-513 E. National Avenue Indianapolis IN
- ------------------------------------------------------------------------------------------------------------------------------------
255 Kearney Villa Flex Buildings 9176 and 9181 Kearny Villa Court San Diego CA
- ------------------------------------------------------------------------------------------------------------------------------------
256 Santa Monica & Beverly SEC of Santa Monica Blvd. & Beverly Dr. Beverly Hills CA
- ------------------------------------------------------------------------------------------------------------------------------------
257 Micron Electronics Building 625 - 651 Stratford Drive Meridian ID
- ------------------------------------------------------------------------------------------------------------------------------------
258 Ashlan / Valentine Phase II Industrial 3410-40 W. Ashlan Ave. / 4033 N. Valentine Ave. Fresno CA
- ------------------------------------------------------------------------------------------------------------------------------------
259 Baxter Rutherford Warehouses 920 S. Doris and 911 S. Homer Seattle WA
- ------------------------------------------------------------------------------------------------------------------------------------
260 Evergreen Claremont Self Storage 454 West Baseline Rd Claremont CA
- ------------------------------------------------------------------------------------------------------------------------------------
261 32nd Street Commerce Park 6701-6735 32nd Street North Highlands CA
- ------------------------------------------------------------------------------------------------------------------------------------
262 Frys Superstition Springs Center 6920 E. Baseline Road Mesa Az
- ------------------------------------------------------------------------------------------------------------------------------------
263 The Schwab Building 19742 MacArthur Boulevard Irvine CA
- ------------------------------------------------------------------------------------------------------------------------------------
264 90 Albright Way 90 Albright Way Los Gatos CA
- ------------------------------------------------------------------------------------------------------------------------------------
265 Tire Discounters - Middletown (2VI) 6551 Terhune Drive Middletown OH
266 Tire Discounters - Cincinnati (2VI) 9075 Fields Ertel Road Cincinnati OH
- ------------------------------------------------------------------------------------------------------------------------------------
267 The Liberty Building 3158 Redhill Avenue Costa Mesa CA
- ------------------------------------------------------------------------------------------------------------------------------------
268 Hollywood Video-OH 16707 Detroit Avenue Lakewood OH
- ------------------------------------------------------------------------------------------------------------------------------------
269 Public Storage - Garland TX 3702 Kingsley Road Garland TX
- ------------------------------------------------------------------------------------------------------------------------------------
270 Downey Plaza Apartments 8020 Birchcrest Road Downey CA
- ------------------------------------------------------------------------------------------------------------------------------------
271 Quarry Office Building 6099 Riverside Drive Columbus OH
- ------------------------------------------------------------------------------------------------------------------------------------
272 Public Storage - Sacramento 3421 Auburn Blvd. Sacramento CA
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------
Loan Property Year Built/
No. Zipcode Type Units/NSF Renovated
- ------------------------------------------------------------------
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------
239 95814 Office 26,729 1987
- ------------------------------------------------------------------
240 95825 Office 26,253 1997
- ------------------------------------------------------------------
241 29812 Retail 24,000 1997
- ------------------------------------------------------------------
242 11050 Industrial 33,200 1983
- ------------------------------------------------------------------
243 91744-6053 Self Storage 456 1985
- ------------------------------------------------------------------
244 63141 Office 45,656 1996
- ------------------------------------------------------------------
245 33408 Multifamily 56 1996
- ------------------------------------------------------------------
246 91302 Office 23,124 1983
- ------------------------------------------------------------------
247 85032 Retail 92,998 1978
- ------------------------------------------------------------------
248 94107 Office 40,400 1995
- ------------------------------------------------------------------
249 90250 Multifamily 78 1972
- ------------------------------------------------------------------
250 46360 Retail 18,300 1996
- ------------------------------------------------------------------
251 89502 Industrial 38,789 1997
- ------------------------------------------------------------------
252 33483 Multifamily 36 1986
- ------------------------------------------------------------------
253 92707 Industrial 59,843 1954
- ------------------------------------------------------------------
254 46227 Mixed Use 39,460 1989
- ------------------------------------------------------------------
255 92123 Industrial 27,622 1989
- ------------------------------------------------------------------
256 90210 Office 25,710 N/A
- ------------------------------------------------------------------
257 83642 Industrial 44,977 1997
- ------------------------------------------------------------------
258 93722 Industrial 41,340 1989
- ------------------------------------------------------------------
259 98108 Industrial 35,060 1965
- ------------------------------------------------------------------
260 91711 Self Storage 679 1992
- ------------------------------------------------------------------
261 95660 Industrial 79,000 1996
- ------------------------------------------------------------------
262 85206 Retail 13,197 1996
- ------------------------------------------------------------------
263 92612 Office 23,978 1979
- ------------------------------------------------------------------
264 95032 Office 15,600 1981
- ------------------------------------------------------------------
265 45044 Retail 6,425 1996
266 45249 Retail 5,425 1996
- ------------------------------------------------------------------
267 92626 Office 21,146 1982
- ------------------------------------------------------------------
268 44107 Retail 7,694 1997
- ------------------------------------------------------------------
269 75041-2218 Self Storage 518 1983
- ------------------------------------------------------------------
270 90240 Multifamily 90 1996
- ------------------------------------------------------------------
271 43017 Office 14,974 1984
- ------------------------------------------------------------------
272 95821-1912 Self Storage 572 1980
- ------------------------------------------------------------------
</TABLE>
II-18
<PAGE> 127
APPENDIX II
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
PROPERTY INFORMATION
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
Loan
No. Property Name Address City State
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
273 7373 Engineer Road 7373 Engineer Road San Diego (Kearny Mesa area) CA
- ---------------------------------------------------------------------------------------------------------------------------------
274 Comcast Building 1830 E. Warner Avenue Santa Ana CA
- ---------------------------------------------------------------------------------------------------------------------------------
275 Dallas Alley 2019 Lamar Street Dallas TX
- ---------------------------------------------------------------------------------------------------------------------------------
276 Royal Oaks Apartments 42780 Washington Bermuda Dunes CA
- ---------------------------------------------------------------------------------------------------------------------------------
277 2441 Pullman/1701 Carnegie 2441 Pullman Street/1701 Carnegie Avenue Santa Ana CA
- ---------------------------------------------------------------------------------------------------------------------------------
278 9 Goodyear 9 Goodyear Irvine CA
- ---------------------------------------------------------------------------------------------------------------------------------
279 Villa Ventura Apartments 7125 N. 19th Ave Phoenix AZ
- ---------------------------------------------------------------------------------------------------------------------------------
280 Federal Express Branch Terminal 9210 Emmott Road Houston TX
- ---------------------------------------------------------------------------------------------------------------------------------
281 Mercado Village 31952 Camino Capistrano San Juan Capistrano CA
- ---------------------------------------------------------------------------------------------------------------------------------
282 Woodcrest Apartments 2951 - 3011 Albany Drive Oxnard CA
- ---------------------------------------------------------------------------------------------------------------------------------
283 440 Broadway 440 Broadway Salt Lake City UT
- ---------------------------------------------------------------------------------------------------------------------------------
284 Villa Monterrey Apartments 525 South Kirk Road West Palm Beach FL
- ---------------------------------------------------------------------------------------------------------------------------------
285 Town & Country Shopping Center 3703 East 29th Bryan TX
- ---------------------------------------------------------------------------------------------------------------------------------
286 3925 W. Adams St 3925 W. Adams Street Phoenix AZ
- ---------------------------------------------------------------------------------------------------------------------------------
287 Harbor View Business Park 2209 - 2211 West 1st Street Tempe AZ
- ---------------------------------------------------------------------------------------------------------------------------------
288 Randalls - Berkman 6800 Berkman Drive Austin TX
- ---------------------------------------------------------------------------------------------------------------------------------
289 12234-36 Sherman Way 12234-36 Sherman Way North Hollywood CA
- ---------------------------------------------------------------------------------------------------------------------------------
290 Cranbrook Plaza Shopping Center 13331 Kuykendahl Houston TX
- ---------------------------------------------------------------------------------------------------------------------------------
291 Crossings at Maple Grove 7961-79 Wedgewood Lane North Maple Grove MN
- ---------------------------------------------------------------------------------------------------------------------------------
292 1452-1548 Fayette Street 1452-1548 Fayette Street El Cajon CA
- ---------------------------------------------------------------------------------------------------------------------------------
293 United Furniture Warehouse 3605 20th Street East Fife WA
- ---------------------------------------------------------------------------------------------------------------------------------
294 Chateux Village/Sea Lord Apartments 240, 252 & 260 Alemeda Drive Palm Springs FL
- ---------------------------------------------------------------------------------------------------------------------------------
295 17352 Daimler Street 17352 Daimler Street Irvine CA
- ---------------------------------------------------------------------------------------------------------------------------------
296 Champions Forest/Louetta 9001-9041 Louetta Rd. Spring TX
- ---------------------------------------------------------------------------------------------------------------------------------
297 Micro Instrument Co. 960 South Andreasen Drive Escondido CA
- ---------------------------------------------------------------------------------------------------------------------------------
298 Hollywood Video-Louisville,KY 4600 Taylorsville Road Louisville KY
- ---------------------------------------------------------------------------------------------------------------------------------
299 710 Post Oak, L.C. 710 North Post Oak Road Houston TX
- ---------------------------------------------------------------------------------------------------------------------------------
300 2030 N. Ivar Avenue 2030 N. Ivar Avenue Hollywood CA
- ---------------------------------------------------------------------------------------------------------------------------------
301 Hollywood Video - GA 5745 Jonesboro Road Lake City GA
- ---------------------------------------------------------------------------------------------------------------------------------
302 Love Field Financial Center 6310 Lemmon Ave Dallas TX
- ---------------------------------------------------------------------------------------------------------------------------------
303 Diagonal Marketplace Shopping Center 1100 Ken Pratt Boulevard Longmont CO
- ---------------------------------------------------------------------------------------------------------------------------------
304 Rialto II Apartments 1576 N. Palm Avenue Rialto CA
- ---------------------------------------------------------------------------------------------------------------------------------
305 7 Studebaker 7 Studebaker Irvine CA
- ---------------------------------------------------------------------------------------------------------------------------------
306 Pioneer Business Center II 320 East Corporate Drive Meridian ID
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------
Loan Property Year Built/
No. Zipcode Type Units/NSF Renovated
- ------------------------------------------------------------------
<S> <C> <C> <C> <C>
273 92111 Industrial 40,666 1975
- ------------------------------------------------------------------
274 92705 Industrial 29,930 1997
- ------------------------------------------------------------------
275 75201 Mixed Use 32,312 1984
- ------------------------------------------------------------------
276 92201 Multifamily 56 1987
- ------------------------------------------------------------------
277 92704 Industrial 33,793 1997
- ------------------------------------------------------------------
278 92618 Industrial 19,278 1984
- ------------------------------------------------------------------
279 85021 Multifamily 50 1970
- ------------------------------------------------------------------
280 77040-3328 Industrial 30,992 1986
- ------------------------------------------------------------------
281 92675 Retail 13,944 1980
- ------------------------------------------------------------------
282 93033 Multifamily 32 1974
- ------------------------------------------------------------------
283 84111 Multifamily 55 1995
- ------------------------------------------------------------------
284 33406 Multifamily 48 1995
- ------------------------------------------------------------------
285 77845 Retail 36,125 1974
- ------------------------------------------------------------------
286 85009 Industrial 44,785 1987
- ------------------------------------------------------------------
287 85251 Industrial 38,640 1995
- ------------------------------------------------------------------
288 78723 Retail 30,000 1977
- ------------------------------------------------------------------
289 91605 Industrial 62,541 1978
- ------------------------------------------------------------------
290 77090 Retail 36,905 1985
- ------------------------------------------------------------------
291 55369 Retail 8,246 1996
- ------------------------------------------------------------------
292 92020 Industrial 34,598 1972
- ------------------------------------------------------------------
293 98424 Industrial 25,020 1992
- ------------------------------------------------------------------
294 33480 Multifamily 50 1996
- ------------------------------------------------------------------
295 92614 Industrial 30,840 1987
- ------------------------------------------------------------------
296 77379-6749 Retail 23,750 1984
- ------------------------------------------------------------------
297 92029 Industrial 24,104 1997
- ------------------------------------------------------------------
298 40220 Retail 7,488 1996
- ------------------------------------------------------------------
299 77024 Office 49,931 1972
- ------------------------------------------------------------------
300 90068 Multifamily 16 1991
- ------------------------------------------------------------------
301 30260 Retail 7,488 1997
- ------------------------------------------------------------------
302 75209 Office 24,952 1988
- ------------------------------------------------------------------
303 80501 Retail 8,997 1997
- ------------------------------------------------------------------
304 92376 Multifamily 72 1965
- ------------------------------------------------------------------
305 92618 Industrial 16,111 1982
- ------------------------------------------------------------------
306 83642 Industrial 9,659 1996
- ------------------------------------------------------------------
</TABLE>
II-19
<PAGE> 128
APPENDIX II
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
PROPERTY OPERATING INFORMATION
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
Loan Underwritable Monthly Property Valuation
No. Property Name Cash Flow Payment DSCR(4) Value(6) Date(6) LTV(4)
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------
1 Scottsdale Plaza Resort $9,229,510 $460,311 1.67 $88,300,000 9/97 67.7%
- -----------------------------------------------------------------------------------------------------------------------------
2 Encinitas Ranch Town Center $4,704,529 $292,991 1.34 $53,000,000 12/97 79.8%
- -----------------------------------------------------------------------------------------------------------------------------
3 Two Democracy Plaza $4,166,523 $238,017 1.46 $47,400,000 11/97 73.9%
- -----------------------------------------------------------------------------------------------------------------------------
4 Kahler Hotel (2I) $3,732,109 $184,401 1.50 $33,000,000 9/97 66.5%
5 Olympia Park (2I) $1,235,984 $90,803 1.50 $16,250,000 10/97 66.5%
- -----------------------------------------------------------------------------------------------------------------------------
6 Clinton Square $4,243,772 $237,535 1.49 $46,800,000 9/97 67.1%
- -----------------------------------------------------------------------------------------------------------------------------
7 Metropolitan Corporate Center $3,895,467 $175,875 1.85 $50,000,000 12/97 60.0%
- -----------------------------------------------------------------------------------------------------------------------------
8 Holiday Inn Boston Logan Airport $3,605,358 $211,676 1.42 $37,500,000 10/97 74.3%
- -----------------------------------------------------------------------------------------------------------------------------
9 Sun Valley Village (2A) $1,254,873 $74,138 1.38 $12,500,000 9/97 80.4%
10 Greenoaks Mobile Home Park (2A) $609,943 $38,834 1.38 $7,250,000 9/97 80.4%
11 Madrone Mobile Estates (2A) $647,705 $38,834 1.38 $6,920,000 9/97 80.4%
- -----------------------------------------------------------------------------------------------------------------------------
12 The Willows Shopping Center $2,433,342 $126,663 1.60 $28,700,000 10/97 66.0%
- -----------------------------------------------------------------------------------------------------------------------------
13 Radisson Hotel/Pittsburgh ExpoMart $3,028,173 $141,175 1.79 $31,000,000 5/97 55.5%
- -----------------------------------------------------------------------------------------------------------------------------
14 Pinebrook Apartments $1,853,294 $115,512 1.34 $22,400,000 5/97 71.1%
- -----------------------------------------------------------------------------------------------------------------------------
15 Woodchase Apartments $1,637,855 $97,914 1.39 $18,130,000 8/97 77.5%
- -----------------------------------------------------------------------------------------------------------------------------
16 Gateway Center Apartments $1,719,876 $93,990 1.52 $19,500,000 12/97 71.7%
- -----------------------------------------------------------------------------------------------------------------------------
17 Sunset Creek (2B) $1,271,587 $71,197 1.46 $13,200,000 1/98 78.4%
18 Creekwood Village (2B) $347,873 $21,080 1.46 $4,000,000 1/98 78.4%
- -----------------------------------------------------------------------------------------------------------------------------
19 Monterey Oaks Mobile Home Park $1,610,604 $85,966 1.56 $17,000,000 10/97 76.3%
- -----------------------------------------------------------------------------------------------------------------------------
20 Fairview Village Apartments $1,728,863 $86,228 1.67 $17,500,000 10/97 74.1%
- -----------------------------------------------------------------------------------------------------------------------------
21 Northgate Plaza $1,592,084 $92,416 1.44 $17,800,000 9/97 72.8%
- -----------------------------------------------------------------------------------------------------------------------------
22 La Valencia Hotel $2,432,306 $97,766 2.07 $33,000,000 7/97 39.2%
- -----------------------------------------------------------------------------------------------------------------------------
23 200 W. Thomas (2II) $527,494 $33,150 1.38 $6,500,000 7/97 68.3%
24 100 W. Harrison (North Tower) (2II) $559,368 $31,608 1.38 $6,200,000 7/97 68.3%
25 100 W. Harrison (South Tower) (2II) $488,758 $30,595 1.38 $6,000,000 7/97 68.3%
- -----------------------------------------------------------------------------------------------------------------------------
26 Pebble Creek Apartments, Phase II-IV $1,457,475 $82,241 1.48 $16,050,000 12/97 77.7%
- -----------------------------------------------------------------------------------------------------------------------------
27 Courtyard by Marriott - Salt Lake City (2C) $977,708 $54,007 1.46 $9,770,000 8/97 71.5%
28 Courtyard by Marriott - Provo (2C) $764,287 $45,637 1.46 $7,660,000 9/97 71.5%
- -----------------------------------------------------------------------------------------------------------------------------
29 Penn's Market II $1,468,716 $89,984 1.36 $16,700,000 5/97 74.5%
- -----------------------------------------------------------------------------------------------------------------------------
30 Budget Suites / Paradise $1,708,781 $88,622 1.61 $17,720,000 11/97 68.4%
- -----------------------------------------------------------------------------------------------------------------------------
31 Waterford at Clear Lake $1,258,196 $76,974 1.36 $14,800,000 1/98 77.6%
- -----------------------------------------------------------------------------------------------------------------------------
32 St. Mary's Square Shopping Center $1,254,846 $81,972 1.28 $14,200,000 12/97 79.5%
- -----------------------------------------------------------------------------------------------------------------------------
33 Trappe Center $1,397,510 $88,172 1.32 $15,340,000 5/97 73.3%
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------
Loan Percent Leased(7) Tenant Information(8)
No. Leased Date Largest Tenant % NSF
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------
1 75.5% 11/97
- -------------------------------------------------------------------------------------
2 99.5% 12/97 Target Greatland 25.4%
- -------------------------------------------------------------------------------------
3 96.7% 10/97 Watson Wyatt & Company 27.3%
- -------------------------------------------------------------------------------------
4 65.3% 8/97
5 64.8% 10/97
- -------------------------------------------------------------------------------------
6 98.4% 9/97 Nixon Hargrave 39.6%
- -------------------------------------------------------------------------------------
7 100.0% 12/97 Applied Materials, Inc 100.0%
- -------------------------------------------------------------------------------------
8 94.5% 8/97
- -------------------------------------------------------------------------------------
9 97.3% 7/97
10 98.6% 12/97
11 97.1% 12/97
- -------------------------------------------------------------------------------------
12 93.4% 10/97 REI 11.9%
- -------------------------------------------------------------------------------------
13 82.5% 7/97 ITT Educational Service 5.3%
- -------------------------------------------------------------------------------------
14 99.2% 12/97
- -------------------------------------------------------------------------------------
15 92.5% 8/97
- -------------------------------------------------------------------------------------
16 93.3% 10/97
- -------------------------------------------------------------------------------------
17 96.2% 12/97
18 90.8% 12/97
- -------------------------------------------------------------------------------------
19 100.0% 12/97
- -------------------------------------------------------------------------------------
20 97.2% 9/97
- -------------------------------------------------------------------------------------
21 100.0% 10/97 Bed Bath & Beyond 37.1%
- -------------------------------------------------------------------------------------
22 84.7% 11/97
- -------------------------------------------------------------------------------------
23 88.7% 9/97 Cybermeals 20.1%
24 98.5% 9/97 USF&G 16.6%
25 96.9% 9/97 Cruise Alaska Tours 19.9%
- -------------------------------------------------------------------------------------
26 97.9% 11/97
- -------------------------------------------------------------------------------------
27 81.9% 4/97
28 71.1% 6/97
- -------------------------------------------------------------------------------------
29 94.4% 7/97 Bass 7.8%
- -------------------------------------------------------------------------------------
30 90.3% 11/97
- -------------------------------------------------------------------------------------
31 93.3% 12/97
- -------------------------------------------------------------------------------------
32 98.2% 12/97 K-Mart 34.1%
- -------------------------------------------------------------------------------------
33 100.0% 12/97 Clemens Market 36.7%
</TABLE>
II-20
<PAGE> 129
APPENDIX II
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
PROPERTY OPERATING INFORMATION
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
Loan Underwritable Monthly Property Valuation
No. Property Name Cash Flow Payment DSCR(4) Value(6) Date(6) LTV(4)
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------
34 Clearwater Creek Apartments $1,055,897 $73,922 1.19 $14,000,000 9/97 79.8%
- -----------------------------------------------------------------------------------------------------------------------------
35 Surveyor-Beltline Office $1,219,973 $82,133 1.24 $14,150,000 3/97 71.5%
- -----------------------------------------------------------------------------------------------------------------------------
36 Chatham Village Apartments $1,264,336 $66,207 1.59 $12,850,000 10/97 74.5%
- -----------------------------------------------------------------------------------------------------------------------------
37 Bank One Tower & Branch $989,143 $69,606 1.18 $12,300,000 10/97 75.4%
- -----------------------------------------------------------------------------------------------------------------------------
38 Stanford Villa Apartments $2,011,428 $59,756 2.81 $22,500,000 10/97 39.9%
- -----------------------------------------------------------------------------------------------------------------------------
39 Copper Terrace Apartments $1,070,131 $60,412 1.48 $11,850,000 10/97 74.9%
- -----------------------------------------------------------------------------------------------------------------------------
40 Briarwood Apartments $971,005 $61,891 1.31 $11,750,000 9/97 74.2%
- -----------------------------------------------------------------------------------------------------------------------------
41 Golden Hills Plaza $1,025,550 $56,373 1.52 $10,740,000 9/97 75.7%
- -----------------------------------------------------------------------------------------------------------------------------
42 Federal Express $1,000,448 $62,364 1.34 $11,000,000 6/97 73.4%
- -----------------------------------------------------------------------------------------------------------------------------
43 Ashford Court Apartments $838,008 $54,411 1.28 $10,250,000 10/97 77.9%
- -----------------------------------------------------------------------------------------------------------------------------
44 Meyer Business Center $948,592 $60,479 1.31 $12,000,000 8/97 66.2%
- -----------------------------------------------------------------------------------------------------------------------------
45 Encinal Terminals $1,206,999 $62,039 1.62 $13,200,000 5/97 59.0%
- -----------------------------------------------------------------------------------------------------------------------------
46 Howard Johnson/Holiday Inn Express $1,094,139 $61,499 1.48 $11,400,000 7/97 68.1%
- -----------------------------------------------------------------------------------------------------------------------------
47 Courtyard by Marriott - Hillsboro $1,516,535 $67,698 1.87 $11,200,000 6/97 68.5%
- -----------------------------------------------------------------------------------------------------------------------------
48 Morning Ridge Apartments $928,619 $54,156 1.43 $10,575,000 7/97 72.5%
- -----------------------------------------------------------------------------------------------------------------------------
49 Lakes Town Ctr./Oakland Shpg. Ctr. $1,167,291 $59,871 1.62 $11,000,000 8/97 68.8%
- -----------------------------------------------------------------------------------------------------------------------------
50 Keeneland Crest Apartments, Phase II $802,205 $53,732 1.24 $9,250,000 8/97 79.8%
- -----------------------------------------------------------------------------------------------------------------------------
51 Naperville Plaza $1,225,380 $48,358 2.11 $12,300,000 9/97 59.7%
- -----------------------------------------------------------------------------------------------------------------------------
52 Smithridge Plaza Shopping Center $1,024,492 $55,717 1.53 $10,500,000 1/97 69.0%
- -----------------------------------------------------------------------------------------------------------------------------
53 Twin Oaks Apartment $764,938 $48,146 1.32 $8,925,000 11/97 79.4%
- -----------------------------------------------------------------------------------------------------------------------------
54 Ravine Bluff Apartments $929,574 $48,595 1.59 $8,750,000 6/97 79.1%
- -----------------------------------------------------------------------------------------------------------------------------
55 300 Rose Ave. & 320 Hampton Dr. (2D) $820,122 $37,186 1.84 $8,850,000 10/97 53.4%
56 350-364 Hampton Drive (2D) $335,788 $15,300 1.84 $3,800,000 11/97 53.4%
- -----------------------------------------------------------------------------------------------------------------------------
57 Hamilton Fixtures $870,681 $52,158 1.39 $8,600,000 8/97 76.5%
- -----------------------------------------------------------------------------------------------------------------------------
58 Riviera Apartments $848,969 $45,182 1.57 $9,000,000 11/97 72.1%
- -----------------------------------------------------------------------------------------------------------------------------
59 Dorado Plaza Apartments $673,673 $45,277 1.24 $8,000,000 9/97 79.8%
- -----------------------------------------------------------------------------------------------------------------------------
60 Clarksville Commons $928,264 $49,714 1.56 $9,290,000 1/97 67.3%
- -----------------------------------------------------------------------------------------------------------------------------
61 20101 South Santa Fe Avenue $668,163 $42,530 1.31 $8,045,000 8/97 74.4%
- -----------------------------------------------------------------------------------------------------------------------------
62 Mariners Mile Marine Center $748,910 $44,887 1.39 $9,300,000 10/97 64.3%
- -----------------------------------------------------------------------------------------------------------------------------
63 Monteray Shores Plaza Shopping Center $772,570 $47,789 1.35 $8,200,000 5/97 72.6%
- -----------------------------------------------------------------------------------------------------------------------------
64 Westland Shopping Center $726,676 $43,374 1.40 $8,000,000 8/97 73.6%
- -----------------------------------------------------------------------------------------------------------------------------
65 Seattle Air Cargo $963,317 $53,106 1.51 $12,300,000 8/97 46.7%
- -----------------------------------------------------------------------------------------------------------------------------
66 Red Bank Plaza (2III) $425,489 $25,980 1.44 $4,350,000 2/97 74.3%
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------
Loan Percent Leased(7) Tenant Information(8)
No. Leased Date Largest Tenant % NSF
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------
34 88.0% 10/97
- -------------------------------------------------------------------------------------
35 90.7% 1/98 Streetball Partners 9.7%
- -------------------------------------------------------------------------------------
36 95.0% 10/97
- -------------------------------------------------------------------------------------
37 94.5% 10/97 Bank One 19.9%
- -------------------------------------------------------------------------------------
38 97.1% 11/97
- -------------------------------------------------------------------------------------
39 94.6% 11/97
- -------------------------------------------------------------------------------------
40 99.5% 10/97
- -------------------------------------------------------------------------------------
41 97.5% 12/97 Food 4 Less 48.1%
- -------------------------------------------------------------------------------------
42 100.0% 1/98 Federal Express 90.4%
- -------------------------------------------------------------------------------------
43 92.5% 10/97
- -------------------------------------------------------------------------------------
44 83.0% 11/97 Adair Office Furniture 11.3%
- -------------------------------------------------------------------------------------
45 100.0% 11/97 Chipman Corporation 63.4%
- -------------------------------------------------------------------------------------
46 58.5% 10/97
- -------------------------------------------------------------------------------------
47 77.4% 11/97
- -------------------------------------------------------------------------------------
48 98.5% 11/97
- -------------------------------------------------------------------------------------
49 82.7% 10/97 Phyls Acadamy, Inc. 7.0%
- -------------------------------------------------------------------------------------
50 99.4% 9/97
- -------------------------------------------------------------------------------------
51 98.8% 11/97 Casey's Foods 15.6%
- -------------------------------------------------------------------------------------
52 100.0% 11/97 Stein Mart 33.6%
- -------------------------------------------------------------------------------------
53 100.0% 9/97
- -------------------------------------------------------------------------------------
54 92.4% 4/97
- -------------------------------------------------------------------------------------
55 100.0% 12/97 Digital Domain 100.0%
56 100.0% 12/97 Gold's Gym 100.0%
- -------------------------------------------------------------------------------------
57 100.0% 8/97 Hamilton Fixtures 100.0%
- -------------------------------------------------------------------------------------
58 100.0% 10/97
- -------------------------------------------------------------------------------------
59 99.5% 10/97
- -------------------------------------------------------------------------------------
60 90.8% 1/98 Gregg Appliances, Inc. 46.0%
- -------------------------------------------------------------------------------------
61 100.0% 11/97 Jimway, Inc. 100.0%
- -------------------------------------------------------------------------------------
62 97.9% 11/97 Newport Marine (Y) 20.8%
- -------------------------------------------------------------------------------------
63 100.0% 1/98 Food Lion 40.7%
- -------------------------------------------------------------------------------------
64 100.0% 12/97 Dick's Clothing & Sporting Goods, Inc. 70.6%
- -------------------------------------------------------------------------------------
65 63.2% 10/97 Federal Express 32.6%
- -------------------------------------------------------------------------------------
66 96.5% 9/97 Self Storage Space 80.9%
</TABLE>
II-21
<PAGE> 130
APPENDIX II
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
PROPERTY OPERATING INFORMATION
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
Loan Underwritable Monthly Property Valuation
No. Property Name Cash Flow Payment DSCR(4) Value(6) Date(6) LTV(4)
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
67 Red Bank Center (2III) $390,178 $21,376 1.44 $3,350,000 2/97 74.3%
- -----------------------------------------------------------------------------------------------------------------------------
68 Radisson Airport Inn $960,817 $52,184 1.53 $8,530,000 8/96 67.1%
- -----------------------------------------------------------------------------------------------------------------------------
69 Foxridge Apartments, Phases IV-V $693,948 $37,502 1.54 $7,600,000 12/97 74.9%
- -----------------------------------------------------------------------------------------------------------------------------
70 Woodside Terrace Apartments $767,826 $40,797 1.57 $8,000,000 9/97 71.1%
- -----------------------------------------------------------------------------------------------------------------------------
71 Ross Center $725,379 $45,079 1.34 $8,000,000 8/97 71.0%
- -----------------------------------------------------------------------------------------------------------------------------
72 The Electric Farm Industrial Park $912,711 $37,483 2.03 $9,775,000 10/97 57.1%
- -----------------------------------------------------------------------------------------------------------------------------
73 Homestead House - San Diego (2IV) $566,098 $37,673 1.27 $5,200,000 3/97 75.7%
74 Homestead House - Huntington Beach (2IV) $234,880 $14,883 1.27 $2,150,000 1/97 75.7%
- -----------------------------------------------------------------------------------------------------------------------------
75 Coffee Creek Apartments $799,174 $37,259 1.79 $8,870,000 9/97 61.8%
- -----------------------------------------------------------------------------------------------------------------------------
76 Strouds of Santa Monica $664,103 $41,389 1.34 $7,360,000 5/97 74.3%
- -----------------------------------------------------------------------------------------------------------------------------
77 1277 Orleans Dr. & 207 Java Dr. $967,593 $40,502 1.99 $11,700,000 8/97 46.7%
- -----------------------------------------------------------------------------------------------------------------------------
78 34-02 Queens Boulevard $1,132,504 $43,591 2.16 $11,000,000 6/97 48.9%
- -----------------------------------------------------------------------------------------------------------------------------
79 3 Waters Office Park $751,811 $40,200 1.56 $7,775,000 8/97 68.5%
- -----------------------------------------------------------------------------------------------------------------------------
80 Sears Plaza $864,926 $36,109 2.00 $9,500,000 9/97 55.9%
- -----------------------------------------------------------------------------------------------------------------------------
81 Smithridge Shopping Center $676,389 $36,565 1.54 $7,100,000 10/97 73.8%
- -----------------------------------------------------------------------------------------------------------------------------
82 Cobb Center $598,949 $42,530 1.17 $7,150,000 12/96 71.9%
- -----------------------------------------------------------------------------------------------------------------------------
83 Northern Hills Shopping Center (2E) $388,781 $20,168 1.53 $3,500,000 8/97 78.2%
84 Perrin Oaks Shopping Center (2E) $294,521 $17,112 1.53 $3,000,000 8/97 78.2%
- -----------------------------------------------------------------------------------------------------------------------------
85 Blalock Woods Apartments $848,398 $46,183 1.53 $8,400,000 11/97 60.3%
- -----------------------------------------------------------------------------------------------------------------------------
86 Broadway Shoppes $696,923 $45,387 1.28 $7,575,000 10/97 66.8%
- -----------------------------------------------------------------------------------------------------------------------------
87 Cambridge Apartments $651,157 $34,756 1.56 $6,950,000 11/97 71.9%
- -----------------------------------------------------------------------------------------------------------------------------
88 Nellis-Bonanza Shopping Center $648,390 $38,831 1.39 $6,500,000 5/97 74.9%
- -----------------------------------------------------------------------------------------------------------------------------
89 Comfort Inn - Downtown New Orleans $719,632 $38,402 1.56 $8,800,000 10/97 54.9%
- -----------------------------------------------------------------------------------------------------------------------------
90 Sun Micro Systems $625,947 $38,346 1.36 $6,800,000 10/97 70.3%
- -----------------------------------------------------------------------------------------------------------------------------
91 Desco Plaza III $563,051 $34,953 1.34 $7,450,000 7/97 63.5%
- -----------------------------------------------------------------------------------------------------------------------------
92 Brook Village West $598,063 $33,089 1.51 $5,900,000 9/97 79.5%
- -----------------------------------------------------------------------------------------------------------------------------
93 Stoneleigh Place Apartments $619,648 $32,960 1.57 $6,250,000 9/97 75.0%
- -----------------------------------------------------------------------------------------------------------------------------
94 Simi Country Estates Mobile Home Park $729,701 $32,138 1.89 $6,900,000 11/97 67.5%
- -----------------------------------------------------------------------------------------------------------------------------
95 Ramada Hilltop $881,352 $36,059 2.04 $7,100,000 9/97 65.5%
- -----------------------------------------------------------------------------------------------------------------------------
96 Sun Shadow Square Shopping Center $561,066 $35,533 1.32 $6,000,000 9/97 76.5%
- -----------------------------------------------------------------------------------------------------------------------------
97 5901 Westheimer Shopping Center $683,887 $33,606 1.70 $6,590,000 10/97 69.6%
- -----------------------------------------------------------------------------------------------------------------------------
98 Park Lane Villas Apartment Complex $946,540 $33,397 2.36 $8,400,000 6/97 54.4%
- -----------------------------------------------------------------------------------------------------------------------------
99 Redwood City Professional Center $530,332 $32,083 1.38 $6,100,000 6/97 73.6%
</TABLE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------
Loan Percent Leased(7) Tenant Information(8)
No. Leased Date Largest Tenant % NSF
- -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
67 98.0% 8/97 Nightingale Medical Services 14.0%
- -----------------------------------------------------------------------------------
68 84.8% 8/96
- -----------------------------------------------------------------------------------
69 99.0% 11/97
- -----------------------------------------------------------------------------------
70 91.0% 11/97
- -----------------------------------------------------------------------------------
71 100.0% 11/97 Ross 53.7%
- -----------------------------------------------------------------------------------
72 100.0% 11/97 Aluminum Roofing 6.8%
- -----------------------------------------------------------------------------------
73 100.0% 3/97 Homestead House 100.0%
74 100.0% 3/97 Homestead House 100.0%
- -----------------------------------------------------------------------------------
75 99.0% 11/97
- -----------------------------------------------------------------------------------
76 100.0% 5/97 Strouds 100.0%
- -----------------------------------------------------------------------------------
77 100.0% 7/97 Quicklogic 55.3%
- -----------------------------------------------------------------------------------
78 100.0% 6/97 Department of Transportation 56.8%
- -----------------------------------------------------------------------------------
79 98.2% 10/97 California Casualty 29.1%
- -----------------------------------------------------------------------------------
80 100.0% 11/97 Future Shop Inc. 54.1%
- -----------------------------------------------------------------------------------
81 100.0% 9/97 Chuck E. Cheese 18.9%
- -----------------------------------------------------------------------------------
82 94.4% 1/98 Publix 62.7%
- -----------------------------------------------------------------------------------
83 90.2% 6/97 Solo Serve 31.0%
84 95.4% 1/98 Racquetball & Fitness 34.2%
- -----------------------------------------------------------------------------------
85 97.3% 12/97
- -----------------------------------------------------------------------------------
86 99.0% 9/97 K-Mart 57.7%
- -----------------------------------------------------------------------------------
87 100.0% 10/97
- -----------------------------------------------------------------------------------
88 96.4% 8/97 Lucky Stores, Inc. 38.3%
- -----------------------------------------------------------------------------------
89 65.5% 10/97
- -----------------------------------------------------------------------------------
90 100.0% 9/97 Sun Micro Systems 100.0%
- -----------------------------------------------------------------------------------
91 100.0% 8/97 Whalen & Co. 13.8%
- -----------------------------------------------------------------------------------
92 97.6% 10/97
- -----------------------------------------------------------------------------------
93 96.4% 9/97
- -----------------------------------------------------------------------------------
94 100.0% 9/97
- -----------------------------------------------------------------------------------
95 80.2% 10/97
- -----------------------------------------------------------------------------------
96 97.1% 12/97 Specialty Retailers Inc. 21.0%
- -----------------------------------------------------------------------------------
97 89.8% 1/98 GTE MobilNet 11.5%
- -----------------------------------------------------------------------------------
98 97.0% 8/97
- -----------------------------------------------------------------------------------
99 95.4% 9/97 Katz 16.5%
</TABLE>
II-22
<PAGE> 131
APPENDIX II
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
PROPERTY OPERATING INFORMATION
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
Loan Underwritable Monthly Property Valuation
No. Property Name Cash Flow Payment DSCR(4) Value(6) Date(6) LTV(4)
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------
100 Centerpointe Apartments $586,892 $30,424 1.61 $6,200,000 9/97 72.3%
- -----------------------------------------------------------------------------------------------------------------------------
101 Vista del Coronado Apts $730,155 $34,791 1.75 $8,310,000 6/97 53.7%
- -----------------------------------------------------------------------------------------------------------------------------
102 Haltom Plaza $525,368 $32,746 1.34 $6,700,000 9/97 66.2%
- -----------------------------------------------------------------------------------------------------------------------------
103 Sycamore Square Shopping Center $605,144 $30,833 1.64 $5,600,000 10/97 79.1%
- -----------------------------------------------------------------------------------------------------------------------------
104 Brookstone Village Apartments $552,677 $34,621 1.33 $6,100,000 9/97 71.9%
- -----------------------------------------------------------------------------------------------------------------------------
105 Autumn Hills - Arbor Apartments $740,400 $31,582 1.95 $7,250,000 7/97 59.7%
- -----------------------------------------------------------------------------------------------------------------------------
106 Mansell Oaks Plaza Shopping Center $508,710 $31,074 1.36 $5,380,000 8/97 79.7%
- -----------------------------------------------------------------------------------------------------------------------------
107 Onyx One Building $618,136 $33,017 1.56 $5,900,000 7/97 72.5%
- -----------------------------------------------------------------------------------------------------------------------------
108 Jillian's Billiard Club $540,665 $33,651 1.34 $6,000,000 6/97 70.6%
- -----------------------------------------------------------------------------------------------------------------------------
109 Shoreline Apartments $874,948 $30,856 2.36 $9,150,000 6/97 46.2%
- -----------------------------------------------------------------------------------------------------------------------------
110 Harbor Plaza Shopping Center $543,285 $32,376 1.40 $5,150,000 9/97 81.9%
- -----------------------------------------------------------------------------------------------------------------------------
111 16325-16407 South Main Street $563,838 $31,038 1.51 $5,720,000 9/97 73.2%
- -----------------------------------------------------------------------------------------------------------------------------
112 Holiday Inn - Merle Hay $628,511 $38,458 1.36 $5,800,000 3/97 70.9%
- -----------------------------------------------------------------------------------------------------------------------------
113 Crosswind Corners Shopping Center $596,056 $30,299 1.64 $6,400,000 10/97 63.9%
- -----------------------------------------------------------------------------------------------------------------------------
114 Narrows Creek Townhomes $493,891 $29,401 1.40 $6,625,000 8/97 61.7%
- -----------------------------------------------------------------------------------------------------------------------------
115 Costa Mesa Motor Inn $588,972 $33,263 1.48 $6,500,000 5/97 62.8%
- -----------------------------------------------------------------------------------------------------------------------------
116 Concord Square Apts. $498,255 $27,026 1.54 $5,600,000 10/97 72.2%
- -----------------------------------------------------------------------------------------------------------------------------
117 1st Avenue (2V) $260,138 $18,022 1.20 $3,100,000 6/97 77.8%
118 Rogmour Center (2V) $168,884 $11,821 1.20 $2,050,000 6/97 77.8%
- -----------------------------------------------------------------------------------------------------------------------------
119 Hampton Inn - Auburn $560,333 $32,221 1.45 $5,400,000 7/97 74.2%
- -----------------------------------------------------------------------------------------------------------------------------
120 First Place Office Center $527,104 $29,812 1.47 $6,700,000 9/97 59.7%
- -----------------------------------------------------------------------------------------------------------------------------
121 Lone Oak Shopping Center $526,368 $26,747 1.64 $5,500,000 9/97 72.6%
- -----------------------------------------------------------------------------------------------------------------------------
122 El Macero Shopping Center $505,276 $27,314 1.54 $5,600,000 10/97 71.3%
- -----------------------------------------------------------------------------------------------------------------------------
123 DeSoto Corporate Industrial $540,808 $28,216 1.60 $6,250,000 8/97 63.8%
- -----------------------------------------------------------------------------------------------------------------------------
124 San Antonio Center $530,285 $29,473 1.50 $6,275,000 8/97 62.6%
- -----------------------------------------------------------------------------------------------------------------------------
125 Sycamore Hills Apartments $391,696 $26,658 1.22 $5,400,000 11/97 72.2%
- -----------------------------------------------------------------------------------------------------------------------------
126 Eagle Rock I Apartments $447,883 $27,269 1.37 $5,100,000 11/97 76.3%
- -----------------------------------------------------------------------------------------------------------------------------
127 Kuebel Fuchs Office Building $550,651 $31,958 1.44 $5,500,000 4/97 70.5%
- -----------------------------------------------------------------------------------------------------------------------------
128 Marijon Dyeing & Finishing Co. $412,568 $27,963 1.23 $4,700,000 6/97 80.6%
- -----------------------------------------------------------------------------------------------------------------------------
129 Holiday Inn Daytona Beach $633,616 $29,860 1.77 $6,795,000 8/97 55.6%
- -----------------------------------------------------------------------------------------------------------------------------
130 Sani-Serve Industrial Building $471,949 $30,114 1.31 $5,490,000 7/97 68.8%
- -----------------------------------------------------------------------------------------------------------------------------
131 1703-1735 Stewart Street $641,536 $28,703 1.86 $8,880,000 10/97 41.6%
- -----------------------------------------------------------------------------------------------------------------------------
132 Walnut Plaza Shopping Center $470,804 $27,227 1.44 $5,000,000 9/97 73.8%
</TABLE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------
Loan Percent Leased(7) Tenant Information(8)
No. Leased Date Largest Tenant % NSF
- -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------
100 95.3% 8/97
- -----------------------------------------------------------------------------------
101 98.2% 12/97
- -----------------------------------------------------------------------------------
102 75.4% 9/97 Big Lots 13.1%
- -----------------------------------------------------------------------------------
103 100.0% 11/97 Ross Stores 59.9%
- -----------------------------------------------------------------------------------
104 100.0% 9/97
- -----------------------------------------------------------------------------------
105 97.2% 8/97
- -----------------------------------------------------------------------------------
106 96.8% 12/97 Longhorn Steaks, Inc. 13.8%
- -----------------------------------------------------------------------------------
107 95.2% 9/97 Merrill Lynch 12.5%
- -----------------------------------------------------------------------------------
108 100.0% 10/97 Jillian's' Billiard Club, Inc. 25.8%
- -----------------------------------------------------------------------------------
109 98.0% 8/97
- -----------------------------------------------------------------------------------
110 97.1% 9/97 Hallmark 19.1%
- -----------------------------------------------------------------------------------
111 100.0% 10/97 Gardena-Main, LLC 100.0%
- -----------------------------------------------------------------------------------
112 68.0% 12/96
- -----------------------------------------------------------------------------------
113 100.0% 7/97 ABC Appliances 28.8%
- -----------------------------------------------------------------------------------
114 93.9% 11/97
- -----------------------------------------------------------------------------------
115 90.6% 12/96
- -----------------------------------------------------------------------------------
116 92.8% 9/97
- -----------------------------------------------------------------------------------
117 93.4% 1/98 Noell Design Group 11.8%
118 96.6% 1/98 Toomevara 13.7%
- -----------------------------------------------------------------------------------
119 69.5% 6/97
- -----------------------------------------------------------------------------------
120 100.0% 12/97 We Fix Macs 21.0%
- -----------------------------------------------------------------------------------
121 98.4% 10/97 HEB Grocery 50.5%
- -----------------------------------------------------------------------------------
122 97.3% 11/97 Nugget Market 46.8%
- -----------------------------------------------------------------------------------
123 100.0% 9/97 Photo Research 46.7%
- -----------------------------------------------------------------------------------
124 100.0% 12/97 Ross Stores 56.0%
- -----------------------------------------------------------------------------------
125 96.6% 11/97
- -----------------------------------------------------------------------------------
126 96.2% 10/97
- -----------------------------------------------------------------------------------
127 100.0% 10/97 Associated Health Plans 21.9%
- -----------------------------------------------------------------------------------
128 100.0% 10/97 Marijon Dyeing & Finishing Co., Inc. 100.0%
- -----------------------------------------------------------------------------------
129 61.6% 9/97
- -----------------------------------------------------------------------------------
130 100.0% 9/97 Sani Serve Manufacturing Corp. 57.1%
- -----------------------------------------------------------------------------------
131 100.0% 12/97 International Images 28.9%
- -----------------------------------------------------------------------------------
132 100.0% 9/97 Lots Off 21.1%
</TABLE>
II-23
<PAGE> 132
APPENDIX II
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
PROPERTY OPERATING INFORMATION
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
Loan Underwritable Monthly Property Valuation
No. Property Name Cash Flow Payment DSCR(4) Value(6) Date(6) LTV(4)
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------
133 Oak Glen Apartments $432,838 $25,846 1.40 $4,860,000 8/97 75.8%
- -----------------------------------------------------------------------------------------------------------------------------
134 Philamer Apartments $426,064 $25,247 1.41 $4,590,000 11/97 79.4%
- -----------------------------------------------------------------------------------------------------------------------------
135 University Carriage House and Essex House Apts. $520,565 $29,048 1.49 $5,325,000 10/97 68.3%
- -----------------------------------------------------------------------------------------------------------------------------
136 The Merrill Lynch Building $431,186 $26,389 1.36 $4,800,000 10/97 75.3%
- -----------------------------------------------------------------------------------------------------------------------------
137 Quality Inn - Toms River $564,370 $28,384 1.66 $5,500,000 9/97 65.3%
- -----------------------------------------------------------------------------------------------------------------------------
138 St. Bernard Plaza $475,767 $27,809 1.43 $5,000,000 6/97 71.6%
- -----------------------------------------------------------------------------------------------------------------------------
139 Southgate Mobile Home Park $453,553 $26,851 1.41 $4,900,000 10/97 71.3%
- -----------------------------------------------------------------------------------------------------------------------------
140 Youngstown Shopping Center $463,201 $25,706 1.50 $4,800,000 8/97 72.7%
- -----------------------------------------------------------------------------------------------------------------------------
141 141 - 145 South Street $617,069 $28,162 1.83 $5,200,000 2/97 67.0%
- -----------------------------------------------------------------------------------------------------------------------------
142 Staples - Norwalk $432,787 $29,275 1.23 $4,600,000 3/96 75.0%
- -----------------------------------------------------------------------------------------------------------------------------
143 Elko Shopping Center $458,192 $26,651 1.43 $5,600,000 7/97 61.3%
- -----------------------------------------------------------------------------------------------------------------------------
144 1580 VFW Parkway $538,031 $27,757 1.62 $5,400,000 4/97 63.5%
- -----------------------------------------------------------------------------------------------------------------------------
145 GE-Horizon Corporate Center $438,423 $28,733 1.27 $5,400,000 9/97 63.5%
- -----------------------------------------------------------------------------------------------------------------------------
146 The Village Shopping Center $434,715 $24,194 1.50 $5,000,000 11/97 67.9%
- -----------------------------------------------------------------------------------------------------------------------------
147 Reynolds Plaza $716,566 $26,806 2.23 $5,200,000 7/97 65.2%
- -----------------------------------------------------------------------------------------------------------------------------
148 North Tower Apartments $445,764 $23,378 1.59 $4,350,000 2/97 76.6%
- -----------------------------------------------------------------------------------------------------------------------------
149 K-Mart $376,368 $25,361 1.24 $4,480,000 10/97 73.5%
- -----------------------------------------------------------------------------------------------------------------------------
150 Staples Plaza Shopping Center $376,004 $25,069 1.25 $4,125,000 7/97 79.5%
- -----------------------------------------------------------------------------------------------------------------------------
151 The Collection at Laguna Beach $421,646 $23,847 1.47 $4,647,000 9/97 69.8%
- -----------------------------------------------------------------------------------------------------------------------------
152 Lapham Drive $406,682 $26,082 1.30 $4,600,000 6/97 70.2%
- -----------------------------------------------------------------------------------------------------------------------------
153 Washington Square Apartments $331,251 $22,136 1.25 $5,525,000 9/97 56.9%
- -----------------------------------------------------------------------------------------------------------------------------
154 Center at Cypresswood $443,297 $27,281 1.35 $4,500,000 8/96 68.9%
- -----------------------------------------------------------------------------------------------------------------------------
155 Westates Building $440,494 $22,559 1.63 $4,500,000 5/97 66.4%
- -----------------------------------------------------------------------------------------------------------------------------
156 Almaden II Office Center $627,159 $23,553 2.22 $7,635,000 6/97 39.0%
- -----------------------------------------------------------------------------------------------------------------------------
157 7110 & 7210 Rosecrans Ave. $470,697 $24,473 1.60 $4,300,000 8/97 68.2%
- -----------------------------------------------------------------------------------------------------------------------------
158 280 Euclid Apartments $418,168 $20,748 1.68 $4,870,000 6/97 60.3%
- -----------------------------------------------------------------------------------------------------------------------------
159 Fairfield Village Shopping Center $399,668 $21,992 1.51 $3,950,000 6/97 74.0%
- -----------------------------------------------------------------------------------------------------------------------------
160 Rust Building (Seafirst) $439,137 $22,383 1.63 $5,800,000 7/97 49.7%
- -----------------------------------------------------------------------------------------------------------------------------
161 4412 Spicewood Springs Road $480,460 $25,167 1.59 $5,400,000 6/97 53.2%
- -----------------------------------------------------------------------------------------------------------------------------
162 Shaw & Blackstone Retail Center $385,749 $20,347 1.58 $4,750,000 11/97 58.8%
- -----------------------------------------------------------------------------------------------------------------------------
163 Shibui Apartments $422,820 $21,860 1.61 $3,900,000 10/97 71.5%
- -----------------------------------------------------------------------------------------------------------------------------
164 Materials Research Group $404,441 $20,257 1.66 $5,680,000 8/97 49.0%
- -----------------------------------------------------------------------------------------------------------------------------
165 Rite Industries $380,201 $27,907 1.14 $4,000,000 12/96 69.2%
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------
Loan Percent Leased(7) Tenant Information(8)
No. Leased Date Largest Tenant % NSF
- -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------
133 96.7% 6/97
- -----------------------------------------------------------------------------------
134 100.0% 11/97
- -----------------------------------------------------------------------------------
135 100.0% 10/97
- -----------------------------------------------------------------------------------
136 100.0% 9/97 Cadence Design Systems Inc. 33.4%
- -----------------------------------------------------------------------------------
137 66.0% 7/97
- -----------------------------------------------------------------------------------
138 93.9% 2/98 Kmart 66.9%
- -----------------------------------------------------------------------------------
139 100.0% 8/97
- -----------------------------------------------------------------------------------
140 95.5% 11/97 Furniture Liquidators 23.1%
- -----------------------------------------------------------------------------------
141 100.0% 9/97 Airborne Freight Corp. 33.4%
- -----------------------------------------------------------------------------------
142 100.0% 10/96 Staples, Inc. 100.0%
- -----------------------------------------------------------------------------------
143 100.0% 12/97 J.C. Penney 38.9%
- -----------------------------------------------------------------------------------
144 100.0% 7/97 New England Pet Centers, Inc. (Pet Club) 35.0%
- -----------------------------------------------------------------------------------
145 100.0% 12/96 General Electric Support Services 100.0%
- -----------------------------------------------------------------------------------
146 83.0% 8/97 Fred Sands 13.3%
- -----------------------------------------------------------------------------------
147 99.3% 10/97 First Sierra Financial 16.9%
- -----------------------------------------------------------------------------------
148 97.9% 11/97
- -----------------------------------------------------------------------------------
149 100.0% 10/97 K-Mart 100.0%
- -----------------------------------------------------------------------------------
150 95.7% 8/97 Staples 61.3%
- -----------------------------------------------------------------------------------
151 100.0% 8/97 Aegean Cafe 19.5%
- -----------------------------------------------------------------------------------
152 100.0% 7/97 Wondertreats 36.0%
- -----------------------------------------------------------------------------------
153 98.2% 8/97
- -----------------------------------------------------------------------------------
154 89.1% 9/97 Burger King 13.9%
- -----------------------------------------------------------------------------------
155 100.0% 11/97 Swedcom Corporation 10.8%
- -----------------------------------------------------------------------------------
156 100.0% 12/97 Hessling-Piper, Inc. 18.4%
- -----------------------------------------------------------------------------------
157 100.0% 10/97 McLane Manufacturing 100.0%
- -----------------------------------------------------------------------------------
158 95.3% 6/97
- -----------------------------------------------------------------------------------
159 100.0% 7/97 Winn-Dixie Montgomery 45.8%
- -----------------------------------------------------------------------------------
160 87.2% 12/97 Tsang Partnership 9.2%
- -----------------------------------------------------------------------------------
161 100.0% 7/97 The University of Texas 34.7%
- -----------------------------------------------------------------------------------
162 88.3% 11/97 Lamps Plus 37.5%
- -----------------------------------------------------------------------------------
163 95.3% 7/97
- -----------------------------------------------------------------------------------
164 100.0% 8/97 Material Research Corp 100.0%
- -----------------------------------------------------------------------------------
165 100.0% 7/97 Rite Industries, Inc. 100.0%
- -----------------------------------------------------------------------------------
</TABLE>
II-24
<PAGE> 133
APPENDIX II
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
PROPERTY OPERATING INFORMATION
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
Loan Underwritable Monthly Property Valuation
No. Property Name Cash Flow Payment DSCR(4) Value(6) Date(6) LTV(4)
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
166 Garden Court Warehouses $377,771 $20,772 1.52 $3,840,000 8/97 71.4%
- -----------------------------------------------------------------------------------------------------------------------------
167 Casa De Colinas - Phase I $302,900 $18,860 1.34 $4,060,000 12/97 66.4%
- -----------------------------------------------------------------------------------------------------------------------------
168 Council Rock Greens Office Complex $339,868 $22,095 1.28 $3,600,000 5/97 74.8%
- -----------------------------------------------------------------------------------------------------------------------------
169 Wayside Shopping Center $531,935 $25,198 1.76 $5,100,000 9/97 52.6%
- -----------------------------------------------------------------------------------------------------------------------------
170 Canoga Valley Center $402,499 $21,216 1.58 $4,600,000 12/97 58.3%
- -----------------------------------------------------------------------------------------------------------------------------
171 Best Buy Store $455,839 $22,972 1.65 $4,850,000 6/97 55.0%
- -----------------------------------------------------------------------------------------------------------------------------
172 Suncoast Plaza $465,247 $29,419 1.32 $5,100,000 8/97 52.1%
- -----------------------------------------------------------------------------------------------------------------------------
173 Public Storage - Hayward, CA $472,311 $19,652 2.00 $5,275,000 10/97 50.1%
- -----------------------------------------------------------------------------------------------------------------------------
174 Park Cedar Building $351,067 $21,739 1.35 $3,800,000 4/97 69.4%
- -----------------------------------------------------------------------------------------------------------------------------
175 Milestone Shopping Center $358,480 $19,260 1.55 $3,750,000 6/97 70.3%
- -----------------------------------------------------------------------------------------------------------------------------
176 Captains Self Storage $341,124 $21,178 1.34 $3,600,000 7/97 73.1%
- -----------------------------------------------------------------------------------------------------------------------------
177 West Lake Plaza Retail Center $355,361 $20,815 1.42 $4,000,000 11/96 65.7%
- -----------------------------------------------------------------------------------------------------------------------------
178 Fortune Park Building XIV $347,924 $20,690 1.40 $3,500,000 7/97 73.9%
- -----------------------------------------------------------------------------------------------------------------------------
179 The Palms Apartments $310,618 $19,180 1.35 $4,210,000 8/97 61.0%
- -----------------------------------------------------------------------------------------------------------------------------
180 South Loop $309,107 $18,764 1.37 $3,700,000 9/97 68.7%
- -----------------------------------------------------------------------------------------------------------------------------
181 Courthouse Square Shopping Ctr. $426,965 $17,721 2.01 $4,700,000 12/97 53.1%
- -----------------------------------------------------------------------------------------------------------------------------
182 Orchard Supply Hardware-Torrance $388,036 $17,309 1.87 $4,450,000 11/97 56.1%
- -----------------------------------------------------------------------------------------------------------------------------
183 East Towne Centre Retail Shops $327,829 $18,808 1.45 $3,420,000 8/97 72.9%
- -----------------------------------------------------------------------------------------------------------------------------
184 Brookside Retirement Residence $322,910 $19,478 1.38 $4,090,000 8/97 60.9%
- -----------------------------------------------------------------------------------------------------------------------------
185 Fed Ex (Van Owen) $339,064 $18,900 1.50 $3,345,000 8/97 74.2%
- -----------------------------------------------------------------------------------------------------------------------------
186 Airline Interiors Building $285,275 $17,509 1.36 $3,300,000 11/97 74.9%
- -----------------------------------------------------------------------------------------------------------------------------
187 Lindley Northwood Apartment $376,489 $19,517 1.61 $3,250,000 10/97 75.7%
- -----------------------------------------------------------------------------------------------------------------------------
188 Arbor Professional Center $329,184 $19,294 1.42 $4,100,000 7/97 59.9%
- -----------------------------------------------------------------------------------------------------------------------------
189 The Staples Building $278,099 $18,128 1.28 $3,395,000 10/97 70.5%
- -----------------------------------------------------------------------------------------------------------------------------
190 Cypress Point Business Center $295,048 $18,065 1.36 $3,960,000 10/97 60.4%
- -----------------------------------------------------------------------------------------------------------------------------
191 Golden Oaks Apartments $279,501 $16,929 1.38 $3,400,000 8/97 70.3%
- -----------------------------------------------------------------------------------------------------------------------------
192 Fountain Garden Apartments $257,702 $16,568 1.30 $3,100,000 8/97 77.1%
- -----------------------------------------------------------------------------------------------------------------------------
193 Sherman Arms Apts. $403,428 $17,387 1.93 $2,900,000 7/97 79.6%
- -----------------------------------------------------------------------------------------------------------------------------
194 Somerset Ramada Inn $376,362 $17,600 1.78 $4,900,000 8/97 46.8%
- -----------------------------------------------------------------------------------------------------------------------------
195 Best Western - Lawndale $452,887 $18,443 2.05 $4,250,000 7/97 53.8%
- -----------------------------------------------------------------------------------------------------------------------------
196 Anchorage Motor Inn $375,864 $20,708 1.51 $4,350,000 6/97 52.4%
- -----------------------------------------------------------------------------------------------------------------------------
197 Revere Industrial Center $293,612 $20,373 1.20 $4,000,000 3/97 55.6%
- -----------------------------------------------------------------------------------------------------------------------------
198 Auburn Town Center $283,914 $16,603 1.43 $3,440,000 11/97 63.8%
</TABLE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------
Loan Percent Leased(7) Tenant Information(8)
No. Leased Date Largest Tenant % NSF
- -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
166 100.0% 7/97 Bonjon Framing 5.6%
- -----------------------------------------------------------------------------------
167 100.0% 10/97
- -----------------------------------------------------------------------------------
168 100.0% 8/97 ICE Inc. 80.6%
- -----------------------------------------------------------------------------------
169 100.0% 8/97 Hollywood Video 15.7%
- -----------------------------------------------------------------------------------
170 88.0% 12/97 F.R.S. Corp 13.2%
- -----------------------------------------------------------------------------------
171 100.0% 6/97 Best Buy Co. Inc. 100.0%
- -----------------------------------------------------------------------------------
172 99.0% 10/97 Winn-Dixie 28.1%
- -----------------------------------------------------------------------------------
173 98.0% 9/97
- -----------------------------------------------------------------------------------
174 91.1% 4/97 Armstrong & Associates 8.9%
- -----------------------------------------------------------------------------------
175 91.1% 8/97 Blockbuster Video 26.8%
- -----------------------------------------------------------------------------------
176 98.1% 6/97
- -----------------------------------------------------------------------------------
177 81.9% 8/97 Blockbuster 26.2%
- -----------------------------------------------------------------------------------
178 100.0% 12/97 Lantech of America , Inc. 53.8%
- -----------------------------------------------------------------------------------
179 90.0% 11/97
- -----------------------------------------------------------------------------------
180 100.0% 9/97 Hobby Lobby 36.1%
- -----------------------------------------------------------------------------------
181 96.5% 10/97 Famous Deli 11.0%
- -----------------------------------------------------------------------------------
182 100.0% 10/97 Orchard Supply 100.0%
- -----------------------------------------------------------------------------------
183 100.0% 7/97 Hollywood Entertainment Corp. 20.9%
- -----------------------------------------------------------------------------------
184 93.9% 6/97
- -----------------------------------------------------------------------------------
185 100.0% 8/97 Federal Express 100.0%
- -----------------------------------------------------------------------------------
186 100.0% 9/97 Airline Interiors 100.0%
- -----------------------------------------------------------------------------------
187 97.5% 12/97
- -----------------------------------------------------------------------------------
188 100.0% 6/97 SBS Electronics 13.0%
- -----------------------------------------------------------------------------------
189 100.0% 9/97 Staples, Inc. 100.0%
- -----------------------------------------------------------------------------------
190 87.9% 10/97 Toyo Tire 49.9%
- -----------------------------------------------------------------------------------
191 100.0% 7/97
- -----------------------------------------------------------------------------------
192 93.0% 8/97
- -----------------------------------------------------------------------------------
193 100.0% 11/97
- -----------------------------------------------------------------------------------
194 73.6% 6/97
- -----------------------------------------------------------------------------------
195 57.2% 12/96
- -----------------------------------------------------------------------------------
196 65.8% 12/96
- -----------------------------------------------------------------------------------
197 100.0% 7/97 Stephenson's Recond. 10.5%
- -----------------------------------------------------------------------------------
198 100.0% 10/97 Roundtable Pizza 18.6%
</TABLE>
II-25
<PAGE> 134
APPENDIX II
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
PROPERTY OPERATING INFORMATION
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
Loan Underwritable Monthly Property Valuation
No. Property Name Cash Flow Payment DSCR(4) Value(6) Date(6) LTV(4)
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------
199 Eagle Country Market $283,631 $18,237 1.30 $2,760,000 6/97 79.3%
- -----------------------------------------------------------------------------------------------------------------------------
200 44 South Bayles Avenue $239,539 $15,956 1.25 $2,874,000 9/97 74.6%
- -----------------------------------------------------------------------------------------------------------------------------
201 Westpark Towne Plaza Center $294,152 $16,197 1.51 $3,100,000 10/97 69.1%
- -----------------------------------------------------------------------------------------------------------------------------
202 Public Storage - Pittsburg, CA $395,030 $15,944 2.06 $4,300,000 10/97 49.8%
- -----------------------------------------------------------------------------------------------------------------------------
203 South Mojave Road Warehouse $255,811 $16,282 1.31 $2,950,000 8/97 72.5%
- -----------------------------------------------------------------------------------------------------------------------------
204 Sussex Plaza Shops $262,386 $15,973 1.37 $2,837,500 4/97 74.6%
- -----------------------------------------------------------------------------------------------------------------------------
205 Healthsouth Surgical Center $258,235 $17,520 1.23 $2,770,000 7/97 75.8%
- -----------------------------------------------------------------------------------------------------------------------------
206 Fargo Industrial $309,064 $15,435 1.67 $3,025,000 5/97 69.3%
- -----------------------------------------------------------------------------------------------------------------------------
207 Secure Self Storage $304,650 $15,247 1.67 $3,190,000 10/97 65.6%
- -----------------------------------------------------------------------------------------------------------------------------
208 Harvest Granger Apartments $267,917 $15,497 1.44 $2,860,000 7/97 73.1%
- -----------------------------------------------------------------------------------------------------------------------------
209 Smithfield Plaza Shops $254,045 $15,695 1.35 $2,660,000 6/97 76.0%
- -----------------------------------------------------------------------------------------------------------------------------
210 Warren Village Apartments and Retail Center $258,721 $15,836 1.36 $2,543,000 7/97 78.2%
- -----------------------------------------------------------------------------------------------------------------------------
211 East Sahara Industrial $321,735 $15,264 1.76 $3,450,000 7/97 57.6%
- -----------------------------------------------------------------------------------------------------------------------------
212 Carson Pirie Scott $277,326 $17,356 1.33 $2,700,000 7/97 73.5%
- -----------------------------------------------------------------------------------------------------------------------------
213 American Eagle Self Storage $304,807 $15,796 1.61 $3,550,000 6/97 55.9%
- -----------------------------------------------------------------------------------------------------------------------------
214 The Pavilions $626,330 $20,452 2.55 $4,850,000 6/97 40.5%
- -----------------------------------------------------------------------------------------------------------------------------
215 Southlake Marketplace-II $240,405 $14,146 1.42 $2,600,000 8/97 74.7%
- -----------------------------------------------------------------------------------------------------------------------------
216 Paxton/Bradley Industrial Park $259,493 $14,296 1.51 $3,000,000 10/97 64.8%
- -----------------------------------------------------------------------------------------------------------------------------
217 15251-15261 Beach Boulevard $247,349 $15,584 1.32 $2,550,000 5/97 75.9%
- -----------------------------------------------------------------------------------------------------------------------------
218 Raintree Apartments $346,079 $16,327 1.77 $3,840,000 9/97 50.3%
- -----------------------------------------------------------------------------------------------------------------------------
219 Hitachi Building $271,970 $14,249 1.59 $2,745,000 9/97 70.2%
- -----------------------------------------------------------------------------------------------------------------------------
220 344-362 Main St. $330,168 $14,874 1.85 $4,400,000 10/97 43.5%
- -----------------------------------------------------------------------------------------------------------------------------
221 National Self Storage of Pittsfield $372,238 $14,326 2.17 $3,630,000 9/97 52.2%
- -----------------------------------------------------------------------------------------------------------------------------
222 Comfort Inn - Seville $270,801 $15,603 1.45 $2,600,000 8/97 72.6%
- -----------------------------------------------------------------------------------------------------------------------------
223 Pine Knoll Apartments $272,122 $14,148 1.60 $2,700,000 8/97 68.7%
- -----------------------------------------------------------------------------------------------------------------------------
224 The Alaska Center $270,075 $14,022 1.61 $3,100,000 7/97 59.2%
- -----------------------------------------------------------------------------------------------------------------------------
225 Petco $231,864 $14,769 1.31 $2,525,000 5/97 71.7%
- -----------------------------------------------------------------------------------------------------------------------------
226 Gateway Park - Dublin $258,422 $14,253 1.51 $2,620,000 7/97 69.0%
- -----------------------------------------------------------------------------------------------------------------------------
227 Town Centre Shops $225,125 $13,530 1.39 $2,450,000 4/97 73.2%
- -----------------------------------------------------------------------------------------------------------------------------
228 Baird Avenue Apartments $192,101 $13,371 1.20 $2,230,000 6/97 80.3%
- -----------------------------------------------------------------------------------------------------------------------------
229 Morena Industrial Buildings $279,799 $13,976 1.67 $2,940,000 7/97 60.8%
- -----------------------------------------------------------------------------------------------------------------------------
230 Cirby Business Park $274,088 $14,012 1.63 $3,170,000 6/97 56.3%
- -----------------------------------------------------------------------------------------------------------------------------
231 Park Place Townhomes $266,491 $11,811 1.88 $2,625,000 10/97 66.7%
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------
Loan Percent Leased(7) Tenant Information(8)
No. Leased Date Largest Tenant % NSF
- -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------
199 100.0% 8/97 Eagle Food Centers, Inc. 100.0%
- -----------------------------------------------------------------------------------
200 100.0% 9/97 North Shore Anestesia 18.1%
- -----------------------------------------------------------------------------------
201 100.0% 12/97 Petco Animal Supplies 73.0%
- -----------------------------------------------------------------------------------
202 93.0% 9/97
- -----------------------------------------------------------------------------------
203 100.0% 9/97 Coney Island 42.9%
- -----------------------------------------------------------------------------------
204 100.0% 9/97 Parts America - Western Auto 25.9%
- -----------------------------------------------------------------------------------
205 100.0% 9/96 Healthsouth Inc. 100.0%
- -----------------------------------------------------------------------------------
206 96.7% 9/97 Handl-It, Inc. 91.0%
- -----------------------------------------------------------------------------------
207 92.3% 2/98
- -----------------------------------------------------------------------------------
208 96.2% 6/97
- -----------------------------------------------------------------------------------
209 100.0% 7/97 Cato Corporation 19.2%
- -----------------------------------------------------------------------------------
210 97.0% 11/97 Dreamland Sleep Centers 8.0%
- -----------------------------------------------------------------------------------
211 92.8% 7/97 LV Review Journal 7.5%
- -----------------------------------------------------------------------------------
212 100.0% 8/97 CPS Department Stores, Inc. 100.0%
- -----------------------------------------------------------------------------------
213 94.3% 12/97
- -----------------------------------------------------------------------------------
214 93.6% 12/97 Cue Club 15.5%
- -----------------------------------------------------------------------------------
215 100.0% 7/97 Happiness Hallmark 25.1%
- -----------------------------------------------------------------------------------
216 100.0% 9/97 Mallasch Fence 14.0%
- -----------------------------------------------------------------------------------
217 100.0% 12/97 Dunn-Edwards 50.0%
- -----------------------------------------------------------------------------------
218 98.0% 9/97
- -----------------------------------------------------------------------------------
219 100.0% 10/97 Hitachi 100.0%
- -----------------------------------------------------------------------------------
220 100.0% 12/97 Digital Domain 93.9%
- -----------------------------------------------------------------------------------
221 88.5% 7/97
- -----------------------------------------------------------------------------------
222 69.0% 8/97
- -----------------------------------------------------------------------------------
223 98.6% 11/97
- -----------------------------------------------------------------------------------
224 94.6% 6/97 Small Business Administration 15.6%
- -----------------------------------------------------------------------------------
225 100.0% 9/97 Petco Animal Supplies, Inc. 100.0%
- -----------------------------------------------------------------------------------
226 100.0% 12/97 Smithkline 12.7%
- -----------------------------------------------------------------------------------
227 100.0% 7/97 Movie King - Video King, Inc. 18.5%
- -----------------------------------------------------------------------------------
228 87.2% 3/97
- -----------------------------------------------------------------------------------
229 100.0% 7/97 Don Janais 22.6%
- -----------------------------------------------------------------------------------
230 100.0% 11/97 Del Webb 32.4%
- -----------------------------------------------------------------------------------
231 100.0% 12/97
- -----------------------------------------------------------------------------------
</TABLE>
II-26
<PAGE> 135
APPENDIX II
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
PROPERTY OPERATING INFORMATION
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
Loan Underwritable Monthly Property Valuation
No. Property Name Cash Flow Payment DSCR(4) Value(6) Date(6) LTV(4)
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
232 Post & Paddock Place $243,680 $13,927 1.46 $2,825,000 5/97 61.4%
- -----------------------------------------------------------------------------------------------------------------------------
233 Parkway East Townhomes $276,325 $11,551 1.99 $1,975,000 8/97 85.9%
- -----------------------------------------------------------------------------------------------------------------------------
234 Auburn Hills Industrial $319,673 $12,273 2.17 $3,295,000 4/97 51.3%
- -----------------------------------------------------------------------------------------------------------------------------
235 2221-2241 Calle De Luna $269,945 $12,975 1.73 $2,900,000 8/97 58.3%
- -----------------------------------------------------------------------------------------------------------------------------
236 Stewart-Lamb Shopping Center $239,084 $13,758 1.45 $2,700,000 5/97 62.6%
- -----------------------------------------------------------------------------------------------------------------------------
237 Arizona Rent-A-Storage $252,883 $12,140 1.74 $2,850,000 10/97 57.7%
- -----------------------------------------------------------------------------------------------------------------------------
238 Public Storage - Decatur, GA $368,356 $12,022 2.55 $3,395,000 10/97 48.4%
- -----------------------------------------------------------------------------------------------------------------------------
239 Hart Building $250,340 $12,768 1.63 $3,310,000 8/97 49.6%
- -----------------------------------------------------------------------------------------------------------------------------
240 855 Howe Avenue $229,671 $11,534 1.66 $2,670,000 10/97 59.8%
- -----------------------------------------------------------------------------------------------------------------------------
241 Dunbarton Plaza $198,549 $12,037 1.37 $2,150,000 8/97 74.2%
- -----------------------------------------------------------------------------------------------------------------------------
242 27 Seaview Boulevard $194,838 $11,763 1.38 $2,119,000 7/97 75.3%
- -----------------------------------------------------------------------------------------------------------------------------
243 Public Storage -La Puente, CA $338,135 $11,658 2.42 $3,150,000 10/97 50.6%
- -----------------------------------------------------------------------------------------------------------------------------
244 Firemans Fund Building $303,316 $12,204 2.07 $3,925,000 10/97 39.3%
- -----------------------------------------------------------------------------------------------------------------------------
245 Lighthouse Apartments $216,413 $11,547 1.56 $2,020,000 8/97 74.3%
- -----------------------------------------------------------------------------------------------------------------------------
246 Mulholland Office Plaza $197,853 $11,291 1.46 $2,250,000 10/97 66.4%
- -----------------------------------------------------------------------------------------------------------------------------
247 Cactus Village $289,127 $11,545 2.09 $3,120,000 9/97 47.9%
- -----------------------------------------------------------------------------------------------------------------------------
248 625 Third Street $281,585 $12,323 1.90 $4,000,000 8/97 37.2%
- -----------------------------------------------------------------------------------------------------------------------------
249 Durango Apartments $266,868 $11,531 1.93 $1,950,000 10/97 74.3%
- -----------------------------------------------------------------------------------------------------------------------------
250 Michigan City Towne Centre $225,869 $11,957 1.57 $2,150,000 10/97 67.2%
- -----------------------------------------------------------------------------------------------------------------------------
251 Greg-Mill Center $239,535 $10,211 1.95 $2,785,000 9/97 51.9%
- -----------------------------------------------------------------------------------------------------------------------------
252 Valex Apartments $159,418 $9,703 1.37 $2,000,000 10/97 69.8%
- -----------------------------------------------------------------------------------------------------------------------------
253 City Center Business Park $208,912 $9,371 1.86 $2,665,000 10/97 52.4%
- -----------------------------------------------------------------------------------------------------------------------------
254 National Square Office Park $198,634 $11,339 1.46 $2,300,000 3/97 60.6%
- -----------------------------------------------------------------------------------------------------------------------------
255 Kearney Villa Flex Buildings $191,823 $10,410 1.54 $2,100,000 8/97 66.3%
- -----------------------------------------------------------------------------------------------------------------------------
256 Santa Monica & Beverly $582,360 $17,090 2.84 $8,300,000 8/97 16.5%
- -----------------------------------------------------------------------------------------------------------------------------
257 Micron Electronics Building $184,613 $10,456 1.47 $1,990,000 8/97 68.5%
- -----------------------------------------------------------------------------------------------------------------------------
258 Ashlan / Valentine Phase II Industrial $187,788 $9,264 1.69 $1,860,000 10/97 72.5%
- -----------------------------------------------------------------------------------------------------------------------------
259 Baxter Rutherford Warehouses $169,087 $10,348 1.36 $1,830,000 8/97 73.5%
- -----------------------------------------------------------------------------------------------------------------------------
260 Evergreen Claremont Self Storage $271,239 $9,039 2.50 $3,325,000 9/97 39.7%
- -----------------------------------------------------------------------------------------------------------------------------
261 32nd Street Commerce Park $189,616 $11,215 1.41 $2,130,000 9/97 61.8%
- -----------------------------------------------------------------------------------------------------------------------------
262 Frys Superstition Springs Center $174,920 $10,267 1.42 $1,850,000 5/97 69.8%
- -----------------------------------------------------------------------------------------------------------------------------
263 The Schwab Building $198,958 $10,761 1.54 $2,450,000 8/97 52.5%
- -----------------------------------------------------------------------------------------------------------------------------
264 90 Albright Way $263,029 $12,244 1.79 $2,850,000 7/97 44.8%
</TABLE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------
Loan Percent Leased(7) Tenant Information(8)
No. Leased Date Largest Tenant % NSF
- -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
232 87.2% 11/97 Carolina Furniture 19.1%
- -----------------------------------------------------------------------------------
233 100.0% 9/97
- -----------------------------------------------------------------------------------
234 100.0% 4/97 Hoechst-Celanese 46.8%
- -----------------------------------------------------------------------------------
235 100.0% 9/97 Elsa, Inc. 51.1%
- -----------------------------------------------------------------------------------
236 100.0% 10/97 Clark County 23.2%
- -----------------------------------------------------------------------------------
237 93.6% 9/97
- -----------------------------------------------------------------------------------
238 88.0% 9/97
- -----------------------------------------------------------------------------------
239 86.3% 12/97 Kahl Associates 41.7%
- -----------------------------------------------------------------------------------
240 100.0% 10/97 Chapman University 43.9%
- -----------------------------------------------------------------------------------
241 100.0% 7/97 Cato Corporation 20.0%
- -----------------------------------------------------------------------------------
242 100.0% 11/97 Bayside Controls 100.0%
- -----------------------------------------------------------------------------------
243 97.0% 9/97
- -----------------------------------------------------------------------------------
244 100.0% 9/97 Fireman's Fund Insurance Company 100.0%
- -----------------------------------------------------------------------------------
245 100.0% 9/97
- -----------------------------------------------------------------------------------
246 100.0% 11/97 Daniel Stav 8.1%
- -----------------------------------------------------------------------------------
247 92.1% 8/97 Stool and Dinette Factory 34.4%
- -----------------------------------------------------------------------------------
248 100.0% 1/98 UBI Soft Inc. 24.8%
- -----------------------------------------------------------------------------------
249 94.4% 9/97
- -----------------------------------------------------------------------------------
250 84.5% 9/97 Hollywood Video 38.3%
- -----------------------------------------------------------------------------------
251 88.2% 11/97 Emser 18.4%
- -----------------------------------------------------------------------------------
252 100.0% 9/97
- -----------------------------------------------------------------------------------
253 100.0% 10/97 Griswold Controls 26.0%
- -----------------------------------------------------------------------------------
254 94.9% 7/97 Health & Hospital of Marion Co. 13.8%
- -----------------------------------------------------------------------------------
255 100.0% 12/97 McKesson Corp. 54.3%
- -----------------------------------------------------------------------------------
256 N/A N/A Bank of America 100.0%
- -----------------------------------------------------------------------------------
257 100.0% 7/97 Micron Electronics 100.0%
- -----------------------------------------------------------------------------------
258 100.0% 11/97 Stanton Office Machines 30.3%
- -----------------------------------------------------------------------------------
259 100.0% 11/97 Baxter Rutherford 88.4%
- -----------------------------------------------------------------------------------
260 91.5% 7/97
- -----------------------------------------------------------------------------------
261 96.8% 8/97 Intech 4.7%
- -----------------------------------------------------------------------------------
262 100.0% 12/97 Video Update Inc. 50.4%
- -----------------------------------------------------------------------------------
263 92.5% 12/97 Schwab 21.3%
- -----------------------------------------------------------------------------------
264 100.0% 6/97 NEC Electronics, Inc. 100.0%
</TABLE>
II-27
<PAGE> 136
APPENDIX II
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
PROPERTY OPERATING INFORMATION
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
Loan Underwritable Monthly Property Valuation
No. Property Name Cash Flow Payment DSCR(4) Value(6) Date(6) LTV(4)
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------
265 Tire Discounters - Middletown (2VI) $81,933 $5,071 1.33 $890,000 7/97 76.1%
266 Tire Discounters - Cincinnati (2VI) $69,993 $4,445 1.33 $780,000 7/97 76.1%
- -----------------------------------------------------------------------------------------------------------------------------
267 The Liberty Building $179,899 $10,327 1.45 $2,050,000 8/97 61.8%
- -----------------------------------------------------------------------------------------------------------------------------
268 Hollywood Video-OH $167,894 $10,438 1.34 $1,700,000 11/97 73.6%
- -----------------------------------------------------------------------------------------------------------------------------
269 Public Storage - Garland TX $219,089 $9,270 1.97 $2,100,000 10/97 59.4%
- -----------------------------------------------------------------------------------------------------------------------------
270 Downey Plaza Apartments $281,294 $8,309 2.82 $2,620,000 10/97 45.7%
- -----------------------------------------------------------------------------------------------------------------------------
271 Quarry Office Building $172,498 $8,697 1.65 $1,824,000 10/97 65.7%
- -----------------------------------------------------------------------------------------------------------------------------
272 Public Storage - Sacramento $217,760 $9,009 2.01 $1,750,000 10/97 68.4%
- -----------------------------------------------------------------------------------------------------------------------------
273 7373 Engineer Road $205,886 $8,712 1.97 $2,500,000 8/97 47.8%
- -----------------------------------------------------------------------------------------------------------------------------
274 Comcast Building $283,649 $9,088 2.60 $3,250,000 7/97 36.7%
- -----------------------------------------------------------------------------------------------------------------------------
275 Dallas Alley $200,801 $9,727 1.72 $1,600,000 8/97 74.0%
- -----------------------------------------------------------------------------------------------------------------------------
276 Royal Oaks Apartments $169,693 $8,397 1.68 $2,000,000 9/97 58.3%
- -----------------------------------------------------------------------------------------------------------------------------
277 2441 Pullman/1701 Carnegie $168,432 $8,671 1.62 $1,900,000 8/97 60.1%
- -----------------------------------------------------------------------------------------------------------------------------
278 9 Goodyear $138,371 $8,381 1.38 $1,485,000 10/97 73.8%
- -----------------------------------------------------------------------------------------------------------------------------
279 Villa Ventura Apartments $149,489 $8,990 1.39 $1,500,000 11/97 73.1%
- -----------------------------------------------------------------------------------------------------------------------------
280 Federal Express Branch Terminal $155,238 $8,294 1.56 $1,500,000 8/97 73.0%
- -----------------------------------------------------------------------------------------------------------------------------
281 Mercado Village $193,791 $10,260 1.57 $2,000,000 11/97 54.7%
- -----------------------------------------------------------------------------------------------------------------------------
282 Woodcrest Apartments $144,401 $7,414 1.62 $1,450,000 10/97 75.0%
- -----------------------------------------------------------------------------------------------------------------------------
283 440 Broadway $234,426 $7,296 2.68 $2,890,000 10/97 36.4%
- -----------------------------------------------------------------------------------------------------------------------------
284 Villa Monterrey Apartments $144,670 $8,004 1.51 $1,695,000 8/97 61.4%
- -----------------------------------------------------------------------------------------------------------------------------
285 Town & Country Shopping Center $118,599 $8,124 1.22 $1,300,000 8/97 79.6%
- -----------------------------------------------------------------------------------------------------------------------------
286 3925 W. Adams St $123,813 $7,409 1.39 $1,450,000 11/97 68.8%
- -----------------------------------------------------------------------------------------------------------------------------
287 Harbor View Business Park $131,658 $7,898 1.39 $1,710,000 7/97 58.1%
- -----------------------------------------------------------------------------------------------------------------------------
288 Randalls - Berkman $145,207 $7,989 1.51 $1,600,000 8/97 62.0%
- -----------------------------------------------------------------------------------------------------------------------------
289 12234-36 Sherman Way $182,034 $9,310 1.63 $2,255,000 9/97 43.9%
- -----------------------------------------------------------------------------------------------------------------------------
290 Cranbrook Plaza Shopping Center $163,563 $10,184 1.34 $1,700,000 8/97 58.0%
- -----------------------------------------------------------------------------------------------------------------------------
291 Crossings at Maple Grove $150,906 $9,661 1.30 $1,600,000 6/97 61.4%
- -----------------------------------------------------------------------------------------------------------------------------
292 1452-1548 Fayette Street $132,460 $6,885 1.60 $1,520,000 10/97 62.3%
- -----------------------------------------------------------------------------------------------------------------------------
293 United Furniture Warehouse $152,109 $7,070 1.79 $1,850,000 8/97 51.1%
- -----------------------------------------------------------------------------------------------------------------------------
294 Chateux Village/Sea Lord Apartments $129,499 $7,231 1.49 $1,347,000 8/97 69.8%
- -----------------------------------------------------------------------------------------------------------------------------
295 17352 Daimler Street $158,664 $6,963 1.90 $1,825,000 7/97 50.3%
- -----------------------------------------------------------------------------------------------------------------------------
296 Champions Forest/Louetta $155,921 $9,421 1.38 $1,315,000 7/97 69.4%
- -----------------------------------------------------------------------------------------------------------------------------
297 Micro Instrument Co. $131,037 $6,987 1.56 $1,495,000 8/97 60.5%
</TABLE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------
Loan Percent Leased(7) Tenant Information(8)
No. Leased Date Largest Tenant % NSF
- -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------
265 100.0% 9/97 Tire Discounters 100.0%
266 100.0% 9/97 Tire Discounters 100.0%
- -----------------------------------------------------------------------------------
267 100.0% 6/97 Schraff 18.0%
- -----------------------------------------------------------------------------------
268 100.0% 12/97 Hollywood Video 100.0%
- -----------------------------------------------------------------------------------
269 94.0% 9/97
- -----------------------------------------------------------------------------------
270 98.9% 10/97
- -----------------------------------------------------------------------------------
271 100.0% 11/97 Manning & Napier Advisors 25.2%
- -----------------------------------------------------------------------------------
272 94.9% 9/97
- -----------------------------------------------------------------------------------
273 100.0% 10/97 Western Fastner, Inc. 34.9%
- -----------------------------------------------------------------------------------
274 100.0% 9/97 Comcast 100.0%
- -----------------------------------------------------------------------------------
275 88.8% 9/97 Step Four 36.0%
- -----------------------------------------------------------------------------------
276 100.0% 10/97
- -----------------------------------------------------------------------------------
277 100.0% 7/97 Keane/Reiz 51.7%
- -----------------------------------------------------------------------------------
278 100.0% 11/97 NRLL 51.1%
- -----------------------------------------------------------------------------------
279 96.1% 8/97
- -----------------------------------------------------------------------------------
280 100.0% 8/97 Federal Express 100.0%
- -----------------------------------------------------------------------------------
281 100.0% 9/97 Cafe Mozart 17.5%
- -----------------------------------------------------------------------------------
282 93.8% 9/97
- -----------------------------------------------------------------------------------
283 96.4% 11/97
- -----------------------------------------------------------------------------------
284 100.0% 7/97
- -----------------------------------------------------------------------------------
285 100.0% 9/97 Liberty Safes 8.3%
- -----------------------------------------------------------------------------------
286 100.0% 10/97 Beltman Moving & Storage 100.0%
- -----------------------------------------------------------------------------------
287 100.0% 11/97 Game Tech 17.0%
- -----------------------------------------------------------------------------------
288 100.0% 4/97 Randall's 100.0%
- -----------------------------------------------------------------------------------
289 100.0% 7/97 Joseph Seagrams & Sons 56.8%
- -----------------------------------------------------------------------------------
290 85.3% 12/97 Boogie Nights 22.7%
- -----------------------------------------------------------------------------------
291 100.0% 5/97 Boston Market 37.3%
- -----------------------------------------------------------------------------------
292 100.0% 9/97 Reiter Mosier Restoration 22.7%
- -----------------------------------------------------------------------------------
293 100.0% 7/97 United Furniture Warehouse 100.0%
- -----------------------------------------------------------------------------------
294 98.0% 9/97
- -----------------------------------------------------------------------------------
295 100.0% 8/97 Fidelity National Title 100.0%
- -----------------------------------------------------------------------------------
296 86.6% 12/97 Teddi's Restaurant 15.8%
- -----------------------------------------------------------------------------------
297 100.0% 9/97 Micro Instrument Co. 100.0%
</TABLE>
II-28
<PAGE> 137
APPENDIX II
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
PROPERTY OPERATING INFORMATION
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
Loan Underwritable Monthly Property Valuation
No. Property Name Cash Flow Payment DSCR(4) Value(6) Date(6) LTV(4)
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------
298 Hollywood Video-Louisville,KY $132,802 $7,935 1.39 $1,420,000 5/97 63.5%
- -----------------------------------------------------------------------------------------------------------------------------
299 710 Post Oak, L.C. $124,648 $7,540 1.38 $1,750,000 5/97 51.1%
- -----------------------------------------------------------------------------------------------------------------------------
300 2030 N. Ivar Avenue $98,793 $6,113 1.35 $1,200,000 8/97 70.6%
- -----------------------------------------------------------------------------------------------------------------------------
301 Hollywood Video - GA $109,098 $7,062 1.29 $1,200,000 11/97 70.6%
- -----------------------------------------------------------------------------------------------------------------------------
302 Love Field Financial Center $145,830 $6,191 1.96 $1,450,000 10/97 57.8%
- -----------------------------------------------------------------------------------------------------------------------------
303 Diagonal Marketplace Shopping Center $116,334 $5,865 1.65 $1,450,000 9/97 55.0%
- -----------------------------------------------------------------------------------------------------------------------------9
304 Rialto II Apartments $140,974 $5,905 1.99 $1,065,000 10/97 70.2%
- -----------------------------------------------------------------------------------------------------------------------------
305 7 Studebaker $128,489 $4,165 2.57 $1,575,000 8/97 34.7%
- -----------------------------------------------------------------------------------------------------------------------------
306 Pioneer Business Center II $65,113 $3,554 1.53 $680,000 8/87 65.8%
- -----------------------------------------------------------------------------------------------------------------------------
Total/Weighted Average: 1.54 68.4%
</TABLE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------
Loan Percent Leased(7) Tenant Information(8)
No. Leased Date Largest Tenant % NSF
- -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------
298 100.0% 5/97 Hollywood Entertainment 100.0%
- -----------------------------------------------------------------------------------
299 100.0% 4/97 Spaulding for Children 16.4%
- -----------------------------------------------------------------------------------
300 93.7% 1/98
- -----------------------------------------------------------------------------------
301 100.0% 10/97 Hollywood Video 100.0%
- -----------------------------------------------------------------------------------
302 100.0% 10/97 Comerica Bank 41.0%
- -----------------------------------------------------------------------------------
303 100.0% 10/97 World Foods, Inc. 26.7%
- -----------------------------------------------------------------------------------
304 91.7% 11/97
- -----------------------------------------------------------------------------------
305 100.0% 7/97 ENDOcare, Inc. 100.0%
- -----------------------------------------------------------------------------------
306 100.0% 7/97 Sunscript 49.9%
- -----------------------------------------------------------------------------------
</TABLE>
II-29
<PAGE> 138
APPENDIX II
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
PREPAYMENT AND SERVICING INFORMATION
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Interest Prepayment Code(9)
Loan Accrual Season- Lockout
No. Property Name Method ing(10) Period YM1 YM 5.0% 4.5% 4.0% 3.0% 2.0% 1.0% Open
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 Scottsdale Plaza Resort Actual/360 3 36 78 6
- ------------------------------------------------------------------------------------------------------------------------------------
2 Encinitas Ranch Town Center Actual/360 3 24 90 6
- ------------------------------------------------------------------------------------------------------------------------------------
3 Two Democracy Plaza 30/360 2 37 80 3
- ------------------------------------------------------------------------------------------------------------------------------------
4 Kahler Hotel (2I) Actual/360 4 36 18 6
5 Olympia Park (2I) Actual/360 4 36 18 6
- ------------------------------------------------------------------------------------------------------------------------------------
6 Clinton Square Actual/360 5 60 57 3
- ------------------------------------------------------------------------------------------------------------------------------------
7 Metropolitan Corporate Center Actual/360 2 24 30 6
- ------------------------------------------------------------------------------------------------------------------------------------
8 Holiday Inn Boston Logan Airport Actual/360 4 60 57 3
- ------------------------------------------------------------------------------------------------------------------------------------
9 Sun Valley Village (2A) Actual/360 4 36 78 6
10 Greenoaks Mobile Home Park (2A) Actual/360 4 36 78 6
11 Madrone Mobile Estates (2A) Actual/360 4 36 78 6
- ------------------------------------------------------------------------------------------------------------------------------------
12 The Willows Shopping Center 30/360 4 36 75 9
- ------------------------------------------------------------------------------------------------------------------------------------
13 Radisson Hotel/Pittsburgh ExpoMart Actual/360 7 60 54 6
- ------------------------------------------------------------------------------------------------------------------------------------
14 Pinebrook Apartments 30/360 6 48 66 6
- ------------------------------------------------------------------------------------------------------------------------------------
15 Woodchase Apartments Actual/360 5 60 57 3
- ------------------------------------------------------------------------------------------------------------------------------------
16 Gateway Center Apartments Actual/360 1 60 57 3
- ------------------------------------------------------------------------------------------------------------------------------------
17 Sunset Creek (2B) Actual/360 2 60 20 4
18 Creekwood Village (2B) Actual/360 2 60 20 4
- ------------------------------------------------------------------------------------------------------------------------------------
19 Monterey Oaks Mobile Home Park 30/360 2 36 30 6
- ------------------------------------------------------------------------------------------------------------------------------------
20 Fairview Village Apartments 30/360 3 36 78 6
- ------------------------------------------------------------------------------------------------------------------------------------
21 Northgate Plaza Actual/360 4 36 78 6
- ------------------------------------------------------------------------------------------------------------------------------------
22 La Valencia Hotel 30/360 5 24 31 6
- ------------------------------------------------------------------------------------------------------------------------------------
23 200 W. Thomas (2II) Actual/360 4 60 57 3
24 100 W. Harrison (North Tower) (2II) Actual/360 4 60 57 3
25 100 W. Harrison (South Tower) (2II) Actual/360 4 60 57 3
- ------------------------------------------------------------------------------------------------------------------------------------
26 Pebble Creek Apartments, Phase II-IV Actual/360 2 36 78 6
- ------------------------------------------------------------------------------------------------------------------------------------
27 Courtyard by Marriott - Salt Lake City (2C) Actual/360 3 60 57 3
28 Courtyard by Marriott - Provo (2C) Actual/360 3 60 57 3
- ------------------------------------------------------------------------------------------------------------------------------------
29 Penn's Market II Actual/360 7 60 57 3
- ------------------------------------------------------------------------------------------------------------------------------------
30 Budget Suites / Paradise Actual/360 2 36 78 6
- ------------------------------------------------------------------------------------------------------------------------------------
31 Waterford at Clear Lake Actual/360 2 60 20 4
- ------------------------------------------------------------------------------------------------------------------------------------
32 St. Mary's Square Shopping Center Actual/360 1 48 69 3
- ------------------------------------------------------------------------------------------------------------------------------------
33 Trappe Center 30/360 8 60 54 6
<CAPTION>
- -------------------------------------------------------------------------
Loan Admin.
No. Property Name Cost Rate (bps)(11)
- -------------------------------------------------------------------------
<S> <C> <C>
1 Scottsdale Plaza Resort 2.80
- -------------------------------------------------------------------------
2 Encinitas Ranch Town Center 2.80
- -------------------------------------------------------------------------
3 Two Democracy Plaza 3.95
- -------------------------------------------------------------------------
4 Kahler Hotel (2I) 2.80
5 Olympia Park (2I) 2.80
- -------------------------------------------------------------------------
6 Clinton Square 12.50
- -------------------------------------------------------------------------
7 Metropolitan Corporate Center 2.80
- -------------------------------------------------------------------------
8 Holiday Inn Boston Logan Airport 12.50
- -------------------------------------------------------------------------
9 Sun Valley Village (2A) 2.80
10 Greenoaks Mobile Home Park (2A) 2.80
11 Madrone Mobile Estates (2A) 2.80
- -------------------------------------------------------------------------
12 The Willows Shopping Center 2.80
- -------------------------------------------------------------------------
13 Radisson Hotel/Pittsburgh ExpoMart 12.50
- -------------------------------------------------------------------------
14 Pinebrook Apartments 2.80
- -------------------------------------------------------------------------
15 Woodchase Apartments 3.95
- -------------------------------------------------------------------------
16 Gateway Center Apartments 10.80
- -------------------------------------------------------------------------
17 Sunset Creek (2B) 3.95
18 Creekwood Village (2B) 3.95
- -------------------------------------------------------------------------
19 Monterey Oaks Mobile Home Park 2.80
- -------------------------------------------------------------------------
20 Fairview Village Apartments 2.80
- -------------------------------------------------------------------------
21 Northgate Plaza 2.80
- -------------------------------------------------------------------------
22 La Valencia Hotel 2.80
- -------------------------------------------------------------------------
23 200 W. Thomas (2II) 12.50
24 100 W. Harrison (North Tower) (2II) 12.50
25 100 W. Harrison (South Tower) (2II) 12.50
- -------------------------------------------------------------------------
26 Pebble Creek Apartments, Phase II-IV 2.80
- -------------------------------------------------------------------------
27 Courtyard by Marriott - Salt Lake City (2C) 3.95
28 Courtyard by Marriott - Provo (2C) 3.95
- -------------------------------------------------------------------------
29 Penn's Market II 3.95
- -------------------------------------------------------------------------
30 Budget Suites / Paradise 2.80
- -------------------------------------------------------------------------
31 Waterford at Clear Lake 3.95
- -------------------------------------------------------------------------
32 St. Mary's Square Shopping Center 10.80
- -------------------------------------------------------------------------
33 Trappe Center 2.80
</TABLE>
II-30
<PAGE> 139
APPENDIX II
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
PREPAYMENT AND SERVICING INFORMATION
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Interest Prepayment Code(9)
Loan Accrual Season- Lockout
No. Property Name Method ing(10) Period YM1 YM 5.0% 4.5% 4.0% 3.0% 2.0% 1.0% Open
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
34 Clearwater Creek Apartments Actual/360 1 60 54 6
- ------------------------------------------------------------------------------------------------------------------------------------
35 Surveyor-Beltline Office * 30/360 8 36 12 12 57 3
- ------------------------------------------------------------------------------------------------------------------------------------
36 Chatham Village Apartments Actual/360 3 60 57 3
- ------------------------------------------------------------------------------------------------------------------------------------
37 Bank One Tower & Branch 30/360 4 60 57 3
- ------------------------------------------------------------------------------------------------------------------------------------
38 Stanford Villa Apartments 30/360 3 48 66 6
- ------------------------------------------------------------------------------------------------------------------------------------
39 Copper Terrace Apartments Actual/360 3 36 78 6
- ------------------------------------------------------------------------------------------------------------------------------------
40 Briarwood Apartments Actual/360 4 60 54 6
- ------------------------------------------------------------------------------------------------------------------------------------
41 Golden Hills Plaza 30/360 3 60 114 6
- ------------------------------------------------------------------------------------------------------------------------------------
42 Federal Express 30/360 8 36 78 6
- ------------------------------------------------------------------------------------------------------------------------------------
43 Ashford Court Apartments Actual/360 3 60 57 3
- ------------------------------------------------------------------------------------------------------------------------------------
44 Meyer Business Center 30/360 6 36 78 6
- ------------------------------------------------------------------------------------------------------------------------------------
45 Encinal Terminals 30/360 1 60 57 3
- ------------------------------------------------------------------------------------------------------------------------------------
46 Howard Johnson/Holiday Inn Express Actual/365 5 60 57 3
- ------------------------------------------------------------------------------------------------------------------------------------
47 Courtyard by Marriott - Hillsboro Actual/360 6 36 12 12 12 12 33 3
- ------------------------------------------------------------------------------------------------------------------------------------
48 Morning Ridge Apartments 30/360 6 36 78 6
- ------------------------------------------------------------------------------------------------------------------------------------
49 Lakes Town Ctr./Oakland Shpg. Ctr. Actual/360 4 60 54 6
- ------------------------------------------------------------------------------------------------------------------------------------
50 Keeneland Crest Apartments, Phase II Actual/360 4 48 30 6
- ------------------------------------------------------------------------------------------------------------------------------------
51 Naperville Plaza 30/360 2 48 66 6
- ------------------------------------------------------------------------------------------------------------------------------------
52 Smithridge Plaza Shopping Center 30/360 12 36 18 6
- ------------------------------------------------------------------------------------------------------------------------------------
53 Twin Oaks Apartment 30/360 3 36 78 6
- ------------------------------------------------------------------------------------------------------------------------------------
54 Ravine Bluff Apartments Actual/360 6 60 57 3
- ------------------------------------------------------------------------------------------------------------------------------------
55 300 Rose Ave. & 320 Hampton Dr. (2D) 30/360 2 36 198 6
56 350-364 Hampton Drive (2D) 30/360 2 36 198 6
- ------------------------------------------------------------------------------------------------------------------------------------
57 Hamilton Fixtures Actual/360 6 60 57 3
- ------------------------------------------------------------------------------------------------------------------------------------
58 Riviera Apartments Actual/360 2 60 57 3
- ------------------------------------------------------------------------------------------------------------------------------------
59 Dorado Plaza Apartments Actual/360 4 60 54 6
- ------------------------------------------------------------------------------------------------------------------------------------
60 Clarksville Commons 30/360 7 36 78 6
- ------------------------------------------------------------------------------------------------------------------------------------
61 20101 South Santa Fe Avenue Actual/360 4 48 66 6
- ------------------------------------------------------------------------------------------------------------------------------------
62 Mariners Mile Marine Center Actual/360 3 36 78 6
- ------------------------------------------------------------------------------------------------------------------------------------
63 Monteray Shores Plaza Shopping Center 30/360 8 48 66 6
- ------------------------------------------------------------------------------------------------------------------------------------
64 Westland Shopping Center 30/360 4 36 78 6
- ------------------------------------------------------------------------------------------------------------------------------------
65 Seattle Air Cargo Actual/360 4 60 138 6
- ------------------------------------------------------------------------------------------------------------------------------------
66 Red Bank Plaza (2III) Actual/360 7 60 57 3
<CAPTION>
- -------------------------------------------------------------------------
Loan Admin.
No. Property Name Cost Rate (bps)(11)
- -------------------------------------------------------------------------
<S> <C> <C>
34 Clearwater Creek Apartments 12.50
- -------------------------------------------------------------------------
35 Surveyor-Beltline Office * 3.95
- -------------------------------------------------------------------------
36 Chatham Village Apartments 10.80
- -------------------------------------------------------------------------
37 Bank One Tower & Branch 3.95
- -------------------------------------------------------------------------
38 Stanford Villa Apartments 2.80
- -------------------------------------------------------------------------
39 Copper Terrace Apartments 2.80
- -------------------------------------------------------------------------
40 Briarwood Apartments 11.80
- -------------------------------------------------------------------------
41 Golden Hills Plaza 2.80
- -------------------------------------------------------------------------
42 Federal Express 2.80
- -------------------------------------------------------------------------
43 Ashford Court Apartments 12.50
- -------------------------------------------------------------------------
44 Meyer Business Center 2.80
- -------------------------------------------------------------------------
45 Encinal Terminals 12.50
- -------------------------------------------------------------------------
46 Howard Johnson/Holiday Inn Express 10.80
- -------------------------------------------------------------------------
47 Courtyard by Marriott - Hillsboro 12.50
- -------------------------------------------------------------------------
48 Morning Ridge Apartments 2.80
- -------------------------------------------------------------------------
49 Lakes Town Ctr./Oakland Shpg. Ctr. 9.80
- -------------------------------------------------------------------------
50 Keeneland Crest Apartments, Phase II 10.80
- -------------------------------------------------------------------------
51 Naperville Plaza 2.80
- -------------------------------------------------------------------------
52 Smithridge Plaza Shopping Center 2.80
- -------------------------------------------------------------------------
53 Twin Oaks Apartment 2.80
- -------------------------------------------------------------------------
54 Ravine Bluff Apartments 11.80
- -------------------------------------------------------------------------
55 300 Rose Ave. & 320 Hampton Dr. (2D) 2.80
56 350-364 Hampton Drive (2D) 2.80
- -------------------------------------------------------------------------
57 Hamilton Fixtures 10.80
- -------------------------------------------------------------------------
58 Riviera Apartments 10.80
- -------------------------------------------------------------------------
59 Dorado Plaza Apartments 11.80
- -------------------------------------------------------------------------
60 Clarksville Commons 2.80
- -------------------------------------------------------------------------
61 20101 South Santa Fe Avenue 10.80
- -------------------------------------------------------------------------
62 Mariners Mile Marine Center 2.80
- -------------------------------------------------------------------------
63 Monteray Shores Plaza Shopping Center 2.80
- -------------------------------------------------------------------------
64 Westland Shopping Center 2.80
- -------------------------------------------------------------------------
65 Seattle Air Cargo 3.95
- -------------------------------------------------------------------------
66 Red Bank Plaza (2III) 12.50
</TABLE>
II-31
<PAGE> 140
APPENDIX II
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
PREPAYMENT AND SERVICING INFORMATION
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Interest Prepayment Code(9)
Loan Accrual Season- Lockout
No. Property Name Method ing(10) Period YM1 YM 5.0% 4.5% 4.0% 3.0% 2.0% 1.0% Open
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
67 Red Bank Center (2III) Actual/360 7 60 57 3
- ------------------------------------------------------------------------------------------------------------------------------------
68 Radisson Airport Inn 30/360 9 60 60 0
- ------------------------------------------------------------------------------------------------------------------------------------
69 Foxridge Apartments, Phases IV-V Actual/360 2 36 78 6
- ------------------------------------------------------------------------------------------------------------------------------------
70 Woodside Terrace Apartments Actual/360 2 60 57 3
- ------------------------------------------------------------------------------------------------------------------------------------
71 Ross Center 30/360 3 36 78 6
- ------------------------------------------------------------------------------------------------------------------------------------
72 The Electric Farm Industrial Park Actual/360 3 24 30 6
- ------------------------------------------------------------------------------------------------------------------------------------
73 Homestead House - San Diego (2IV) Actual/360 8 72 138 6
74 Homestead House - Huntington Beach (2IV) Actual/360 8 72 138 6
- ------------------------------------------------------------------------------------------------------------------------------------
75 Coffee Creek Apartments Actual/360 4 36 78 6
- ------------------------------------------------------------------------------------------------------------------------------------
76 Strouds of Santa Monica 30/360 8 36 78 6
- ------------------------------------------------------------------------------------------------------------------------------------
77 1277 Orleans Dr. & 207 Java Dr. 30/360 6 36 78 6
- ------------------------------------------------------------------------------------------------------------------------------------
78 34-02 Queens Boulevard Actual/360 5 60 12 12 12 12 6 6
- ------------------------------------------------------------------------------------------------------------------------------------
79 3 Waters Office Park 30/360 4 36 78 6
- ------------------------------------------------------------------------------------------------------------------------------------
80 Sears Plaza 30/360 3 36 78 6
- ------------------------------------------------------------------------------------------------------------------------------------
81 Smithridge Shopping Center Actual/360 3 36 78 6
- ------------------------------------------------------------------------------------------------------------------------------------
82 Cobb Center 30/360 9 60 180
- ------------------------------------------------------------------------------------------------------------------------------------
83 Northern Hills Shopping Center (2E) Actual/360 5 60 54 6
84 Perrin Oaks Shopping Center (2E) Actual/360 5 60 54 6
- ------------------------------------------------------------------------------------------------------------------------------------
85 Blalock Woods Apartments 30/360 2 60 114 6
- ------------------------------------------------------------------------------------------------------------------------------------
86 Broadway Shoppes Actual/360 3 120 81 3
- ------------------------------------------------------------------------------------------------------------------------------------
87 Cambridge Apartments Actual/360 1 60 57 3
- ------------------------------------------------------------------------------------------------------------------------------------
88 Nellis-Bonanza Shopping Center Actual/360 6 48 69 3
- ------------------------------------------------------------------------------------------------------------------------------------
89 Comfort Inn - Downtown New Orleans Actual/360 3 60 57 3
- ------------------------------------------------------------------------------------------------------------------------------------
90 Sun Micro Systems Actual/360 2 36 78 6
- ------------------------------------------------------------------------------------------------------------------------------------
91 Desco Plaza III 30/360 6 60 60
- ------------------------------------------------------------------------------------------------------------------------------------
92 Brook Village West Actual/360 3 60 57 3
- ------------------------------------------------------------------------------------------------------------------------------------
93 Stoneleigh Place Apartments Actual/360 4 60 57 3
- ------------------------------------------------------------------------------------------------------------------------------------
94 Simi Country Estates Mobile Home Park Actual/360 0 48 69 3
- ------------------------------------------------------------------------------------------------------------------------------------
95 Ramada Hilltop Actual/360 2 72 45 3
- ------------------------------------------------------------------------------------------------------------------------------------
96 Sun Shadow Square Shopping Center Actual/360 5 36 13 12 12 8 3
- ------------------------------------------------------------------------------------------------------------------------------------
97 5901 Westheimer Shopping Center 30/360 3 36 78 6
- ------------------------------------------------------------------------------------------------------------------------------------
98 Park Lane Villas Apartment Complex Actual/360 5 60 57 3
- ------------------------------------------------------------------------------------------------------------------------------------
99 Redwood City Professional Center Actual/360 4 60 57 3
<CAPTION>
- -------------------------------------------------------------------------
Loan Admin.
No. Property Name Cost Rate (bps)(11)
- -------------------------------------------------------------------------
<S> <C> <C>
67 Red Bank Center (2III) 12.50
- -------------------------------------------------------------------------
68 Radisson Airport Inn 3.95
- -------------------------------------------------------------------------
69 Foxridge Apartments, Phases IV-V 2.80
- -------------------------------------------------------------------------
70 Woodside Terrace Apartments 11.80
- -------------------------------------------------------------------------
71 Ross Center 2.80
- -------------------------------------------------------------------------
72 The Electric Farm Industrial Park 2.80
- -------------------------------------------------------------------------
73 Homestead House - San Diego (2IV) 12.50
74 Homestead House - Huntington Beach (2IV) 12.50
- -------------------------------------------------------------------------
75 Coffee Creek Apartments 2.80
- -------------------------------------------------------------------------
76 Strouds of Santa Monica 2.80
- -------------------------------------------------------------------------
77 1277 Orleans Dr. & 207 Java Dr. 2.80
- -------------------------------------------------------------------------
78 34-02 Queens Boulevard 3.95
- -------------------------------------------------------------------------
79 3 Waters Office Park 2.80
- -------------------------------------------------------------------------
80 Sears Plaza 2.80
- -------------------------------------------------------------------------
81 Smithridge Shopping Center 2.80
- -------------------------------------------------------------------------
82 Cobb Center 3.95
- -------------------------------------------------------------------------
83 Northern Hills Shopping Center (2E) 3.95
84 Perrin Oaks Shopping Center (2E) 3.95
- -------------------------------------------------------------------------
85 Blalock Woods Apartments 2.80
- -------------------------------------------------------------------------
86 Broadway Shoppes 10.80
- -------------------------------------------------------------------------
87 Cambridge Apartments 10.80
- -------------------------------------------------------------------------
88 Nellis-Bonanza Shopping Center 11.80
- -------------------------------------------------------------------------
89 Comfort Inn - Downtown New Orleans 10.80
- -------------------------------------------------------------------------
90 Sun Micro Systems 2.80
- -------------------------------------------------------------------------
91 Desco Plaza III 3.95
- -------------------------------------------------------------------------
92 Brook Village West 10.80
- -------------------------------------------------------------------------
93 Stoneleigh Place Apartments 10.80
- -------------------------------------------------------------------------
94 Simi Country Estates Mobile Home Park 10.80
- -------------------------------------------------------------------------
95 Ramada Hilltop 10.80
- -------------------------------------------------------------------------
96 Sun Shadow Square Shopping Center 10.80
- -------------------------------------------------------------------------
97 5901 Westheimer Shopping Center 2.80
- -------------------------------------------------------------------------
98 Park Lane Villas Apartment Complex 12.50
- -------------------------------------------------------------------------
99 Redwood City Professional Center 12.50
</TABLE>
II-32
<PAGE> 141
APPENDIX II
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
PREPAYMENT AND SERVICING INFORMATION
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Interest Prepayment Code(9)
Loan Accrual Season- Lockout
No. Property Name Method ing(10) Period YM1 YM 5.0% 4.5% 4.0% 3.0% 2.0% 1.0% Open
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
100 Centerpointe Apartments Actual/360 4 60 57 3
- ------------------------------------------------------------------------------------------------------------------------------------
101 Vista del Coronado Apts 30/360 8 36 78 6
- ------------------------------------------------------------------------------------------------------------------------------------
102 Haltom Plaza Actual/360 4 90 84 6
- ------------------------------------------------------------------------------------------------------------------------------------
103 Sycamore Square Shopping Center Actual/360 3 36 78 6
- ------------------------------------------------------------------------------------------------------------------------------------
104 Brookstone Village Apartments Actual/360 4 36 198 6
- ------------------------------------------------------------------------------------------------------------------------------------
105 Autumn Hills - Arbor Apartments Actual/360 5 60 57 3
- ------------------------------------------------------------------------------------------------------------------------------------
106 Mansell Oaks Plaza Shopping Center Actual/360 4 60 54 6
- ------------------------------------------------------------------------------------------------------------------------------------
107 Onyx One Building Actual/360 5 36 12 12 12 12 33 3
- ------------------------------------------------------------------------------------------------------------------------------------
108 Jillian's Billiard Club Actual/360 3 60 54 6
- ------------------------------------------------------------------------------------------------------------------------------------
109 Shoreline Apartments Actual/360 5 60 57 3
- ------------------------------------------------------------------------------------------------------------------------------------
110 Harbor Plaza Shopping Center Actual/360 5 36 78 6
- ------------------------------------------------------------------------------------------------------------------------------------
111 16325-16407 South Main Street 30/360 3 36 78 6
- ------------------------------------------------------------------------------------------------------------------------------------
112 Holiday Inn - Merle Hay Actual/360 9 60 57 3
- ------------------------------------------------------------------------------------------------------------------------------------
113 Crosswind Corners Shopping Center Actual/360 2 60 57 3
- ------------------------------------------------------------------------------------------------------------------------------------
114 Narrows Creek Townhomes 30/360 5 48 66 6
- ------------------------------------------------------------------------------------------------------------------------------------
115 Costa Mesa Motor Inn Actual/360 5 60 57 3
- ------------------------------------------------------------------------------------------------------------------------------------
116 Concord Square Apts. Actual/360 2 60 57 3
- ------------------------------------------------------------------------------------------------------------------------------------
117 1st Avenue (2V) 30/360 7 36 78 6
118 Rogmour Center (2V) 30/360 7 36 78 6
- ------------------------------------------------------------------------------------------------------------------------------------
119 Hampton Inn - Auburn Actual/360 5 60 57 3
- ------------------------------------------------------------------------------------------------------------------------------------
120 First Place Office Center 30/360 5 36 78 6
- ------------------------------------------------------------------------------------------------------------------------------------
121 Lone Oak Shopping Center 30/360 2 36 78 6
- ------------------------------------------------------------------------------------------------------------------------------------
122 El Macero Shopping Center Actual/360 3 36 78 6
- ------------------------------------------------------------------------------------------------------------------------------------
123 DeSoto Corporate Industrial Actual/360 4 60 60
- ------------------------------------------------------------------------------------------------------------------------------------
124 San Antonio Center 30/360 5 36 78 6
- ------------------------------------------------------------------------------------------------------------------------------------
125 Sycamore Hills Apartments Actual/360 0 60 57 3
- ------------------------------------------------------------------------------------------------------------------------------------
126 Eagle Rock I Apartments Actual/360 2 36 138 6
- ------------------------------------------------------------------------------------------------------------------------------------
127 Kuebel Fuchs Office Building Actual/360 6 60 57 3
- ------------------------------------------------------------------------------------------------------------------------------------
128 Marijon Dyeing & Finishing Co. Actual/360 4 60 57 3
- ------------------------------------------------------------------------------------------------------------------------------------
129 Holiday Inn Daytona Beach Actual/360 5 48 69 3
- ------------------------------------------------------------------------------------------------------------------------------------
130 Sani-Serve Industrial Building 30/360 6 60 57 3
- ------------------------------------------------------------------------------------------------------------------------------------
131 1703-1735 Stewart Street 30/360 2 36 198 6
- ------------------------------------------------------------------------------------------------------------------------------------
132 Walnut Plaza Shopping Center Actual/360 4 78 96 6
<CAPTION>
- -------------------------------------------------------------------------
Loan Admin.
No. Property Name Cost Rate (bps)(11)
- -------------------------------------------------------------------------
<S> <C> <C>
100 Centerpointe Apartments 3.95
- -------------------------------------------------------------------------
101 Vista del Coronado Apts 2.80
- -------------------------------------------------------------------------
102 Haltom Plaza 3.95
- -------------------------------------------------------------------------
103 Sycamore Square Shopping Center 2.80
- -------------------------------------------------------------------------
104 Brookstone Village Apartments 2.80
- -------------------------------------------------------------------------
105 Autumn Hills - Arbor Apartments 12.50
- -------------------------------------------------------------------------
106 Mansell Oaks Plaza Shopping Center 12.50
- -------------------------------------------------------------------------
107 Onyx One Building 3.95
- -------------------------------------------------------------------------
108 Jillian's Billiard Club 12.50
- -------------------------------------------------------------------------
109 Shoreline Apartments 12.50
- -------------------------------------------------------------------------
110 Harbor Plaza Shopping Center 2.80
- -------------------------------------------------------------------------
111 16325-16407 South Main Street 2.80
- -------------------------------------------------------------------------
112 Holiday Inn - Merle Hay 12.50
- -------------------------------------------------------------------------
113 Crosswind Corners Shopping Center 10.80
- -------------------------------------------------------------------------
114 Narrows Creek Townhomes 2.80
- -------------------------------------------------------------------------
115 Costa Mesa Motor Inn 11.80
- -------------------------------------------------------------------------
116 Concord Square Apts. 10.80
- -------------------------------------------------------------------------
117 1st Avenue (2V) 2.80
118 Rogmour Center (2V) 2.80
- -------------------------------------------------------------------------
119 Hampton Inn - Auburn 12.50
- -------------------------------------------------------------------------
120 First Place Office Center 2.80
- -------------------------------------------------------------------------
121 Lone Oak Shopping Center 2.80
- -------------------------------------------------------------------------
122 El Macero Shopping Center 2.80
- -------------------------------------------------------------------------
123 DeSoto Corporate Industrial 3.95
- -------------------------------------------------------------------------
124 San Antonio Center 2.80
- -------------------------------------------------------------------------
125 Sycamore Hills Apartments 12.50
- -------------------------------------------------------------------------
126 Eagle Rock I Apartments 2.80
- -------------------------------------------------------------------------
127 Kuebel Fuchs Office Building 12.50
- -------------------------------------------------------------------------
128 Marijon Dyeing & Finishing Co. 3.95
- -------------------------------------------------------------------------
129 Holiday Inn Daytona Beach 10.80
- -------------------------------------------------------------------------
130 Sani-Serve Industrial Building 10.80
- -------------------------------------------------------------------------
131 1703-1735 Stewart Street 2.80
- -------------------------------------------------------------------------
132 Walnut Plaza Shopping Center 3.95
</TABLE>
II-33
<PAGE> 142
APPENDIX II
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
PREPAYMENT AND SERVICING INFORMATION
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Interest Prepayment Code(9)
Loan Accrual Season- Lockout
No. Property Name Method ing(10) Period YM1 YM 5.0% 4.5% 4.0% 3.0% 2.0% 1.0% Open
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
133 Oak Glen Apartments 30/360 5 48 66 6
- ------------------------------------------------------------------------------------------------------------------------------------
134 Philamer Apartments Actual/360 1 60 57 3
- ------------------------------------------------------------------------------------------------------------------------------------
135 University Carriage House and
Essex House Apts Actual/360 2 60 57 3
- ------------------------------------------------------------------------------------------------------------------------------------
136 The Merrill Lynch Building Actual/360 3 36 78 6
- ------------------------------------------------------------------------------------------------------------------------------------
137 Quality Inn - Toms River Actual/360 3 36 78 6
- ------------------------------------------------------------------------------------------------------------------------------------
138 St. Bernard Plaza Actual/360 6 60 57 3
- ------------------------------------------------------------------------------------------------------------------------------------
139 Southgate Mobile Home Park Actual/360 2 36 78 6
- ------------------------------------------------------------------------------------------------------------------------------------
140 Youngstown Shopping Center Actual/360 5 72 45 3
- ------------------------------------------------------------------------------------------------------------------------------------
141 141 - 145 South Street 30/360 9 36 81 3
- ------------------------------------------------------------------------------------------------------------------------------------
142 Staples - Norwalk 30/360 7 36 204
- ------------------------------------------------------------------------------------------------------------------------------------
143 Elko Shopping Center 30/360 5 48 66 6
- ------------------------------------------------------------------------------------------------------------------------------------
144 1580 VFW Parkway Actual/360 6 60 57 3
- ------------------------------------------------------------------------------------------------------------------------------------
145 GE-Horizon Corporate Center 30/360 11 36 96
- ------------------------------------------------------------------------------------------------------------------------------------
146 The Village Shopping Center Actual/360 2 60 57 3
- ------------------------------------------------------------------------------------------------------------------------------------
147 Reynolds Plaza Actual/360 4 36 81 3
- ------------------------------------------------------------------------------------------------------------------------------------
148 North Tower Apartments 30/360 7 48 66 6
- ------------------------------------------------------------------------------------------------------------------------------------
149 K-Mart Actual/360 2 60 57 3
- ------------------------------------------------------------------------------------------------------------------------------------
150 Staples Plaza Shopping Center Actual/360 6 60 54 6
- ------------------------------------------------------------------------------------------------------------------------------------
151 The Collection at Laguna Beach Actual/360 3 60 57 3
- ------------------------------------------------------------------------------------------------------------------------------------
152 Lapham Drive 30/360 7 36 78 6
- ------------------------------------------------------------------------------------------------------------------------------------
153 Washington Square Apartments Actual/360 5 36 78 6
- ------------------------------------------------------------------------------------------------------------------------------------
154 Center at Cypresswood 30/360 17 60 54 6
- ------------------------------------------------------------------------------------------------------------------------------------
155 Westates Building Actual/360 7 60 56 4
- ------------------------------------------------------------------------------------------------------------------------------------
156 Almaden II Office Center 30/360 7 48 66 6
- ------------------------------------------------------------------------------------------------------------------------------------
157 7110 & 7210 Rosecrans Ave. Actual/360 3 36 78 6
- ------------------------------------------------------------------------------------------------------------------------------------
158 280 Euclid Apartments 30/360 7 36 78 6
- ------------------------------------------------------------------------------------------------------------------------------------
159 Fairfield Village Shopping Center Actual/360 5 60 57 3
- ------------------------------------------------------------------------------------------------------------------------------------
160 Rust Building (Seafirst) 30/360 6 36 78 6
- ------------------------------------------------------------------------------------------------------------------------------------
161 4412 Spicewood Springs Road * 30/360 6 36 12 12 57 3
- ------------------------------------------------------------------------------------------------------------------------------------
162 Shaw & Blackstone Retail Center Actual/360 2 36 78 6
- ------------------------------------------------------------------------------------------------------------------------------------
163 Shibui Apartments 30/360 2 36 84 24 36 60
- ------------------------------------------------------------------------------------------------------------------------------------
164 Materials Research Group 30/360 5 36 78 6
- ------------------------------------------------------------------------------------------------------------------------------------
165 Rite Industries * 30/360 6 36 84 60
<CAPTION>
- -------------------------------------------------------------------------
Loan Admin.
No. Property Name Cost Rate (bps)(11)
- -------------------------------------------------------------------------
<S> <C> <C>
133 Oak Glen Apartments 2.80
- -------------------------------------------------------------------------
134 Philamer Apartments 10.80
- -------------------------------------------------------------------------
135 University Carriage House and
Essex House Apts 10.80
- -------------------------------------------------------------------------
136 The Merrill Lynch Building 2.80
- -------------------------------------------------------------------------
137 Quality Inn - Toms River 3.95
- -------------------------------------------------------------------------
138 St. Bernard Plaza 12.50
- -------------------------------------------------------------------------
139 Southgate Mobile Home Park 2.80
- -------------------------------------------------------------------------
140 Youngstown Shopping Center 10.80
- -------------------------------------------------------------------------
141 141 - 145 South Street 12.50
- -------------------------------------------------------------------------
142 Staples - Norwalk 3.95
- -------------------------------------------------------------------------
143 Elko Shopping Center 2.80
- -------------------------------------------------------------------------
144 1580 VFW Parkway 12.50
- -------------------------------------------------------------------------
145 GE-Horizon Corporate Center 3.95
- -------------------------------------------------------------------------
146 The Village Shopping Center 10.80
- -------------------------------------------------------------------------
147 Reynolds Plaza 12.50
- -------------------------------------------------------------------------
148 North Tower Apartments 2.80
- -------------------------------------------------------------------------
149 K-Mart 10.80
- -------------------------------------------------------------------------
150 Staples Plaza Shopping Center 3.95
- -------------------------------------------------------------------------
151 The Collection at Laguna Beach 10.80
- -------------------------------------------------------------------------
152 Lapham Drive 2.80
- -------------------------------------------------------------------------
153 Washington Square Apartments 2.80
- -------------------------------------------------------------------------
154 Center at Cypresswood 2.80
- -------------------------------------------------------------------------
155 Westates Building 12.50
- -------------------------------------------------------------------------
156 Almaden II Office Center 2.80
- -------------------------------------------------------------------------
157 7110 & 7210 Rosecrans Ave. 2.80
- -------------------------------------------------------------------------
158 280 Euclid Apartments 2.80
- -------------------------------------------------------------------------
159 Fairfield Village Shopping Center 10.80
- -------------------------------------------------------------------------
160 Rust Building (Seafirst) 2.80
- -------------------------------------------------------------------------
161 4412 Spicewood Springs Road * 3.95
- -------------------------------------------------------------------------
162 Shaw & Blackstone Retail Center 2.80
- -------------------------------------------------------------------------
163 Shibui Apartments 2.80
- -------------------------------------------------------------------------
164 Materials Research Group 2.80
- -------------------------------------------------------------------------
165 Rite Industries * 3.95
</TABLE>
II-34
<PAGE> 143
APPENDIX II
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
PREPAYMENT AND SERVICING INFORMATION
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Interest Prepayment Code(9)
Loan Accrual Season- Lockout
No. Property Name Method ing(10) Period YM1 YM 5.0% 4.5% 4.0% 3.0% 2.0% 1.0% Open
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
166 Garden Court Warehouses Actual/360 3 36 78 6
- ------------------------------------------------------------------------------------------------------------------------------------
167 Casa De Colinas - Phase I Actual/360 2 48 126 6
- ------------------------------------------------------------------------------------------------------------------------------------
168 Council Rock Greens Office Complex Actual/360 5 60 57 3
- ------------------------------------------------------------------------------------------------------------------------------------
169 Wayside Shopping Center 30/360 2 36 138 6
- ------------------------------------------------------------------------------------------------------------------------------------
170 Canoga Valley Center 30/360 7 24 12 12 12 12 6 6
- ------------------------------------------------------------------------------------------------------------------------------------
171 Best Buy Store Actual/360 7 60 177 3
- ------------------------------------------------------------------------------------------------------------------------------------
172 Suncoast Plaza Actual/360 4 60 81 3
- ------------------------------------------------------------------------------------------------------------------------------------
173 Public Storage - Hayward, CA Actual/360 3 36 78 6
- ------------------------------------------------------------------------------------------------------------------------------------
174 Park Cedar Building Actual/360 7 36 81 3
- ------------------------------------------------------------------------------------------------------------------------------------
175 Milestone Shopping Center 30/360 7 36 78 6
- ------------------------------------------------------------------------------------------------------------------------------------
176 Captains Self Storage 30/360 7 36 78 6
- ------------------------------------------------------------------------------------------------------------------------------------
177 West Lake Plaza Retail Center 30/360 5 48 66 6
- ------------------------------------------------------------------------------------------------------------------------------------
178 Fortune Park Building XIV Actual/360 4 60 57 3
- ------------------------------------------------------------------------------------------------------------------------------------
179 The Palms Apartments Actual/360 3 36 78 6
- ------------------------------------------------------------------------------------------------------------------------------------
180 South Loop Actual/360 4 90 84 6
- ------------------------------------------------------------------------------------------------------------------------------------
181 Courthouse Square Shopping Ctr. Actual/360 1 84 93 3
- ------------------------------------------------------------------------------------------------------------------------------------
182 Orchard Supply Hardware-Torrance 30/360 2 60 150 6
- ------------------------------------------------------------------------------------------------------------------------------------
183 East Towne Centre Retail Shops Actual/360 5 36 78 6
- ------------------------------------------------------------------------------------------------------------------------------------
184 Brookside Retirement Residence 30/360 4 48 66 6
- ------------------------------------------------------------------------------------------------------------------------------------
185 Fed Ex (Van Owen) 30/360 6 36 42 6
- ------------------------------------------------------------------------------------------------------------------------------------
186 Airline Interiors Building Actual/360 2 72 69 3
- ------------------------------------------------------------------------------------------------------------------------------------
187 Lindley Northwood Apartment 30/360 3 36 84 24 36 60
- ------------------------------------------------------------------------------------------------------------------------------------
188 Arbor Professional Center 30/360 6 48 66 6
- ------------------------------------------------------------------------------------------------------------------------------------
189 The Staples Building 30/360 2 36 138 6
- ------------------------------------------------------------------------------------------------------------------------------------
190 Cypress Point Business Center 30/360 3 36 78 6
- ------------------------------------------------------------------------------------------------------------------------------------
191 Golden Oaks Apartments Actual/360 5 60 54 6
- ------------------------------------------------------------------------------------------------------------------------------------
192 Fountain Garden Apartments Actual/360 5 36 81 3
- ------------------------------------------------------------------------------------------------------------------------------------
193 Sherman Arms Apts. 30/360 4 36 78 6
- ------------------------------------------------------------------------------------------------------------------------------------
194 Somerset Ramada Inn Actual/360 2 36 81 3
- ------------------------------------------------------------------------------------------------------------------------------------
195 Best Western - Lawndale Actual/360 6 60 57 3
- ------------------------------------------------------------------------------------------------------------------------------------
196 Anchorage Motor Inn Actual/360 6 60 57 3
- ------------------------------------------------------------------------------------------------------------------------------------
197 Revere Industrial Center Actual/360 6 60 60 93 3
- ------------------------------------------------------------------------------------------------------------------------------------
198 Auburn Town Center 30/360 2 36 138 6
<CAPTION>
- -------------------------------------------------------------------------
Loan Admin.
No. Property Name Cost Rate (bps)(11)
- -------------------------------------------------------------------------
<S> <C> <C>
166 Garden Court Warehouses 2.80
- -------------------------------------------------------------------------
167 Casa De Colinas - Phase I 2.80
- -------------------------------------------------------------------------
168 Council Rock Greens Office Complex 10.80
- -------------------------------------------------------------------------
169 Wayside Shopping Center 2.80
- -------------------------------------------------------------------------
170 Canoga Valley Center 2.80
- -------------------------------------------------------------------------
171 Best Buy Store 3.95
- -------------------------------------------------------------------------
172 Suncoast Plaza 10.80
- -------------------------------------------------------------------------
173 Public Storage - Hayward, CA 2.80
- -------------------------------------------------------------------------
174 Park Cedar Building 12.50
- -------------------------------------------------------------------------
175 Milestone Shopping Center 2.80
- -------------------------------------------------------------------------
176 Captains Self Storage 2.80
- -------------------------------------------------------------------------
177 West Lake Plaza Retail Center 2.80
- -------------------------------------------------------------------------
178 Fortune Park Building XIV 12.50
- -------------------------------------------------------------------------
179 The Palms Apartments 2.80
- -------------------------------------------------------------------------
180 South Loop 3.95
- -------------------------------------------------------------------------
181 Courthouse Square Shopping Ctr. 10.80
- -------------------------------------------------------------------------
182 Orchard Supply Hardware-Torrance 2.80
- -------------------------------------------------------------------------
183 East Towne Centre Retail Shops 12.50
- -------------------------------------------------------------------------
184 Brookside Retirement Residence 2.80
- -------------------------------------------------------------------------
185 Fed Ex (Van Owen) 2.80
- -------------------------------------------------------------------------
186 Airline Interiors Building 10.80
- -------------------------------------------------------------------------
187 Lindley Northwood Apartment 2.80
- -------------------------------------------------------------------------
188 Arbor Professional Center 2.80
- -------------------------------------------------------------------------
189 The Staples Building 2.80
- -------------------------------------------------------------------------
190 Cypress Point Business Center 2.80
- -------------------------------------------------------------------------
191 Golden Oaks Apartments 3.95
- -------------------------------------------------------------------------
192 Fountain Garden Apartments 12.50
- -------------------------------------------------------------------------
193 Sherman Arms Apts. 2.80
- -------------------------------------------------------------------------
194 Somerset Ramada Inn 3.95
- -------------------------------------------------------------------------
195 Best Western - Lawndale 3.95
- -------------------------------------------------------------------------
196 Anchorage Motor Inn 10.80
- -------------------------------------------------------------------------
197 Revere Industrial Center 3.95
- -------------------------------------------------------------------------
198 Auburn Town Center 2.80
</TABLE>
II-35
<PAGE> 144
APPENDIX II
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
PREPAYMENT AND SERVICING INFORMATION
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Interest Prepayment Code(9)
Loan Accrual Season- Lockout
No. Property Name Method ing(10) Period YM1 YM 5.0% 4.5% 4.0% 3.0% 2.0% 1.0% Open
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
199 Eagle Country Market Actual/360 6 60 57 3
- ------------------------------------------------------------------------------------------------------------------------------------
200 44 South Bayles Avenue Actual/360 4 60 54 6
- ------------------------------------------------------------------------------------------------------------------------------------
201 Westpark Towne Plaza Center 30/360 3 36 78 6
- ------------------------------------------------------------------------------------------------------------------------------------
202 Public Storage - Pittsburg, CA Actual/360 3 36 78 6
- ------------------------------------------------------------------------------------------------------------------------------------
203 South Mojave Road Warehouse Actual/360 5 36 18 6
- ------------------------------------------------------------------------------------------------------------------------------------
204 Sussex Plaza Shops Actual/360 6 36 78 6
- ------------------------------------------------------------------------------------------------------------------------------------
205 Healthsouth Surgical Center Actual/360 5 60 12 12 12 12 9 3
- ------------------------------------------------------------------------------------------------------------------------------------
206 Fargo Industrial Actual/360 2 60 57 3
- ------------------------------------------------------------------------------------------------------------------------------------
207 Secure Self Storage Actual/360 3 36 78 6
- ------------------------------------------------------------------------------------------------------------------------------------
208 Harvest Granger Apartments 30/360 7 24 12 12 12 12 6 6
- ------------------------------------------------------------------------------------------------------------------------------------
209 Smithfield Plaza Shops Actual/360 7 36 78 6
- ------------------------------------------------------------------------------------------------------------------------------------
210 Warren Village Apartments and Retail Center 30/360 6 60 57 3
- ------------------------------------------------------------------------------------------------------------------------------------
211 East Sahara Industrial 30/360 6 36 78 6
- ------------------------------------------------------------------------------------------------------------------------------------
212 Carson Pirie Scott Actual/360 5 36 84 60 48 12
- ------------------------------------------------------------------------------------------------------------------------------------
213 American Eagle Self Storage 30/360 8 36 78 6
- ------------------------------------------------------------------------------------------------------------------------------------
214 The Pavilions 30/360 7 48 126 6
- ------------------------------------------------------------------------------------------------------------------------------------
215 Southlake Marketplace-II 30/360 5 48 30 6
- ------------------------------------------------------------------------------------------------------------------------------------
216 Paxton/Bradley Industrial Park 30/360 3 36 78 6
- ------------------------------------------------------------------------------------------------------------------------------------
217 15251-15261 Beach Boulevard 30/360 7 36 78 6
- ------------------------------------------------------------------------------------------------------------------------------------
218 Raintree Apartments 30/360 4 60 150 6
- ------------------------------------------------------------------------------------------------------------------------------------
219 Hitachi Building Actual/360 4 36 78 6
- ------------------------------------------------------------------------------------------------------------------------------------
220 344-362 Main St. 30/360 2 36 198 6
- ------------------------------------------------------------------------------------------------------------------------------------
221 National Self Storage of Pittsfield 30/360 2 36 77 6
- ------------------------------------------------------------------------------------------------------------------------------------
222 Comfort Inn - Seville Actual/360 1 60 57 3
- ------------------------------------------------------------------------------------------------------------------------------------
223 Pine Knoll Apartments 30/360 5 48 65 6
- ------------------------------------------------------------------------------------------------------------------------------------
224 The Alaska Center 30/360 7 36 78 6
- ------------------------------------------------------------------------------------------------------------------------------------
225 Petco 30/360 8 36 78 6
- ------------------------------------------------------------------------------------------------------------------------------------
226 Gateway Park - Dublin 30/360 6 36 78 6
- ------------------------------------------------------------------------------------------------------------------------------------
227 Town Centre Shops Actual/360 6 36 78 6
- ------------------------------------------------------------------------------------------------------------------------------------
228 Baird Avenue Apartments 30/360 7 36 78 6
- ------------------------------------------------------------------------------------------------------------------------------------
229 Morena Industrial Buildings 30/360 6 36 78 6
- ------------------------------------------------------------------------------------------------------------------------------------
230 Cirby Business Park 30/360 8 36 78 6
- ------------------------------------------------------------------------------------------------------------------------------------
231 Park Place Townhomes 30/360 2 36 78 6
<CAPTION>
- -------------------------------------------------------------------------
Loan Admin.
No. Property Name Cost Rate (bps)(11)
- -------------------------------------------------------------------------
<S> <C> <C>
199 Eagle Country Market 10.80
- -------------------------------------------------------------------------
200 44 South Bayles Avenue 10.80
- -------------------------------------------------------------------------
201 Westpark Towne Plaza Center 2.80
- -------------------------------------------------------------------------
202 Public Storage - Pittsburg, CA 2.80
- -------------------------------------------------------------------------
203 South Mojave Road Warehouse 2.80
- -------------------------------------------------------------------------
204 Sussex Plaza Shops 12.50
- -------------------------------------------------------------------------
205 Healthsouth Surgical Center 12.50
- -------------------------------------------------------------------------
206 Fargo Industrial 10.80
- -------------------------------------------------------------------------
207 Secure Self Storage 2.80
- -------------------------------------------------------------------------
208 Harvest Granger Apartments 2.80
- -------------------------------------------------------------------------
209 Smithfield Plaza Shops 12.50
- -------------------------------------------------------------------------
210 Warren Village Apartments and Retail Center 10.80
- -------------------------------------------------------------------------
211 East Sahara Industrial 2.80
- -------------------------------------------------------------------------
212 Carson Pirie Scott 3.95
- -------------------------------------------------------------------------
213 American Eagle Self Storage 2.80
- -------------------------------------------------------------------------
214 The Pavilions 2.80
- -------------------------------------------------------------------------
215 Southlake Marketplace-II 2.80
- -------------------------------------------------------------------------
216 Paxton/Bradley Industrial Park 2.80
- -------------------------------------------------------------------------
217 15251-15261 Beach Boulevard 2.80
- -------------------------------------------------------------------------
218 Raintree Apartments 2.80
- -------------------------------------------------------------------------
219 Hitachi Building 2.80
- -------------------------------------------------------------------------
220 344-362 Main St. 2.80
- -------------------------------------------------------------------------
221 National Self Storage of Pittsfield 2.80
- -------------------------------------------------------------------------
222 Comfort Inn - Seville 10.80
- -------------------------------------------------------------------------
223 Pine Knoll Apartments 2.80
- -------------------------------------------------------------------------
224 The Alaska Center 2.80
- -------------------------------------------------------------------------
225 Petco 2.80
- -------------------------------------------------------------------------
226 Gateway Park - Dublin 2.80
- -------------------------------------------------------------------------
227 Town Centre Shops 12.50
- -------------------------------------------------------------------------
228 Baird Avenue Apartments 2.80
- -------------------------------------------------------------------------
229 Morena Industrial Buildings 2.80
- -------------------------------------------------------------------------
230 Cirby Business Park 2.80
- -------------------------------------------------------------------------
231 Park Place Townhomes 2.80
</TABLE>
II-36
<PAGE> 145
APPENDIX II
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
PREPAYMENT AND SERVICING INFORMATION
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Interest Prepayment Code(9)
Loan Accrual Season- Lockout
No. Property Name Method ing(10) Period YM1 YM 5.0% 4.5% 4.0% 3.0% 2.0% 1.0% Open
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
232 Post & Paddock Place 30/360 8 36 78 6
- ------------------------------------------------------------------------------------------------------------------------------------
233 Parkway East Townhomes 30/360 3 48 66 6
- ------------------------------------------------------------------------------------------------------------------------------------
234 Auburn Hills Industrial 30/360 7 60 54 6
- ------------------------------------------------------------------------------------------------------------------------------------
235 2221-2241 Calle De Luna 30/360 5 36 78 6
- ------------------------------------------------------------------------------------------------------------------------------------
236 Stewart-Lamb Shopping Center Actual/360 6 48 69 3
- ------------------------------------------------------------------------------------------------------------------------------------
237 Arizona Rent-A-Storage Actual/360 3 36 78 6
- ------------------------------------------------------------------------------------------------------------------------------------
238 Public Storage - Decatur, GA Actual/360 3 36 78 6
- ------------------------------------------------------------------------------------------------------------------------------------
239 Hart Building Actual/360 5 36 78 6
- ------------------------------------------------------------------------------------------------------------------------------------
240 855 Howe Avenue Actual/360 2 36 78 6
- ------------------------------------------------------------------------------------------------------------------------------------
241 Dunbarton Plaza Actual/360 5 36 78 6
- ------------------------------------------------------------------------------------------------------------------------------------
242 27 Seaview Boulevard Actual/360 5 60 54 6
- ------------------------------------------------------------------------------------------------------------------------------------
243 Public Storage -La Puente, CA Actual/360 3 36 78 6
- ------------------------------------------------------------------------------------------------------------------------------------
244 Firemans Fund Building 30/360 3 60 174 6
- ------------------------------------------------------------------------------------------------------------------------------------
245 Lighthouse Apartments Actual/360 5 36 81 3
- ------------------------------------------------------------------------------------------------------------------------------------
246 Mulholland Office Plaza 30/360 3 36 78 6
- ------------------------------------------------------------------------------------------------------------------------------------
247 Cactus Village * Actual/360 3 36 36 12 12 12 12
- ------------------------------------------------------------------------------------------------------------------------------------
248 625 Third Street 30/360 5 36 24 12 12 12 18 6
- ------------------------------------------------------------------------------------------------------------------------------------
249 Durango Apartments 30/360 4 36 84 24 36 60
- ------------------------------------------------------------------------------------------------------------------------------------
250 Michigan City Towne Centre 30/360 2 60 174 6
- ------------------------------------------------------------------------------------------------------------------------------------
251 Greg-Mill Center Actual/360 3 36 72 12
- ------------------------------------------------------------------------------------------------------------------------------------
252 Valex Apartments Actual/360 3 60 57 3
- ------------------------------------------------------------------------------------------------------------------------------------
253 City Center Business Park Actual/360 3 24 30 6
- ------------------------------------------------------------------------------------------------------------------------------------
254 National Square Office Park Actual/360 5 60 58 3
- ------------------------------------------------------------------------------------------------------------------------------------
255 Kearney Villa Flex Buildings 30/360 5 36 78 6
- ------------------------------------------------------------------------------------------------------------------------------------
256 Santa Monica & Beverly 30/360 4 36 78 6
- ------------------------------------------------------------------------------------------------------------------------------------
257 Micron Electronics Building 30/360 5 48 66 6
- ------------------------------------------------------------------------------------------------------------------------------------
258 Ashlan / Valentine Phase II Industrial Actual/360 2 36 78 6
- ------------------------------------------------------------------------------------------------------------------------------------
259 Baxter Rutherford Warehouses 30/360 4 36 78 6
- ------------------------------------------------------------------------------------------------------------------------------------
260 Evergreen Claremont Self Storage Actual/360 4 36 78 6
- ------------------------------------------------------------------------------------------------------------------------------------
261 32nd Street Commerce Park Actual/360 4 36 138 6
- ------------------------------------------------------------------------------------------------------------------------------------
262 Frys Superstition Springs Center 30/360 6 48 66 6
- ------------------------------------------------------------------------------------------------------------------------------------
263 The Schwab Building Actual/360 6 36 78 6
- ------------------------------------------------------------------------------------------------------------------------------------
264 90 Albright Way 30/360 6 36 42 6
<CAPTION>
- -------------------------------------------------------------------------
Loan Admin.
No. Property Name Cost Rate (bps)(11)
- -------------------------------------------------------------------------
<S> <C> <C>
232 Post & Paddock Place 2.80
- -------------------------------------------------------------------------
233 Parkway East Townhomes 2.80
- -------------------------------------------------------------------------
234 Auburn Hills Industrial 2.80
- -------------------------------------------------------------------------
235 2221-2241 Calle De Luna 2.80
- -------------------------------------------------------------------------
236 Stewart-Lamb Shopping Center 11.80
- -------------------------------------------------------------------------
237 Arizona Rent-A-Storage 2.80
- -------------------------------------------------------------------------
238 Public Storage - Decatur, GA 2.80
- -------------------------------------------------------------------------
239 Hart Building 2.80
- -------------------------------------------------------------------------
240 855 Howe Avenue 2.80
- -------------------------------------------------------------------------
241 Dunbarton Plaza 12.50
- -------------------------------------------------------------------------
242 27 Seaview Boulevard 10.80
- -------------------------------------------------------------------------
243 Public Storage -La Puente, CA 2.80
- -------------------------------------------------------------------------
244 Firemans Fund Building 2.80
- -------------------------------------------------------------------------
245 Lighthouse Apartments 10.80
- -------------------------------------------------------------------------
246 Mulholland Office Plaza 2.80
- -------------------------------------------------------------------------
247 Cactus Village * 3.95
- -------------------------------------------------------------------------
248 625 Third Street 2.80
- -------------------------------------------------------------------------
249 Durango Apartments 2.80
- -------------------------------------------------------------------------
250 Michigan City Towne Centre 2.80
- -------------------------------------------------------------------------
251 Greg-Mill Center 2.80
- -------------------------------------------------------------------------
252 Valex Apartments 11.80
- -------------------------------------------------------------------------
253 City Center Business Park 2.80
- -------------------------------------------------------------------------
254 National Square Office Park 12.50
- -------------------------------------------------------------------------
255 Kearney Villa Flex Buildings 2.80
- -------------------------------------------------------------------------
256 Santa Monica & Beverly 2.80
- -------------------------------------------------------------------------
257 Micron Electronics Building 2.80
- -------------------------------------------------------------------------
258 Ashlan / Valentine Phase II Industrial 2.80
- -------------------------------------------------------------------------
259 Baxter Rutherford Warehouses 2.80
- -------------------------------------------------------------------------
260 Evergreen Claremont Self Storage 2.80
- -------------------------------------------------------------------------
261 32nd Street Commerce Park 2.80
- -------------------------------------------------------------------------
262 Frys Superstition Springs Center 2.80
- -------------------------------------------------------------------------
263 The Schwab Building 2.80
- -------------------------------------------------------------------------
264 90 Albright Way 2.80
</TABLE>
II-37
<PAGE> 146
APPENDIX II
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
PREPAYMENT AND SERVICING INFORMATION
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Interest Prepayment Code(9)
Loan Accrual Season- Lockout
No. Property Name Method ing(10) Period YM1 YM 5.0% 4.5% 4.0% 3.0% 2.0% 1.0% Open
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
265 Tire Discounters - Middletown (2VI) Actual/360 4 60 57 3
266 Tire Discounters - Cincinnati (2VI) Actual/360 4 60 57 3
- ------------------------------------------------------------------------------------------------------------------------------------
267 The Liberty Building 30/360 6 36 78 6
- ------------------------------------------------------------------------------------------------------------------------------------
268 Hollywood Video-OH Actual/360 2 36 138 6
- ------------------------------------------------------------------------------------------------------------------------------------
269 Public Storage - Garland TX Actual/360 2 36 77 6
- ------------------------------------------------------------------------------------------------------------------------------------
270 Downey Plaza Apartments Actual/360 2 36 138 6
- ------------------------------------------------------------------------------------------------------------------------------------
271 Quarry Office Building Actual/360 3 60 57 3
- ------------------------------------------------------------------------------------------------------------------------------------
272 Public Storage - Sacramento Actual/360 2 36 78 6
- ------------------------------------------------------------------------------------------------------------------------------------
273 7373 Engineer Road Actual/360 4 36 78 6
- ------------------------------------------------------------------------------------------------------------------------------------
274 Comcast Building 30/360 5 36 78 6
- ------------------------------------------------------------------------------------------------------------------------------------
275 Dallas Alley Actual/360 5 60 56 4
- ------------------------------------------------------------------------------------------------------------------------------------
276 Royal Oaks Apartments Actual/360 3 36 78 6
- ------------------------------------------------------------------------------------------------------------------------------------
277 2441 Pullman/1701 Carnegie Actual/360 6 36 78 6
- ------------------------------------------------------------------------------------------------------------------------------------
278 9 Goodyear 30/360 3 36 78 6
- ------------------------------------------------------------------------------------------------------------------------------------
279 Villa Ventura Apartments Actual/360 2 36 78 6
- ------------------------------------------------------------------------------------------------------------------------------------
280 Federal Express Branch Terminal 30/360 4 36 78 6
- ------------------------------------------------------------------------------------------------------------------------------------
281 Mercado Village 30/360 2 36 138 6
- ------------------------------------------------------------------------------------------------------------------------------------
282 Woodcrest Apartments Actual/360 3 36 78 6
- ------------------------------------------------------------------------------------------------------------------------------------
283 440 Broadway Actual/360 3 36 78 6
- ------------------------------------------------------------------------------------------------------------------------------------
284 Villa Monterrey Apartments Actual/360 5 36 81 3
- ------------------------------------------------------------------------------------------------------------------------------------
285 Town & Country Shopping Center Actual/360 5 60 54 6
- ------------------------------------------------------------------------------------------------------------------------------------
286 3925 W. Adams St 30/360 2 36 78 6
- ------------------------------------------------------------------------------------------------------------------------------------
287 Harbor View Business Park 30/360 7 36 78 6
- ------------------------------------------------------------------------------------------------------------------------------------
288 Randalls - Berkman 30/360 4 36 78 6
- ------------------------------------------------------------------------------------------------------------------------------------
289 12234-36 Sherman Way 30/360 3 36 137 6
- ------------------------------------------------------------------------------------------------------------------------------------
290 Cranbrook Plaza Shopping Center 30/360 5 48 126 6
- ------------------------------------------------------------------------------------------------------------------------------------
291 Crossings at Maple Grove 30/360 6 36 138 6
- ------------------------------------------------------------------------------------------------------------------------------------
292 1452-1548 Fayette Street Actual/360 3 36 78 6
- ------------------------------------------------------------------------------------------------------------------------------------
293 United Furniture Warehouse 30/360 5 36 78 6
- ------------------------------------------------------------------------------------------------------------------------------------
294 Chateux Village/Sea Lord Apartments Actual/360 5 36 81 3
- ------------------------------------------------------------------------------------------------------------------------------------
295 17352 Daimler Street 30/360 6 36 78 6
- ------------------------------------------------------------------------------------------------------------------------------------
296 Champions Forest/Louetta 30/360 5 48 126 6
- ------------------------------------------------------------------------------------------------------------------------------------
297 Micro Instrument Co. 30/360 5 36 78 6
<CAPTION>
- -------------------------------------------------------------------------
Loan Admin.
No. Property Name Cost Rate (bps)(11)
- -------------------------------------------------------------------------
<S> <C> <C>
265 Tire Discounters - Middletown (2VI) 12.50
266 Tire Discounters - Cincinnati (2VI) 12.50
- -------------------------------------------------------------------------
267 The Liberty Building 2.80
- -------------------------------------------------------------------------
268 Hollywood Video-OH 2.80
- -------------------------------------------------------------------------
269 Public Storage - Garland TX 2.80
- -------------------------------------------------------------------------
270 Downey Plaza Apartments 2.80
- -------------------------------------------------------------------------
271 Quarry Office Building 10.80
- -------------------------------------------------------------------------
272 Public Storage - Sacramento 2.80
- -------------------------------------------------------------------------
273 7373 Engineer Road 2.80
- -------------------------------------------------------------------------
274 Comcast Building 2.80
- -------------------------------------------------------------------------
275 Dallas Alley 10.80
- -------------------------------------------------------------------------
276 Royal Oaks Apartments 2.80
- -------------------------------------------------------------------------
277 2441 Pullman/1701 Carnegie 2.80
- -------------------------------------------------------------------------
278 9 Goodyear 2.80
- -------------------------------------------------------------------------
279 Villa Ventura Apartments 2.80
- -------------------------------------------------------------------------
280 Federal Express Branch Terminal 2.80
- -------------------------------------------------------------------------
281 Mercado Village 2.80
- -------------------------------------------------------------------------
282 Woodcrest Apartments 2.80
- -------------------------------------------------------------------------
283 440 Broadway 2.80
- -------------------------------------------------------------------------
284 Villa Monterrey Apartments 10.80
- -------------------------------------------------------------------------
285 Town & Country Shopping Center 11.80
- -------------------------------------------------------------------------
286 3925 W. Adams St 2.80
- -------------------------------------------------------------------------
287 Harbor View Business Park 2.80
- -------------------------------------------------------------------------
288 Randalls - Berkman 2.80
- -------------------------------------------------------------------------
289 12234-36 Sherman Way 2.80
- -------------------------------------------------------------------------
290 Cranbrook Plaza Shopping Center 2.80
- -------------------------------------------------------------------------
291 Crossings at Maple Grove 2.80
- -------------------------------------------------------------------------
292 1452-1548 Fayette Street 2.80
- -------------------------------------------------------------------------
293 United Furniture Warehouse 2.80
- -------------------------------------------------------------------------
294 Chateux Village/Sea Lord Apartments 10.80
- -------------------------------------------------------------------------
295 17352 Daimler Street 2.80
- -------------------------------------------------------------------------
296 Champions Forest/Louetta 2.80
- -------------------------------------------------------------------------
297 Micro Instrument Co. 2.80
</TABLE>
II-38
<PAGE> 147
APPENDIX II
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
PREPAYMENT AND SERVICING INFORMATION
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Interest Prepayment Code(9)
Loan Accrual Season- Lockout
No. Property Name Method ing(10) Period YM1 YM 5.0% 4.5% 4.0% 3.0% 2.0% 1.0% Open
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
298 Hollywood Video-Louisville,KY 30/360 8 60 114 6
- ------------------------------------------------------------------------------------------------------------------------------------
299 710 Post Oak, L.C. 30/360 8 48 66 6
- ------------------------------------------------------------------------------------------------------------------------------------
300 2030 N. Ivar Avenue 30/360 4 36 78 6
- ------------------------------------------------------------------------------------------------------------------------------------
301 Hollywood Video - GA Actual/360 2 36 138 6
- ------------------------------------------------------------------------------------------------------------------------------------
302 Love Field Financial Center 30/360 2 48 60 12
- ------------------------------------------------------------------------------------------------------------------------------------
303 Diagonal Marketplace Shopping Center Actual/360 2 36 78 6
- ------------------------------------------------------------------------------------------------------------------------------------
304 Rialto II Apartments 30/360 2 36 84 24 36 60
- ------------------------------------------------------------------------------------------------------------------------------------
305 7 Studebaker 30/360 5 36 78 6
- ------------------------------------------------------------------------------------------------------------------------------------
306 Pioneer Business Center II 30/360 5 48 66 6
<CAPTION>
- -------------------------------------------------------------------------
Loan Admin.
No. Property Name Cost Rate (bps)(11)
- -------------------------------------------------------------------------
<S> <C> <C>
298 Hollywood Video-Louisville,KY 2.80
- -------------------------------------------------------------------------
299 710 Post Oak, L.C. 2.80
- -------------------------------------------------------------------------
300 2030 N. Ivar Avenue 2.80
- -------------------------------------------------------------------------
301 Hollywood Video - GA 2.80
- -------------------------------------------------------------------------
302 Love Field Financial Center 2.80
- -------------------------------------------------------------------------
303 Diagonal Marketplace Shopping Center 2.80
- -------------------------------------------------------------------------
304 Rialto II Apartments 2.80
- -------------------------------------------------------------------------
305 7 Studebaker 2.80
- -------------------------------------------------------------------------
306 Pioneer Business Center II 2.80
</TABLE>
II-39
<PAGE> 148
Footnotes to Appendix II
(1) "WF", "MS" and "JHREF" denote Wells Fargo Bank, National Association,
Morgan Stanley Mortgage Capital Inc. and John Hancock Real Estate Finance,
Inc., respectively, as Sellers.
(2) Sets of Mortgage Loans that have identical alphabetical coding designates
multiple loans that are cross-collateralized and cross-defaulted, while
Mortgage Loans that have identical roman numeral coding indicate multiple
properties securing one note. For the purpose of the Prospectus
Supplement, the latter are treated as if they were multiple loans that are
cross-collateralized and cross-defaulted.
(3) Loan No. 7 requires interest only payments until maturity.
(4) Certain ratios including Cut-Off Date Balance Loan/Unit or SF, DSCR, LTV,
and Balloon LTV are calculated on a combined basis for Mortgage Loans that
are secured by multiple properties or are cross-collateralized and
cross-defaulted. For the purposes of the statistical information set forth
in this Prospectus Supplement, as to such multiple property loans, a
portion of the aggregate Cut-Off Date Balance has been allocated to each
property, generally based on relative appraised value or Underwritable
Cash Flow.
(5) The Amortization Term shown is the basis for determining the fixed monthly
principal and interest payment as set forth in the related note. Due to
the actual/360 interest calculation methodology applied to most Mortgage
Loans, the actual amortization to a zero balance will be longer.
(6) Values are generally based upon appraisals but in some cases, values of
the related Mortgaged Properties were estimated by the Seller based on
sales and rental information with respect to comparable properties and
third-party market studies.
(7) In general for each property, "Percent Leased" was determined based on a
rent roll provided by the borrower. In certain cases, "Percent Leased" was
determined based on an appraisal, executed lease, operating statement or
occupancy report. "Percent Leased as of Date" indicates the date as of
which "Percent Leased" was determined based on such information. For
hospitality properties, the data shown is the average daily occupancy
rate, generally for the preceding twelve month period.
(8) "Largest Tenant" refers to the tenant that represents the greatest
percentage, equal to, or in excess of 20%, of the total square footage at
the subject property.
(9) Indicates prepayment provisions from the first Due Date as stated in the
Mortgage Loan. "YM" represents yield maintenance and "YM1" represents the
greater of yield maintenance or one percent of the outstanding principal
balance at such time. The stated percentages represent Percentage
Premiums. "Open" represents a period during which Principal Prepayments
are permitted without payment of a Prepayment Premium. For each Mortgage
Loan, the number set forth under a category of prepayment provision
represents the number of months in the original term to maturity for which
such provision applies. An asterik ("*") denotes Mortgage Loans wherein up
to 10% of the original loan balance may be prepaid without penalty each
year. Loan No. 3, Two Democracy Plaza, has Yield Maintenance based on
defeasance provisions.
(10) "Seasoning" represents the approximate number of months elapsed from the
date of origination of the Mortgage Loan to the Cut-Off Date.
(11) The "Administrative Cost Rate" indicated for each Mortgage Loan will be
calculated based on the same interest calculation methodology (ie.,
actual/360) applicable to such Mortgage Loan.
II-40
<PAGE> 149
APPENDIX III
SIGNIFICANT LOAN SUMMARIES
Loan No. 1 - Scottsdale Plaza Resort Loan and Property
- --------------------------------------------------------------------------------
Cut-off Date Balance: $59,807,596 Property Type: Hospitality
Loan Type: Principal and Location: Scottsdale,
Interest AZ
Origination Date: 11/26/1997 Year Built/Renovated: 1990
Maturity Date: 12/1/2007 Rooms: 404
Cut-off Date
Mortgage Rate: 7.93% Balance/Rm.: $148,039
Annual Debt Service: $5,523,731 Appraised Value: $88,300,000
DSCR: 1.67 Current LTV: 68%
Underwritten Cash Flow: $9,229,510 Balloon LTV: 56%
Balloon Balance: $49,345,703 Average Occupancy: 75.5%
Average Occupancy as of
Date: 11/30/1997
- --------------------------------------------------------------------------------
The Loan
The Scottsdale Plaza Resort Loan (the "Scottsdale Plaza Loan") is secured
by a first mortgage on a 404-room resort hotel situated on 36.4 acres located in
Scottsdale, Arizona (the "Scottsdale Plaza Property"). The Scottsdale Plaza Loan
was originated by Wells Fargo on November 26, 1997.
The Borrower. The borrower is Scott Plaza Resort, LLC, a special purpose
Arizona limited liability company (the "Scottsdale Plaza Borrower"). The sponsor
of Scottsdale Plaza Borrower is John W. Dawson.
Security. The Scottsdale Plaza Loan is secured by a Mortgage, UCC
Financing Statements and certain additional security documents. The mortgage is
a first lien on a fee interest in the Scottsdale Plaza Property. The Scottsdale
Plaza Loan is non-recourse, subject to certain limited exceptions.
Payment Terms. The Mortgage Rate is fixed at 7.93%. The Scottsdale Plaza
Loan requires monthly payments of principal and interest of $460,311 until its
maturity on December 1, 2007, at which time all unpaid principal and accrued but
unpaid interest is due. The Scottsdale Plaza Loan accrues interest computed on
the basis of the actual number of days elapsed each month in a 360-day year.
Prepayment. The Scottsdale Plaza Loan may not be prepaid prior to January
1, 2001. Thereafter, prepayment is permitted upon payment of an amount equal to
the greater of 1% of the then outstanding principal balance of the Scottsdale
Plaza Loan or a yield maintenance charge. No Prepayment Premium is due if the
Scottsdale Plaza Loan is prepaid within one-hundred eighty (180) days prior to
maturity.
If there is an event of default and the lender accelerates the Scottsdale
Plaza Loan, the security documents require Scottsdale Plaza Borrower to pay a
prepayment premium as described above. There is a 4% late fee on overdue
installments, and the Scottsdale Plaza Loan accrues interest at the mortgage
rate plus 5% per annum while the Scottsdale Plaza Loan is in default.
Transfer of Properties or Interest in Borrower. The Scottsdale Plaza Loan
becomes immediately due and payable upon the transfer of the Scottsdale Plaza
Property or any ownership interest in the Scottsdale Plaza Borrower, except in
connection with the one-time right of transfer described below and for transfers
where John W. Dawson continues to own and control at least 50% of the same type
of ownership interests which were held, directly or indirectly, by Mr. Dawson at
the time the Scottsdale Plaza Loan was made, and Mr. Dawson continues to control
the management of Scottsdale Plaza Property and Scottsdale Plaza Borrower. In
addition, Mr. Dawson is permitted to transfer interest to a revocable inter
vivos family trust so long as Mr. Dawson is the trustee. The Scottsdale Plaza
Loan documents also provide for a one-time right of the Scottsdale Plaza
Borrower to transfer the Scottsdale Plaza
III-1
<PAGE> 150
Property and the Scottsdale Plaza Borrower's obligations under the Scottsdale
Plaza Loan to a third party approved by lender.
Escrow/Reserves. There are tax and insurance reserves which require
deposits in an amount sufficient to pay taxes and insurance premiums when due.
There is also a reserve to be used for capital expenditures which is funded
monthly in the amount of 4% of gross revenue. Such amounts will be disbursed to
pay such costs and provide additional security for the Scottsdale Plaza Loan.
Subordination/Other Debt. Subordinate indebtedness and encumbrances are
prohibited.
The Property
The Scottsdale Plaza Property is a 404-room full-service hotel located in
the Town of Paradise Valley, near Scottsdale, Arizona. Facilities include 31,596
square feet of meeting rooms, two restaurants, three lounges, voice mail and
data ports in the rooms, wet bars, stocked refrigerators, a gift shop, a beauty
salon, four outdoor pools, health club, five tennis courts with pro shop, three
racquetball courts and a putting green. The Scottsdale Plaza Property consists
of twenty-nine one- and two-story buildings situated on 36.4 acres.
The Scottsdale Plaza Property achieved occupancy rates for the calendar
years 1995 and 1996 and the twelve month period ending November 30, 1997 of
approximately 71.0%, 70.5% and 75.5%, respectively, and average daily rates for
the same periods of approximately $140, $146 and $154, respectively.
The Scottsdale Plaza Property was built in 1973 and renovated in 1990.
John W. Dawson was subject to a bankruptcy proceeding from 1989 through 1996. In
late 1987, Mr. Dawson became involved with an acquaintance in the development of
a shopping center in Scottsdale. Shortly thereafter, the real estate market in
Phoenix began to experience declines in valuation and occupancy and Mr. Dawson
decided to become more involved in the operation of the retail property. In
1989, his partner successfully obtained a judgment against Mr. Dawson for what
he claimed to be a hindrance to the operation caused by Mr. Dawson's
involvement. This judgment prompted the bankruptcy filing on November 3, 1989 to
stay any ability for this outside partner to jeopardize the Scottsdale Plaza
Property. Mr. Dawson resolved this judgment and satisfactorily reorganized,
obtaining a final decree on March 1, 1993. This final decree was vacated on
January 17, 1995, and another final decree was entered on August 1, 1996. The
prior lender, First Interstate, continued to provide financing for the
Scottsdale Plaza Resort until the Scottsdale Plaza Loan was originated because
of First Interstate's satisfactory experience working with Mr. Dawson.
Management
The sponsor of the Scottsdale Plaza Borrower is John W. Dawson. The
Scottsdale Plaza Borrower has owned the Scottsdale Plaza Property for over 10
years and has managed it since 1989.
III-2
<PAGE> 151
Loan No. 2 - Encinitas Ranch Town Center Loan and Property
- --------------------------------------------------------------------------------
Cut-off Date Balance: $42,302,887 Property Type: Retail
Loan Type: Principal and
Interest Location: Encinitas, CA
Origination Date: 11/13/1997 Year Built/Renovated: 1997
Maturity Date: 12/1/2007 Square Feet: 489,297
Mortgage Rate: 7.38% Cut-off Date Balance/SF: $86
Annual Debt Service: $3,515,889 Appraised Value: $53,000,000
DSCR: 1.34 Current LTV: 80%
Underwritten Cash Flow: $4,704,529 Balloon LTV: 70%
Balloon Balance: $37,338,170 Percent Leased: 99.5%
Percent Leased as of
Date: 12/16/1997
- --------------------------------------------------------------------------------
The Loan
The Encinitas Ranch Town Center Loan (the "Encinitas Loan") is secured by
a first mortgage on a 489,297 square foot shopping center located in Encinitas,
California (the "Encinitas Property"). The Loan was originated by Wells Fargo on
November 13, 1997.
The Borrower. The borrower is Encinitas Town Center Associates, LLC, a
California limited liability company (the "Encinitas Borrower"). The Members of
the Encinitas Borrower consist of Carltas Company (Member, 50%); Zelman Retail
Partners (Managing Member, 23.75%); and Laulhere Enterprises, LLC (an affiliate
of The Hood Corporation Enterprises) (Member, 26.25%).
Security. The Encinitas Loan is secured by a Mortgage, Assignment of Rents
and Leases, UCC Financing Statements and certain additional security documents.
The mortgage is a first lien on a fee interest in the Encinitas Property. The
Encinitas Loan is non-recourse, subject to certain limited exceptions.
Major Anchors. The major anchor stores at the Encinitas Property are:
Target, Albertsons, Sports Authority, Linens `n Things, Office Depot, PetSmart,
Ross Dress for Less, Comp USA and Barnes & Noble. Certain easement agreements
establish the rights and obligations of the anchor stores and the Encinitas
Borrower.
Payment Terms. The Mortgage Rate is fixed at 7.38%. The Encinitas Loan
requires monthly payments of principal and interest of $292,991 until its
maturity on December 1, 2007, at which time all unpaid principal and accrued but
unpaid interest is due. The Encinitas Loan accrues interest computed on the
basis of the actual number of days elapsed each month in a 360-day year.
Prepayment. The Encinitas Loan may be prepaid in whole, but not in part,
on or after January 1, 2000 upon payment of a Yield Maintenance Premium
calculated by reference to U.S. Treasury obligations. No Prepayment Premium is
due if the Loan is prepaid within one-hundred eighty (180) days prior to
maturity.
If there is an event of default and the lender accelerates the Encinitas
Loan, the security documents require Encinitas Borrower to pay a prepayment
premium as described above. There is a 4% late fee on overdue installments, and
the Encinitas Loan accrues interest at the mortgage rate plus 5% per annum while
the Encinitas Loan is in default.
Transfer of Properties or Interest in Borrower. The Encinitas Loan becomes
immediately due and payable upon the transfer of the Encinitas Property or any
ownership interest in the Encinitas Property, except in connection with the
rights of transfer described below. The following transfers of ownership
interests in the Encinitas Borrower shall be permitted so long as any of Carltas
Company, ZRP Encinitas, LLC, or Laulhere Realty Limited Partnership remain as a
member of Encinitas Borrower: (a) transfers resulting from the death of any
individual and where such transfer does not result in any change in the
management and control of the Encinitas Borrower; (b) any transfers between the
constituent members of Encinitas Borrower; or (c) any transfers of any
III-3
<PAGE> 152
interest in the constituent members of Encinitas Borrower which are permitted
under the Encinitas Borrower's Limited Liability Company Agreement; further
provided, however, that if Laulhere Realty Limited Partnership acquires the
interest of both Carltas Company and ZRP Encinitas, LLC, Laulhere Realty Limited
Partnership must retain a professional property management company, acceptable
to lender, to manage the Encinitas Property. The Encinitas Loan documents also
provide for a one-time right of the Encinitas Borrower to transfer the Encinitas
Property and the Encinitas Borrower's obligations under the Encinitas Loan to a
third party approved by lender.
Escrow/Reserves. There are tax and insurance reserves which require
deposits in an amount sufficient to pay taxes and insurance premiums when due.
Subordination/Other Debt. Subordinate indebtedness and encumbrances are
prohibited.
The Property
The Encinitas Property is a 489,297 square foot shopping center located in
Encinitas, California. Although still partially under construction the Encinitas
Property was approximately 99.5% leased and approximately 97.8% occupied as of
December 16, 1997. Major anchor buildings are typically of concrete block
construction and shop spaces are generally wood frame and stucco construction.
The property is a suburban-style shopping center with botanical themes exhibited
in its landscaping and architectural detail. In addition, there are seven
tenants on ground leases for a total of 197,027 square feet of building space.
Target relocated their store to this center from a nearby center.
Approximately 60% of rents are provided by national tenants including
Target, Office Depot, Linens 'n Things, Barnes & Noble, PetSmart, Ross Dress for
Less, Albertsons, Sports Authority, and Comp USA. As of December 16, 1997 the
center was 99.5% leased to 37 tenants. Anchors make up approximately 61% of the
space, or 391,000 square feet. Contractual lease expirations during the loan
term are as follows: 11,579 square feet (2.4%) in 2001, 31,970 square feet
(6.5%) in 2002, 9,600 square feet (2.0%) in 2006 and 52,373 square feet (10.7%)
in 2007. As of December 16, 1997 average base rents for anchor space was $12.33
per square foot and average base rents for in-line space was $20.38 per square
foot.
Management
Zelman Development Co. is the property manager. Reportedly, Ben Reiling,
the President of the property manager, has 30 years experience in real estate in
Southern California. Zelman Retail Partners, an affiliate of Zelman Development
Co., is the Managing Member of the Encinitas Borrower.
III-4
<PAGE> 153
Loan No. 3 - Two Democracy Plaza Loan and Property
- --------------------------------------------------------------------------------
Cut-off Date Balance: $35,030,405 Property Type: Office
Loan Type: Principal and
Interest Location: Bethesda, MD
Origination Date: 12/8/1997 Year Built/Renovated: 1990
Maturity Date: 1/1/2008 Square Feet: 260,369
Mortgage Rate: 7.19% Cut-off Date Balance/SF: $135
Annual Debt Service: $2,856,205 Appraised Value: $47,400,000
DSCR: 1.46 Current LTV: 74%
Underwritten Cash Flow: $4,166,523 Balloon LTV: 64%
Balloon Balance: $30,225,062 Percent Leased: 96.7%
Percent Leased as of
Date: 10/1/1997
- --------------------------------------------------------------------------------
The Loan
The Two Democracy Plaza Loan (the "Democracy Plaza Loan") is secured by a
first mortgage on a 260,369 square foot office building located in Bethesda,
Maryland (the "Democracy Plaza Property"). The Democracy Plaza Loan was
originated by MSMC on December 8, 1997.
The Borrower. The borrower is Second Rock Spring Park Limited Partnership,
a Maryland limited partnership (the "Democracy Plaza Borrower"). The general
partners of the Democracy Plaza Borrower are Robert H. Smith and Robert P.
Kogod. The borrower is affiliated with Charles E. Smith Companies.
Security. The Democracy Plaza Loan is secured by a Deed of Trust, an
Assignment of Leases and Rent, UCC financing statements and certain additional
security documents. The mortgage is a first lien on a leasehold interest in the
Democracy Plaza Property. The Democracy Plaza Loan is non-recourse, subject to
certain limited exceptions.
Payment Terms. The Mortgage Rate is fixed at 7.19%. The Democracy Plaza
Loan requires monthly payments of principal and interest of $238,017 until its
maturity on January 1, 2008, at which time all unpaid principal and accrued but
unpaid interest is due. The Democracy Plaza Loan accrues interest computed on
the basis of an assumed 30-day month and 360-day year.
Prepayment. On or after March 1, 2001, the Democracy Plaza Loan may be
prepaid in whole, but not in part, upon payment of a Prepayment Premium based on
a defeasance calculation.
If there is an event of default and the lender accelerates the Democracy
Plaza Loan, the security documents require Democracy Plaza Borrower to pay a
prepayment premium as described below. There is a 5% late fee on overdue
installments, and the Democracy Plaza Loan accrues interest at the mortgage rate
plus 5% per annum while the Democracy Plaza Loan is in default.
Transfer of Properties or Interest in Borrower. The Democracy Plaza Loan
becomes immediately due and payable upon the transfer of the Democracy Plaza
Property or any ownership interest in the Democracy Plaza Borrower, except for
transfers to family members or affiliates.
Escrow/Reserves. There is a tax reserve which requires deposits in an
amount sufficient to pay taxes when due. There is no insurance escrow.
Subordination/Other Debt. Subordinate indebtedness and encumbrances are
prohibited without the prior consent of the lender. The Democracy Plaza Borrower
may incur up to $1,755,000 of unsecured indebtedness to C.E. Smith Management,
Inc., an affiliate of the Democracy Plaza Borrower and the property manager
III-5
<PAGE> 154
The Property
The Democracy Plaza Property consists of a 10-story office building with
260,369 net rentable square feet of space at the intersection of two major local
thoroughfares in Bethesda, Maryland. Major tenants in the Democracy Plaza
Property include Watson, Wyatt & Company (71,086 square feet) and CSC
Communications (62,420 square feet). The Democracy Plaza Property is part of a
master-planned development that also includes another office building with space
totaling 203,605 square feet, an eleven-story, 274-room Marriott Suites Hotel,
and several parking garages.
The interest of the Democracy Plaza Borrower in the Democracy Plaza
Property consists of a ground lease that expires in 2087. Ground rent is
stipulated as $0.80 times the maximum gross building area allowable. This base
rental amount is further escalated by 5.5% annually. The fixed rent payments are
not subordinated to the first mortgage, however any subsequent escalation or
increase is subordinate.
As of October 1, 1997, the property was 96.7% leased to approximately 37
tenants, the largest of which occupies 71,086 square feet (27.3%). Contractual
lease expirations are as follows: 1998 - 9,210 square feet (3.5%); 1999 - 19,349
square feet (7.4%); 2000 - 168,371 square feet (64.7%); 2001 - 24,006 square
feet (9.2%); and 2002 - 15,903 square feet (6.1%). Average base rents were
$26.39 per square foot as of October 1, 1997.
Management
C.E. Smith Management, Inc. is the property manager. The property manager
is an affiliate of the Democracy Plaza Borrower.
III-6
<PAGE> 155
Loan Nos. 4 and 5 - Kahler Hotel Loan and Property and Olympia Park Hotel
Loan and Property
- --------------------------------------------------------------------------------
Cut-off Date Balance: $32,772,710 Kahler Hotel -Year
Loan Type: Principal and Renovated: 1998
Interest Olympia Park Hotel - Year
Origination Date: 10/14/1997 Renovated: 1997
Maturity Date: 11/1/2002 Kahler Hotel - Rooms: 699
Olympia Park Hotel -
Mortgage Rate: 7.96% Rooms: 200
Annual Debt Service: $3,302,451 Cut-off Date Balance/Room: $36,455
DSCR: 1.50 Appraised Value - Kahler: $33,000,000
Appraised Value: -
Underwritten Cash Flow: $4,968,093 Olympia: $16,250,000
Underwritten NOI: $5,725,903 Current LTV: 67%
Balloon Balance: $29,084,920 Balloon LTV: 59%
Property Type: Hospitality Kahler Average Occupancy: 65.3%
Kahler Hotel -
Location: Rochester, MN Kahler Average Occ. Date: 8/24/97
Olympia Park Hotel -
Location: Park City, UT Olympia Average Occupancy: 64.8%
Olympia Average Occ. Date: 10/26/1997
- --------------------------------------------------------------------------------
The Loan
The Kahler Hotel Loan and Olympia Park Hotel Loan (collectively, the
"Kahler/Olympia Park Hotel Loan") is secured by both a first mortgage on a
699-room full-service hotel situated on 1.99 acres located in Rochester,
Minnesota (the "Kahler Property") and by a first mortgage on a 200-room
full-service hotel situated on 1.04 acres located in Park City, Utah (the
"Olympia Park Property"). The Kahler/Olympia Park Loan was originated by Wells
Fargo on October 14, 1997.
The Borrower. The borrower is Kahler E&P Partners, L.P., a Minnesota
limited partnership (the "Kahler/Olympia Park Borrower").
Security. The Kahler/Olympia Park Loan is secured by a Mortgage, UCC
Financing Statements and certain additional security documents. The mortgage is
a first lien on a fee interest in the Kahler Property and the Olympia Park
Property. The Kahler/Olympia Park Loan is non-recourse, subject to certain
limited exceptions.
Payment Terms. The Mortgage Rate is fixed at 7.96%. The Kahler/Olympia
Park Loan requires monthly payments of principal and interest of $275,204 until
its maturity on November 1, 2002, at which time all unpaid principal and accrued
but unpaid interest is due. The Kahler/Olympia Park Loan accrues interest
computed on the basis of the actual number of days elapsed each month in a
360-day year.
Prepayment. On or after December 1, 2000, the Kahler/Olympia Park Loan may
be prepaid in whole, but not in part, upon payment of a Prepayment Premium equal
to the greater of 1% of outstanding principal or a Yield Maintenance Premium
calculated by reference to U.S. Treasury obligations. No Prepayment Premium is
due if the Kahler/Olympia Park Loan is prepaid within the one-hundred eighty
(180) days prior to maturity.
If there is an event of default and the lender accelerates the
Kahler/Olympia Park Loan, the security documents require Kahler/Olympia Park
Borrower to pay a prepayment premium as described above. There is a 4% late fee
on overdue installments, and the Kahler/Olympia Park Loan accrues interest at
the mortgage rate plus 5% per annum while the Kahler/Olympia Park Loan is in
default.
Transfer of Properties or Interest in Borrower. The Kahler/Olympia Park
Loan becomes immediately due and payable upon the transfer of the Kahler/Olympia
Park Property or any ownership interest in the Kahler/Olympia Park Borrower,
except in connection with the one-time right of transfer described below and for
transfers to Sunstone B&P Corporation 1, which is a wholly-owned subsidiary of
Sunstone Hotel Investors, Inc. and Sunstone Hotel Investors, L.P., collectively,
of 100% of the partnership interests in Kahler/Olympia Park Borrower shall be
permitted without the consent of Lender. The Kahler/Olympia Park Loan documents
also provide for a one-time right of the Kahler/Olympia Park Borrower to
transfer the Kahler Property and the Olympia Park Property and the
Kahler/Olympia Park Borrower's obligations under the Kahler/Olympia Park Loan to
a third party approved by
III-7
<PAGE> 156
lender.
Escrow/Reserves. There is a tax reserve which requires deposits in an
amount sufficient to pay taxes when due. There is also a cash flow escrow to be
used for capital expenditures which is funded monthly in the amount of 2.87% of
gross revenue. An initial deposit of $1,500,000 was made on the disbursement
date to the cash flow escrow account. Such amounts will be disbursed to pay such
costs and provide additional security for the Kahler/Olympia Park Loan.
Subordination/Other Debt. Subordinate indebtedness and encumbrances are
prohibited.
The Property
The Kahler Property is a 699-room full-service hotel situated on 1.99
acres located in Rochester, Minnesota. Facilities include conference and banquet
facilities with approximately 15,000 square feet of space arranged in 15
flexible meeting rooms. The Kahler Property also has 4 restaurants and an indoor
shopping arcade of 55 shops.
The Kahler Property achieved occupancy rates for the calendar years 1995
and 1996 and the twelve month period ending October 26, 1997 of approximately
59.7%, 63.1% and 65.3%, respectively and average daily rates for the same
periods of approximately $64.29, $66.81 and $67.68, respectively. The Kahler
Property was originally built in 1921 and has gone through numerous renovations,
the last in 1998. Of the four major full-service hotels in the area, the Kahler
Property has over 45% of the rooms available giving it a considerable market
share.
The Olympia Park Property is a 200-room full-service hotel situated on
1.04 acres and located in Park City, Utah. Facilities include 8,000 square feet
of conference and banquet facilities and amenities include an atrium, swimming
pool, spa and sauna.
The Olympia Park Property achieved occupancy rates for the calendar years
1995 and 1996 and the twelve month period ending October 26, 1997 of
approximately 56.6%, 70.3% and 64.8%, respectively and average daily rates for
the same period of approximately $70.77, $69.87 and $76.70, respectively.
The Olympia Park Property was built in 1985 and renovated during 1997.
Management
Kahler Realty Corp. manages the Kahler Property and the Olympia Park
Property. Kahler Realty Corp., an affiliate of the Kahler/Olympia Park Borrower,
was founded in 1921 and currently owns and operates 17 hotels with 4,255 rooms,
principally in two markets, Salt Lake City (6 hotels) and Rochester (4 hotels).
III-8
<PAGE> 157
Loan No. 6 - Clinton Square Loan and Property
- --------------------------------------------------------------------------------
Cut-off Date Balance: $31,406,616 Property Type: Office
Loan Type: Principal and
Interest Location: Rochester, NY
Origination Date: 9/25/1997 Year Built/Renovated: 1990
Maturity Date: 10/1/2007 Square Feet: 305,371
Mortgage Rate: 8.29% Cut-off Date Balance/SF: $103
Annual Debt Service: $2,850,424 Appraised Value: $46,800,000
DSCR: 1.49 Current LTV: 67%
Underwritten Cash Flow: $4,243,772 Balloon LTV: 61%
Balloon Balance: $28,359,526 Percent Leased: 98.4%
Percent Leased as of
Date: 9/1/1997
- --------------------------------------------------------------------------------
The Loan
The Clinton Square Loan (the "Clinton Loan") is secured by a first
mortgage on a 305,371 square foot office building situated on 1.39 acres located
in Rochester, New York (the "Clinton Property"). The Clinton Loan was originated
by MSMC on September 25, 1997.
The Borrower. The borrower is Clinton Asset Holding Associates, L.P., a
New York limited partnership (the "Clinton Borrower"), with CS Broad Street,
Inc. ("CS Broad Street") and Genesee Rochester Properties II, Inc. ("GRP") as
equal general partners holding 1% each. CS Broad Street is the managing general
partner. Norman Leenhouts and Nelson Leenhouts (the "Leenhouts") each own 50% of
CS Broad Street. The Leenhouts also own a 55% limited partnership interest in
Clinton Borrower through two other partnerships. GRP is a wholly-owned
subsidiary of Genesee Corp. (publicly traded) which holds a 9% limited
partnership interest. Clinton Square Builders, LP, (Salvador LeCesse principal)
holds a 25% limited partnership interest in the Clinton Borrower. The remaining
limited partnership interests are held by officers Genesee Rochester Properties,
Inc., Leenhouts Columbus Venture, CSB Limited Partnership and Clinton Broad
Street Association, L.P. ("CBSA").
Security. The Clinton Loan is secured by an Agreement of Confirmation and
Modification of Bond and Mortgage, an Assignment of Leases and Rent, UCC
financing statements and certain additional security documents. The mortgage is
a first lien on a fee interest in the Clinton Property. The Clinton Loan is
non-recourse, subject to certain limited exceptions.
Payment Terms. The Mortgage Rate is fixed at 8.29%. The Clinton Loan
requires monthly payments of principal and interest of $237,535 until its
maturity on October 1, 2007, at which time all unpaid principal and accrued but
unpaid interest is due. The Clinton Loan accrues interest computed on the basis
of the actual number of days elapsed each month in a 360-day year.
Prepayment. On or after November 1, 2002, the Clinton Loan may be prepaid
in whole, but not in part, upon payment of a Prepayment Premium equal to the
greater of 1% of outstanding principal or a Yield Maintenance Premium calculated
by reference to U.S. Treasury obligations. No Prepayment Premium is due if the
Clinton Loan is prepaid within the ninety (90) days prior to maturity.
If there is an event of default and the lender accelerates the Clinton
Loan, the security documents require Clinton Borrower to pay a prepayment
premium as described above. There is a 5% late fee on overdue installments, and
the Clinton Loan accrues interest at the mortgage rate plus 5% per annum while
the Clinton Loan is in default.
Transfer of Properties or Interest in Borrower. The Clinton Loan becomes
immediately due and payable upon the transfer of the Clinton Property or any
ownership interest in the Clinton Borrower (other than the pledge of shares of
capital stock of CS Broad Street to secure certain indebtedness described below
under "Subordination/Other Debt").
Escrow/Reserves. There are tax and insurance reserves which require
deposits in an amount sufficient to
III-9
<PAGE> 158
pay taxes and insurance premiums when due. There is also a capital expenditure
reserve which requires monthly deposits of $6,362. In addition, there is a
reserve for tenant improvements and leasing commissions which requires monthly
deposits of $15,000 through April 1, 2001, which is to be applied to any
re-leasing costs associated with the expiration of a lease to IBM which expires
on July 31, 2001. Such amounts will be disbursed to pay such costs and provide
additional security for the Clinton Loan.
Subordination/Other Debt. Subordinate indebtedness and encumbrances are
prohibited without the prior consent of the lender. The Clinton Borrower's
partnership agreement requires revenues in excess of real property taxes and
insurance, debt service on the Clinton Loan, payments for reserves required by
the Clinton Loan, and normal operating expenses in place as set forth in the
Clinton Borrower's Annual Plan be distributed first to CBSA in an amount
sufficient to make payments on certain loans with an aggregate outstanding
principal balance as of the date of origination of the Clinton Loan of
approximately $8,440,010.
The Property
The Clinton Property is a 14-story 305,371 square foot office building
developed in 1990 situated in Rochester's central business district. The Clinton
Property includes a 390-space underground parking garage and is linked by a
grade-level enclosed connector to the Rochester Skyway System, which connects
the major downtown office, retail, hotel and convention facilities through a
series of covered bridges & walkways.
Approximately 40% of the building is occupied by Nixon, Hargrave, Devans &
Doyle ("NHD&D"), the largest law firm in the upstate New York region, under a
lease expiring in July 2010. Other significant tenants include IBM, Chase
Manhattan, KPMG Peat Marwick, and Chubb Insurance. The above mentioned tenants,
including NHD&D, account for approximately 83.5% of the rentable area.
As of September 1, 1997, the property was 98.4% leased to approximately 15
tenants, the largest of which occupies 120,910 square feet (39.6%). Contractual
lease expirations are as follows: 1998 - 3,984 square feet (1%); 1999 - none;
2000 - 53,157 square feet (17%); 2001 - 69,135 square feet (23%); 2002 - 5,900
square feet (2%). Average rents were $15.39 per square foot as of September 1,
1997.
Management
Home Leasing Corporation, an affiliate of the Clinton Borrower, is the
property manager.
III-10
<PAGE> 159
Loan No. 7 - Metropolitan Corporate Center Loan and Property
- --------------------------------------------------------------------------------
Cut-off Date Balance: $30,000,000 Property Type: Industrial
Location: Santa Clara,
Loan Type: Interest Only CA
Origination Date: 12/18/1997 Year Built/Renovated: 1985
Maturity Date: 1/2/2003 Square Feet: 320,047
Mortgage Rate: 7.035% Cut-off Date Balance/SF: $94
Annual Debt Service: $2,110,500 Appraised Value: $50,000,000
DSCR: 1.85 Current LTV: 60%
Underwritten Cash Flow: $3,895,467 Balloon LTV: 60%
Balloon Balance: $30,000,000 Percent Leased: 100%
Percent Leased as of
Date: 12/19/1997
- --------------------------------------------------------------------------------
The Loan
The Metropolitan Corporate Center Loan (the "Metropolitan Loan") is
secured by a first mortgage on four, two-story office/R&D buildings totaling
320,047 square feet on an 18.3 acre site located in Santa Clara, California (the
"Metropolitan Property"). The Metropolitan Loan was originated by Wells Fargo on
December 18, 1997.
The Borrower. The borrower is G&I Kifer Road, LLC, a Delaware limited
liability company (the "Metropolitan Borrower"). The managing member of the
Metropolitan Borrower is G&I Investment Kifer Road Corp., a Delaware corporation
(1%). Other members of the Metropolitan Borrower are DRA Growth and Income Fund,
LLC (98%), and Landmark Asset Management Group (1%). DRA Growth and Income Fund,
LLC is an investment fund which includes TRW, IBM and other investors. G&I
Investment Kifer Road Corp. is 100% owned by DRA Growth and Income Fund, LLC.
Security. The Metropolitan Loan is secured by a Mortgage, Assignment of
Rents and Leases, UCC Financing Statements and certain additional security
documents. The mortgage is a first lien on a fee interest in the Metropolitan
Property. The Metropolitan Loan is non-recourse, subject to certain limited
exceptions.
Payment Terms. The Mortgage Rate is fixed at 7.035%. The Metropolitan Loan
requires monthly payments of interest of $175,875 until its maturity on January
2, 2003, at which time all principal and accrued but unpaid interest is due. The
Metropolitan Loan accrues interest computed on the basis of the actual number of
days elapsed each month in a 360-day year.
Prepayment. On or after February 1, 2000, the Metropolitan Loan may be
prepaid in whole, but not in part, upon payment of a Yield Maintenance Premium
calculated by reference to U.S. Treasury obligations. No Prepayment Premium is
due if the Metropolitan Loan is prepaid within one-hundred eighty (180) days
prior to maturity.
If there is an event of default and the lender accelerates the
Metropolitan Loan, the security documents require Metropolitan Borrower to pay a
prepayment premium as described above. There is a 4% late fee on overdue
installments, and the Metropolitan Loan accrues interest at the mortgage rate
plus 5% per annum while the Metropolitan Loan is in default.
Transfer of Properties or Interest in Borrower. The Metropolitan Loan
becomes immediately due and payable upon the transfer of the Metropolitan
Property or any ownership interest in the Metropolitan Borrower, except in
connection with the one-time right of transfer described below and for transfers
where (a) David Luski and Francis X. Tansey continue to own and control at least
50% of the same type of ownership which were held, directly or indirectly, by
Mr. Luski and Mr. Tansey at the time the Metropolitan Loan was made, and Mr.
Luski and Mr. Tansey continue to control the management of the Metropolitan
Borrower and the Metropolitan Property. In addition, Mr. Luski and Mr. Tansey
are permitted to transfer interest to a revocable inter vivos family trust so
long
III-11
<PAGE> 160
as they are the respective trustees. The Metropolitan Loan documents also
provide for a two-time right of the Metropolitan Borrower to transfer the
Metropolitan Property and the Metropolitan Borrower's obligations under the
Metropolitan Loan to a third party approved by lender.
Escrow/Reserves. There are no reserves for taxes or insurance.
Subordination/Other Debt. Subordinate indebtedness and encumbrances are
not permitted.
The Property
The Metropolitan Property consists of four, two-story office/research and
development buildings totaling 320,047 net rentable square feet on an 18.3 acre
site. The buildings were built in 1985 and were designed for multi-tenant use.
Applied Materials, Inc. is currently occupying 100% of the space. Facilities
include a full-service cafeteria, outdoor patio, fitness center with lockers,
showers and an aerobics room. As of November 1, 1997 the contractual lease rate
was $12.60 per square foot. The Applied Materials lease expires on December 31,
2006.
Management
DRA Advisors, Inc. is the managing member of DRA Growth and Income Fund,
LLC. David Luski and Francis Tansey are the owners and executives of DRA
Advisors, Inc. Luski and Tansey are the key executives for DRA Advisors Inc., a
New York based investment advisor providing customized real estate advisory
services to institutional and private investors. The company was established in
1994 and currently manages over $950 million in assets. DRA is privately owned
by the principals of the company. The Property is managed by Landmark Asset
Management Group, a property management company based in Laguna Hills,
California.
III-12
<PAGE> 161
Loan No. 8 - Holiday Inn Boston Logan Airport Loan and Property
- --------------------------------------------------------------------------------
Cut-off Date Balance: $27,876,504 Property Type: Hospitality
Loan Type: Principal and
Interest Location: Boston, MA
Origination Date: 10/31/1997 Year Built/Renovated: 1995
Maturity Date: 11/1/2007 Units: 356
Cut-off Date
Mortgage Rate: 7.76% Balance/Rm.: $78,305
Annual Debt Service: $2,540,111 Appraised Value: $37,500,000
DSCR: 1.42 Current LTV: 74%
Underwritten Cash Flow: $3,605,358 Balloon LTV: 61%
Balloon Balance: $22,910,720 Occupancy: 94.5%
Occupancy as of Date: 8/31/1997
- --------------------------------------------------------------------------------
The Loan
The Holiday Inn Boston Logan Airport Loan (the "Logan Loan") is secured by
a first mortgage on a 356-unit full-service hotel located in Boston,
Massachusetts (the "Logan Property"). The Logan Loan was originated by MSMC on
October 31, 1997.
The Borrower. The borrower is Logan Acquisitions Corp., a Florida special
purpose corporation (the "Logan Borrower"). The Logan Borrower is a wholly owned
subsidiary of McClellan Acquisition Corp., a Florida corporation ("McClellan
Corp."), which is a wholly owned subsidiary of Quinmass, Inc., a Florida
corporation controlled by the Thomas T. Walsh family.
Security. The Logan Loan is secured by a Mortgage, UCC financing
statements and certain additional security documents. The mortgage is a first
lien on a fee interest in the Logan Property. The Logan Loan is non-recourse,
subject to certain limited exceptions.
Payment Terms. The Mortgage Rate is fixed at 7.76%. The Logan Loan
requires monthly payments of principal and interest of $211,676 until its
maturity on November 1, 2007, at which time all unpaid principal and accrued but
unpaid interest is due. The Logan Loan accrues interest computed on the basis of
the actual number of days elapsed each month in a 360-day year.
Prepayment. The Logan Loan may be prepaid in whole, but not in part, on or
after December 1, 2002, upon payment of a Prepayment Premium equal to the
greater of 1% of outstanding principal or a Yield Maintenance Premium calculated
by reference to U.S. Treasury obligations. No Prepayment Premium is due if the
Logan Loan is prepaid within ninety (90) days prior to maturity.
If there is an event of default and the lender accelerates the Logan Loan,
the security documents require Logan Borrower to pay a prepayment premium as
described above. There is a 5% late fee on overdue installments, and the Logan
Loan accrues interest at the mortgage rate plus 5% per annum while the Logan
Loan is in default.
Transfer of Properties or Interest in Borrower. The Logan Loan becomes
immediately due and payable upon the transfer of the Logan Property or any
ownership interest in the Logan Borrower. However, the lender's consent is not
required to sell the Logan Property, provided: (i) the Logan Property is not in
default at the time of sale; (ii) the purchaser is an affiliate of the Logan
Borrower; (iii) such sale does not result in the downgrade, withdrawal or
qualification of the then current ratings on the Certificates; (iv) such
transfer does not cause an event of default under the Franchise Agreement with
Holiday Inn; and (v) the loan to MSMC described below under "Subordination/Other
Debt" is paid in full.
Escrow/Reserves. There is a tax reserve which requires monthly deposits in
an amount sufficient to pay taxes when due. There is no insurance escrow. There
is also a capital expenditure reserve with a principal balance as of the Cut-Off
Date of approximately $116,000. Such amounts will be disbursed to pay such costs
and provide additional security for the Logan Loan.
III-13
<PAGE> 162
Subordination/Other Debt. Future subordinate indebtedness and encumbrances
are prohibited without the prior consent of the lender. McClellan Corp., the
corporate parent of the Logan Borrower, has pledged the capital stock of the
Logan Borrower to secure a certain loan to MSMC with an outstanding principal
balance as of its date of origination of $3,500,000. The MSMC loan is
fully-amortizing over ten years, has a maturity date of November 1, 2007, an
annual interest rate of 10.41% and requires monthly payments of $47,051.
The Property
The Logan Property is a 356-room full-service hotel located approximately
2 miles from the Boston Logan International Airport Terminal.
The Logan Property was built in 1972 and a 120 room addition was
constructed in 1990. The Logan Property was renovated in 1984 and all guest
rooms were refurbished in 1995 with a $5.5 million capital expenditure program.
The Logan Property is a twelve story reinforced concrete frame hotel with a
reinforced concrete and glass exterior. Facilities include 356 rooms (including
eleven suites), a 90-seat restaurant, a 186-person lounge, outdoor swimming
pool, indoor exercise room with sauna facilities, parking for 328 automobiles, a
conference/banquet facility with a 4,000 square foot ballroom, a seating
capacity of 250 and reception capacity of 500, a total of approximately 8,000
square feet of meeting room area and exhibit capacity for 25-30 booths.
Management
Ocean Hospitalities, Inc., a subsidiary of Ocean Properties Limited, is
the property manager. Ocean Properties Limited, an affiliate of the Logan
Borrower, is a forty-year old operating and development company with offices in
Portsmouth, New Hampshire and Del Ray Beach, Florida.
III-14
<PAGE> 163
- --------------------------------------------------------------------------------
MORGAN STANLEY February 26, 1998
Real Estate Debt Capital Markets
Mortgage/Asset Capital Markets [GRAPHIC OMITTED]
- --------------------------------------------------------------------------------
CMBS New Issue
Term Sheet
----------------------------------
Pricing Date: February 26, 1998
----------------------------------
$1,256,471,000
(Approximate)
Morgan Stanley Capital I Inc.
as Depositor
Wells Fargo Bank, National Association
as Master Servicer and Seller
Morgan Stanley Mortgage Capital Inc.
as Seller
John Hancock Real Estate Finance, Inc.
as Seller
Commercial Mortgage Pass-Through Certificates
Series 1998-WF1
----------------------------------
MORGAN STANLEY DEAN WITTER
BEAR, STEARNS & CO. INC.
DEUTSCHE MORGAN GRENFELL INC.
THE SECURITIES DESCRIBED HEREIN ARE OFFERED ONLY PURSUANT TO A DEFINITIVE
PROSPECTUS SUPPLEMENT AND PROSPECTUS AND PROSPECTIVE INVESTORS WHO CONSIDER
PURCHASING ANY SUCH SECURITIES SHOULD MAKE THEIR INVESTMENT DECISION BASED ONLY
UPON THE INFORMATION PROVIDED THEREIN. CAPITALIZED TERMS USED BUT NOT DEFINED
HEREIN HAVE THE MEANINGS GIVEN TO SUCH TERMS IN THE PROSPECTUS SUPPLEMENT.
<PAGE> 164
$1,256,471,000 (Approximate)
Commercial Mortgage Pass-Through Certificates
Series 1998-WF1
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------
Initial
Aggregate
Certificate Expected
Balance or Rating Weighted Final
Notional (DCR/ Average Principal Distribution Pass-Through
Class Amount(1) S&P) Life Window(3)(4) Date(3) Rate(5)
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
A-1 $363,000,000 AAA/AAA 5.43 1-112 07/15/07 6.25%
- --------------------------------------------------------------------------------------------
A-2 653,315,000 AAA/AAA 9.62 112-117 12/15/07 6.55
- --------------------------------------------------------------------------------------------
Variable
X-1(6) 1,392,212,342(2) AAA/AAAr 8.88 ---- 01/15/18 Rate(7)
- --------------------------------------------------------------------------------------------
Variable
X-2 763,756,000(2) AAA/AAAr 5.03 ---- 03/15/03 Rate(7)
- --------------------------------------------------------------------------------------------
B 69,610,000 AA/AA 9.78 117-117 12/15/07 6.67
- --------------------------------------------------------------------------------------------
C 69,610,000 A/A 9.80 117-118 01/15/08 6.77
- --------------------------------------------------------------------------------------------
D 69,611,000 BBB/BBB 9.86 118-118 01/15/08 7.12
- --------------------------------------------------------------------------------------------
E 31,325,000 BBB-/NR 9.88 118-119 02/15/08 7.30
- --------------------------------------------------------------------------------------------
F(6) 24,364,000 BB+/BB+ 9.94 119-119 02/15/08 7.30
- --------------------------------------------------------------------------------------------
G(6) 38,286,000 NR/BB 10.34 119-142 01/15/10 6.25
- --------------------------------------------------------------------------------------------
H(6) 10,441,000 NR/BB- 12.60 142-160 07/15/11 6.25
- --------------------------------------------------------------------------------------------
J(6) 27,845,000 NR/B 14.51 160-178 01/15/13 6.25
- --------------------------------------------------------------------------------------------
K(6) 10,441,000 NR/B- 14.88 178-179 02/15/13 6.25
- --------------------------------------------------------------------------------------------
L(6) 24,364,342 NR/NR 17.48 179-238 01/15/18 6.25
- --------------------------------------------------------------------------------------------
</TABLE>
Notes: (1) In the case of each such Class, subject to a permitted
variance of plus or minus 5%.
(2) The Class X-1 Notional Amount is equal to the sum of all
Certificate Balances outstanding from time to time. The Class
X-2 Notional Amount is equal to the sum of the Certificate
Balances of the Class B, Class C, Class D, Class E and the
deemed Certificate Balance of a component (the "Class A-2B
Component") of the Class A-2 Certificates representing an
initial Certificate Balance equal to $523,600,000, which
component is assumed to be entitled to distributions only
after the deemed Certificate Balance of another component (the
"Class A-2A Component"), representing an initial Certificate
Balance equal to $129,715,000, has been reduced to zero.
(3) Based on Maturity Assumptions described in the Prospectus
Supplement.
(4) Principal Window is the period (expressed in terms of months
and commencing with the month of the first Distribution Date)
during which distributions of principal are expected to be
made to the holders of each designated Class in accordance
with the Maturity Assumptions.
(5) Other than the Class X-1 and X-2 Certificates (collectively
the "Class X Certificates"), each Class of Certificates will
accrue interest generally at a fixed rate of interest except
in certain circumstances as described in the Prospectus
Supplement.
(6) To be offered privately.
(7) See note (1) on page T-3.
T-1
<PAGE> 165
$1,256,471,000 (Approximate)
Commercial Mortgage Pass-Through Certificates
Series 1998-WF1
I. Issue Characteristics
Issue Type: The Class A-1, A-2, X-2, B, C, D, and E Certificates are
offered pursuant to the Prospectus Supplement and
accompanying Prospectus dated February 26, 1998, and the
Class X-1, F, G, H, J, K, and L Certificates will be
offered privately (pursuant to Rule 144A under the
Securities Act of 1933, as amended) pursuant to a
Private Placement Memorandum, dated February 26, 1998.
Securities Offered: $1,256,471,000 monthly pay, multi-class sequential pay
commercial mortgage REMIC Pass-Through Certificates,
including six fixed-rate principal and interest Classes
(Classes A-1, A-2, B, C, D and E) and a variable rate
interest only class (Class X-2).
Collateral: The collateral consists of a $1,392,212,342 pool of
fixed-rate commercial and multifamily Mortgage Loans
Sellers: Wells Fargo Bank, National Association, Morgan Stanley
Mortgage Capital Inc. and John Hancock Real Estate
Finance, Inc.
Lead Manager: Morgan Stanley & Co. Incorporated
Co-Managers: Bear, Stearns & Co. Inc. and Deutsche Morgan Grenfell
Inc. (Classes A-1 and A-2 only)
Master Servicer: Wells Fargo Bank, National Association
Special Servicer: CRIIMI MAE Services Limited Partnership
Trustee/Fiscal Agent: LaSalle National Bank/ABN AMRO Bank N.V.
Pricing Date: February 26, 1998
Closing Date: March 5, 1998
Distribution Dates: The 15th of each month, commencing April 15, 1998
Minimum Denominations: $5,000 for Class A Certificates; $50,000 for all other
Certificates (other than the Class R Certificates)
Settlement Terms: DTC, Euroclear and Cedel, same day funds, with accrued
interest
Legal/Regulatory The Class A-1, A-2 and X-2 Certificates are expected to
Status: be eligible for exemptive relief under ERISA. No Class
of Certificates is SMMEA eligible.
Risk Factors: THE CERTIFICATES INVOLVE A DEGREE OF RISK AND MAY NOT BE
SUITABLE FOR ALL INVESTORS. SEE THE "RISK FACTORS AND
OTHER SPECIAL CONSIDERATIONS" SECTION OF THE PROSPECTUS
SUPPLEMENT AND THE "RISK FACTORS" SECTION OF THE
PROSPECTUS.
T-2
<PAGE> 166
$1,256,471,000 (Approximate)
Commercial Mortgage Pass-Through Certificates
Series 1998-WF1
II. Structure Characteristics
The Certificates (other than the Class X-1, X-2 and Class R Certificates) are
fixed-rate, monthly pay, multi-class, sequential pay REMIC Pass-Through
Certificates. All Classes of Certificates derive their cash flows from the
entire pool of Mortgage Loans.
[GRAPHIC OMITTED]
Note(1): The Pass-Through Rate for the Class X-1 Certificates on each
Distribution Date will equal, in general, the weighted average of
the Class X-1 Strip Rates for the respective Principal Balance
Certificates (or, in the case of the Class A-2 Certificates, the
Class A-2A Component and the Class A-2B Component thereof) for such
Distribution Date (weighted on the basis of their respective
Certificate Balances or Component Balances). The Class X-1 Strip
Rate in respect of any such Class of Certificates or such Component
for any Distribution Date will, in general, equal (i) the Weighted
Average Net Mortgage Rate for such Distribution Date minus (ii) (x)
in the case of the Class A-1, Class F, Class G, Class H, Class J,
Class K, and Class L Certificates and the Class A-2A Component, the
Pass-Through Rate for such Class of Certificates or such Component
and (y) in the case of the Class A-2B Component and the Class B,
Class C, Class D, and Class E Certificates, (I) for any Distribution
Date occurring on or before March 15, 2003, the corresponding rates
set forth on Schedule A to the Prospectus Supplement for such
Distribution Date and (II) for any Distribution Date occurring after
March 15, 2003, the Pass-Through Rate for such Class Certificates or
such Component. The Pass-Through Rate for the Class X-2 Certificates
on each Distribution Date will equal, in general, the weighted
average of the Class X-2 Strip Rates for the Class A-2B Component
and the Class B, Class C, Class D, and Class E Certificates for such
Distribution Date (weighted on the basis of their respective
Certificate Balances or Component Balances). The Class X-2 Strip
Rate in respect of any such Class or Component for any Distribution
Date will, in general, equal the (i) lesser of (x) the rates set
forth on Schedule A to the Prospectus Supplement for such
Distribution Date less the Class A-2, Class B, Class C, Class D, and
Class E Pass-Through Rates respectively, and (y) the Weighted
Average Net Mortgage Rate for such Distribution Date minus (ii) the
Pass-Through Rate for such Class of Certificates or such Component.
The Pass-Through Rate for each class of Principal Balance
Certificates for any Distribution Date will not exceed the Weighted
Average Net Mortgage Rate for such Distribution Date.
T-3
<PAGE> 167
$1,256,471,000 (Approximate)
Commercial Mortgage Pass-Through Certificates
Series 1998-WF1
Interest Distributions: Each Class of Certificates (other than the Class R
Certificates) will be entitled on each Distribution Date
to interest accrued at its Pass-Through Rate on the
outstanding Certificate Balance or Notional Amount of
such Class, as applicable.
Pass-Through Rates: Class A-1: 6.25%
Class A-2: 6.55%
Class B: 6.67%
Class C: 6.77%
Class D: 7.12%
Class E: 7.30%
Class F: 7.30%
Class G: 6.25%
Class H: 6.25%
Class J: 6.25%
Class K: 6.25%
Class L: 6.25%
Class X-1: See note (1) on page T-3
Class X-2: See note (1) on page T-3
Principal
Distributions: Principal will be distributed on each Distribution Date
to the most senior Class (i.e., the Class with the
earliest alphabetical/numerical Class designation) of
the Principal Balance Certificates outstanding, until
its Certificate Balance is reduced to zero (sequential
order). If, due to losses, the Certificate Balances of
the Class B through Class L Certificates are reduced to
zero or Appraisal Reductions exceed the aggregate
Certificate Balance of the Subordinate Certificates,
payments of principal to the Class A-1 and A-2
Certificates will be made on a pro rata basis.
Prepayment Premium Prepayment Premiums (to the extent received) will be
Allocation: allocated among the Class X-1 Certificates and the
Principal Balance Certificates (other than Classes F, G,
H, J, K, and L) entitled to distributions in respect of
principal on any Distribution Date, as described in the
Prospectus Supplement under "DESCRIPTION OF THE
CERTIFICATES - Distributions of Prepayment Premiums."
Credit Enhancement: Each Class of Certificates (other than Classes A-1, A-2,
X-1, and X-2) will be subordinate to all other Classes
with an earlier alphabetical Class designation.
Advancing: The Master Servicer, the Trustee, and the Fiscal Agent
(in that order) will each be obligated to make P&I
Advances and Servicing Advances, including delinquent
property taxes and insurance, but only to the extent
that such Advances are deemed recoverable.
Realized Losses and Realized Losses and Expense Losses, if any, will be
Expense Losses: allocated to the Class L, Class K, Class J, Class H,
Class G, Class F, Class E, Class D, Class C and Class B
Certificates, in that order, and then to Classes A-1 and
A-2 and, with respect to losses allocated to interest,
Class X Certificates, pro rata, in each case reducing
amounts payable thereto. Any interest shortfall of any
Class of Certificates will result in unpaid interest for
such Class which, together with interest thereon
compounded monthly at one-twelfth the applicable
Pass-Through Rate for such Class, will be payable in
subsequent periods, subject to available funds.
T-4
<PAGE> 168
$1,256,471,000 (Approximate)
Commercial Mortgage Pass-Through Certificates
Series 1998-WF1
Prepayment Interest For any Distribution Date, any Net Aggregate Prepayment
Shortfalls: Interest Shortfall for such Distribution Date will
generally be allocated pro rata to each Class of
Certificates in proportion to its entitlement to
interest.
Appraisal Reductions: An appraisal reduction generally will be created in the
amount, if any, by which the Principal Balance of a
Specially Serviced Mortgage Loan (plus other amounts
overdue in connection with such loan) exceeds 90% of the
appraised value of the related Mortgaged Property. The
Appraisal Reduction Amount will reduce proportionately
the amount of P&I Advances for such loan, which
reduction will result, in general, in a reduction of
interest distributable to the most subordinate Class of
Principal Balance Certificates outstanding.
An Appraisal Reduction will be reduced to zero as of the
date the related Mortgage Loan has been brought current
for at least three consecutive months, paid in full,
liquidated, repurchased, or otherwise disposed of.
Operating Adviser: The Operating Adviser, which may be appointed by the
Controlling Class, will have the right to approve and
direct certain actions of the Special Servicer with
respect to Specially Serviced Mortgage Loans. Examples
include the right to make certain modifications,
foreclose, sell, bring an REO Property into
environmental compliance or accept substitute or
additional collateral.
Controlling Class: The Controlling Class will generally be the most
subordinate Class of Certificates outstanding at any
time or, if the Certificate Balance of such Class is
less than 50% (or for Class L, 20%) of the initial
Certificate Balance of such Class, the next most
subordinate Class of Principal Balance Certificates.
Special Servicer: In general, the Special Servicer has the right to modify
the terms of a Specially Serviced Mortgage Loan if it
determines that such modification would increase the net
present value of the proceeds to the Trust, provided
that the Special Servicer generally may not extend the
maturity date of a Mortgage Loan beyond two years prior
to the Final Rated Distribution Date, grant more than
three one-year extensions of the maturity date of a
Mortgage Loan which has a below market rate, reduce the
Mortgage Rate to a rate below the market rate or defer
interest due in excess of 10% of the Scheduled Principal
Balance of such Mortgage Loan.
Optional Termination: The Depositor, then the Master Servicer, then the
Special Servicer, and then the holder of a majority of
the R-1 Certificates will have the option to purchase,
in whole but not in part, the remaining assets of the
Trust on or after the Distribution Date on which the
aggregate Certificate Balance of all Classes of
Certificates then outstanding is less than or equal to
1% of the Initial Pool Balance. Such purchase price will
generally be at a price equal to the unpaid aggregate
Scheduled Principal Balance of the Mortgage Loans, plus
accrued and unpaid interest and unreimbursed Advances.
Reports to The Trustee will prepare and deliver monthly
Certificateholders: Certificateholder Reports. The Special Servicer will
prepare and deliver to the Trustee a monthly Special
Servicer Report summarizing the status of each Specially
Serviced Mortgage Loan. The Master Servicer and the
Special Servicer will prepare and deliver to the Trustee
an annual report setting forth, among other things, the
debt service coverage ratios for each Mortgage Loan, as
available. Each of the reports will be available to the
Certificateholders. A Report containing information
regarding the Mortgage Loans will be available
electronically.
T-5
<PAGE> 169
$1,256,471,000 (Approximate)
Commercial Mortgage Pass-Through Certificates
Series 1998-WF1
III. Originators Wells Fargo
The Mortgage Pool includes 175 Mortgage Loans, representing
approximately 53.0% of the Initial Pool Balance, originated by
Wells Fargo, National Association ("Wells Fargo").
Founded in 1852, Wells Fargo & Company is the holding company
for Wells Fargo. Wells Fargo provides a full range of banking
services to individual, agri-business, real estate,
commercial, and small business customers. For the year ended
December 31, 1997 and for the year ended December 31, 1996,
Wells Fargo & Company reported, on a consolidated basis, net
income of $1,155MM and $1,071MM, respectively. As of December
31, 1997 and as of December 31, 1996 Wells Fargo & Company
reported, on a consolidated basis, total assets of $97.5Bn and
$108.9Bn, respectively and total capital (Tier 1 & 2) of
$9.2Bn and $10.0Bn, respectively.
As of December 31, 1997 Wells Fargo and its subsidiaries
serviced a portfolio of multifamily and commercial mortgage
loans totaling approximately $15.2Bn, of which $3.0Bn was for
third parties. Commercial and multifamily mortgage loans
originated for securitization by Wells Fargo and its
subsidiaries are generally serviced by Wells Fargo. Wells
Fargo has been approved as a master and special servicer by
all four rating agencies.
The Loans originated by Wells Fargo were originated through
Wells Fargo's Capital Markets Group ("Capital Markets Group").
The Capital Markets Group maintains loan production offices in
six metropolitan areas in California and nine other cities
nationwide. The group is staffed with approximately 20
originators and approximately 20 underwriters and is supported
by Wells Fargo's Appraisal and Real Estate Technical Services
(RETECHS) personnel.
Wells Fargo has completed three previous conduit
securitizations.
Morgan Stanley Mortgage Capital Inc.
The Mortgage Pool includes 97 Mortgage Loans, representing
approximately 36.0% of the Initial Pool Balance, either
acquired or originated by or on behalf of Morgan Stanley
Mortgage Capital Inc. ("MSMC"). MSMC is a subsidiary of Morgan
Stanley & Co. that was formed to originate and purchase
mortgage loans secured by commercial and multifamily real
estate.
John Hancock Real Estate Finance, Inc.
The Mortgage Pool includes 34 Mortgage Loans, representing
approximately 11.0% of the Initial Pool Balance, originated by
John Hancock Real Estate Finance, Inc. ("JHREF"). JHREF is a
wholly-owned subsidiary of John Hancock Subsidiaries, Inc.,
which is a wholly-owned subsidiary of John Hancock Mutual Life
Insurance Company. JHREF was formed to originate and service
commercial and multifamily mortgage loans. JHREF presently has
seven offices across the country and a loan servicing center
in Atlanta, GA. Each of the JHREF Loans were underwritten at
JHREF's Boston headquarters and was closed by JHREF.
T-6
<PAGE> 170
$1,256,471,000 (Approximate)
Commercial Mortgage Pass-Through Certificates
Series 1998-WF1
IV. Collateral Description
Summary: The Mortgage Pool consists of a $1,392,212,342 pool of 306
fixed-rate, first lien, mortgage loans secured by liens on
commercial and multifamily properties located throughout 36
states. As of the Cut-Off Date, the Mortgage Loans have a
weighted average Mortgage Rate of 7.760% and a weighted
average remaining term to maturity of 118 months. See the
Appendices to the Prospectus Supplement for more detailed
collateral information.
GEOGRAPHIC DISTRIBUTION
[GRAPHIC OMITTED]
T-7
<PAGE> 171
PROSPECTUS
Mortgage Pass-Through Certificates
(Issuable in Series)
Morgan Stanley Capital I Inc.
Depositor
The Certificates offered hereby and by Supplements to this Prospectus (the
"Offered Certificates") will be offered from time to time in one or more series.
Each series of Certificates will represent in the aggregate the entire
beneficial ownership interest in a trust fund (with respect to any series, the
"Trust Fund") consisting of one or more segregated pools of various types of
multifamily or commercial mortgage loans (the "Mortgage Loans"), mortgage
participations, mortgage pass-through certificates, mortgage-backed securities
evidencing interests therein or secured thereby (the "MBS"), certain direct
obligations of the United States, agencies thereof or agencies created thereby
(the "Government Securities") or a combination of Mortgage Loans, MBS and/or
Government Securities (with respect to any series, collectively, "Assets"). If
so specified in the related Prospectus Supplement, some or all of the Mortgage
Loans will include assignments of the leases of the related Mortgaged Properties
(as defined herein) and/or assignments of the rental payments due from the
lessees under such leases (each type of assignment, a "Lease Assignment"). A
significant or the sole source of payments on certain Commercial Loans (as
defined herein) and, therefore, of distributions on certain series of
Certificates, will be such rent payments. The Mortgage Loans and MBS are
collectively referred to herein as the "Mortgage Assets." If so specified in the
related Prospectus Supplement, the Trust Fund for a series of Certificates may
include letters of credit, insurance policies, guarantees, reserve funds or
other types of credit support, or any combination thereof (with respect to any
series, collectively, "Credit Support"), and currency or interest rate exchange
agreements and other financial assets, or any combination thereof (with respect
to any series, collectively, "Cash Flow Agreements"). See "Description of the
Trust Funds," "Description of the Certificates" and "Description of Credit
Support."
Each series of Certificates will consist of one or more classes of
Certificates that may (i) provide for the accrual of interest thereon based on
fixed, variable or adjustable rates; (ii) be senior or subordinate to one or
more other classes of Certificates in respect of certain distributions on the
Certificates; (iii) be entitled to principal distributions, with
disproportionately low, nominal or no interest distributions; (iv) be entitled
to interest distributions, with disproportionately low, nominal or no principal
distributions; (v) provide for distributions of accrued interest thereon
commencing only following the occurrence of certain events, such as the
retirement of one or more other classes of Certificates of such series; (vi)
provide for distributions of principal sequentially, based on specified payment
schedules or other methodologies; and/or (vii) provide for distributions based
on a combination of two or more components thereof with one or more of the
characteristics described in this paragraph, to the extent of available funds,
in each case as described in the related Prospectus Supplement. Any such classes
may include classes of Offered Certificates. See "Description of the
Certificates."
(cover continued on next page)
--------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS OR THE RELATED PROSPECTUS SUPPLEMENT. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
--------------------
Investors should consider, among other things, certain risks set forth
under the caption "Risk Factors" herein and in the related Prospectus
Supplement.
Prior to issuance there will have been no market for the Certificates of
any series and there can be no assurance that a secondary market for any Offered
Certificates will develop or that, if it does develop, it will continue. This
Prospectus may not be used to consummate sales of the Offered Certificates of
any series unless accompanied by the Prospectus Supplement for such series.
Offers of the Offered Certificates may be made through one or more
different methods, including offerings through underwriters, as more fully
described under "Plan of Distribution" herein and in the related Prospectus
Supplement.
----------------------
MORGAN STANLEY & CO.
INCOPORATED
February 19, 1998
<PAGE> 172
Principal and interest with respect to Certificates will be distributable
monthly, quarterly, semi-annually or at such other intervals and on the dates
specified in the related Prospectus Supplement. Distributions on the
Certificates of any series will be made only from the assets of the related
Trust Fund.
The Certificates of each series will not represent an obligation of or
interest in the Depositor, Morgan Stanley & Co. Incorporated, any Master
Servicer, any Sub-Servicer, any Special Servicer or any of their respective
affiliates, except to the limited extent described herein and in the related
Prospectus Supplement. Neither the Certificates nor any assets in the related
Trust Fund will be guaranteed or insured by any governmental agency or
instrumentality or by any other person, unless otherwise provided in the related
Prospectus Supplement. The assets in each Trust Fund will be held in trust for
the benefit of the holders of the related series of Certificates pursuant to a
Pooling and Servicing Agreement or a Trust Agreement, as more fully described
herein.
The yield on each class of Certificates of a series will be affected by,
among other things, the rate of payment of principal (including prepayments,
repurchase and defaults) on the Mortgage Assets in the related Trust Fund and
the timing of receipt of such payments as described under the caption "Yield
Considerations" herein and in the related Prospectus Supplement. A Trust Fund
may be subject to early termination under the circumstances described herein and
in the related Prospectus Supplement.
Prospective investors should review the information appearing under the
caption "Risk Factors" herein and such information as may be set forth under the
caption "Risk Factors" in the related Prospectus Supplement before purchasing
any Offered Certificate.
If so provided in the related Prospectus Supplement, one or more elections
may be made to treat the related Trust Fund or a designated portion thereof as a
"real estate mortgage investment conduit" for federal income tax purposes. See
also "Certain Federal Income Tax Consequences" herein.
Until 90 days after the date of each Prospectus Supplement, all dealers
effecting transactions in the Offered Certificates covered by such Prospectus
Supplement, whether or not participating in the distribution thereof, may be
required to deliver such Prospectus Supplement and this Prospectus. This is in
addition to the obligation of dealers to deliver a Prospectus and Prospectus
Supplement when acting as underwriters and with respect to their unsold
allotments or subscriptions.
PROSPECTUS SUPPLEMENT
As more particularly described herein, the Prospectus Supplement relating
to the Offered Certificates of each series will, among other things, set forth
with respect to such Certificates, as appropriate: (i) a description of the
class or classes of Certificates, the payment provisions with respect to each
such class and the Pass-Through Rate or method of determining the Pass-Through
Rate with respect to each such class; (ii) the aggregate principal amount and
distribution dates relating to such series and, if applicable, the initial and
final scheduled distribution dates for each class; (iii) information as to the
assets comprising the Trust Fund, including the general characteristics of the
assets included therein, including the Mortgage Assets and any Credit Support
and Cash Flow Agreements (with respect to the Certificates of any series, the
"Trust Assets"); (iv) the circumstances, if any, under which the Trust Fund may
be subject to early termination; (v) additional information with respect to the
method of distribution of such Certificates; (vi) whether one or more REMIC
elections will be made and designation of the regular interests and residual
interests; (vii) the aggregate original percentage ownership interest in the
Trust Fund to be evidenced by each class of Certificates; (viii) information as
to any Master Servicer, any Sub-Servicer, any Special Servicer (or provision for
the appointment thereof) and the Trustee, as applicable; (ix) information as to
the nature and extent of subordination with respect to any class of Certificates
that is subordinate in right of payment to any other class; and (x) whether such
Certificates will be initially issued in definitive or book-entry form.
2
<PAGE> 173
AVAILABLE INFORMATION
The Depositor has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement (of which this Prospectus forms a part)
under the Securities Act of 1933, as amended, with respect to the Offered
Certificates. This Prospectus and the Prospectus Supplement relating to each
series of Certificates contain summaries of the material terms of the documents
referred to herein and therein, but do not contain all of the information set
forth in the Registration Statement pursuant to the rules and regulations of the
Commission. For further information, reference is made to such Registration
Statement and the exhibits thereto. Such Registration Statement and exhibits can
be inspected and copied at prescribed rates at the public reference facilities
maintained by the Commission at its Public Reference Section, 450 Fifth Street,
N.W., Washington, D.C. 20549, and at its Regional Offices located as follows:
Chicago Regional Office, Citicorp Center, 500 West Madison Street, Chicago,
Illinois 60661; and New York Regional Office, Seven World Trade Center, New
York, New York 10048.
To the extent described in the related Prospectus Supplement, some or all
of the Mortgage Loans may be secured by an assignment of the lessors' (i.e., the
related mortgagors') rights in one or more leases (each, a "Lease") of the
related Mortgaged Property. Unless otherwise specified in the related Prospectus
Supplement, no series of Certificates will represent interests in or obligations
of any lessee (each, a "Lessee") under a Lease. If indicated, however, in the
Prospectus Supplement for a given series, a significant or the sole source of
payments on the Mortgage Loans in such series, and, therefore, of distributions
on such Certificates, will be rental payments due from the Lessees under the
Leases. Under such circumstances, prospective investors in the related series of
Certificates may wish to consider publicly available information, if any,
concerning the Lessees. Reference should be made to the related Prospectus
Supplement for information concerning the Lessees and whether any such Lessees
are subject to the periodic reporting requirements of the Securities Exchange
Act of 1934, as amended.
No person has been authorized to give any information or to make any
representations other than those contained in this Prospectus and any Prospectus
Supplement with respect hereto and, if given or made, such information or
representations must not be relied upon. This Prospectus and any Prospectus
Supplement with respect hereto do not constitute an offer to sell or a
solicitation of an offer to buy any securities other than the Offered
Certificates or an offer of the Offered Certificates to any person in any state
or other jurisdiction in which such offer would be unlawful. The delivery of
this Prospectus at any time does not imply that information herein is correct as
of any time subsequent to its date; however, if any material change occurs while
this Prospectus is required by law to be delivered, this Prospectus will be
amended or supplemented accordingly.
A Master Servicer or the Trustee will be required to mail to holders of
Offered Certificates of each series periodic unaudited reports concerning the
related Trust Fund. Unless and until definitive Certificates are issued, or
unless otherwise provided in the related Prospectus Supplement, such reports
will be sent on behalf of the related Trust Fund to Cede & Co. ("Cede"), as
nominee of The Depository Trust Company ("DTC") and registered holder of the
Offered Certificates, pursuant to the applicable Agreement. Such reports may be
available to holders of interests in the Certificates (the "Certificateholders")
upon request to their respective DTC participants. See "Description of the
Certificates--Reports to Certificateholders" and "Description of the
Agreements--Evidence as to Compliance." The Depositor will file or cause to be
filed with the Commission such periodic reports with respect to each Trust Fund
as are required under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and the rules and regulations of the Commission thereunder.
3
<PAGE> 174
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
There are incorporated herein by reference all documents and reports filed
or caused to be filed by the Depositor with respect to a Trust Fund pursuant to
Section 13(a), 13(c), 14 or 15(d) of the Exchange Act, prior to the termination
of an offering of Offered Certificates evidencing interests therein. The
Depositor will provide or cause to be provided without charge to each person to
whom this Prospectus is delivered in connection with the offering of one or more
classes of Offered Certificates, a copy of any or all documents or reports
incorporated herein by reference, in each case to the extent such documents or
reports relate to one or more of such classes of such Offered Certificates,
other than the exhibits to such documents (unless such exhibits are specifically
incorporated by reference in such documents). Requests to the Depositor should
be directed in writing to Morgan Stanley Capital I Inc., c/o Morgan Stanley &
Co. Incorporated, 1585 Broadway, 37th Floor, New York, New York 10036,
Attention: John E. Westerfield, or by telephone at (212) 761-4700. The Depositor
has determined that its financial statements are not material to the offering of
any Offered Certificates.
TABLE OF CONTENTS
PAGE
PROSPECTUS SUPPLEMENT...................................................... 2
AVAILABLE INFORMATION...................................................... 3
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE.......................... 4
SUMMARY OF PROSPECTUS...................................................... 5
RISK FACTORS............................................................... 13
DESCRIPTION OF THE TRUST FUNDS............................................. 20
USE OF PROCEEDS............................................................ 26
YIELD CONSIDERATIONS....................................................... 26
THE DEPOSITOR.............................................................. 30
DESCRIPTION OF THE CERTIFICATES............................................ 30
DESCRIPTION OF THE AGREEMENTS.............................................. 38
DESCRIPTION OF CREDIT SUPPORT.............................................. 54
CERTAIN LEGAL ASPECTS OF THE MORTGAGE LOANS AND THE LEASES................. 57
CERTAIN FEDERAL INCOME TAX CONSEQUENCES.................................... 73
STATE TAX CONSIDERATIONS................................................... 98
ERISA CONSIDERATIONS....................................................... 99
LEGAL INVESTMENT........................................................... 101
PLAN OF DISTRIBUTION....................................................... 103
LEGAL MATTERS.............................................................. 103
FINANCIAL INFORMATION...................................................... 104
RATING..................................................................... 104
INDEX OF PRINCIPAL DEFINITIONS............................................. 105
4
<PAGE> 175
SUMMARY OF PROSPECTUS
The following summary of certain pertinent information is qualified in its
entirety by reference to the more detailed information appearing elsewhere in
this Prospectus and by reference to the information with respect to each series
of Certificates contained in the Prospectus Supplement to be prepared and
delivered in connection with the offering of such series. An Index of Principal
Definitions is included at the end of this Prospectus.
Title of Certificates............... Mortgage Pass-Through Certificates,
issuable in series (the "Certificates").
Depositor........................... Morgan Stanley Capital I Inc., a
wholly-owned subsidiary of Morgan Stanley
Group Inc. See "The Depositor."
Master Servicer..................... The master servicer (the "Master
Servicer"), if any, for each series of
Certificates, which may be an affiliate
of the Depositor, will be named in the
related Prospectus Supplement. See
"Description of the
Agreements--Collection and Other
Servicing Procedures."
Special Servicer.................... The special servicer (the "Special
Servicer"), if any, for each series of
Certificates, which may be an affiliate
of the Depositor, will be named, or the
circumstances in accordance with which a
Special Servicer will be appointed will
be described, in the related Prospectus
Supplement. See "Description of the
Agreements--Special Servicers."
Trustee............................. The trustee (the "Trustee") for each
series of Certificates will be named in
the related Prospectus Supplement. See
"Description of the Agreements--The
Trustee."
The Trust Assets.................... Each series of Certificates will
represent in the aggregate the entire
beneficial ownership interest in a Trust
Fund consisting primarily of:
(a) Mortgage Assets................. The Mortgage Assets with respect to each
series of Certificates will consist of a
pool of multifamily and/or commercial
mortgage loans (collectively, the
"Mortgage Loans") and mortgage
participations, mortgage pass-through
certificates or other mortgage-backed
securities evidencing interests in or
secured by Mortgage Loans (collectively,
the "MBS") or a combination of Mortgage
Loans and MBS. The Mortgage Loans will
not be guaranteed or insured by the
Depositor or any of its affiliates or,
unless otherwise provided in the
Prospectus Supplement, by any
governmental agency or instrumentality or
other person. As more specifically
described herein, the Mortgage Loans will
be secured by first or junior liens on,
or security interests in, properties
consisting of (i) residential properties
consisting of five or more rental or
cooperatively-owned dwelling units (the
"Multifamily Properties") or (ii) office
buildings, shopping centers, retail
stores, hotels or motels, nursing homes,
hospitals or other health-care related
facilities, mobile home parks, warehouse
facilities, mini-warehouse facilities or
self-storage facilities, industrial
plants, congregate care facilities, mixed
use or other types of commercial
properties (the "Commercial Properties").
5
<PAGE> 176
The term "Mortgaged Properties" shall
refer to Multifamily Properties or
Commercial Properties, or both.
To the extent described in the related
Prospectus Supplement, some or all of the
Mortgage Loans may also be secured by an
assignment of one or more leases (each, a
"Lease") of one or more lessees (each, a
"Lessee") of all or a portion of the
related Mortgaged Properties. Unless
otherwise specified in the related
Prospectus Supplement, a significant or
the sole source of payments on certain
Commercial Loans (as defined herein) will
be the rental payments due under the
related Leases. In certain circumstances,
with respect to Commercial Properties,
the material terms and conditions of the
related Leases may be set forth in the
related Prospectus Supplement. See
"Description of the Trust Funds--Mortgage
Loans--Leases" and "Risk Factors--Limited
Assets" herein.
The Mortgaged Properties may be located
in any one of the fifty states, the
District of Columbia or the Commonwealth
of Puerto Rico. The Prospectus Supplement
will indicate additional jurisdictions,
if any, in which the Mortgaged Properties
may be located. Unless otherwise provided
in the related Prospectus Supplement, all
Mortgage Loans will have individual
principal balances at origination of not
less than $25,000 and original terms to
maturity of not more than 40 years. All
Mortgage Loans will have been originated
by persons other than the Depositor, and
all Mortgage Assets will have been
purchased, either directly or indirectly,
by the Depositor on or before the date of
initial issuance of the related series of
Certificates. The related Prospectus
Supplement will indicate if any such
persons are affiliates of the Depositor.
Each Mortgage Loan may provide for no
accrual of interest or for accrual of
interest thereon at an interest rate (a
"Mortgage Rate") that is fixed over its
term or that adjusts from time to time,
or that may be converted from an
adjustable to a fixed Mortgage Rate, or
from a fixed to an adjustable Mortgage
Rate, from time to time at the
mortgagor's election, in each case as
described in the related Prospectus
Supplement. Adjustable Mortgage Rates on
the Mortgage Loans in a Trust Fund may be
based on one or more indices. Each
Mortgage Loan may provide for scheduled
payments to maturity, payments that
adjust from time to time to accommodate
changes in the Mortgage Rate or to
reflect the occurrence of certain events,
and may provide for negative amortization
or accelerated amortization, in each case
as described in the related Prospectus
Supplement. Each Mortgage Loan may be
fully amortizing or require a balloon
payment due on its stated maturity date,
in each case as described in the related
Prospectus Supplement. Each Mortgage Loan
may contain prohibitions on prepayment or
require payment of a premium or a yield
maintenance penalty in connection with a
prepayment, in each case as described in
the related Prospectus Supplement. The
Mortgage Loans may provide for payments
of principal, interest or both, on due
dates that occur monthly, quarterly,
semi-annually or
6
<PAGE> 177
at such other interval as is specified in
the related Prospectus Supplement. See
"Description of the Trust Funds--Assets."
(b) Government Securities........... If so provided in the related Prospectus
Supplement, the Trust Fund may include,
in addition to Mortgage Assets, certain
direct obligations of the United States,
agencies thereof or agencies created
thereby which provide for payment of
interest and/or principal (collectively,
"Government Securities").
(c) Collection Accounts............. Each Trust Fund will include one or more
accounts established and maintained on
behalf of the Certificateholders into
which the person or persons designated in
the related Prospectus Supplement will,
to the extent described herein and in
such Prospectus Supplement, deposit all
payments and collections received or
advanced with respect to the Mortgage
Assets and other assets in the Trust
Fund. Such an account may be maintained
as an interest bearing or a non-interest
bearing account, and funds held therein
may be held as cash or invested in
certain short-term, investment grade
obligations, in each case as described in
the related Prospectus Supplement. See
"Description of the
Agreements--Certificate Account and Other
Collection Accounts."
(d) Credit Support.................. If so provided in the related Prospectus
Supplement, partial or full protection
against certain defaults and losses on
the Mortgage Assets in the related Trust
Fund may be provided to one or more
classes of Certificates of the related
series in the form of subordination of
one or more other classes of Certificates
of such series, which other classes may
include one or more classes of Offered
Certificates, or by one or more other
types of credit support, such as a letter
of credit, insurance policy, guarantee,
reserve fund or another type of credit
support, or a combination thereof (any
such coverage with respect to the
Certificates of any series, "Credit
Support"). The amount and types of
coverage, the identification of the
entity providing the coverage (if
applicable) and related information with
respect to each type of Credit Support,
if any, will be described in the
Prospectus Supplement for a series of
Certificates. The Prospectus Supplement
for any series of Certificates evidencing
an interest in a Trust Fund that includes
MBS will describe any similar forms of
credit support that are provided by or
with respect to, or are included as part
of the trust fund evidenced by or
providing security for, such MBS. See
"Risk Factors--Credit Support
Limitations" and "Description of Credit
Support."
(e) Cash Flow Agreements............ If so provided in the related Prospectus
Supplement, the Trust Fund may include
guaranteed investment contracts pursuant
to which moneys held in the funds and
accounts established for the related
series will be invested at a specified
rate. The Trust Fund may also include
certain other agreements, such as
interest rate exchange agreements,
interest rate cap or floor agreements,
currency exchange agreements or similar
agreements provided to reduce the effects
of interest rate or currency exchange
rate fluctuations on the Assets or on one
or more classes of Certificates.
(Currency exchange agreements might be
included in the Trust Fund if some or all
of the
7
<PAGE> 178
Mortgage Assets (such as Mortgage Loans
secured by Mortgaged Properties located
outside the United States) were
denominated in a non-United States
currency.) The principal terms of any
such guaranteed investment contract or
other agreement (any such agreement, a
"Cash Flow Agreement"), including,
without limitation, provisions relating
to the timing, manner and amount of
payments thereunder and provisions
relating to the termination thereof,
will be described in the Prospectus
Supplement for the related series. In
addition, the related Prospectus
Supplement will provide certain
information with respect to the obligor
under any such Cash Flow Agreement. The
Prospectus Supplement for any series of
Certificates evidencing an interest in a
Trust Fund that includes MBS will
describe any cash flow agreements that
are included as part of the trust fund
evidenced by or providing security for
such MBS. See "Description of the Trust
Funds--Cash Flow Agreements."
Description of Certificates.
Distributions on Certificates....... Each series of Certificates evidencing an
interest in a Trust Fund that includes
Mortgage Loans as part of its assets will
be issued pursuant to a pooling and
servicing agreement, and each series of
Certificates evidencing an interest in a
Trust Fund that does not include Mortgage
Loans will be issued pursuant to a trust
agreement. Pooling and servicing
agreements and trust agreements are
referred to herein as the "Agreements."
Each series of Certificates will include
one or more classes. Each series of
Certificates (including any class or
classes of Certificates of such series
not offered hereby) will represent in the
aggregate the entire beneficial ownership
interest in the Trust Fund. Each class of
Certificates (other than certain Stripped
Interest Certificates, as defined below)
will have a stated principal amount (a
"Certificate Balance") and (other than
certain Stripped Principal Certificates,
as defined below), will accrue interest
thereon based on a fixed, variable or
adjustable interest rate (a "Pass-Through
Rate"). The related Prospectus Supplement
will specify the Certificate Balance, if
any, and the Pass-Through Rate for each
class of Certificates or, in the case of
a variable or adjustable Pass-Through
Rate, the method for determining the
Pass-Through Rate.
Each series of Certificates will consist
of one or more classes of Certificates
that may (i) provide for the accrual of
interest thereon based on fixed, variable
or adjustable rates; (ii) be senior
(collectively, "Senior Certificates") or
subordinate (col-lectively, "Subordinate
Certificates") to one or more other
classes of Certificates in respect of
certain distributions on the
Certificates; (iii) be entitled to
principal distributions, with
disproportionately low, nominal or no
interest distributions (collectively,
"Stripped Principal Certificates"); (iv)
be entitled to interest distributions,
with disproportionately low, nominal or
no principal distributions (collectively,
"Stripped Interest Certificates"); (v)
provide for distributions of accrued
interest thereon commencing only
following the occurrence of certain
events, such as the retirement of one or
more other classes of Certificates of
such series (collectively, "Accrual
Certificates"); (vi) provide for
distributions of principal
8
<PAGE> 179
sequentially, based on specified payment
schedules or other methodologies; and/or
(vii) provide for distributions based on
a combination of two or more components
thereof with one or more of the
characteristics described in this
paragraph, including a Stripped
Principal Certificate component and a
Stripped Interest Certificate component,
to the extent of available funds, in
each case as described in the related
Prospectus Supplement. Any such classes
may include classes of Offered
Certificates. With respect to
Certificates with two or more
components, references herein to
Certificate Balance, notional amount and
Pass-Through Rate refer to the principal
balance, if any, notional amount, if
any, and the Pass-Through Rate, if any,
for any such component.
The Certificates will not be guaranteed
or insured by the Depositor or any of its
affiliates, by any governmental agency or
instrumentality or by any other person,
unless otherwise provided in the related
Prospectus Supplement. See "Risk
Factors--Limited Assets" and "Description
of the Certificates."
(a) Interest........................ Interest on each class of Offered
Certificates (other than Stripped
Principal Certificates and certain
classes of Stripped Interest
Certificates) of each series will accrue
at the applicable Pass-Through Rate on
the outstanding Certificate Balance
thereof and will be distributed to
Certificateholders as provided in the
related Prospectus Supplement (each of
the specified dates on which
distributions are to be made, a
"Distribution Date"). Distributions with
respect to interest on Stripped Interest
Certificates may be made on each
Distribution Date on the basis of a
notional amount as described in the
related Prospectus Supplement.
Distributions of interest with respect to
one or more classes of Certificates may
be reduced to the extent of certain
delinquencies, losses, prepayment
interest shortfalls, and other
contingencies described herein and in the
related Prospectus Supplement. See "Risk
Factors--Average Life of Certificates;
Prepayments; Yields," "Yield
Considerations" and "Description of the
Certificates--Distributions of Interest
on the Certificates."
(b) Principal....................... The Certificates of each series initially
will have an aggregate Certificate
Balance no greater than the outstanding
principal balance of the Assets as of,
unless the related Prospectus Supplement
provides otherwise, the close of business
on the first day of the month of
formation of the related Trust Fund (the
"Cut-off Date"), after application of
scheduled payments due on or before such
date, whether or not received. The
Certificate Balance of a Certificate
outstanding from time to time represents
the maximum amount that the holder
thereof is then entitled to receive in
respect of principal from future cash
flow on the assets in the related Trust
Fund. Unless otherwise provided in the
related Prospectus Supplement,
distributions of principal will be made
on each Distribution Date to the class or
classes of Certificates entitled thereto
until the Certificate Balances of such
Certificates have been reduced to zero.
Unless otherwise specified in the related
Prospectus Supplement, distributions of
principal of any class of Certificates
will be made on
9
<PAGE> 180
a pro rata basis among all of the
Certificates of such class or by random
selection, as described in the related
Prospectus Supplement or otherwise
established by the related Trustee.
Stripped Interest Certificates with no
Certificate Balance will not receive
distributions in respect of principal.
See "Description of the
Certificates--Distributions of Principal
of the Certificates."
Advances............................ Unless otherwise provided in the related
Prospectus Supplement, the Master
Servicer will be obligated as part of its
servicing responsibilities to make
certain advances that in its good faith
judgment it deems recoverable with
respect to delinquent scheduled payments
on the Whole Loans in such Trust Fund.
Neither the Depositor nor any of its
affiliates will have any responsibility
to make such advances. Advances made by a
Master Servicer are reimbursable
generally from subsequent recoveries in
respect of such Whole Loans and otherwise
to the extent described herein and in the
related Prospectus Supplement. If and to
the extent provided in the Prospectus
Supplement for any series, the Master
Servicer will be entitled to receive
interest on its outstanding advances,
payable from amounts in the related Trust
Fund. The Prospectus Supplement for any
series of Certificates evidencing an
interest in a Trust Fund that includes
MBS will describe any corresponding
advancing obligation of any person in
connection with such MBS. See
"Description of the
Certificates--Advances in Respect of
Delinquencies."
Termination......................... If so specified in the related Prospectus
Supplement, a series of Certificates may
be subject to optional early termination
through the repurchase of the Assets in
the related Trust Fund by the party
specified therein, under the
circumstances and in the manner set forth
therein. If so provided in the related
Prospectus Supplement, upon the reduction
of the Certificate Balance of a specified
class or classes of Certificates by a
specified percentage or amount or on and
after a date specified in such Prospectus
Supplement, the party specified therein
will solicit bids for the purchase of all
of the Assets of the Trust Fund, or of a
sufficient portion of such Assets to
retire such class or classes, or purchase
such Assets at a price set forth in the
related Prospectus Supplement. In
addition, if so provided in the related
Prospectus Supplement, certain classes of
Certificates may be purchased subject to
similar conditions. See "Description of
the Certificates--Termination."
Registration of Certificates........ If so provided in the related Prospectus
Supplement, one or more classes of the
Offered Certificates will initially be
represented by one or more Certificates
registered in the name of Cede & Co., as
the nominee of DTC. No person acquiring
an interest in Offered Certificates so
registered will be entitled to receive a
definitive certificate representing such
person's interest except in the event
that definitive certificates are issued
under the limited circumstances described
herein. See "Risk Factors--Book-Entry
Registration" and "Description of the
Certificates--Book-Entry Registration and
Definitive Certificates."
10
<PAGE> 181
Tax Status of the Certificates...... The Certificates of each series will
constitute either (i) "regular interests"
("REMIC Regular Certificates") and
"residual interests" ("REMIC Residual
Certificates") in a Trust Fund treated as
a REMIC under Sections 860A through 860G
of the Code, or (ii) interests ("Grantor
Trust Certificates") in a Trust Fund
treated as a grantor trust under
applicable provisions of the Code.
(a) REMIC........................... REMIC Regular Certificates generally will
be treated as debt obligations of the
applicable REMIC for federal income tax
purposes. Certain REMIC Regular
Certificates may be issued with original
issue discount for federal income tax
purposes. See "Certain Federal Income Tax
Consequences" in the Prospectus
Supplement.
A portion (or, in certain cases, all) of
the income from REMIC Residual
Certificates (i) may not be offset by any
losses from other activities of the
holder of such REMIC Residual
Certificates, (ii) may be treated as
unrelated business taxable income for
holders of REMIC Residual Certificates
that are subject to tax on unrelated
business taxable income (as defined in
Section 511 of the Code), and (iii) may
be subject to foreign withholding rules.
See "Certain Federal Income Tax
Consequences--REMICs--Taxation of Owners
of REMIC Residual Certificates".
The Offered Certificates will be treated
as (i) assets described in section
7701(a)(19)(C) of the Internal Revenue
Code of 1986, as amended (the "Code") and
(ii) "real estate assets" within the
meaning of section 856(c)(4)(A) of the
Code, in each case to the extent
described herein and in the Prospectus.
See "Certain Federal Income Tax
Consequences" herein and in the
Prospectus.
(b) Grantor Trust................... If no election is made to treat the Trust
Fund relating to a Series of Certificates
as a real estate mortgage investment
conduit ("REMIC"), the Trust Fund will be
classified as a grantor trust and not as
an association taxable as a corporation
for federal income tax purposes, and
therefore holders of Certificates will be
treated as the owners of undivided pro
rata interests in the Mortgage Pool or
pool of securities and any other assets
held by the Trust Fund.
Investors are advised to consult their
tax advisors and to review "Certain
Federal Income Tax Consequences" herein
and in the related Prospectus Supplement.
ERISA Considerations................ A fiduciary of an employee benefit plan
or other retirement plan or arrangement,
including an individual retirement
account or annuity or a Keogh plan, and
any collective investment fund or
insurance company general or separate
account in which such plans, accounts,
annuities or arrangements are invested,
that is subject to Title I of the
Employee Retirement Income Security Act
of 1974, as amended ("ERISA"), or Section
4975 of the Code should carefully review
with its legal advisors whether the
purchase or holding of Offered
Certificates could give rise to a
transaction that is prohibited or is not
otherwise permissible either under ERISA
or Section 4975 of the Code. See "ERISA
Considerations" herein and in the related
11
<PAGE> 182
Prospectus Supplement. To the extent
specified in the related Prospectus
Supplement, certain classes of
Certificates may not be transferred
unless the Trustee and the Depositor are
furnished with a letter of
representations or an opinion of counsel
to the effect that such transfer will
not result in a violation of the
prohibited transaction provisions of
ERISA and the Code, will not cause the
assets of the Trust to be deemed "plan
assets" for purposes of ERISA and the
Code and will not subject the Trustee,
the Depositor or the Master Servicer to
additional obligations. See "ERISA
Considerations" herein and in the
related Prospectus Supplement.
Legal Investment.................... The related Prospectus Supplement will
specify whether any class or classes of
the Offered Certificates will constitute
"mortgage related securities" for
purposes of the Secondary Mortgage Market
Enhancement Act of 1984, as amended.
Investors whose investment authority is
subject to legal restrictions should
consult their own legal advisors to
determine whether and to what extent the
Offered Certificates constitute legal
investments for them. See "Legal
Investment" herein and in the related
Prospectus Supplement.
Rating.............................. At the date of issuance, as to each
series, each class of Offered
Certificates will be rated not lower than
investment grade by one or more
nationally recognized statistical rating
agencies (each, a "Rating Agency"). See
"Rating" herein and in the related
Prospectus Supplement.
12
<PAGE> 183
RISK FACTORS
Investors should consider, in connection with the purchase of Offered
Certificates, among other things, the following factors and certain other
factors as may be set forth in "Risk Factors" in the related Prospectus
Supplement.
Limited Liquidity
There can be no assurance that a secondary market for the Certificates of
any series will develop or, if it does develop, that it will provide holders
with liquidity of investment or will continue while Certificates of such series
remain outstanding. Any such secondary market may provide less liquidity to
investors than any comparable market for securities evidencing interests in
single family mortgage loans. The market value of Certificates will fluctuate
with changes in prevailing rates of interest. Consequently, sale of Certificates
by a holder in any secondary market that may develop may be at a discount from
100% of their original principal balance or from their purchase price.
Furthermore, secondary market purchasers may look only hereto, to the related
Prospectus Supplement and to the reports to Certificateholders delivered
pursuant to the related Agreement as described herein under the heading
"Description of the Certificates--Reports to Certificateholders", "--Book-Entry
Registration and Definitive Certificates" and "Description of the
Agreements--Evidence as to Compliance" for information concerning the
Certificates. Except to the extent described herein and in the related
Prospectus Supplement, Certificateholders will have no redemption rights and the
Certificates are subject to early retirement only under certain specified
circumstances described herein and in the related Prospectus Supplement. See
"Description of the Certificates--Termination". Morgan Stanley & Co.
Incorporated currently expects to make a secondary market in the Offered
Certificates, but has no obligation to do so.
Limited Assets
The Certificates will not represent an interest in or obligation of the
Depositor, the Master Servicer, or any of their affiliates. The only obligations
with respect to the Certificates or the Assets will be the obligations (if any)
of the Warrantying Party (as defined herein) pursuant to certain limited
representations and warranties made with respect to the Mortgage Loans, the
Master Servicer's, any Special Servicer's and any Sub-Servicer's servicing
obligations under the related Pooling and Servicing Agreement (including the
limited obligation to make certain advances in the event of delinquencies on the
Mortgage Loans, but only to the extent deemed recoverable). Since certain
representations and warranties with respect to the Mortgage Assets may have been
made and/or assigned in connection with transfers of such Mortgage Assets prior
to the Closing Date, the rights of the Trustee and the Certificateholders with
respect to such representations or warranties will be limited to their rights as
an assignee thereof. Unless otherwise specified in the related Prospectus
Supplement, none of the Depositor, the Master Servicer or any affiliate thereof
will have any obligation with respect to representations or warranties made by
any other entity. Unless otherwise specified in the related Prospectus
Supplement, neither the Certificates nor the underlying Mortgage Assets will be
guaranteed or insured by any governmental agency or instrumentality, or by the
Depositor, the Master Servicer, any Special Servicer, any Sub-Servicer or any of
their affiliates. Proceeds of the assets included in the related Trust Fund for
each series of Certificates (including the Assets and any form of credit
enhancement) will be the sole source of payments on the Certificates, and there
will be no recourse to the Depositor or any other entity in the event that such
proceeds are insufficient or otherwise unavailable to make all payments provided
for under the Certificates.
Unless otherwise specified in the related Prospectus Supplement, a series
of Certificates will not have any claim against or security interest in the
Trust Funds for any other series. If the related Trust Fund is insufficient to
make payments on such Certificates, no other assets will be available for
payment of the deficiency. Additionally, certain amounts remaining in certain
funds or accounts, including the Certificate Account and any accounts maintained
as Credit Support, may be withdrawn under certain conditions, as described in
the related Prospectus Supplement. In the event of such withdrawal, such amounts
will not be available for future payment of principal of or interest on the
Certificates. If so provided in the Prospectus Supplement for a series of
Certificates consisting of one or more classes of Subordinate Certificates, on
any Distribution Date in respect of which losses or shortfalls in collections on
the Assets have been incurred, the amount of such losses or shortfalls will be
borne first by one
13
<PAGE> 184
or more classes of the Subordinate Certificates, and, thereafter, by the
remaining classes of Certificates in the priority and manner and subject to the
limitations specified in such Prospectus Supplement.
Average Life of Certificates; Prepayments; Yields
Prepayments (including those caused by defaults) on the Mortgage Assets in
any Trust Fund generally will result in a faster rate of principal payments on
one or more classes of the related Certificates than if payments on such
Mortgage Assets were made as scheduled. Thus, the prepayment experience on the
Mortgage Assets may affect the average life of each class of related
Certificates. The rate of principal payments on pools of mortgage loans varies
between pools and from time to time is influenced by a variety of economic,
demographic, geographic, social, tax, legal and other factors. There can be no
assurance as to the rate of prepayment on the Mortgage Assets in any Trust Fund
or that the rate of payments will conform to any model described herein or in
any Prospectus Supplement. If prevailing interest rates fall significantly below
the applicable mortgage interest rates, principal prepayments are likely to be
higher than if prevailing rates remain at or above the rates borne by the
Mortgage Loans underlying or comprising the Mortgage Assets in any Trust Fund.
As a result, the actual maturity of any class of Certificates could occur
significantly earlier than expected. A series of Certificates may include one or
more classes of Certificates with priorities of payment and, as a result, yields
on other classes of Certificates, including classes of Offered Certificates, of
such series may be more sensitive to prepayments on Mortgage Assets. A series of
Certificates may include one or more classes offered at a significant premium or
discount. Yields on such classes of Certificates will be sensitive, and in some
cases extremely sensitive, to prepayments on Mortgage Assets and, where the
amount of interest payable with respect to a class is disproportionately high,
as compared to the amount of principal, as with certain classes of Stripped
Interest Certificates, a holder might, in some prepayment scenarios, fail to
recoup its original investment. A series of Certificates may include one or more
classes of Certificates, including classes of Offered Certificates, that provide
for distribution of principal thereof from amounts attributable to interest
accrued but not currently distributable on one or more classes of Accrual
Certificates and, as a result, yields on such Certificates will be sensitive to
(a) the provisions of such Accrual Certificates relating to the timing of
distributions of interest thereon and (b) if such Accrual Certificates accrue
interest at a variable or adjustable Pass-Through Rate, changes in such rate.
See "Yield Considerations" herein and, if applicable, in the related Prospectus
Supplement.
Limited Nature of Ratings
Any rating assigned by a Rating Agency to a class of Certificates will
reflect such Rating Agency's assessment solely of the likelihood that holders of
Certificates of such class will receive payments to which such
Certificateholders are entitled under the related Agreement. Such rating will
not constitute an assessment of the likelihood that principal prepayments
(including those caused by defaults) on the related Mortgage Assets will be
made, the degree to which the rate of such prepayments might differ from that
originally anticipated or the likelihood of early optional termination of the
series of Certificates. Such rating will not address the possibility that
prepayment at higher or lower rates than anticipated by an investor may cause
such investor to experience a lower than anticipated yield or that an investor
purchasing a Certificate at a significant premium might fail to recoup its
initial investment under certain prepayment scenarios. Each Prospectus
Supplement will identify any payment to which holders of Offered Certificates of
the related series are entitled that is not covered by the applicable rating.
The amount, type and nature of credit support, if any, established with
respect to a series of Certificates will be determined on the basis of criteria
established by each Rating Agency rating classes of such series. Such criteria
are sometimes based upon an actuarial analysis of the behavior of mortgage loans
in a larger group. Such analysis is often the basis upon which each Rating
Agency determines the amount of credit support required with respect to each
such class. There can be no assurance that the historical data supporting any
such actuarial analysis will accurately reflect future experience nor any
assurance that the data derived from a large pool of mortgage loans accurately
predicts the delinquency, foreclosure or loss experience of any particular pool
of Mortgage Assets. No assurance can be given that values of any Mortgaged
Properties have remained or will remain at their levels on the respective dates
of origination of the related Mortgage Loans. Moreover, there is no assurance
that appreciation of real estate values generally will limit loss experiences on
the Mortgaged Properties. If the commercial or multifamily residential real
estate markets should experience an overall decline in property values such that
the outstanding
14
<PAGE> 185
principal balances of the Mortgage Loans underlying or comprising the Mortgage
Assets in a particular Trust Fund and any secondary financing on the related
Mortgaged Properties become equal to or greater than the value of the Mortgaged
Properties, the rates of delinquencies, foreclosures and losses could be higher
than those now generally experienced by institutional lenders. In addition,
adverse economic conditions (which may or may not affect real property values)
may affect the timely payment by mortgagors of scheduled payments of principal
and interest on the Mortgage Loans and, accordingly, the rates of delinquencies,
foreclosures and losses with respect to any Trust Fund. To the extent that such
losses are not covered by the Credit Support, if any, described in the related
Prospectus Supplement, such losses will be borne, at least in part, by the
holders of one or more classes of the Certificates of the related series. See
"Description of Credit Support" and "Rating."
Risks Associated with Mortgage Loans and Mortgaged Properties
Mortgage loans made with respect to multifamily or commercial property may
entail risks of delinquency and foreclosure, and risks of loss in the event
thereof, that are greater than similar risks associated with single family
property. See "Description of the Trust Funds--Assets." The ability of a
mortgagor to repay a loan secured by an income-producing property typically is
dependent primarily upon the successful operation of such property rather than
any independent income or assets of the mortgagor; thus, the value of an
income-producing property is directly related to the net operating income
derived from such property. In contrast, the ability of a mortgagor to repay a
single family loan typically is dependent primarily upon the mortgagor's
household income, rather than the capacity of the property to produce income;
thus, other than in geographical areas where employment is dependent upon a
particular employer or an industry, the mortgagor's income tends not to reflect
directly the value of such property. A decline in the net operating income of an
income-producing property will likely affect both the performance of the related
loan as well as the liquidation value of such property, whereas a decline in the
income of a mortgagor on a single family property will likely affect the
performance of the related loan but may not affect the liquidation value of such
property. Moreover, a decline in the value of a Mortgaged Property will increase
the risk of loss particularly with respect to any related junior Mortgage Loan.
See "--Junior Mortgage Loans."
The performance of a mortgage loan secured by an income-producing property
leased by the mortgagor to tenants as well as the liquidation value of such
property may be dependent upon the business operated by such tenants in
connection with such property, the creditworthiness of such tenants or both; the
risks associated with such loans may be offset by the number of tenants or, if
applicable, a diversity of types of business operated by such tenants.
It is anticipated that a substantial portion of the Mortgage Loans
included in any Trust Fund will be nonrecourse loans or loans for which recourse
may be restricted or unenforceable, as to which, in the event of mortgagor
default, recourse may be had only against the specific property and such other
assets, if any, as have been pledged to secure the related Mortgage Loan. With
respect to those Mortgage Loans that provide for recourse against the mortgagor
and its assets generally, there can be no assurance that such recourse will
ensure a recovery in respect of a defaulted Mortgage Loan greater than the
liquidation value of the related Mortgaged Property.
Further, the concentration of default, foreclosure and loss risks in
individual mortgagors or Mortgage Loans in a particular Trust Fund or the
related Mortgaged Properties will generally be greater than for pools of single
family loans both because the Mortgage Assets in a Trust Fund will generally
consist of a smaller number of loans than would a single family pool of
comparable aggregate unpaid principal balance and because of the higher
principal balance of individual Mortgage Loans. Mortgage Assets in a Trust Fund
may consist of only a limited number of Mortgage Loans and/or relate to Leases
to only a single Lessee or a limited number of Lessees.
If applicable, certain legal aspects of the Mortgage Loans for a series of
Certificates may be described in the related Prospectus Supplement. See also
"Certain Legal Aspects of the Mortgage Loans and the Leases" herein.
Risks Associated with Commercial Loans and Leases
If so described in the related Prospectus Supplement, each mortgagor under
a Commercial Loan may be an entity created by the owner or purchaser of the
related Commercial Property solely to own or purchase such
15
<PAGE> 186
property, in part to isolate the property from the debts and liabilities of such
owner or purchaser. Unless otherwise specified, each such Commercial Loan will
represent a nonrecourse obligation of the related mortgagor secured by the lien
of the related Mortgage and the related Lease Assignments. Whether or not such
loans are recourse or nonrecourse obligations, it is not expected that the
mortgagors will have any significant assets other than the Commercial Properties
and the related Leases, which will be pledged to the Trustee under the related
Agreement. Therefore, the payment of amounts due on any such Commercial Loans,
and, consequently, the payment of principal of and interest on the related
Certificates, will depend primarily or solely on rental payments by the Lessees.
Such rental payments will, in turn, depend on continued occupancy by, and/or the
creditworthiness of, such Lessees, which in either case may be adversely
affected by a general economic downturn or an adverse change in their financial
condition. Moreover, to the extent a Commercial Property was designed for the
needs of a specific type of tenant (e.g., a nursing home, hospital, hotel or
motel), the value of such property in the event of a default by the Lessee or
the early termination of such Lease may be adversely affected because of
difficulty in re-leasing the property to a suitable substitute lessee or, if
re-leasing to such a substitute is not possible, because of the cost of altering
the property for another more marketable use. As a result, without the benefit
of the Lessee's continued support of the Commercial Property, and absent
significant amortization of the Commercial Loan, if such loan is foreclosed on
and the Commercial Property liquidated following a lease default, the net
proceeds might be insufficient to cover the outstanding principal and interest
owing on such loan, thereby increasing the risk that holders of the Certificates
will suffer some loss.
Balloon Payments
Certain of the Mortgage Loans (the "Balloon Mortgage Loans") as of the
Cut-off Date may not be fully amortizing over their terms to maturity and, thus,
will require substantial principal payments (i.e., balloon payments) at their
stated maturity. Mortgage Loans with balloon payments involve a greater degree
of risk because the ability of a mortgagor to make a balloon payment typically
will depend upon its ability either to timely refinance the loan or to timely
sell the related Mortgaged Property. The ability of a mortgagor to accomplish
either of these goals will be affected by a number of factors, including the
level of available mortgage interest rates at the time of sale or refinancing,
the mortgagor's equity in the related Mortgaged Property, the financial
condition and operating history of the mortgagor and the related Mortgaged
Property, tax laws, rent control laws (with respect to certain Multifamily
Properties and mobile home parks), reimbursement rates (with respect to certain
hospitals, nursing homes and convalescent homes), renewability of operating
licenses, prevailing general economic conditions and the availability of credit
for commercial or multifamily real properties, as the case may be, generally.
Junior Mortgage Loans
To the extent specified in the related Prospectus Supplement, certain of
the Mortgage Loans may be secured primarily by junior mortgages. In the case of
liquidation, Mortgage Loans secured by junior mortgages are entitled to
satisfaction from proceeds that remain from the sale of the related Mortgaged
Property after the mortgage loans senior to such Mortgage Loans have been
satisfied. If there are not sufficient funds to satisfy such junior Mortgage
Loans and senior mortgage loans, such Mortgage Loan would suffer a loss and,
accordingly, one or more classes of Certificates would bear such loss.
Therefore, any risks of deficiencies associated with first Mortgage Loans will
be greater with respect to junior Mortgage Loans. See "--Risks Associated with
Mortgage Loans and Mortgaged Properties."
Obligor Default
If so specified in the related Prospectus Supplement, in order to maximize
recoveries on defaulted Whole Loans, a Master Servicer, a Sub-Servicer or a
Special Servicer will be permitted (within prescribed parameters) to extend and
modify Whole Loans that are in default or as to which a payment default is
imminent, including in particular with respect to balloon payments. In addition,
a Master Servicer, a Sub-Servicer or a Special Servicer may receive a workout
fee based on receipts from or proceeds of such Whole Loans. While any such
entity generally will be required to determine that any such extension or
modification is reasonably likely to produce a greater recovery on a present
value basis than liquidation, there can be no assurance that such flexibility
with respect to extensions or modifications or payment of a workout fee will
increase the present value of receipts from or
16
<PAGE> 187
proceeds of Whole Loans that are in default or as to which a
payment default is imminent. Additionally, if so specified in the related
Prospectus Supplement, certain of the Mortgage Loans included in the Mortgage
Pool for a Series may have been subject to workouts or similar arrangements
following periods of delinquency and default.
Mortgagor Type
Mortgage Loans made to partnerships, corporations or other entities may
entail risks of loss from delinquency and foreclosure that are greater than
those of single family mortgage loans. The mortgagor's sophistication and form
of organization may increase the likelihood of protracted litigation or
bankruptcy in default situations.
Credit Support Limitations
The Prospectus Supplement for a series of Certificates will describe any
Credit Support in the related Trust Fund, which may include letters of credit,
insurance policies, guarantees, reserve funds or other types of credit support,
or combinations thereof. Use of Credit Support will be subject to the conditions
and limitations described herein and in the related Prospectus Supplement.
Moreover, such Credit Support may not cover all potential losses or risks; for
example, Credit Support may or may not cover fraud or negligence by a mortgage
loan originator or other parties.
A series of Certificates may include one or more classes of Subordinate
Certificates (which may include Offered Certificates), if so provided in the
related Prospectus Supplement. Although subordination is intended to reduce the
risk to holders of Senior Certificates of delinquent distributions or ultimate
losses, the amount of subordination will be limited and may decline under
certain circumstances. In addition, if principal payments on one or more classes
of Certificates of a series are made in a specified order of priority, any
limits with respect to the aggregate amount of claims under any related Credit
Support may be exhausted before the principal of the lower priority classes of
Certificates of such series has been repaid. As a result, the impact of
significant losses and shortfalls on the Assets may fall primarily upon those
classes of Certificates having a lower priority of payment. Moreover, if a form
of Credit Support covers more than one series of Certificates (each, a "Covered
Trust"), holders of Certificates evidencing an interest in a Covered Trust will
be subject to the risk that such Credit Support will be exhausted by the claims
of other Covered Trusts.
The amount of any applicable Credit Support supporting one or more classes
of Offered Certificates, including the subordination of one or more classes of
Certificates, will be determined on the basis of criteria established by each
Rating Agency rating such classes of Certificates based on an assumed level of
defaults, delinquencies, other losses or other factors. There can, however, be
no assurance that the loss experience on the related Mortgage Assets will not
exceed such assumed levels. See "--Limited Nature of Ratings," "Description of
the Certificates" and "Description of Credit Support."
Regardless of the form of credit enhancement provided, the amount of
coverage will be limited in amount and in most cases will be subject to periodic
reduction in accordance with a schedule or formula. The Master Servicer will
generally be permitted to reduce, terminate or substitute all or a portion of
the credit enhancement for any series of Certificates, if the applicable Rating
Agency indicates that the then-current rating thereof will not be adversely
affected. The rating of any series of Certificates by any applicable Rating
Agency may be lowered following the initial issuance thereof as a result of the
downgrading of the obligations of any applicable credit support provider, or as
a result of losses on the related Mortgage Assets substantially in excess of the
levels contemplated by such Rating Agency at the time of its initial rating
analysis. None of the Depositor, the Master Servicer or any of their affiliates
will have any obligation to replace or supplement any credit enhancement, or to
take any other action to maintain any rating of any series of Certificates.
Subordination of the Subordinate Certificates; Effect of Losses on the Assets
The rights of Subordinate Certificateholders to receive distributions
to which they would otherwise be entitled with respect to the Assets will be
subordinate to the rights of the Master Servicer (to the extent that the
17
<PAGE> 188
Master Servicer is paid its servicing fee, including any unpaid servicing fees
with respect to one or more prior Due Periods, and is reimbursed for certain
unreimbursed advances and unreimbursed liquidation expenses) and the Senior
Certificateholders to the extent described herein. As a result of the foregoing,
investors must be prepared to bear the risk that they may be subject to delays
in payment and may not recover their initial investments in the Subordinate
Certificates. See "Description of the Certificates--General" and "--Allocation
of Losses and Shortfalls."
The yields on the Subordinate Certificates may be extremely sensitive to
the loss experience of the Assets and the timing of any such losses. If the
actual rate and amount of losses experienced by the Assets exceed the rate and
amount of such losses assumed by an investor, the yields to maturity on the
Subordinate Certificates may be lower than anticipated.
Enforceability
Mortgages may contain a due-on-sale clause, which permits the lender to
accelerate the maturity of the Mortgage Loan if the mortgagor sells, transfers
or conveys the related Mortgaged Property or its interest in the Mortgaged
Property. Mortgages may also include a debt-acceleration clause, which permits
the lender to accelerate the debt upon a monetary or non-monetary default of the
mortgagor. Such clauses are generally enforceable subject to certain exceptions.
The courts of all states will enforce clauses providing for acceleration in the
event of a material payment default. The equity courts of any state, however,
may refuse the foreclosure of a mortgage or deed of trust when an acceleration
of the indebtedness would be inequitable or unjust or the circumstances would
render the acceleration unconscionable.
If so specified in the related Prospectus Supplement, the Mortgage Loans
will be secured by an assignment of leases and rents pursuant to which the
mortgagor typically assigns its right, title and interest as landlord under the
leases on the related Mortgaged Property and the income derived therefrom to the
lender as further security for the related Mortgage Loan, while retaining a
license to collect rents for so long as there is no default. In the event the
mortgagor defaults, the license terminates and the lender is entitled to collect
rents. Such assignments are typically not perfected as security interests prior
to actual possession of the cash flows. Some state laws may require that the
lender take possession of the Mortgaged Property and obtain a judicial
appointment of a receiver before becoming entitled to collect the rents. In
addition, if bankruptcy or similar proceedings are commenced by or in respect of
the mortgagor, the lender's ability to collect the rents may be adversely
affected. See "Certain Legal Aspects of the Mortgage Loans and the
Leases--Leases and Rents."
Environmental Risks
Real property pledged as security for a mortgage loan may be subject to
certain environmental risks. Under the laws of certain states, contamination of
a property may give rise to a lien on the property to assure the costs of
cleanup. In several states, such a lien has priority over the lien of an
existing mortgage against such property. In addition, under the laws of some
states and under the federal Comprehensive Environmental Response, Compensation
and Liability Act of 1980 ("CERCLA") a lender may be liable, as an "owner" or
"operator," for costs of addressing releases or threatened releases of hazardous
substances that require remedy at a property, if agents or employees of the
lender have become sufficiently involved in the operations of the mortgagor,
regardless of whether or not the environmental damage or threat was caused by a
prior owner. A lender also risks such liability on foreclosure of the mortgage.
Unless otherwise specified in the related Prospectus Supplement, each Pooling
and Servicing Agreement will provide that none of the Master Servicer, the
Sub-Servicer or the Special Servicer, acting on behalf of the Trust Fund, may
acquire title to a Mortgaged Property securing a Mortgage Loan or take over its
operation unless the Master Servicer has previously determined, based upon a
report prepared by a person who regularly conducts environmental audits, that:
(i) the Mortgaged Property is in compliance with applicable environmental laws,
and there are no circumstances present at the Mortgaged Property relating to the
use, management or disposal of any hazardous substances, hazardous materials,
wastes, or petroleum based materials for which investigation, testing,
monitoring, containment, clean-up or remediation could be required under any
federal, state or local law or regulation; or (ii) if he Mortgaged Property is
not so in compliance or such circumstances are so present, then it would be in
the best economic interest of the Trust Fund to acquire title to the
18
<PAGE> 189
Mortgaged Property and further to take such actions as would be necessary and
appropriate to effect such compliance and/or respond to such circumstances. See
"Certain Legal Aspects of the Mortgage Loans and the Leases--Environmental
Legislation."
ERISA Considerations
Generally, ERISA applies to investments made by employee benefit plans and
transactions involving the assets of such plans. Due to the complexity of
regulations which govern such plans, prospective investors that are subject to
ERISA are urged to consult their own counsel regarding consequences under ERISA
of acquisition, ownership and disposition of the Offered Certificates of any
series.
Certain Federal Income Tax Considerations Regarding REMIC Residual Certificates
Except as provided in the Prospectus Supplement, REMIC Residual
Certificates, if offered hereunder, are anticipated to have "phantom income"
associated with them. That is, taxable income is anticipated to be allocated to
the REMIC Residual Certificates in the early years of the existence of the
related REMIC, even if the REMIC Residual Certificates receive no distributions
from the related REMIC, with a corresponding amount of losses allocated to the
REMIC Residual Certificates in later years. Accordingly, the present value of
the tax detriments associated with the REMIC Residual Certificates may
significantly exceed the present value of the tax benefits related thereto, and
the REMIC Residual Certificates may have a negative "value." Moreover, the REMIC
Residual Certificates will in effect be allocated an amount of gross income
equal to the non-interest expenses of the REMIC, but such expenses will be
deductible by holders of the REMIC Residual Certificates that are individuals
only as itemized deductions (and be subject to all the limitations applicable to
itemized deductions). Accordingly, investment in the REMIC Residual Certificates
will generally not be suitable for individuals or for certain pass-through
entities, such as partnerships or S corporations, that have individuals as
partners or shareholders. In addition, REMIC Residual Certificates are subject
to certain restrictions on transfer. Finally, prospective purchasers of a REMIC
Residual Certificate should be aware that recently issued final regulations
provide restrictions on the ability to mark-to-market certain "negative value"
REMIC residual interests. See "Certain Federal Income Tax Consequences--REMICs."
Control
Under certain circumstances, the consent or approval of the holders of a
specified percentage of the aggregate Certificate Balance of all outstanding
Certificates of a series or a similar means of allocating decision-making under
the related Agreement ("Voting Rights") will be required to direct, and will be
sufficient to bind all Certificateholders of such series to, certain actions,
including directing the Special Servicer or the Master Servicer with respect to
actions to be taken with respect to certain Mortgage Loans and REO Properties
and amending the related Agreement in certain circumstances. See "Description of
the Agreements--Events of Default," "--Rights Upon Event of Default,"
"--Amendment" and "--List of Certificateholders."
Book-Entry Registration
If so provided in the Prospectus Supplement, one or more classes of the
Certificates will be initially represented by one or more certificates
registered in the name of Cede, the nominee for DTC, and will not be registered
in the names of the Certificateholders or their nominees. Because of this,
unless and until Definitive Certificates are issued, Certificateholders will not
be recognized by the Trustee as "Certificateholders" (as that term is to be used
in the related Agreement). Hence, until such time, Certificateholders will be
able to exercise the rights of Certificateholders only indirectly through DTC
and its participating organizations. See "Description of the
Certificates--Book-Entry Registration and Definitive Certificates."
19
<PAGE> 190
DESCRIPTION OF THE TRUST FUNDS
Assets
The primary assets of each Trust Fund (the "Assets") will include (i)
multifamily and/or commercial mortgage loans (the "Mortgage Loans"), (ii)
mortgage participations, pass-through certificates or other mortgage-backed
securities evidencing interests in or secured by one or more Mortgage Loans or
other similar participations, certificates or securities ("MBS"), (iii) direct
obligations of the United States, agencies thereof or agencies created thereby
which are not subject to redemption prior to maturity at the option of the
issuer and are (a) interest-bearing securities, (b) non-interest-bearing
securities, (c) originally interest-bearing securities from which coupons
representing the right to payment of interest have been removed, or (d)
interest-bearing securities from which the right to payment of principal has
been removed (the "Government Securities"), or (iv) a combination of Mortgage
Loans, MBS and Government Securities. As used herein, "Mortgage Loans" refers to
both whole Mortgage Loans and Mortgage Loans underlying MBS. Mortgage Loans that
secure, or interests in which are evidenced by, MBS are herein sometimes
referred to as Underlying Mortgage Loans. Mortgage Loans that are not Underlying
Mortgage Loans are sometimes referred to as "Whole Loans." Any mortgage
participations, pass-through certificates or other asset-backed certificates in
which an MBS evidences an interest or which secure an MBS are sometimes referred
to herein also as MBS or as "Underlying MBS." Mortgage Loans and MBS are
sometimes referred to herein as "Mortgage Assets." The Mortgage Assets will not
be guaranteed or insured by Morgan Stanley Capital I Inc. (the "Depositor") or
any of its affiliates or, unless otherwise provided in the Prospectus
Supplement, by any governmental agency or instrumentality or by any other
person. Each Asset will be selected by the Depositor for inclusion in a Trust
Fund from among those purchased, either directly or indirectly, from a prior
holder thereof (an "Asset Seller"), which may be an affiliate of the Depositor
and, with respect to Mortgage Assets, which prior holder may or may not be the
originator of such Mortgage Loan or the issuer of such MBS.
Unless otherwise specified in the related Prospectus Supplement, the
Certificates will be entitled to payment only from the assets of the related
Trust Fund and will not be entitled to payments in respect of the assets of any
other trust fund established by the Depositor. If specified in the related
Prospectus Supplement, the assets of a Trust Fund will consist of certificates
representing beneficial ownership interests in another trust fund that contains
the Assets.
Mortgage Loans
General
The Mortgage Loans will be secured by liens on, or security interests in,
Mortgaged Properties consisting of (i) residential properties consisting of five
or more rental or cooperatively-owned dwelling units in high-rise, mid-rise or
garden apartment buildings ("Multifamily Properties" and the related loans,
"Multifamily Loans") or (ii) office buildings, shopping centers, retail stores,
hotels or motels, nursing homes, hospitals or other health care-related
facilities, mobile home parks, warehouse facilities, mini-warehouse facilities
or self-storage facilities, industrial plants, congregate care facilities, mixed
use or other types of commercial properties ("Commercial Properties" and the
related loans, "Commercial Loans") located, unless otherwise specified in the
related Prospectus Supplement, in any one of the fifty states, the District of
Columbia or the Commonwealth of Puerto Rico. To the extent specified in the
related Prospectus Supplement, the Mortgage Loans will be secured by first or
junior mortgages or deeds of trust or other similar security instruments
creating a first or junior lien on Mortgaged Property. Multifamily Property may
include mixed commercial and residential structures and may include apartment
buildings owned by private cooperative housing corporations ("Cooperatives").
The Mortgaged Properties may include leasehold interests in properties, the
title to which is held by third party lessors. Unless otherwise specified in the
Prospectus Supplement, the term of any such leasehold will exceed the term of
the related mortgage note by at least five years. Each Mortgage Loan will have
been originated by a person (the "Originator") other than the Depositor. The
related Prospectus Supplement will indicate if any Originator is an affiliate of
the Depositor. The Mortgage Loans will be evidenced by promissory notes (the
"Mortgage Notes") secured by mortgages or deeds of
20
<PAGE> 191
trust (the "Mortgages") creating a lien on the Mortgaged Properties. Mortgage
Loans will generally also be secured by an assignment of leases and rents and/or
operating or other cash flow guarantees relating to the Mortgage Loan.
Leases
To the extent specified in the related Prospectus Supplement, the
Commercial Properties may be leased to Lessees that respectively occupy all or a
portion of such properties. Pursuant to a Lease Assignment, the related
mortgagor may assign its rights, title and interest as lessor under each Lease
and the income derived therefrom to the related mortgagee, while retaining a
license to collect the rents for so long as there is no default. If the
mortgagor defaults, the license terminates and the mortgagee or its agent is
entitled to collect the rents from the related Lessee or Lessees for application
to the monetary obligations of the mortgagor. State law may limit or restrict
the enforcement of the Lease Assignments by a mortgagee until it takes
possession of the related Mortgaged Property and/or a receiver is appointed. See
"Certain Legal Aspects of the Mortgage Loans and the Leases--Leases and Rents."
Alternatively, to the extent specified in the related Prospectus Supplement, the
mortgagor and the mortgagee may agree that payments under Leases are to be made
directly to the Master Servicer.
To the extent described in the related Prospectus Supplement, the Leases
may require the Lessees to pay rent that is sufficient in the aggregate to cover
all scheduled payments of principal and interest on the related Mortgage Loans
and, in certain cases, their pro rata share of the operating expenses, insurance
premiums and real estate taxes associated with the Mortgaged Properties. Certain
of the Leases may require the mortgagor to bear costs associated with structural
repairs and/or the maintenance of the exterior or other portions of the
Mortgaged Property or provide for certain limits on the aggregate amount of
operating expenses, insurance premiums, taxes and other expenses that the
Lessees are required to pay. If so specified in the related Prospectus
Supplement, under certain circumstances the Lessees may be permitted to set off
their rental obligations against the obligations of the mortgagors under the
Leases. In those cases where payments under the Leases (net of any operating
expenses payable by the mortgagors) are insufficient to pay all of the scheduled
principal and interest on the related Mortgage Loans, the mortgagors must rely
on other income or sources (including security deposits) generated by the
related Mortgaged Property to make payments on the related Mortgage Loan. To the
extent specified in the related Prospectus Supplement, some Commercial
Properties may be leased entirely to one Lessee. In such cases, absent the
availability of other funds, the mortgagor must rely entirely on rent paid by
such Lessee in order for the mortgagor to pay all of the scheduled principal and
interest on the related Commercial Loan. To the extent specified in the related
Prospectus Supplement, certain of the Leases may expire prior to the stated
maturity of the related Mortgage Loan. In such cases, upon expiration of the
Leases the mortgagors will have to look to alternative sources of income,
including rent payment by any new Lessees or proceeds from the sale or
refinancing of the Mortgaged Property, to cover the payments of principal and
interest due on such Mortgage Loans unless the Lease is renewed. As specified in
the related Prospectus Supplement, certain of the Leases may provide that upon
the occurrence of a casualty affecting a Mortgaged Property, the Lessee will
have the right to terminate its Lease, unless the mortgagor, as lessor, is able
to cause the Mortgaged Property to be restored within a specified period of
time. Certain Leases may provide that it is the lessor's responsibility, while
other Leases provide that it is the Lessee's responsibility, to restore the
Mortgaged Property after a casualty to its original condition. Certain Leases
may provide a right of termination to the related Lessee if a taking of a
material or specified percentage of the leased space in the Mortgaged Property
occurs, or if the ingress or egress to the leased space has been materially
impaired.
Default and Loss Considerations with Respect to the Mortgage Loans
Mortgage loans secured by commercial and multifamily properties are
markedly different from owner-occupied single family mortgage loans. The
repayment of loans secured by commercial or multifamily properties is typically
dependent upon the successful operation of such property rather than upon the
liquidation value of the real estate. Unless otherwise specified in the
Prospectus Supplement, the Mortgage Loans will be non-recourse loans, which
means that, absent special facts, the mortgagee may look only to the Net
Operating Income from the property for repayment of the mortgage debt, and not
to any other of the mortgagor's assets, in the event of the mortgagor's default.
Lenders typically look to the Debt Service Coverage Ratio of a loan secured by
income-producing property as an important measure of the risk of default on such
a loan. The "Debt Service Coverage Ratio" of a Mortgage Loan at any given time
is the ratio of the Net Operating Income for a twelve-month
21
<PAGE> 192
period to the annualized scheduled payments on the Mortgage Loan. "Net
Operating Income" means, for any given period, unless otherwise specified
in the related Prospectus Supplement, the total operating revenues derived from
a Mortgaged Property during such period, minus the total operating expenses
incurred in respect of such Mortgaged Property during such period other than
(i) non-cash items such as depreciation and amortization, (ii) capital
expenditures and (iii) debt service on loans secured by the Mortgaged Property.
The Net Operating Income of a Mortgaged Property will fluctuate over time and
may be sufficient or insufficient to cover debt service on the related Mortgage
Loan at any given time.
As the primary component of Net Operating Income, rental income (as well
as maintenance payments from tenant-stockholders of a Cooperative) is subject to
the vagaries of the applicable real estate market and/or business climate.
Properties typically leased, occupied or used on a short-term basis, such as
health care-related facilities, hotels and motels, and mini-warehouse and
self-storage facilities, tend to be affected more rapidly by changes in market
or business conditions than do properties leased, occupied or used for longer
periods, such as (typically) warehouses, retail stores, office buildings and
industrial plants. Commercial Loans may be secured by owner-occupied Mortgaged
Properties or Mortgaged Properties leased to a single tenant. Accordingly, a
decline in the financial condition of the mortgagor or single tenant, as
applicable, may have a disproportionately greater effect on the Net Operating
Income from such Mortgaged Properties than would be the case with respect to
Mortgaged Properties with multiple tenants.
Changes in the expense components of Net Operating Income due to the
general economic climate or economic conditions in a locality or industry
segment, such as increases in interest rates, real estate and personal property
tax rates and other operating expenses, including energy costs; changes in
governmental rules, regulations and fiscal policies, including environmental
legislation; and acts of God may also affect the risk of default on the related
Mortgage Loan. As may be further described in the related Prospectus Supplement,
in some cases leases of Mortgaged Properties may provide that the Lessee, rather
than the mortgagor, is responsible for payment of some or all of these expenses;
however, because leases are subject to default risks as well when a tenant's
income is insufficient to cover its rent and operating expenses, the existence
of such "net of expense" provisions will only temper, not eliminate, the impact
of expense increases on the performance of the related Mortgage Loan. See
"--Leases" above.
While the duration of leases and the existence of any "net of expense"
provisions are often viewed as the primary considerations in evaluating the
credit risk of mortgage loans secured by certain income-producing properties,
such risk may be affected equally or to a greater extent by changes in
government regulation of the operator of the property. Examples of the latter
include mortgage loans secured by health care-related facilities and hospitals,
the income from which and the operating expenses of which are subject to state
and/or federal regulations, such as Medicare and Medicaid, and multifamily
properties and mobile home parks, which may be subject to state or local rent
control regulation and, in certain cases, restrictions on changes in use of the
property. Low-and moderate-income housing in particular may be subject to legal
limitations and regulations but, because of such regulations, may also be less
sensitive to fluctuations in market rents generally.
The Debt Service Coverage Ratio should not be relied upon as the sole
measure of the risk of default of any loan, however, since other factors may
outweigh a high Debt Service Coverage Ratio. With respect to a Balloon Mortgage
Loan, for example, the risk of default as a result of the unavailability of a
source of funds to finance the related balloon payment at maturity on terms
comparable to or better than those of such Balloon Mortgage Loans could be
significant even though the related Debt Service Coverage Ratio is high.
The liquidation value of any Mortgaged Property may be adversely affected
by risks generally incident to interests in real property, including declines in
rental or occupancy rates. Lenders generally use the Loan-to-Value Ratio of a
mortgage loan as a measure of risk of loss if a property must be liquidated upon
a default by the mortgagor.
Appraised values of income-producing properties may be based on the market
comparison method (recent resale value of comparable properties at the date of
the appraisal), the cost replacement method (the cost of replacing the property
at such date), the income capitalization method (a projection of value based
upon the
22
<PAGE> 193
property's projected net cash flow), or upon a selection from or interpolation
of the values derived from such methods. Each of these appraisal methods
presents analytical challenges. It is often difficult to find truly comparable
properties that have recently been sold; the replacement cost of a property may
have little to do with its current market value; and income capitalization is
inherently based on inexact projections of income and expense and the selection
of an appropriate capitalization rate. Where more than one of these appraisal
methods are used and create significantly different results, or where a high
Loan-to-Value Ratio accompanies a high Debt Service Coverage Ratio (or vice
versa), the analysis of default and loss risks is even more difficult.
While the Depositor believes that the foregoing considerations are
important factors that generally distinguish the Multifamily and Commercial
Loans from single family mortgage loans and provide insight to the risks
associated with income-producing real estate, there is no assurance that such
factors will in fact have been considered by the Originators of the Multifamily
and Commercial Loans, or that, for any of such Mortgage Loans, they are complete
or relevant. See "Risk Factors--Risks Associated with Mortgage Loans and
Mortgaged Properties," "--Balloon Payments," "--Junior Mortgage Loans,"
"--Obligor Default" and "--Mortgagor Type."
Loan-to-Value Ratio
The "Loan-to-Value Ratio" of a Mortgage Loan at any given time is the
ratio (expressed as a percentage) of the then outstanding principal balance of
the Mortgage Loan to the Value of the related Mortgaged Property. The "Value" of
a Mortgaged Property, other than with respect to Refinance Loans, is generally
the lesser of (a) the appraised value determined in an appraisal obtained by the
originator at origination of such loan and (b) the sales price for such
property. "Refinance Loans" are loans made to refinance existing loans. Unless
otherwise set forth in the related Prospectus Supplement, the Value of the
Mortgaged Property securing a Refinance Loan is the appraised value thereof
determined in an appraisal obtained at the time of origination of the Refinance
Loan. The Value of a Mortgaged Property as of the date of initial issuance of
the related series of Certificates may be less than the value at origination and
will fluctuate from time to time based upon changes in economic conditions and
the real estate market.
Mortgage Loan Information in Prospectus Supplements
Each Prospectus Supplement will contain information, as of the date of
such Prospectus Supplement and to the extent then applicable and specifically
known to the Depositor, with respect to the Mortgage Loans, including (i) the
aggregate outstanding principal balance and the largest, smallest and average
outstanding principal balance of the Mortgage Loans as of the applicable Cut-off
Date, (ii) the type of property securing the Mortgage Loans (e.g., Multifamily
Property or Commercial Property and the type of property in each such category),
(iii) the weighted average (by principal balance) of the original and remaining
terms to maturity of the Mortgage Loans, (iv) the earliest and latest
origination date and maturity date of the Mortgage Loans, (v) the weighted
average (by principal balance) of the Loan-to-Value Ratios at origination of the
Mortgage Loans, (vi) the Mortgage Rates or range of Mortgage Rates and the
weighted average Mortgage Rate borne by the Mortgage Loans, (vii) the state or
states in which most of the Mortgaged Properties are located, (viii) information
with respect to the prepayment provisions, if any, of the Mortgage Loans, (ix)
the weighted average Retained Interest, if any, (x) with respect to Mortgage
Loans with adjustable Mortgage Rates ("ARM Loans"), the index, the frequency of
the adjustment dates, the highest, lowest and weighted average note margin and
pass-through margin, and the maximum Mortgage Rate or monthly payment variation
at the time of any adjustment thereof and over the life of the ARM Loan and the
frequency of such monthly payment adjustments, (xi) the Debt Service Coverage
Ratio either at origination or as of a more recent date (or both) and (xii)
information regarding the payment characteristics of the Mortgage Loans,
including without limitation balloon payment and other amortization provisions.
The related Prospectus Supplement will also contain certain information
available to the Depositor with respect to the provisions of leases and the
nature of tenants of the Mortgaged Properties and other information referred to
in a general manner under "--Mortgage Loans--Default and Loss Considerations
with Respect to the Mortgage Loans" above. If specific information respecting
the Mortgage Loans is not known to the Depositor at the time Certificates are
initially offered, more general information of the nature described above will
be provided in the Prospectus Supplement, and specific information will be set
forth in a report which will be available to purchasers of the related
Certificates at or before
23
<PAGE> 194
the initial issuance thereof and will be filed as part of a Current Report on
Form 8-K with the Securities and Exchange Commission within fifteen days after
such initial issuance.
Payment Provisions of the Mortgage Loans
Unless otherwise specified in the related Prospectus Supplement, all of
the Mortgage Loans will (i) have individual principal balances at origination of
not less than $25,000, (ii) have original terms to maturity of not more than 40
years and (iii) provide for payments of principal, interest or both, on due
dates that occur monthly, quarterly or semi-annually or at such other interval
as is specified in the related Prospectus Supplement. Each Mortgage Loan may
provide for no accrual of interest or for accrual of interest thereon at an
interest rate (a "Mortgage Rate") that is fixed over its term or that adjusts
from time to time, or that may be converted from an adjustable to a fixed
Mortgage Rate, or from a fixed to an adjustable Mortgage Rate, from time to time
pursuant to an election or as otherwise specified on the related Mortgage Note,
in each case as described in the related Prospectus Supplement. Each Mortgage
Loan may provide for scheduled payments to maturity or payments that adjust from
time to time to accommodate changes in the Mortgage Rate or to reflect the
occurrence of certain events, and may provide for negative amortization or
accelerated amortization, in each case as described in the related Prospectus
Supplement. Each Mortgage Loan may be fully amortizing or require a balloon
payment due on its stated maturity date, in each case as described in the
related Prospectus Supplement. Each Mortgage Loan may contain prohibitions on
prepayment (a "Lock-out Period" and the date of expiration thereof, a "Lock-out
Date") or require payment of a premium or a yield maintenance penalty (a
"Prepayment Premium") in connection with a prepayment, in each case as described
in the related Prospectus Supplement. In the event that holders of any class or
classes of Offered Certificates will be entitled to all or a portion of any
Prepayment Premiums collected in respect of Mortgage Loans, the related
Prospectus Supplement will specify the method or methods by which any such
amounts will be allocated. A Mortgage Loan may also contain provisions entitling
the mortgagee to a share of profits realized from the operation or disposition
of the Mortgaged Property ("Equity Participations"), as described in the related
Prospectus Supplement. In the event that holders of any class or classes of
Offered Certificates will be entitled to all or a portion of an Equity
Participation, the related Prospectus Supplement will specify the terms and
provisions of the Equity Participation and the method or methods by which
distributions in respect thereof will be allocated among such Certificates.
MBS
Any MBS will have been issued pursuant to a participation and servicing
agreement, a pooling and servicing agreement, a trust agreement, an indenture or
similar agreement (an "MBS Agreement"). A seller (the "MBS Issuer") and/or
servicer (the "MBS Servicer") of the underlying Mortgage Loans (or Underlying
MBS) will have entered into the MBS Agreement with a trustee or a custodian
under the MBS Agreement (the "MBS Trustee"), if any, or with the original
purchaser of the interest in the underlying Mortgage Loans or MBS evidenced by
the MBS.
Distributions of any principal or interest, as applicable, will be made on
MBS on the dates specified in the related Prospectus Supplement. The MBS may be
issued in one or more classes with characteristics similar to the classes of
Certificates described in this Prospectus. Any principal or interest
distributions will be made on the MBS by the MBS Trustee or the MBS Servicer.
The MBS Issuer or the MBS Servicer or another person specified in the related
Prospectus Supplement may have the right or obligation to repurchase or
substitute assets underlying the MBS after a certain date or under other
circumstances specified in the related Prospectus Supplement.
Enhancement in the form of reserve funds, subordination or other forms of
credit support similar to that described for the Certificates under "Description
of Credit Support" may be provided with respect to the MBS. The type,
characteristics and amount of such credit support, if any, will be a function of
certain characteristics of the Mortgage Loans or Underlying MBS evidenced by or
securing such MBS and other factors and generally will have been established for
the MBS on the basis of requirements of either any Rating Agency that may have
assigned a rating to the MBS or the initial purchasers of the MBS.
24
<PAGE> 195
The Prospectus Supplement for a series of Certificates evidencing
interests in Mortgage Assets that include MBS will specify, to the extent
available, (i) the aggregate approximate initial and outstanding principal
amount or notional amount, as applicable, and type of the MBS to be included in
the Trust Fund, (ii) the original and remaining term to stated maturity of the
MBS, if applicable, (iii) whether such MBS is entitled only to interest
payments, only to principal payments or to both, (iv) the pass-through or bond
rate of the MBS or formula for determining such rates, if any, (v) the
applicable payment provisions for the MBS, including, but not limited to, any
priorities, payment schedules and subordination features, (vi) the MBS Issuer,
MBS Servicer and MBS Trustee, as applicable, (vii) certain characteristics of
the credit support, if any, such as subordination, reserve funds, insurance
policies, letters of credit or guarantees relating to the related Underlying
Mortgage Loans, the Underlying MBS or directly to such MBS, (viii) the terms on
which the related Underlying Mortgage Loans or Underlying MBS for such MBS or
the MBS may, or are required to, be purchased prior to their maturity, (ix) the
terms on which Mortgage Loans or Underlying MBS may be substituted for those
originally underlying the MBS, (x) the servicing fees payable under the MBS
Agreement, (xi) the type of information in respect of the Underlying Mortgage
Loans described under "--Mortgage Loans--Mortgage Loan Information in Prospectus
Supplements" above, and the type of information in respect of the Underlying MBS
described in this paragraph, (xii) the characteristics of any cash flow
agreements that are included as part of the trust fund evidenced or secured by
the MBS and (xiii) whether the MBS is in certificated form, book-entry form or
held through a depository such as The Depository Trust Company or the
Participants Trust Company.
Government Securities
The Prospectus Supplement for a series of Certificates evidencing
interests in Assets of a Trust Fund that include Government Securities will
specify, to the extent available, (i) the aggregate approximate initial and
outstanding principal amounts or notional amounts, as applicable, and types of
the Government Securities to be included in the Trust Fund, (ii) the original
and remaining terms to stated maturity of the Government Securities, (iii)
whether such Government Securities are entitled only to interest payments, only
to principal payments or to both, (iv) the interest rates of the Government
Securities or the formula to determine such rates, if any, (v) the applicable
payment provisions for the Government Securities and (vi) to what extent, if
any, the obligation evidenced thereby is backed by the full faith and credit of
the United States.
Accounts
Each Trust Fund will include one or more accounts established and
maintained on behalf of the Certificateholders into which the person or persons
designated in the related Prospectus Supplement will, to the extent described
herein and in such Prospectus Supplement deposit all payments and collections
received or advanced with respect to the Assets and other assets in the Trust
Fund. Such an account may be maintained as an interest bearing or a non-interest
bearing account, and funds held therein may be held as cash or invested in
certain short-term, investment grade obligations, in each case as described in
the related Prospectus Supplement. See "Description of the
Agreement--Certificate Account and Other Collection Accounts."
Credit Support
If so provided in the related Prospectus Supplement, partial or full
protection against certain defaults and losses on the Assets in the related
Trust Fund may be provided to one or more classes of Certificates in the related
series in the form of subordination of one or more other classes of Certificates
in such series or by one or more other types of credit support, such as a letter
of credit, insurance policy, guarantee, reserve fund or another type of credit
support, or a combination thereof (any such coverage with respect to the
Certificates of any series, "Credit Support"). The amount and types of coverage,
the identification of the entity providing the coverage (if applicable) and
related information with respect to each type of Credit Support, if any, will be
described in the Prospectus Supplement for a series of Certificates. See "Risk
Factors--Credit Support Limitations" and "Description of Credit Support."
25
<PAGE> 196
Cash Flow Agreements
If so provided in the related Prospectus Supplement, the Trust Fund may
include guaranteed investment contracts pursuant to which moneys held in the
funds and accounts established for the related series will be invested at a
specified rate. The Trust Fund may also include certain other agreements, such
as interest rate exchange agreements, interest rate cap or floor agreements,
currency exchange agreements or similar agreements provided to reduce the
effects of interest rate or currency exchange rate fluctuations on the Assets or
on one or more classes of Certificates. (Currency exchange agreements might be
included in the Trust Fund if some or all of the Mortgage Assets (such as
Mortgage Loans secured by Mortgaged Properties located outside the United
States) were denominated in a non-United States currency.) The principal terms
of any such guaranteed investment contract or other agreement (any such
agreement, a "Cash Flow Agreement"), including, without limitation, provisions
relating to the timing, manner and amount of payments thereunder and provisions
relating to the termination thereof, will be described in the Prospectus
Supplement for the related series. In addition, the related Prospectus
Supplement will provide certain information with respect to the obligor under
any such Cash Flow Agreement.
USE OF PROCEEDS
The net proceeds to be received from the sale of the Certificates will be
applied by the Depositor to the purchase of Assets and to pay for certain
expenses incurred in connection with such purchase of Assets and sale of
Certificates. The Depositor expects to sell the Certificates from time to time,
but the timing and amount of offerings of Certificates will depend on a number
of factors, including the volume of Assets acquired by the Depositor, prevailing
interest rates, availability of funds and general market conditions.
YIELD CONSIDERATIONS
General
The yield on any Offered Certificate will depend on the price paid by the
Certificateholder, the Pass-Through Rate of the Certificate, the receipt and
timing of receipt of distributions on the Certificate and the weighted average
life of the Assets in the related Trust Fund (which may be affected by
prepayments, defaults, liquidations or repurchases). See "Risk Factors."
Pass-Through Rate
Certificates of any class within a series may have fixed, variable or
adjustable Pass-Through Rates, which may or may not be based upon the interest
rates borne by the Assets in the related Trust Fund. The Prospectus Supplement
with respect to any series of Certificates will specify the Pass-Through Rate
for each class of such Certificates or, in the case of a variable or adjustable
Pass-Through Rate, the method of determining the Pass-Through Rate; the effect,
if any, of the prepayment of any Mortgage Asset on the Pass-Through Rate of one
or more classes of Certificates; and whether the distributions of interest on
the Certificates of any class will be dependent, in whole or in part, on the
performance of any obligor under a Cash Flow Agreement.
The effective yield to maturity to each holder of Certificates entitled to
payments of interest will be below that otherwise produced by the applicable
Pass-Through Rate and purchase price of such Certificate because, while interest
may accrue on each Asset during a certain period, the distribution of such
interest will be made on a day which may be several days, weeks or months
following the period of accrual.
Timing of Payment of Interest
Each payment of interest on the Certificates (or addition to the
Certificate Balance of a class of Accrual Certificates) on a Distribution Date
will include interest accrued during the Interest Accrual Period for such
Distribution Date. As indicated above under "--Pass-Through Rate," if the
Interest Accrual Period ends on a date other than a Distribution Date for the
related series, the yield realized by the holders of such Certificates may be
lower than the yield that would result if the Interest Accrual Period ended on
such Distribution Date. In addition,
26
<PAGE> 197
if so specified in the related Prospectus Supplement, interest accrued for an
Interest Accrual Period for one or more classes of Certificates may be
calculated on the assumption that distributions of principal (and additions to
the Certificate Balance of Accrual Certificates) and allocations of losses on
the Assets may be made on the first day of the Interest Accrual Period for a
Distribution Date and not on such Distribution Date. Such method would produce a
lower effective yield than if interest were calculated on the basis of the
actual principal amount outstanding during an Interest Accrual Period. The
Interest Accrual Period for any class of Offered Certificates will be described
in the related Prospectus Supplement.
Payments of Principal; Prepayments
The yield to maturity on the Certificates will be affected by the rate of
principal payments on the Assets (including principal prepayments on Mortgage
Loans resulting from both voluntary prepayments by the mortgagors and
involuntary liquidations). Such payments may be directly dependent upon the
payments on Leases underlying such Mortgage Loans. The rate at which principal
prepayments occur on the Mortgage Loans will be affected by a variety of
factors, including, without limitation, the terms of the Mortgage Loans, the
level of prevailing interest rates, the availability of mortgage credit and
economic, demographic, geographic, tax, legal and other factors. In general,
however, if prevailing interest rates fall significantly below the Mortgage
Rates on the Mortgage Loans comprising or underlying the Assets in a particular
Trust Fund, such Mortgage Loans are likely to be the subject of higher principal
prepayments than if prevailing rates remain at or above the rates borne by such
Mortgage Loans. In this regard, it should be noted that certain Assets may
consist of Mortgage Loans with different Mortgage Rates and the stated
pass-through or pay-through interest rate of certain MBS may be a number of
percentage points higher or lower than certain of the underlying Mortgage Loans.
The rate of principal payments on some or all of the classes of Certificates of
a series will correspond to the rate of principal payments on the Assets in the
related Trust Fund and is likely to be affected by the existence of Lock-out
Periods and Prepayment Premium provisions of the Mortgage Loans underlying or
comprising such Assets, and by the extent to which the servicer of any such
Mortgage Loan is able to enforce such provisions. Mortgage Loans with a Lock-out
Period or a Prepayment Premium provision, to the extent enforceable, generally
would be expected to experience a lower rate of principal prepayments than
otherwise identical Mortgage Loans without such provisions, with shorter
Lock-out Periods or with lower Prepayment Premiums.
If the purchaser of a Certificate offered at a discount calculates its
anticipated yield to maturity based on an assumed rate of distributions of
principal that is faster than that actually experienced on the Assets, the
actual yield to maturity will be lower than that so calculated. Conversely, if
the purchaser of a Certificate offered at a premium calculates its anticipated
yield to maturity based on an assumed rate of distributions of principal that is
slower than that actually experienced on the Assets, the actual yield to
maturity will be lower than that so calculated. In either case, if so provided
in the Prospectus Supplement for a series of Certificates, the effect on yield
on one or more classes of the Certificates of such series of prepayments of the
Assets in the related Trust Fund may be mitigated or exacerbated by any
provisions for sequential or selective distribution of principal to such
classes.
When a full prepayment is made on a Mortgage Loan, the mortgagor is
charged interest on the principal amount of the Mortgage Loan so prepaid for the
number of days in the month actually elapsed up to the date of the prepayment.
Unless otherwise specified in the related Prospectus Supplement, the effect of
prepayments in full will be to reduce the amount of interest paid in the
following month to holders of Certificates entitled to payments of interest
because interest on the principal amount of any Mortgage Loan so prepaid will be
paid only to the date of prepayment rather than for a full month. Unless
otherwise specified in the related Prospectus Supplement, a partial prepayment
of principal is applied so as to reduce the outstanding principal balance of the
related Mortgage Loan as of the Due Date in the month in which such partial
prepayment is received. As a result, unless otherwise specified in the related
Prospectus Supplement, the effect of a partial prepayment on a Mortgage Loan
will be to reduce the amount of interest passed through to holders of
Certificates in the month following the receipt of such partial prepayment by an
amount equal to one month's interest at the applicable Pass-Through Rate on the
prepaid amount.
The timing of changes in the rate of principal payments on the Mortgage
Assets may significantly affect an investor's actual yield to maturity, even if
the average rate of distributions of principal is consistent with an
27
<PAGE> 198
investor's expectation. In general, the earlier a principal payment is received
on the Mortgage Assets and distributed on a Certificate, the greater the effect
on such investor's yield to maturity. The effect on an investor's yield of
principal payments occurring at a rate higher (or lower) than the rate
anticipated by the investor during a given period may not be offset by a
subsequent like decrease (or increase) in the rate of principal payments.
Prepayments--Maturity and Weighted Average Life
The rates at which principal payments are received on the Assets included
in or comprising a Trust Fund and the rate at which payments are made from any
Credit Support or Cash Flow Agreement for the related series of Certificates may
affect the ultimate maturity and the weighted average life of each class of such
series. Prepayments on the Mortgage Loans comprising or underlying the Mortgage
Assets in a particular Trust Fund will generally accelerate the rate at which
principal is paid on some or all of the classes of the Certificates of the
related series.
If so provided in the Prospectus Supplement for a series of Certificates,
one or more classes of Certificates may have a final scheduled Distribution
Date, which is the date on or prior to which the Certificate Balance thereof is
scheduled to be reduced to zero, calculated on the basis of the assumptions
applicable to such series set forth therein.
Weighted average life refers to the average amount of time that will
elapse from the date of issue of a security until each dollar of principal of
such security will be repaid to the investor. The weighted average life of a
class of Certificates of a series will be influenced by the rate at which
principal on the Mortgage Loans comprising or underlying the Mortgage Assets is
paid to such class, which may be in the form of scheduled amortization or
prepayments (for this purpose, the term "prepayment" includes prepayments, in
whole or in part, and liquidations due to default).
In addition, the weighted average life of the Certificates may be affected
by the varying maturities of the Mortgage Loans comprising or underlying the
MBS. If any Mortgage Loans comprising or underlying the Assets in a particular
Trust Fund have actual terms to maturity of less than those assumed in
calculating final scheduled Distribution Dates for the classes of Certificates
of the related series, one or more classes of such Certificates may be fully
paid prior to their respective final scheduled Distribution Dates, even in the
absence of prepayments. Accordingly, the prepayment experience of the Assets
will, to some extent, be a function of the mix of Mortgage Rates and maturities
of the Mortgage Loans comprising or underlying such Assets. See "Description of
the Trust Funds."
Prepayments on loans are also commonly measured relative to a prepayment
standard or model, such as the Constant Prepayment Rate ("CPR") prepayment
model. CPR represents a constant assumed rate of prepayment each month relative
to the then outstanding principal balance of a pool of loans for the life of
such loans.
Neither CPR nor any other prepayment model or assumption purports to be a
historical description of prepayment experience or a prediction of the
anticipated rate of prepayment of any pool of loans, including the Mortgage
Loans underlying or comprising the Mortgage Assets. Moreover, CPR was developed
based upon historical prepayment experience for single family loans. Thus, it is
likely that prepayment of any Mortgage Loans comprising or underlying the
Mortgage Assets for any series will not conform to any particular level of CPR.
The Depositor is not aware of any meaningful publicly available prepayment
statistics for multifamily or commercial mortgage loans.
The Prospectus Supplement with respect to each series of Certificates will
contain tables, if applicable, setting forth the projected weighted average life
of each class of Offered Certificates of such series and the percentage of the
initial Certificate Balance of each such class that would be outstanding on
specified Distribution Dates based on the assumptions stated in such Prospectus
Supplement, including assumptions that prepayments on the Mortgage Loans
comprising or underlying the related Assets are made at rates corresponding to
various percentages of CPR or at such other rates specified in such Prospectus
Supplement. Such tables and assumptions
28
<PAGE> 199
are intended to illustrate the sensitivity of weighted average life of the
Certificates to various prepayment rates and will not be intended to predict or
to provide information that will enable investors to predict the actual weighted
average life of the Certificates. It is unlikely that prepayment of any Mortgage
Loans comprising or underlying the Mortgage Assets for any series will conform
to any particular level of CPR or any other rate specified in the related
Prospectus Supplement.
Other Factors Affecting Weighted Average Life
Type of Mortgage Asset
A number of Mortgage Loans may have balloon payments due at maturity, and
because the ability of a mortgagor to make a balloon payment typically will
depend upon its ability either to refinance the loan or to sell the related
Mortgaged Property, there is a risk that a number of Mortgage Loans having
balloon payments may default at maturity, or that the servicer may extend the
maturity of such a Mortgage Loan in connection with a workout. In the case of
defaults, recovery of proceeds may be delayed by, among other things, bankruptcy
of the mortgagor or adverse conditions in the market where the property is
located. In order to minimize losses on defaulted Mortgage Loans, the servicer
may, to the extent and under the circumstances set forth in the related
Prospectus Supplement, be permitted to modify Mortgage Loans that are in default
or as to which a payment default is imminent. Any defaulted balloon payment or
modification that extends the maturity of a Mortgage Loan will tend to extend
the weighted average life of the Certificates, thereby lengthening the period of
time elapsed from the date of issuance of a Certificate until it is retired.
Foreclosures and Payment Plans
The number of foreclosures and the principal amount of the Mortgage Loans
comprising or underlying the Mortgage Assets that are foreclosed in relation to
the number and principal amount of Mortgage Loans that are repaid in accordance
with their terms will affect the weighted average life of the Mortgage Loans
comprising or underlying the Mortgage Assets and that of the related series of
Certificates. Servicing decisions made with respect to the Mortgage Loans,
including the use of payment plans prior to a demand for acceleration and the
restructuring of Mortgage Loans in bankruptcy proceedings, may also have an
effect upon the payment patterns of particular Mortgage Loans and thus the
weighted average life of the Certificates.
Due-on-Sale and Due-on-Encumbrance Clauses
Acceleration of mortgage payments as a result of certain transfers of or
the creation of encumbrances upon underlying Mortgaged Property is another
factor affecting prepayment rates that may not be reflected in the prepayment
standards or models used in the relevant Prospectus Supplement. A number of the
Mortgage Loans comprising or underlying the Assets may include "due-on-sale"
clauses or "due-on-encumbrance" clauses that allow the holder of the Mortgage
Loans to demand payment in full of the remaining principal balance of the
Mortgage Loans upon sale or certain other transfers of or the creation of
encumbrances upon the related Mortgaged Property. With respect to any Whole
Loans, unless otherwise provided in the related Prospectus Supplement, the
Master Servicer, on behalf of the Trust Fund, will be required to exercise (or
waive its right to exercise) any such right that the Trustee may have as
mortgagee to accelerate payment of the Whole Loan in a manner consistent with
the Servicing Standard. See "Certain Legal Aspects of the Mortgage Loans and the
Leases--Due-on-Sale and Due-on-Encumbrance" and "Description of the
Agreements--Due-on-Sale and Due-on-Encumbrance Provisions."
29
<PAGE> 200
THE DEPOSITOR
Morgan Stanley Capital I Inc., the Depositor, is a direct wholly-owned
subsidiary of Morgan Stanley Group Inc. and was incorporated in the State of
Delaware on January 28, 1985. The principal executive offices of the Depositor
are located at 1585 Broadway, 37th Floor, New York, New York 10036. Its
telephone number is (212) 761-4700.
The Depositor does not have, nor is it expected in the future to have, any
significant assets.
DESCRIPTION OF THE CERTIFICATES
General
The Certificates of each series (including any class of Certificates not
offered hereby) will represent the entire beneficial ownership interest in the
Trust Fund created pursuant to the related Agreement. Each series of
Certificates will consist of one or more classes of Certificates that may (i)
provide for the accrual of interest thereon based on fixed, variable or
adjustable rates; (ii) be senior (collectively, "Senior Certificates") or
subordinate (collectively, "Subordinate Certificates") to one or more other
classes of Certificates in respect of certain distributions on the Certificates;
(iii) be entitled to principal distributions, with disproportionately low,
nominal or no interest distributions (collectively, "Stripped Principal
Certificates"); (iv) be entitled to interest distributions, with
disproportionately low, nominal or no principal distributions (collectively,
"Stripped Interest Certificates"); (v) provide for distributions of accrued
interest thereon commencing only following the occurrence of certain events,
such as the retirement of one or more other classes of Certificates of such
series (collectively, "Accrual Certificates"); (vi) provide for payments of
principal sequentially, based on specified payment schedules, from only a
portion of the Assets in such Trust Fund or based on specified calculations, to
the extent of available funds, in each case as described in the related
Prospectus Supplement; and/or (vii) provide for distributions based on a
combination of two or more components thereof with one or more of the
characteristics described in this paragraph including a Stripped Principal
Certificate component and a Stripped Interest Certificate component. Any such
classes may include classes of Offered Certificates.
Each class of Offered Certificates of a series will be issued in minimum
denominations corresponding to the Certificate Balances or, in case of Stripped
Interest Certificates, notional amounts or percentage interests specified in the
related Prospectus Supplement. The transfer of any Offered Certificates may be
registered and such Certificates may be exchanged without the payment of any
service charge payable in connection with such registration of transfer or
exchange, but the Depositor or the Trustee or any agent thereof may require
payment of a sum sufficient to cover any tax or other governmental charge. One
or more classes of Certificates of a series may be issued in definitive form
("Definitive Certificates") or in book-entry form ("Book-Entry Certificates"),
as provided in the related Prospectus Supplement. See "Risk Factors--Book-Entry
Registration" and "Description of the Certificates--Book-Entry Registration and
Definitive Certificates." Definitive Certificates will be exchangeable for other
Certificates of the same class and series of a like aggregate Certificate
Balance, notional amount or percentage interest but of different authorized
denominations. See "Risk Factors--Limited Liquidity" and "Limited Assets."
Distributions
Distributions on the Certificates of each series will be made by or on
behalf of the Trustee on each Distribution Date as specified in the related
Prospectus Supplement from the Available Distribution Amount for such series and
such Distribution Date. Except as otherwise specified in the related Prospectus
Supplement, distributions (other than the final distribution) will be made 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 the
Distribution Date occurs (the "Record Date"), and the amount of each
distribution will be determined as of the close of business on the date
specified in the related Prospectus Supplement (the "Determination Date"). All
distributions with respect to each class of Certificates on each Distribution
Date will be allocated pro rata among the outstanding Certificates in such class
or by random selection, as described in the related Prospectus Supplement or
otherwise established by the
30
<PAGE> 201
related Trustee. Payments will be made either by wire transfer in immediately
available funds to the account of a Certificateholder at a bank or other entity
having appropriate facilities therefor, if such Certificateholder has so
notified the Trustee or other person required to make such payments no later
than the date specified in the related Prospectus Supplement (and, if so
provided in the related Prospectus Supplement, holds Certificates in the
requisite amount specified therein), or by check mailed to the address of the
person entitled thereto as it appears on the Certificate Register; provided,
however, that the final distribution in retirement of the Certificates (whether
Definitive Certificates or Book-Entry Certificates) will be made only upon
presentation and surrender of the Certificates at the location specified in the
notice to Certificateholders of such final distribution.
Available Distribution Amount
All distributions on the Certificates of each series on each Distribution
Date will be made from the Available Distribution Amount described below, in
accordance with the terms described in the related Prospectus Supplement. Unless
provided otherwise in the related Prospectus Supplement, the "Available
Distribution Amount" for each Distribution Date equals the sum of the following
amounts:
(i) the total amount of all cash on deposit in the related Certificate
Account as of the corresponding Determination Date, exclusive of:
(a) all scheduled payments of principal and interest collected but
due on a date subsequent to the related Due Period (unless the
related Prospectus Supplement provides otherwise, a "Due Period"
with respect to any Distribution Date will commence on the second
day of the month in which the immediately preceding Distribution
Date occurs, or the day after the Cut-off Date in the case of the
first Due Period, and will end on the first day of the month of the
related Distribution Date),
(b) unless the related Prospectus Supplement provides otherwise, all
prepayments, together with related payments of the interest thereon
and related Prepayment Premiums, Liquidation Proceeds, Insurance
Proceeds and other unscheduled recoveries received subsequent to the
related Due Period, and
(c) all amounts in the Certificate Account that are due or
reimbursable to the Depositor, the Trustee, an Asset Seller, a
Sub-Servicer, a Special Servicer, the Master Servicer or any other
entity as specified in the related Prospectus Supplement or that are
payable in respect of certain expenses of the related Trust Fund;
(ii) if the related Prospectus Supplement so provides, interest or
investment income on amounts on deposit in the Certificate Account,
including any net amounts paid under any Cash Flow Agreements;
(iii) all advances made by a Master Servicer or any other entity as
specified in the related Prospectus Supplement with respect to such
Distribution Date;
(iv) if and to the extent the related Prospectus Supplement so provides,
amounts paid by a Master Servicer or any other entity as specified in the
related Prospectus Supplement with respect to interest shortfalls
resulting from prepayments during the related Prepayment Period; and
(v) unless the related Prospectus Supplement provides otherwise, to the
extent not on deposit in the related Certificate Account as of the
corresponding Determination Date, any amounts collected under, from or in
respect of any Credit Support with respect to such Distribution Date.
As described below, the entire Available Distribution Amount will be
distributed among the related Certificates (including any Certificates not
offered hereby) on each Distribution Date, and accordingly will be released from
the Trust Fund and will not be available for any future distributions.
31
<PAGE> 202
Distributions of Interest on the Certificates
Each class of Certificates (other than classes of Stripped Principal
Certificates that have no Pass-Through Rate) may have a different Pass-Through
Rate, which will be a fixed, variable or adjustable rate at which interest will
accrue on such class or a component thereof (the "Pass-Through Rate"). The
related Prospectus Supplement will specify the Pass-Through Rate for each class
or component or, in the case of a variable or adjustable Pass-Through Rate, the
method for determining the Pass-Through Rate. Unless otherwise specified in the
related Prospectus Supplement, interest on the Certificates will be calculated
on the basis of a 360-day year consisting of twelve 30-day months.
Distributions of interest in respect of the Certificates of any class will
be made on each Distribution Date (other than any class of Accrual Certificates,
which will be entitled to distributions of accrued interest commencing only on
the Distribution Date, or under the circumstances, specified in the related
Prospectus Supplement, and any class of Stripped Principal Certificates that are
not entitled to any distributions of interest) based on the Accrued Certificate
Interest for such class and such Distribution Date, subject to the sufficiency
of the portion of the Available Distribution Amount allocable to such class on
such Distribution Date. Prior to the time interest is distributable on any class
of Accrual Certificates, the amount of Accrued Certificate Interest otherwise
distributable on such class will be added to the Certificate Balance thereof on
each Distribution Date. With respect to each class of Certificates and each
Distribution Date (other than certain classes of Stripped Interest
Certificates), "Accrued Certificate Interest" will be equal to interest accrued
for a specified period on the outstanding Certificate Balance thereof
immediately prior to the Distribution Date, at the applicable Pass-Through Rate,
reduced as described below. Unless otherwise provided in the Prospectus
Supplement, Accrued Certificate Interest on Stripped Interest Certificates will
be equal to interest accrued for a specified period on the outstanding notional
amount thereof immediately prior to each Distribution Date, at the applicable
Pass-Through Rate, reduced as described below. The method of determining the
notional amount for any class of Stripped Interest Certificates will be
described in the related Prospectus Supplement. Reference to notional amount is
solely for convenience in certain calculations and does not represent the right
to receive any distributions of principal. Unless otherwise provided in the
related Prospectus Supplement, the Accrued Certificate Interest on a series of
Certificates will be reduced in the event of prepayment interest shortfalls,
which are shortfalls in collections of interest for a full accrual period
resulting from prepayments prior to the due date in such accrual period on the
Mortgage Loans comprising or underlying the Mortgage Assets in the Trust Fund
for such series. The particular manner in which such shortfalls are to be
allocated among some or all of the classes of Certificates of that series will
be specified in the related Prospectus Supplement. The related Prospectus
Supplement will also describe the extent to which the amount of Accrued
Certificate Interest that is otherwise distributable on (or, in the case of
Accrual Certificates, that may otherwise be added to the Certificate Balance of)
a class of Offered Certificates may be reduced as a result of any other
contingencies, including delinquencies, losses and deferred interest on or in
respect of the Mortgage Loans comprising or underlying the Mortgage Assets in
the related Trust Fund. Unless otherwise provided in the related Prospectus
Supplement, any reduction in the amount of Accrued Certificate Interest
otherwise distributable on a class of Certificates by reason of the allocation
to such class of a portion of any deferred interest on the Mortgage Loans
comprising or underlying the Mortgage Assets in the related Trust Fund will
result in a corresponding increase in the Certificate Balance of such class. See
"Risk Factors--Average Life of Certificates; Prepayments; Yields" and "Yield
Considerations."
Distributions of Principal of the Certificates
The Certificates of each series, other than certain classes of Stripped
Interest Certificates, will have a "Certificate Balance" which, at any time,
will equal the then maximum amount that the holder will be entitled to receive
in respect of principal out of the future cash flow on the Assets and other
assets included in the related Trust Fund. The outstanding Certificate Balance
of a Certificate will be reduced to the extent of distributions of principal
thereon from time to time and, if and to the extent so provided in the related
Prospectus Supplement, by the amount of losses incurred in respect of the
related Assets, may be increased in respect of deferred interest on the related
Mortgage Loans to the extent provided in the related Prospectus Supplement and,
in the case of Accrual Certificates prior to the Distribution Date on which
distributions of interest are required to commence, will be increased by any
related Accrued Certificate Interest. Unless otherwise provided in the related
Prospectus Supplement, the initial
32
<PAGE> 203
aggregate Certificate Balance of all classes of Certificates of a series will
not be greater than the outstanding aggregate principal balance of the related
Assets as of the applicable Cut-off Date. The initial aggregate Certificate
Balance of a series and each class thereof will be specified in the related
Prospectus Supplement. Unless otherwise provided in the related Prospectus
Supplement, distributions of principal will be made on each Distribution Date to
the class or classes of Certificates entitled thereto in accordance with the
provisions described in such Prospectus Supplement until the Certificate Balance
of such class has been reduced to zero. Stripped Interest Certificates with no
Certificate Balance are not entitled to any distributions of principal.
Components
To the extent specified in the related Prospectus Supplement, distribution
on a class of Certificates may be based on a combination of two or more
different components as described under "--General" above. To such extent, the
descriptions set forth under "--Distributions of Interests on the Certificates"
and "--Distributions of Principal of the Certificates" above also relate to
components of such a class of Certificates. In such case, reference in such
sections to Certificate Balance and Pass-Through Rate refer to the principal
balance, if any, of any such component and the Pass-Through Rate, if any, on any
such component, respectively.
Distributions on the Certificates of Prepayment Premiums or in Respect of Equity
Participations
If so provided in the related Prospectus Supplement, Prepayment Premiums
or payments in respect of Equity Participations that are collected on the
Mortgage Assets in the related Trust Fund will be distributed on each
Distribution Date to the class or classes of Certificates entitled thereto in
accordance with the provisions described in such Prospectus Supplement.
Allocation of Losses and Shortfalls
If so provided in the Prospectus Supplement for a series of Certificates
consisting of one or more classes of Subordinate Certificates, on any
Distribution Date in respect of which losses or shortfalls in collections on the
Mortgage Assets have been incurred, the amount of such losses or shortfalls will
be borne first by a class of Subordinate Certificates in the priority and manner
and subject to the limitations specified in such Prospectus Supplement. See
"Description of Credit Support" for a description of the types of protection
that may be included in a Trust Fund against losses and shortfalls on Mortgage
Assets comprising such Trust Fund.
Advances in Respect of Delinquencies
With respect to any series of Certificates evidencing an interest in a
Trust Fund, unless otherwise provided in the related Prospectus Supplement, the
Master Servicer or another entity described therein will be required as part of
its servicing responsibilities to advance on or before each Distribution Date
its own funds or funds held in the Certificate Account that are not included in
the Available Distribution Amount for such Distribution Date, in an amount equal
to the aggregate of payments of principal (other than any balloon payments) and
interest (net of related servicing fees and Retained Interest) that were due on
the Whole Loans in such Trust Fund during the related Due Period and were
delinquent on the related Determination Date, subject to the Master Servicer's
(or another entity's) good faith determination that such advances will be
reimbursable from Related Proceeds (as defined below). In the case of a series
of Certificates that includes one or more classes of Subordinate Certificates
and if so provided in the related Prospectus Supplement, the Master Servicer's
(or another entity's) advance obligation may be limited only to the portion of
such delinquencies necessary to make the required distributions on one or more
classes of Senior Certificates and/or may be subject to the Master Servicer's
(or another entity's) good faith determination that such advances will be
reimbursable not only from Related Proceeds but also from collections on other
Assets otherwise distributable on one or more classes of such Subordinate
Certificates. See "Description of Credit Support."
Advances are intended to maintain a regular flow of scheduled interest and
principal payments to holders of the class or classes of Certificates entitled
thereto, rather than to guarantee or insure against losses. Unless otherwise
provided in the related Prospectus Supplement, advances of the Master Servicer's
(or another entity's)
33
<PAGE> 204
funds will be reimbursable only out of related recoveries on the Mortgage Loans
(including amounts received under any form of Credit Support) respecting which
such advances were made (as to any Mortgage Loan, "Related Proceeds") and, if so
provided in the Prospectus Supplement, out of any amounts otherwise
distributable on one or more classes of Subordinate Certificates of such series;
provided, however, that any such advance will be reimbursable from any amounts
in the Certificate Account prior to any distributions being made on the
Certificates to the extent that the Master Servicer (or such other entity) shall
determine in good faith that such advance (a "Nonrecoverable Advance") is not
ultimately recoverable from Related Proceeds or, if applicable, from collections
on other Assets otherwise distributable on such Subordinate Certificates. If
advances have been made by the Master Servicer from excess funds in the
Certificate Account, the Master Servicer is required to replace such funds in
the Certificate Account on any future Distribution Date to the extent that funds
in the Certificate Account on such Distribution Date are less than payments
required to be made to Certificateholders on such date. If so specified in the
related Prospectus Supplement, the obligations of the Master Servicer (or
another entity) to make advances may be secured by a cash advance reserve fund,
a surety bond, a letter of credit or another form of limited guaranty. If
applicable, information regarding the characteristics of, and the identity of
any obligor on, any such surety bond, will be set forth in the related
Prospectus Supplement.
If and to the extent so provided in the related Prospectus Supplement, the
Master Servicer (or another entity) will be entitled to receive interest at the
rate specified therein on its outstanding advances and will be entitled to pay
itself such interest periodically from general collections on the Assets prior
to any payment to Certificateholders or as otherwise provided in the related
Agreement and described in such Prospectus Supplement.
The Prospectus Supplement for any series of Certificates evidencing an
interest in a Trust Fund that includes MBS will describe any corresponding
advancing obligation of any person in connection with such MBS.
Reports to Certificateholders
Unless otherwise provided in the Prospectus Supplement, with each
distribution to holders of any class of Certificates of a series, the Master
Servicer or the Trustee, as provided in the related Prospectus Supplement, will
forward or cause to be forwarded to each such holder, to the Depositor and to
such other parties as may be specified in the related Agreement, a statement
setting forth, in each case to the extent applicable and available:
(i) the amount of such distribution to holders of Certificates of such
class applied to reduce the Certificate Balance thereof;
(ii) the amount of such distribution to holders of Certificates of such
class allocable to Accrued Certificate Interest;
(iii) the amount of such distribution allocable to (a) Prepayment Premiums
and (b) payments on account of Equity Participations;
(iv) the amount of related servicing compensation received by a Master
Servicer (and, if payable directly out of the related Trust Fund, by any
Special Servicer and any Sub-Servicer) and such other customary
information as any such Master Servicer or the Trustee deems necessary or
desirable, or that a Certificateholder reasonably requests, to enable
Certificateholders to prepare their tax returns;
(v) the aggregate amount of advances included in such distribution, and
the aggregate amount of unreimbursed advances at the close of business on
such Distribution Date;
(vi) the aggregate principal balance of the Assets at the close of
business on such Distribution Date;
(vii) the number and aggregate principal balance of Whole Loans in respect
of which (a) one scheduled payment is delinquent, (b) two scheduled
payments are delinquent, (c) three or more scheduled payments are
delinquent and (d) foreclosure proceedings have been commenced;
34
<PAGE> 205
(viii) with respect to each Whole Loan that is delinquent two or more
months, (a) the loan number thereof, (b) the unpaid balance thereof, (c)
whether the delinquency is in respect of any balloon payment, (d) the
aggregate amount of unreimbursed servicing expenses and unreimbursed
advances in respect thereof, (e) if applicable, the aggregate amount of
any interest accrued and payable on related servicing expenses and related
advances assuming such Mortgage Loan is subsequently liquidated through
foreclosure, (f) whether a notice of acceleration has been sent to the
mortgagor and, if so, the date of such notice, (g) whether foreclosure
proceedings have been commenced and, if so, the date so commenced and (h)
if such Mortgage Loan is more than three months delinquent and foreclosure
has not been commenced, the reason therefor;
(ix) with respect to any Whole Loan liquidated during the related Due
Period (other than by payment in full), (a) the loan number thereof, (b)
the manner in which it was liquidated and (c) the aggregate amount of
liquidation proceeds received;
(x) with respect to any Whole Loan liquidated during the related Due
Period, (a) the portion of such liquidation proceeds payable or
reimbursable to the Master Servicer (or any other entity) in respect of
such Mortgage Loan and (b) the amount of any loss to Certificateholders;
(xi) with respect to each REO Property relating to a Whole Loan and
included in the Trust Fund as of the end of the related Due Period, (a)
the loan number of the related Mortgage Loan and (b) the date of
acquisition;
(xii) with respect to each REO Property relating to a Whole Loan and
included in the Trust Fund as of the end of the related Due Period, (a)
the book value, (b) the principal balance of the related Mortgage Loan
immediately following such Distribution Date (calculated as if such
Mortgage Loan were still outstanding taking into account certain limited
modifications to the terms thereof specified in the Agreement), (c) the
aggregate amount of unreimbursed servicing expenses and unreimbursed
advances in respect thereof and (d) if applicable, the aggregate amount of
interest accrued and payable on related servicing expenses and related
advances;
(xiii) with respect to any such REO Property sold during the related Due
Period (a) the loan number of the related Mortgage Loan, (b) the aggregate
amount of sale proceeds, (c) the portion of such sales proceeds payable or
reimbursable to the Master Servicer or a Special Servicer in respect of
such REO Property or the related Mortgage Loan and (d) the amount of any
loss to Certificateholders in respect of the related Mortgage Loan;
(xiv) the aggregate Certificate Balance or notional amount, as the case
may be, of each class of Certificates (including any class of Certificates
not offered hereby) at the close of business on such Distribution Date,
separately identifying any reduction in such Certificate Balance due to
the allocation of any loss and increase in the Certificate Balance of a
class of Accrual Certificates in the event that Accrued Certificate
Interest has been added to such balance;
(xv) the aggregate amount of principal prepayments made during the related
Due Period;
(xvi) the amount deposited in the reserve fund, if any, on such
Distribution Date;
(xvii) the amount remaining in the reserve fund, if any, as of the close
of business on such Distribution Date;
(xviii) the aggregate unpaid Accrued Certificate Interest, if any, on each
class of Certificates at the close of business on such Distribution Date;
35
<PAGE> 206
(xix) in the case of Certificates with a variable Pass-Through Rate, the
Pass-Through Rate applicable to such Distribution Date, and, if available,
the immediately succeeding Distribution Date, as calculated in accordance
with the method specified in the related Prospectus Supplement;
(xx) in the case of Certificates with an adjustable Pass-Through Rate, for
statements to be distributed in any month in which an adjustment date
occurs, the adjustable Pass-Through Rate applicable to such Distribution
Date and the immediately succeeding Distribution Date as calculated in
accordance with the method specified in the related Prospectus Supplement;
(xxi) as to any series which includes Credit Support, the amount of
coverage of each instrument of Credit Support included therein as of the
close of business on such Distribution Date; and
(xxii) the aggregate amount of payments by the mortgagors of (a) default
interest, (b) late charges and (c) assumption and modification fees
collected during the related Due Period.
In the case of information furnished pursuant to subclauses (i)-(iv)
above, the amounts shall be expressed as a dollar amount per minimum
denomination of Certificates or for such other specified portion thereof. In
addition, in the case of information furnished pursuant to subclauses (i), (ii),
(xiv), (xviii) and (xix) above, such amounts shall also be provided with respect
to each component, if any, of a class of Certificates. The Master Servicer or
the Trustee, as specified in the related Prospectus Supplement, will forward or
cause to be forwarded to each holder, to the Depositor and to such other parties
as may be specified in the Agreement, a copy of any statements or reports
received by the Master Servicer or the Trustee, as applicable, with respect to
any MBS. The Prospectus Supplement for each series of Offered Certificates will
describe any additional information to be included in reports to the holders of
such Certificates.
Within a reasonable period of time after the end of each calendar year,
the Master Servicer or the Trustee, as provided in the related Prospectus
Supplement, shall furnish to each person who at any time during the calendar
year was a holder of a Certificate a statement containing the information set
forth in subclauses (i)-(iv) above, aggregated for such calendar year or the
applicable portion thereof during which such person was a Certificateholder.
Such obligation of the Master Servicer or the Trustee shall be deemed to have
been satisfied to the extent that substantially comparable information shall be
provided by the Master Servicer or the Trustee pursuant to any requirements of
the Code as are from time to time in force. See "Description of the
Certificates--Book-Entry Registration and Definitive Certificates."
Termination
The obligations created by the Agreement for each series of Certificates
will terminate upon the payment to Certificateholders of that series of all
amounts held in the Certificate Account or by the Master Servicer, if any, or
the Trustee and required to be paid to them pursuant to such Agreement following
the earlier of (i) the final payment or other liquidation of the last Asset
subject thereto or the disposition of all property acquired upon foreclosure of
any Whole Loan subject thereto and (ii) the purchase of all of the assets of the
Trust Fund by the party entitled to effect such termination, under the
circumstances and in the manner set forth in the related Prospectus Supplement.
In no event, however, will the trust created by the Agreement continue beyond
the date specified in the related Prospectus Supplement. Written notice of
termination of the Agreement will be given to each Certificateholder, and the
final distribution will be made only upon presentation and surrender of the
Certificates at the location to be specified in the notice of termination.
If so specified in the related Prospectus Supplement, a series of
Certificates may be subject to optional early termination through the repurchase
of the assets in the related Trust Fund by the party specified therein, under
the circumstances and in the manner set forth therein. If so provided in the
related Prospectus Supplement, upon the reduction of the Certificate Balance of
a specified class or classes of Certificates by a specified percentage or
amount, the party specified therein will solicit bids for the purchase of all
assets of the Trust Fund, or of a sufficient portion of such assets to retire
such class or classes or purchase such class or classes at a price set forth in
the related Prospectus Supplement, in each case, under the circumstances and in
the manner set forth therein.
36
<PAGE> 207
Book-Entry Registration and Definitive Certificates
If so provided in the related Prospectus Supplement, one or more classes
of the Offered Certificates of any series will be issued as Book-Entry
Certificates, and each such class will be represented by one or more single
Certificates registered in the name of a nominee for the depository, The
Depository Trust Company ("DTC").
DTC is a limited-purpose trust company organized under the laws of the
State of New York, a member of the Federal Reserve System, a "clearing
corporation" within the meaning of the Uniform Commercial Code ("UCC") and a
"clearing agency" registered pursuant to the provisions of Section 17A of the
Securities Exchange Act of 1934, as amended. DTC was created to hold securities
for its participating organizations ("Participants") and facilitate the
clearance and settlement of securities transactions between Participants through
electronic book-entry changes in their accounts, thereby eliminating the need
for physical movement of certificates. Participants include Morgan Stanley & Co.
Incorporated, securities brokers and dealers, banks, trust companies and
clearing corporations and may include certain other organizations. Indirect
access to the DTC system also is available to others such as banks, brokers,
dealers and trust companies that clear through or maintain a custodial
relationship with a Participant, either directly or indirectly ("Indirect
Participants"). Unless otherwise provided in the related Prospectus Supplement,
investors that are not Participants or Indirect Participants but desire to
purchase, sell or otherwise transfer ownership of, or other interests in,
Book-Entry Certificates may do so only through Participants and Indirect
Participants. In addition, such investors ("Certificate Owners") will receive
all distributions on the Book-Entry Certificates through DTC and its
Participants. Under a book-entry format, Certificate Owners will receive
payments after the related Distribution Date because, while payments are
required to be forwarded to Cede & Co., as nominee for DTC ("Cede"), on each
such date, DTC will forward such payments to its Participants which thereafter
will be required to forward them to Indirect Participants or Certificate Owners.
Unless otherwise provided in the related Prospectus Supplement, the only
"Certificateholder" (as such term is used in the Agreement) will be Cede, as
nominee of DTC, and the Certificate Owners will not be recognized by the Trustee
as Certificateholders under the Agreement. Certificate Owners will be permitted
to exercise the rights of Certificateholders under the related Agreement only
indirectly through the Participants who in turn will exercise their rights
through DTC.
Under the rules, regulations and procedures creating and affecting DTC and
its operations, DTC is required to make book-entry transfers among Participants
on whose behalf it acts with respect to the Book-Entry Certificates and is
required to receive and transmit distributions of principal of and interest on
the Book-Entry Certificates. Participants and Indirect Participants with which
Certificate Owners have accounts with respect to the Book-Entry Certificates
similarly are required to make book-entry transfers and receive and transmit
such payments on behalf of their respective Certificate Owners.
Because DTC can act only on behalf of Participants, who in turn act on
behalf of Indirect Participants and certain banks, the ability of a Certificate
Owner to pledge its interest in the Book-Entry Certificates to persons or
entities that do not participate in the DTC system, or otherwise take actions in
respect of its interest in the Book-Entry Certificates, may be limited due to
the lack of a physical certificate evidencing such interest.
DTC has advised the Depositor that it will take any action permitted to be
taken by a Certificateholder under an Agreement only at the direction of one or
more Participants to whose account with DTC interests in the Book-Entry
Certificates are credited.
Unless otherwise specified in the related Prospectus Supplement,
Certificates initially issued in book-entry form will be issued in fully
registered, certificated form to Certificate Owners or their nominees
("Definitive Certificates"), rather than to DTC or its nominee only if (i) the
Depositor advises the Trustee in writing that DTC is no longer willing or able
to properly discharge its responsibilities as depository with respect to the
Certificates and the Depositor is unable to locate a qualified successor or (ii)
the Depositor, at its option, elects to terminate the book-entry system through
DTC.
Upon the occurrence of either of the events described in the immediately
preceding paragraph, DTC is required to notify all Participants of the
availability through DTC of Definitive Certificates for the Certificate
37
<PAGE> 208
Owners. Upon surrender by DTC of the certificate or certificates representing
the Book-Entry Certificates, together with instructions for reregistration, the
Trustee will issue (or cause to be issued) to the Certificate Owners identified
in such instructions the Definitive Certificates to which they are entitled, and
thereafter the Trustee will recognize the holders of such Definitive
Certificates as Certificateholders under the Agreement.
DESCRIPTION OF THE AGREEMENTS
The Certificates of each series evidencing interests in a Trust Fund
including Whole Loans will be issued pursuant to a Pooling and Servicing
Agreement among the Depositor, a Master Servicer, any Special Servicer appointed
as of the date of the Pooling and Servicing Agreement and the Trustee. The
Certificates of each series evidencing interests in a Trust Fund not including
Whole Loans will be issued pursuant to a Trust Agreement between the Depositor
and a Trustee. Any Master Servicer, any such Special Servicer and the Trustee
with respect to any series of Certificates will be named in the related
Prospectus Supplement. In lieu of appointing a Master Servicer, a servicer may
be appointed pursuant to the Pooling and Servicing Agreement for any Trust Fund.
Such servicer will service all or a significant number of Whole Loans directly
without a Sub-Servicer. Unless otherwise specified in the related Prospectus
Supplement, the obligations of any such servicer shall be commensurate with
those of the Master Servicer described herein. References in this prospectus to
Master Servicer and its rights and obligations, unless otherwise specified in
the related Prospectus Supplement, shall be deemed to also be references to any
servicer servicing Whole Loans directly. A manager or administrator may be
appointed pursuant to the Trust Agreement for any Trust Fund to administer such
Trust Fund. The provisions of each Agreement will vary depending upon the nature
of the Certificates to be issued thereunder and the nature of the related Trust
Fund. A form of a Pooling and Servicing Agreement has been filed as an exhibit
to the Registration Statement of which this Prospectus is a part. Any Trust
Agreement will generally conform to the form of Pooling and Servicing Agreement
filed herewith, but will not contain provisions with respect to the servicing
and maintenance of Whole Loans. The following summaries describe certain
provisions that may appear in each Agreement. The Prospectus Supplement for a
series of Certificates will describe any provision of the Agreement relating to
such series that materially differs from the description thereof contained in
this Prospectus. The summaries do not purport to be complete and are subject to,
and are qualified in their entirety by reference to, all of the provisions of
the Agreement for each Trust Fund and the description of such provisions in the
related Prospectus Supplement. As used herein with respect to any series, the
term "Certificate" refers to all of the Certificates of that series, whether or
not offered hereby and by the related Prospectus Supplement, unless the context
otherwise requires. The Depositor will provide a copy of the Agreement (without
exhibits) relating to any series of Certificates without charge upon written
request of a holder of a Certificate of such series addressed to Morgan Stanley
Capital I Inc., c/o Morgan Stanley & Co. Incorporated, 1585 Broadway, 37th
Floor, New York, New York 10036, Attention: John E. Westerfield.
Assignment of Assets; Repurchases
At the time of issuance of any series of Certificates, the Depositor will
assign (or cause to be assigned) to the designated Trustee the Assets to be
included in the related Trust Fund, together with all principal and interest to
be received on or with respect to such Assets after the Cut-off Date, other than
principal and interest due on or before the Cut-off Date and other than any
Retained Interest. The Trustee will, concurrently with such assignment, deliver
the Certificates to the Depositor in exchange for the Assets and the other
assets comprising the Trust Fund for such series. Each Mortgage Asset will be
identified in a schedule appearing as an exhibit to the related Agreement.
Unless otherwise provided in the related Prospectus Supplement, such schedule
will include detailed information (i) in respect of each Whole Loan included in
the related Trust Fund, including without limitation, the address of the related
Mortgaged Property and type of such property, the Mortgage Rate and, if
applicable, the applicable index, margin, adjustment date and any rate cap
information, the original and remaining term to maturity, the original and
outstanding principal balance and balloon payment, if any, the Value,
Loan-to-Value Ratio and the Debt Service Coverage Ratio as of the date indicated
and payment and prepayment provisions, if applicable, and (ii) in respect of
each MBS included in the related Trust Fund, including without limitation, the
MBS Issuer, MBS Servicer and MBS Trustee, the pass-through or bond rate or
formula for determining such rate, the issue date and original and remaining
term to maturity, if applicable, the original and outstanding principal amount
and payment provisions, if applicable.
38
<PAGE> 209
With respect to each Whole Loan, the Depositor will deliver or cause to be
delivered to the Trustee (or to the custodian hereinafter referred to) certain
loan documents, which unless otherwise specified in the related Prospectus
Supplement will include the original Mortgage Note endorsed, without recourse,
in blank or to the order of the Trustee, the original Mortgage (or a certified
copy thereof) with evidence of recording indicated thereon and an assignment of
the Mortgage to the Trustee in recordable form. Notwithstanding the foregoing, a
Trust Fund may include Mortgage Loans where the original Mortgage Note is not
delivered to the Trustee if the Depositor delivers to the Trustee or the
custodian a copy or a duplicate original of the Mortgage Note, together with an
affidavit certifying that the original thereof has been lost or destroyed. With
respect to such Mortgage Loans, the Trustee (or its nominee) may not be able to
enforce the Mortgage Note against the related borrower. Unless otherwise
specified in the related Prospectus Supplement, the Asset Seller will be
required to agree to repurchase, or substitute for, each such Mortgage Loan that
is subsequently in default if the enforcement thereof or of the related Mortgage
is materially adversely affected by the absence of the original Mortgage Note.
Unless otherwise provided in the related Prospectus Supplement, the related
Agreement will require the Depositor or another party specified therein to
promptly cause each such assignment of Mortgage to be recorded in the
appropriate public office for real property records, except in the State of
California or in other states where, in the opinion of counsel acceptable to the
Trustee, such recording is not required to protect the Trustee's interest in the
related Whole Loan against the claim of any subsequent transferee or any
successor to or creditor of the Depositor, the Master Servicer, the relevant
Asset Seller or any other prior holder of the Whole Loan.
The Trustee (or a custodian) will review such Whole Loan documents within
a specified period of days after receipt thereof, and the Trustee (or a
custodian) will hold such documents in trust for the benefit of the
Certificateholders. Unless otherwise specified in the related Prospectus
Supplement, if any such document is found to be missing or defective in any
material respect, the Trustee (or such custodian) shall immediately notify the
Master Servicer and the Depositor, and the Master Servicer shall immediately
notify the relevant Asset Seller. If the Asset Seller cannot cure the omission
or defect within a specified number of days after receipt of such notice, then
unless otherwise specified in the related Prospectus Supplement, the Asset
Seller will be obligated, within a specified number of days of receipt of such
notice, to repurchase the related Whole Loan from the Trustee at the Purchase
Price or substitute for such Mortgage Loan. There can be no assurance that an
Asset Seller will fulfill this repurchase or substitution obligation, and
neither the Master Servicer nor the Depositor will be obligated to repurchase or
substitute for such Mortgage Loan if the Asset Seller defaults on its
obligation. Unless otherwise specified in the related Prospectus Supplement,
this repurchase or substitution obligation constitutes the sole remedy available
to the Certificateholders or the Trustee for omission of, or a material defect
in, a constituent document. To the extent specified in the related Prospectus
Supplement, in lieu of curing any omission or defect in the Asset or
repurchasing or substituting for such Asset, the Asset Seller may agree to cover
any losses suffered by the Trust Fund as a result of such breach or defect.
If so provided in the related Prospectus Supplement, the Depositor will,
as to some or all of the Mortgage Loans, assign or cause to be assigned to the
Trustee the related Lease Assignments. In certain cases, the Trustee, or Master
Servicer, as applicable, may collect all moneys under the related Leases and
distribute amounts, if any, required under the Lease for the payment of
maintenance, insurance and taxes, to the extent specified in the related Lease
agreement. The Trustee, or if so specified in the Prospectus Supplement, the
Master Servicer, as agent for the Trustee, may hold the Lease in trust for the
benefit of the Certificateholders.
With respect to each Government Security or MBS in certificated form, the
Depositor will deliver or cause to be delivered to the Trustee (or the
custodian) the original certificate or other definitive evidence of such
Government Security or MBS, as applicable, together with bond power or other
instruments, certifications or documents required to transfer fully such
Government Security or MBS, as applicable, to the Trustee for the benefit of the
Certificateholders. With respect to each Government Security or MBS in
uncertificated or book-entry form or held through a "clearing corporation"
within the meaning of the UCC, the Depositor and the Trustee will cause such
Government Security or MBS to be registered directly or on the books of such
clearing corporation or of a financial intermediary in the name of the Trustee
for the benefit of the Certificateholders. Unless otherwise provided in the
related Prospectus Supplement, the related Agreement will require that either
the Depositor or the Trustee promptly cause any MBS and Government Securities in
certificated form not registered in the name of the Trustee to be re-registered,
with the applicable persons, in the name of the Trustee.
39
<PAGE> 210
Representations and Warranties; Repurchases
Unless otherwise provided in the related Prospectus Supplement the
Depositor will, with respect to each Whole Loan, make or assign certain
representations and warranties, as of a specified date (the person making such
representations and warranties, the "Warrantying Party") covering, by way of
example, the following types of matters: (i) the accuracy of the information set
forth for such Whole Loan on the schedule of Assets appearing as an exhibit to
the related Agreement; (ii) the existence of title insurance insuring the lien
priority of the Whole Loan; (iii) the authority of the Warrantying Party to sell
the Whole Loan; (iv) the payment status of the Whole Loan and the status of
payments of taxes, assessments and other charges affecting the related Mortgaged
Property; (v) the existence of customary provisions in the related Mortgage Note
and Mortgage to permit realization against the Mortgaged Property of the benefit
of the security of the Mortgage; and (vi) the existence of hazard and extended
perils insurance coverage on the Mortgaged Property.
Any Warrantying Party, if other than the Depositor, shall be an Asset
Seller or an affiliate thereof or such other person acceptable to the Depositor
and shall be identified in the related Prospectus Supplement.
Representations and warranties made in respect of a Whole Loan may have
been made as of a date prior to the applicable Cut-off Date. A substantial
period of time may have elapsed between such date and the date of initial
issuance of the related series of Certificates evidencing an interest in such
Whole Loan. Unless otherwise specified in the related Prospectus Supplement, in
the event of a breach of any such representation or warranty, the Warrantying
Party will be obligated to reimburse the Trust Fund for losses caused by any
such breach or either cure such breach or repurchase or replace the affected
Whole Loan as described below. Since the representations and warranties may not
address events that may occur following the date as of which they were made, the
Warrantying Party will have a reimbursement, cure, repurchase or substitution
obligation in connection with a breach of such a representation and warranty
only if the relevant event that causes such breach occurs prior to such date.
Such party would have no such obligations if the relevant event that causes such
breach occurs after such date.
Unless otherwise provided in the related Prospectus Supplement, each
Agreement will provide that the Master Servicer and/or Trustee will be required
to notify promptly the relevant Warrantying Party of any breach of any
representation or warranty made by it in respect of a Whole Loan that materially
and adversely affects the value of such Whole Loan or the interests therein of
the Certificateholders. If such Warrantying Party cannot cure such breach within
a specified period following the date on which such party was notified of such
breach, then such Warrantying Party will be obligated to repurchase such Whole
Loan from the Trustee within a specified period from the date on which the
Warrantying Party was notified of such breach, at the Purchase Price therefor.
As to any Whole Loan, unless otherwise specified in the related Prospectus
Supplement, the "Purchase Price" is equal to the sum of the unpaid principal
balance thereof, plus unpaid accrued interest thereon at the Mortgage Rate from
the date as to which interest was last paid to the due date in the Due Period in
which the relevant purchase is to occur, plus certain servicing expenses that
are reimbursable to the Master Servicer. If so provided in the Prospectus
Supplement for a series, a Warrantying Party, rather than repurchase a Whole
Loan as to which a breach has occurred, will have the option, within a specified
period after initial issuance of such series of Certificates, to cause the
removal of such Whole Loan from the Trust Fund and substitute in its place one
or more other Whole Loans, in accordance with the standards described in the
related Prospectus Supplement. If so provided in the Prospectus Supplement for a
series, a Warrantying Party, rather than repurchase or substitute a Whole Loan
as to which a breach has occurred, will have the option to reimburse the Trust
Fund or the Certificateholders for any losses caused by such breach. Unless
otherwise specified in the related Prospectus Supplement, this reimbursement,
repurchase or substitution obligation will constitute the sole remedy available
to holders of Certificates or the Trustee for a breach of representation by a
Warrantying Party.
Neither the Depositor (except to the extent that it is the Warrantying
Party) nor the Master Servicer will be obligated to purchase or substitute for a
Whole Loan if a Warrantying Party defaults on its obligation to do so, and no
assurance can be given that Warrantying Parties will carry out such obligations
with respect to Whole Loans.
Unless otherwise provided in the related Prospectus Supplement the
Warrantying Party will, with respect to a Trust Fund that includes Government
Securities or MBS, make or assign certain representations or warranties,
40
<PAGE> 211
as of a specified date, with respect to such Government Securities or MBS,
covering (i) the accuracy of the information set forth therefor on the schedule
of Assets appearing as an exhibit to the related Agreement and (ii) the
authority of the Warrantying Party to sell such Assets. The related Prospectus
Supplement will describe the remedies for a breach thereof.
A Master Servicer will make certain representations and warranties
regarding its authority to enter into, and its ability to perform its
obligations under, the related Agreement. A breach of any such representation of
the Master Servicer which materially and adversely affects the interests of the
Certificateholders and which continues unremedied for thirty days after the
giving of written notice of such breach to the Master Servicer by the Trustee or
the Depositor, or to the Master Servicer, the Depositor and the Trustee by the
holders of Certificates evidencing not less than 25% of the Voting Rights
(unless otherwise specified in the related Prospectus Supplement), will
constitute an Event of Default under such Pooling and Servicing Agreement. See
"Events of Default" and "Rights Upon Event of Default."
Certificate Account and Other Collection Accounts
General
The Master Servicer and/or the Trustee will, as to each Trust Fund,
establish and maintain or cause to be established and maintained one or more
separate accounts for the collection of payments on the related Assets
(collectively, the "Certificate Account"), which must be either (i) an account
or accounts the deposits in which are insured by the Bank Insurance Fund or the
Savings Association Insurance Fund of the Federal Deposit Insurance Corporation
("FDIC") (to the limits established by the FDIC) and the uninsured deposits in
which are otherwise secured such that the Certificateholders have a claim with
respect to the funds in the Certificate Account or a perfected first priority
security interest against any collateral securing such funds that is superior to
the claims of any other depositors or general creditors of the institution with
which the Certificate Account is maintained or (ii) otherwise maintained with a
bank or trust company, and in a manner, satisfactory to the Rating Agency or
Agencies rating any class of Certificates of such series. The collateral
eligible to secure amounts in the Certificate Account is limited to United
States government securities and other investment grade obligations specified in
the Agreement ("Permitted Investments"). A Certificate Account may be maintained
as an interest bearing or a non-interest bearing account and the funds held
therein may be invested pending each succeeding Distribution Date in certain
short-term Permitted Investments. Unless otherwise provided in the related
Prospectus Supplement, any interest or other income earned on funds in the
Certificate Account will be paid to a Master Servicer or its designee as
additional servicing compensation. The Certificate Account may be maintained
with an institution that is an affiliate of the Master Servicer, if applicable,
provided that such institution meets the standards imposed by the Rating Agency
or Agencies. If permitted by the Rating Agency or Agencies and so specified in
the related Prospectus Supplement, a Certificate Account may contain funds
relating to more than one series of mortgage pass-through certificates and may
contain other funds respecting payments on mortgage loans belonging to the
Master Servicer or serviced or master serviced by it on behalf of others.
Deposits
A Master Servicer or the Trustee will deposit or cause to be deposited in
the Certificate Account for one or more Trust Funds on a daily basis, unless
otherwise provided in the related Agreement, the following payments and
collections received, or advances made, by the Master Servicer or the Trustee or
on its behalf subsequent to the Cut-off Date (other than payments due on or
before the Cut-off Date, and exclusive of any amounts representing a Retained
Interest):
(i) all payments on account of principal, including principal prepayments,
on the Assets;
(ii) all payments on account of interest on the Assets, including any
default interest collected, in each case net of any portion thereof
retained by a Master Servicer, a Sub-Servicer or a Special Servicer as its
servicing compensation and net of any Retained Interest;
41
<PAGE> 212
(iii) all proceeds of the hazard, business interruption and general
liability insurance policies to be maintained in respect of each Mortgaged
Property securing a Whole Loan in the Trust Fund (to the extent such proceeds
are not applied to the restoration of the property or released to the mortgagor
in accordance with the normal servicing procedures of a Master Servicer or the
related Sub-Servicer, subject to the terms and conditions of the related
Mortgage and Mortgage Note) and all proceeds of rental interruption policies, if
any, insuring against losses arising from the failure of Lessees under a Lease
to make timely rental payments because of certain casualty events (collectively,
"Insurance Proceeds") and all other amounts received and retained in connection
with the liquidation of defaulted Mortgage Loans in the Trust Fund, by
foreclosure or otherwise ("Liquidation Proceeds"), together with the net
proceeds on a monthly basis with respect to any Mortgaged Properties acquired
for the benefit of Certificateholders by foreclosure or by deed in lieu of
foreclosure or otherwise;
(iv) any amounts paid under any instrument or drawn from any fund that
constitutes Credit Support for the related series of Certificates as
described under "Description of Credit Support";
(v) any advances made as described under "Description of the
Certificates--Advances in Respect of Delinquencies";
(vi) any amounts representing Prepayment Premiums;
(vii) any amounts paid under any Cash Flow Agreement, as described under
"Description of the Trust Funds--Cash Flow Agreements";
(viii) all proceeds of any Asset or, with respect to a Whole Loan,
property acquired in respect thereof purchased by the Depositor, any Asset
Seller or any other specified person as described under "Assignment of
Assets; Repurchases" and "Representations and Warranties; Repurchases,"
all proceeds of any defaulted Mortgage Loan purchased as described under
"Realization Upon Defaulted Whole Loans," and all proceeds of any Asset
purchased as described under "Description of the Certificates Termination"
(also, "Liquidation Proceeds");
(ix) any amounts paid by a Master Servicer to cover certain interest
shortfalls arising out of the prepayment of Whole Loans in the Trust Fund
as described under "Description of the Agreements Retained Interest;
Servicing Compensation and Payment of Expenses";
(x) to the extent that any such item does not constitute additional
servicing compensation to a Master Servicer, any payments on account of
modification or assumption fees, late payment charges, Prepayment Premiums
or Equity Participations on the Mortgage Assets; (xi) all payments
required to be deposited in the Certificate Account with respect to any
deductible clause in any blanket insurance policy described under "Hazard
Insurance Policies";
(xii) any amount required to be deposited by a Master Servicer or the
Trustee in connection with losses realized on investments for the benefit
of the Master Servicer or the Trustee, as the case may be, of funds held
in the Certificate Account; and
(xiii) any other amounts required to be deposited in the Certificate
Account as provided in the related Agreement and described in the related
Prospectus Supplement.
Withdrawals
A Master Servicer or the Trustee may, from time to time, unless otherwise
provided in the related Agreement and described in the related Prospectus
Supplement, make withdrawals from the Certificate Account for each Trust Fund
for any of the following purposes:
(i) to make distributions to the Certificateholders on each Distribution
Date;
42
<PAGE> 213
(ii) to reimburse a Master Servicer for unreimbursed amounts advanced as
described under "Description of the Certificates Advances in Respect of
Delinquencies," such reimbursement to be made out of amounts received
which were identified and applied by the Master Servicer as late
collections of interest (net of related servicing fees and Retained
Interest) on and principal of the particular Whole Loans with respect to
which the advances were made or out of amounts drawn under any form of
Credit Support with respect to such Whole Loans;
(iii) to reimburse a Master Servicer for unpaid servicing fees earned and
certain unreimbursed servicing expenses incurred with respect to Whole
Loans and properties acquired in respect thereof, such reimbursement to be
made out of amounts that represent Liquidation Proceeds and Insurance
Proceeds collected on the particular Whole Loans and properties, and net
income collected on the particular properties, with respect to which such
fees were earned or such expenses were incurred or out of amounts drawn
under any form of Credit Support with respect to such Whole Loans and
properties;
(iv) to reimburse a Master Servicer for any advances described in clause
(ii) above and any servicing expenses described in clause (iii) above
which, in the Master Servicer's good faith judgment, will not be
recoverable from the amounts described in clauses (ii) and (iii),
respectively, such reimbursement to be made from amounts collected on
other Assets or, if and to the extent so provided by the related Agreement
and described in the related Prospectus Supplement, just from that portion
of amounts collected on other Assets that is otherwise distributable on
one or more classes of Subordinate Certificates, if any, remain
outstanding, and otherwise any outstanding class of Certificates, of the
related series;
(v) if and to the extent described in the related Prospectus Supplement,
to pay a Master Servicer interest accrued on the advances described in
clause (ii) above and the servicing expenses described in clause (iii)
above while such remain outstanding and unreimbursed;
(vi) to pay for costs and expenses incurred by the Trust Fund for
environmental site assessments with respect to, and for containment,
clean-up or remediation of hazardous wastes, substances and materials on,
Mortgaged Properties securing defaulted Whole Loans as described under
"Realization Upon Defaulted Whole Loans";
(vii) to reimburse a Master Servicer, the Depositor, or any of their
respective directors, officers, employees and agents, as the case may be,
for certain expenses, costs and liabilities incurred thereby, as and to
the extent described under "Certain Matters Regarding a Master Servicer
and the Depositor";
(viii) if and to the extent described in the related Prospectus
Supplement, to pay (or to transfer to a separate account for purposes of
escrowing for the payment of) the Trustee's fees;
(ix) to reimburse the Trustee or any of its directors, officers, employees
and agents, as the case may be, for certain expenses, costs and
liabilities incurred thereby, as and to the extent described under
"Certain Matters Regarding the Trustee";
(x) unless otherwise provided in the related Prospectus Supplement, to pay
a Master Servicer, as additional servicing compensation, interest and
investment income earned in respect of amounts held in the Certificate
Account;
(xi) to pay the person entitled thereto any amounts deposited in the
Certificate Account that were identified and applied by the Master
Servicer as recoveries of Retained Interest;
(xii) to pay for costs reasonably incurred in connection with the proper
operation, management and maintenance of any Mortgaged Property acquired
for the benefit of Certificateholders by foreclosure or by deed in lieu of
foreclosure or otherwise, such payments to be made out of income received
on such property;
43
<PAGE> 214
(xiii) if one or more elections have been made to treat the Trust Fund or
designated portions thereof as a REMIC, to pay any federal, state or local
taxes imposed on the Trust Fund or its assets or transactions, as and to
the extent described under "Certain Federal Income Tax
Consequences--REMICS--Prohibited Transactions Tax and Other Taxes";
(xiv) to pay for the cost of an independent appraiser or other expert in
real estate matters retained to determine a fair sale price for a
defaulted Whole Loan or a property acquired in respect thereof in
connection with the liquidation of such Whole Loan or property;
(xv) to pay for the cost of various opinions of counsel obtained pursuant
to the related Agreement for the benefit of Certificateholders;
(xvi) to pay for the costs of recording the related Agreement if such
recordation materially and beneficially affects the interests of
Certificateholders, provided that such payment shall not constitute a
waiver with respect to the obligation of the Warrantying Party to remedy
any breach of representation or warranty under the Agreement;
(xvii) to pay the person entitled thereto any amounts deposited in the
Certificate Account in error, including amounts received on any Asset
after its removal from the Trust Fund whether by reason of purchase or
substitution as contemplated by "Assignment of Assets; Repurchase" and
"Representations and Warranties; Repurchases" or otherwise;
(xviii) to make any other withdrawals permitted by the related Agreement
and described in the related Prospectus Supplement; and
(xix) to clear and terminate the Certificate Account at the termination of
the Trust Fund.
Other Collection Accounts
Notwithstanding the foregoing, if so specified in the related Prospectus
Supplement, the Agreement for any series of Certificates may provide for the
establishment and maintenance of a separate collection account into which the
Master Servicer or any related Sub-Servicer or Special Servicer will deposit on
a daily basis the amounts described under "--Deposits" above for one or more
series of Certificates. Any amounts on deposit in any such collection account
will be withdrawn therefrom and deposited into the appropriate Certificate
Account by a time specified in the related Prospectus Supplement. To the extent
specified in the related Prospectus Supplement, any amounts which could be
withdrawn from the Certificate Account as described under "--Withdrawals" above,
may also be withdrawn from any such collection account. The Prospectus
Supplement will set forth any restrictions with respect to any such collection
account, including investment restrictions and any restrictions with respect to
financial institutions with which any such collection account may be maintained.
Collection and Other Servicing Procedures
The Master Servicer, directly or through Sub-Servicers, is required to
make reasonable efforts to collect all scheduled payments under the Whole Loans
and will follow or cause to be followed such collection procedures as it would
follow with respect to mortgage loans that are comparable to the Whole Loans and
held for its own account, provided such procedures are consistent with (i) the
terms of the related Agreement and any related hazard, business interruption,
rental interruption or general liability insurance policy or instrument of
Credit Support included in the related Trust Fund described herein or under
"Description of Credit Support," (ii) applicable law and (iii) the general
servicing standard specified in the related Prospectus Supplement or, if no such
standard is so specified, its normal servicing practices (in either case, the
"Servicing Standard"). In connection therewith, the Master Servicer will be
permitted in its discretion to waive any late payment charge or penalty interest
in respect of a late Whole Loan payment.
44
<PAGE> 215
Each Master Servicer will also be required to perform other customary
functions of a servicer of comparable loans, including maintaining (or causing
the mortgagor or Lessee on each Mortgage or Lease to maintain) hazard, business
interruption and general liability insurance policies (and, if applicable,
rental interruption policies) as described herein and in any related Prospectus
Supplement, and filing and settling claims thereunder; maintaining escrow or
impoundment accounts of mortgagors for payment of taxes, insurance and other
items required to be paid by any mortgagor pursuant to the Whole Loan;
processing assumptions or substitutions in those cases where the Master Servicer
has determined not to enforce any applicable due-on-sale clause; attempting to
cure delinquencies; supervising foreclosures; inspecting and managing Mortgaged
Properties under certain circumstances; and maintaining accounting records
relating to the Whole Loans. Unless otherwise specified in the related
Prospectus Supplement, the Master Servicer will be responsible for filing and
settling claims in respect of particular Whole Loans under any applicable
instrument of Credit Support. See "Description of Credit Support."
The Master Servicer may agree to modify, waive or amend any term of any
Whole Loan in a manner consistent with the Servicing Standard so long as the
modification, waiver or amendment will not (i) affect the amount or timing of
any scheduled payments of principal or interest on the Whole Loan or (ii) in its
judgment, materially impair the security for the Whole Loan or reduce the
likelihood of timely payment of amounts due thereon. The Master Servicer also
may agree to any modification, waiver or amendment that would so affect or
impair the payments on, or the security for, a Whole Loan if, unless otherwise
provided in the related Prospectus Supplement, (i) in its judgment, a material
default on the Whole Loan has occurred or a payment default is imminent and (ii)
in its judgment, such modification, waiver or amendment is reasonably likely to
produce a greater recovery with respect to the Whole Loan on a present value
basis than would liquidation. The Master Servicer is required to notify the
Trustee in the event of any modification, waiver or amendment of any Whole Loan.
Sub-Servicers
A Master Servicer may delegate its servicing obligations in respect of the
Whole Loans to third-party servicers (each, a "Sub-Servicer"), but such Master
Servicer will remain obligated under the related Agreement. Each sub-servicing
agreement between a Master Servicer and a Sub-Servicer (a "Sub-Servicing
Agreement") must be consistent with the terms of the related Agreement and must
provide that, if for any reason the Master Servicer for the related series of
Certificates is no longer acting in such capacity, the Trustee or any successor
Master Servicer may assume the Master Servicer's rights and obligations under
such Sub-Servicing Agreement.
Unless otherwise provided in the related Prospectus Supplement, the Master
Servicer will be solely liable for all fees owed by it to any Sub-Servicer,
irrespective of whether the Master Servicer's compensation pursuant to the
related Agreement is sufficient to pay such fees. However, a Sub-Servicer may be
entitled to a Retained Interest in certain Whole Loans. Each Sub-Servicer will
be reimbursed by the Master Servicer for certain expenditures which it makes,
generally to the same extent the Master Servicer would be reimbursed under an
Agreement. See "Retained Interest, Servicing Compensation and Payment of
Expenses."
Special Servicers
To the extent so specified in the related Prospectus Supplement, a special
servicer (the "Special Servicer") may be appointed. The related Prospectus
Supplement will describe the rights, obligations and compensation of a Special
Servicer. The Master Servicer will only be responsible for the duties and
obligations of a Special Servicer to the extent set forth in the Prospectus
Supplement.
Realization Upon Defaulted Whole Loans
A mortgagor's failure to make required payments may reflect inadequate
income or the diversion of that income from the service of payments due under
the Mortgage Loan, and may call into question such mortgagor's ability to make
timely payment of taxes and to pay for necessary maintenance of the related
Mortgaged Property. Unless otherwise provided in the related Prospectus
Supplement, the Master Servicer is required to monitor any Whole Loan which is
in default, contact the mortgagor concerning the default, evaluate whether the
causes of the default can be cured over a reasonable period without significant
impairment of the value of the Mortgaged
45
<PAGE> 216
Property, initiate corrective action in cooperation with the mortgagor if cure
is likely, inspect the Mortgaged Property and take such other actions as are
consistent with the Servicing Standard. A significant period of time may elapse
before the Master Servicer is able to assess the success of such corrective
action or the need for additional initiatives.
The time within which the Master Servicer makes the initial determination
of appropriate action, evaluates the success of corrective action, develops
additional initiatives, institutes foreclosure proceedings and actually
forecloses (or takes a deed to a Mortgaged Property in lieu of foreclosure) on
behalf of the Certificateholders, may vary considerably depending on the
particular Whole Loan, the Mortgaged Property, the mortgagor, the presence of an
acceptable party to assume the Whole Loan and the laws of the jurisdiction in
which the Mortgaged Property is located. Under federal bankruptcy law, the
Master Servicer in certain cases may not be permitted to accelerate a Whole Loan
or to foreclose on a Mortgaged Property for a considerable period of time. See
"Certain Legal Aspects of the Mortgage--Loans and the Leases."
Any Agreement relating to a Trust Fund that includes Whole Loans may grant
to the Master Servicer and/or the holder or holders of certain classes of
Certificates a right of first refusal to purchase from the Trust Fund at a
predetermined purchase price any such Whole Loan as to which a specified number
of scheduled payments thereunder are delinquent. Any such right granted to the
holder of an Offered Certificate will be described in the related Prospectus
Supplement. The related Prospectus Supplement will also describe any such right
granted to any person if the predetermined purchase price is less than the
Purchase Price described under "Representations and Warranties; Repurchases."
Unless otherwise specified in the related Prospectus Supplement, the
Master Servicer may offer to sell any defaulted Whole Loan described in the
preceding paragraph and not otherwise purchased by any person having a right of
first refusal with respect thereto, if and when the Master Servicer determines,
consistent with the Servicing Standard, that such a sale would produce a greater
recovery on a present value basis than would liquidation through foreclosure or
similar proceeding. The related Agreement will provide that any such offering be
made in a commercially reasonable manner for a specified period and that the
Master Servicer accept the highest cash bid received from any person (including
itself, an affiliate of the Master Servicer or any Certificateholder) that
constitutes a fair price for such defaulted Whole Loan. In the absence of any
bid determined in accordance with the related Agreement to be fair, the Master
Servicer shall proceed with respect to such defaulted Mortgage Loan as described
below. Any bid in an amount at least equal to the Purchase Price described under
"Representations and Warranties; Repurchases" will in all cases be deemed fair.
The Master Servicer, on behalf of the Trustee, may at any time institute
foreclosure proceedings, exercise any power of sale contained in any mortgage,
obtain a deed in lieu of foreclosure, or otherwise acquire title to a Mortgaged
Property securing a Whole Loan by operation of law or otherwise, if such action
is consistent with the Servicing Standard and a default on such Whole Loan has
occurred or, in the Master Servicer's judgment, is imminent. Unless otherwise
specified in the related Prospectus Supplement, the Master Servicer may not
acquire title to any related Mortgaged Property or take any other action that
would cause the Trustee, for the benefit of Certificateholders, or any other
specified person to be considered to hold title to, to be a
"mortgagee-in-possession" of, or to be an "owner" or an "operator" of such
Mortgaged Property within the meaning of certain federal environmental laws,
unless the Master Servicer has previously determined, based on a report prepared
by a person who regularly conducts environmental audits (which report will be an
expense of the Trust Fund), that either:
(i) the Mortgaged Property is in compliance with applicable environmental
laws, and there are no circumstances present at the Mortgaged Property
relating to the use, management or disposal of any hazardous substances,
hazardous materials, wastes, or petroleum-based materials for which
investigation, testing, monitoring, containment, clean-up or remediation
could be required under any federal, state or local law or regulation; or
(ii) if the Mortgaged Property is not so in compliance or such
circumstances are so present, then it would be in the best economic
interest of the Trust Fund to acquire title to the Mortgaged Property and
46
<PAGE> 217
further to take such actions as would be necessary and appropriate to
effect such compliance and/or respond to such circumstances (the cost of
which actions will be an expense of the Trust Fund).
Unless otherwise provided in the related Prospectus Supplement, if title
to any Mortgaged Property is acquired by a Trust Fund as to which a REMIC
election has been made, the Master Servicer, on behalf of the Trust Fund, will
be required to sell the Mortgaged Property prior to the close of the third
calendar year following the year of acquisition of such Mortgaged Property by
the Trust Fund, unless (i) the Internal Revenue Service grants an extension of
time to sell such property or (ii) the Trustee receives an opinion of
independent counsel to the effect that the holding of the property by the Trust
Fund subsequent to such period will not result in the imposition of a tax on the
Trust Fund or cause the Trust Fund to fail to qualify as a REMIC under the Code
at any time that any Certificate is outstanding. Subject to the foregoing, the
Master Servicer will be required to (i) solicit bids for any Mortgaged Property
so acquired in such a manner as will be reasonably likely to realize a fair
price for such property and (ii) accept the first (and, if multiple bids are
contemporaneously received, the highest) cash bid received from any person that
constitutes a fair price.
If the Trust Fund acquires title to any Mortgaged Property, the Master
Servicer, on behalf of the Trust Fund, may retain an independent contractor to
manage and operate such property. The retention of an independent contractor,
however, will not relieve the Master Servicer of any of its obligations with
respect to the management and operation of such Mortgaged Property. Unless
otherwise specified in the related Prospectus Supplement, any such property
acquired by the Trust Fund will be managed in a manner consistent with the
management and operation of similar property by a prudent lending institution.
The limitations imposed by the related Agreement and the REMIC provisions
of the Code (if a REMIC election has been made with respect to the related Trust
Fund) on the operations and ownership of any Mortgaged Property acquired on
behalf of the Trust Fund may result in the recovery of an amount less than the
amount that would otherwise be recovered. See "Certain Legal Aspects of the
Mortgage Loans and the Leases--Foreclosure."
If recovery on a defaulted Whole Loan under any related instrument of
Credit Support is not available, the Master Servicer nevertheless will be
obligated to follow or cause to be followed such normal practices and procedures
as it deems necessary or advisable to realize upon the defaulted Whole Loan. If
the proceeds of any liquidation of the property securing the defaulted Whole
Loan are less than the outstanding principal balance of the defaulted Whole Loan
plus interest accrued thereon at the Mortgage Rate plus the aggregate amount of
expenses incurred by the Master Servicer in connection with such proceedings and
which are reimbursable under the Agreement, the Trust Fund will realize a loss
in the amount of such difference. The Master Servicer will be entitled to
withdraw or cause to be withdrawn from the Certificate Account out of the
Liquidation Proceeds recovered on any defaulted Whole Loan, prior to the
distribution of such Liquidation Proceeds to Certificateholders, amounts
representing its normal servicing compensation on the Whole Loan, unreimbursed
servicing expenses incurred with respect to the Whole Loan and any unreimbursed
advances of delinquent payments made with respect to the Whole Loan.
If any property securing a defaulted Whole Loan is damaged and proceeds,
if any, from the related hazard insurance policy are insufficient to restore the
damaged property to a condition sufficient to permit recovery under the related
instrument of Credit Support, if any, the Master Servicer is not required to
expend its own funds to restore the damaged property unless it determines (i)
that such restoration will increase the proceeds to Certificateholders on
liquidation of the Whole Loan after reimbursement of the Master Servicer for its
expenses and (ii) that such expenses will be recoverable by it from related
Insurance Proceeds or Liquidation Proceeds.
As servicer of the Whole Loans, a Master Servicer, on behalf of itself,
the Trustee and the Certificateholders, will present claims to the obligor under
each instrument of Credit Support, and will take such reasonable steps as are
necessary to receive payment or to permit recovery thereunder with respect to
defaulted Whole Loans.
If a Master Servicer or its designee recovers payments under any
instrument of Credit Support with respect to any defaulted Whole Loan, the
Master Servicer will be entitled to withdraw or cause to be withdrawn from the
47
<PAGE> 218
Certificate Account out of such proceeds, prior to distribution thereof to
Certificateholders, amounts representing its normal servicing compensation on
such Whole Loan, unreimbursed servicing expenses incurred with respect to the
Whole Loan and any unreimbursed advances of delinquent payments made with
respect to the Whole Loan. See "Hazard Insurance Policies" and "Description of
Credit Support."
Hazard Insurance Policies
Unless otherwise specified in the related Prospectus Supplement, each
Agreement for a Trust Fund that includes Whole Loans will require the Master
Servicer to cause the mortgagor on each Whole Loan to maintain a hazard
insurance policy providing for such coverage as is required under the related
Mortgage or, if any Mortgage permits the holder thereof to dictate to the
mortgagor the insurance coverage to be maintained on the related Mortgaged
Property, then such coverage as is consistent with the Servicing Standard.
Unless otherwise specified in the related Prospectus Supplement, such coverage
will be in general in an amount equal to the lesser of the principal balance
owing on such Whole Loan and the amount necessary to fully compensate for any
damage or loss to the improvements on the Mortgaged Property on a replacement
cost basis, but in either case not less than the amount necessary to avoid the
application of any co-insurance clause contained in the hazard insurance policy.
The ability of the Master Servicer to assure that hazard insurance proceeds are
appropriately applied may be dependent upon its being named as an additional
insured under any hazard insurance policy and under any other insurance policy
referred to below, or upon the extent to which information in this regard is
furnished by mortgagors. All amounts collected by the Master Servicer under any
such policy (except for amounts to be applied to the restoration or repair of
the Mortgaged Property or released to the mortgagor in accordance with the
Master Servicer's normal servicing procedures, subject to the terms and
conditions of the related Mortgage and Mortgage Note) will be deposited in the
Certificate Account. The Agreement will provide that the Master Servicer may
satisfy its obligation to cause each mortgagor to maintain such a hazard
insurance policy by the Master Servicer's maintaining a blanket policy insuring
against hazard losses on the Whole Loans. If such blanket policy contains a
deductible clause, the Master Servicer will be required to deposit in the
Certificate Account all sums that would have been deposited therein but for such
clause.
In general, the standard form of fire and extended coverage policy covers
physical damage to or destruction of the improvements of the property by fire,
lightning, explosion, smoke, windstorm and hail, and riot, strike and civil
commotion, subject to the conditions and exclusions specified in each policy.
Although the policies relating to the Whole Loans will be underwritten by
different insurers under different state laws in accordance with different
applicable state forms, and therefore will not contain identical terms and
conditions, the basic terms thereof are dictated by respective state laws, and
most such policies typically do not cover any physical damage resulting from
war, revolution, governmental actions, floods and other water-related causes,
earth movement (including earthquakes, landslides and mudflows), wet or dry rot,
vermin, domestic animals and certain other kinds of uninsured risks.
The hazard insurance policies covering the Mortgaged Properties securing
the Whole Loans will typically contain a co-insurance clause that in effect
requires the insured at all times to carry insurance of a specified percentage
(generally 80% to 90%) of the full replacement value of the improvements on the
property in order to recover the full amount of any partial loss. If the
insured's coverage falls below this specified percentage, such clause generally
provides that the insurer's liability in the event of partial loss does not
exceed the lesser of (i) the replacement cost of the improvements less physical
depreciation and (ii) such proportion of the loss as the amount of insurance
carried bears to the specified percentage of the full replacement cost of such
improvements.
Each Agreement for a Trust Fund that includes Whole Loans will require the
Master Servicer to cause the mortgagor on each Whole Loan, or, in certain cases,
the related Lessee, to maintain all such other insurance coverage with respect
to the related Mortgaged Property as is consistent with the terms of the related
Mortgage and the Servicing Standard, which insurance may typically include flood
insurance (if the related Mortgaged Property was located at the time of
origination in a federally designated flood area).
In addition, to the extent required by the related Mortgage, the Master
Servicer may require the mortgagor or related Lessee to maintain other forms of
insurance including, but not limited to, loss of rent endorsements,
48
<PAGE> 219
business interruption insurance and comprehensive public liability insurance,
and the related Agreement may require the Master Servicer, Sub-Servicer or
Special Servicer to maintain public liability insurance with respect to any REO
Properties. Any cost incurred by the Master Servicer in maintaining any such
insurance policy will be added to the amount owing under the Mortgage Loan where
the terms of the Mortgage Loan so permit; provided, however, that the addition
of such cost will not be taken into account for purposes of calculating the
distribution to be made to Certificateholders. Such costs may be recovered by
the Master Servicer, Sub-Servicer or Special Servicer, as the case may be, from
the Collection Account, with interest thereon, as provided by the Agreement.
Under the terms of the Whole Loans, mortgagors will generally be required
to present claims to insurers under hazard insurance policies maintained on the
related Mortgaged Properties. The Master Servicer, on behalf of the Trustee and
Certificateholders, is obligated to present or cause to be presented claims
under any blanket insurance policy insuring against hazard losses on Mortgaged
Properties securing the Whole Loans. However, the ability of the Master Servicer
to present or cause to be presented such claims is dependent upon the extent to
which information in this regard is furnished to the Master Servicer by
mortgagors.
Rental Interruption Insurance Policy
If so specified in the related Prospectus Supplement, the Master Servicer
or the mortgagors will maintain rental interruption insurance policies in full
force and effect with respect to some or all of the Leases. Although the terms
of such policies vary to some degree, a rental interruption insurance policy
typically provides that, to the extent that a Lessee fails to make timely rental
payments under the related Lease due to a casualty event, such losses will be
reimbursed to the insured. If so specified in the related Prospectus Supplement,
the Master Servicer will be required to pay from its servicing compensation the
premiums on the rental interruption policy on a timely basis. If so specified in
the Prospectus Supplement, if such rental interruption policy is canceled or
terminated for any reason (other than the exhaustion of total policy coverage),
the Master Servicer will exercise its best reasonable efforts to obtain from
another insurer a replacement policy comparable to the rental interruption
policy with a total coverage that is equal to the then existing coverage of the
terminated rental interruption policy; provided that if the cost of any such
replacement policy is greater than the cost of the terminated rental
interruption policy, the amount of coverage under the replacement policy will,
unless otherwise specified in the related Prospectus Supplement, be reduced to a
level such that the applicable premium does not exceed, by a percentage that may
be set forth in the related Prospectus Supplement, the cost of the rental
interruption policy that was replaced. Any amounts collected by the Master
Servicer under the rental interruption policy in the nature of insurance
proceeds will be deposited in the Certificate Account.
Fidelity Bonds and Errors and Omissions Insurance
Unless otherwise specified in the related Prospectus Supplement, each
Agreement will require that the Master Servicer and any Special Servicer obtain
and maintain in effect a fidelity bond or similar form of insurance coverage
(which may provide blanket coverage) or any combination thereof insuring against
loss occasioned by fraud, theft or other intentional misconduct of the officers,
employees and agents of the Master Servicer or the Special Servicer, as
applicable. The related Agreement will allow the Master Servicer and any Special
Servicer to self-insure against loss occasioned by the errors and omissions of
the officers, employees and agents of the Master Servicer or the Special
Servicer so long as certain criteria set forth in the Agreement are met.
Due-on-Sale and Due-on-Encumbrance Provisions
Certain of the Whole Loans may contain clauses requiring the consent of
the mortgagee to any sale or other transfer of the related Mortgaged Property,
or due-on-sale clauses entitling the mortgagee to accelerate payment of the
Whole Loan upon any sale or other transfer of the related Mortgaged Property.
Certain of the Whole Loans may contain clauses requiring the consent of the
mortgagee to the creation of any other lien or encumbrance on the Mortgaged
Property or due-on-encumbrance clauses entitling the mortgagee to accelerate
payment of the Whole Loan upon the creation of any other lien or encumbrance
upon the Mortgaged Property. Unless otherwise provided in the related Prospectus
Supplement, the Master Servicer, on behalf of the Trust Fund, will exercise any
right the Trustee may have as mortgagee to accelerate payment of any such Whole
Loan or to withhold its consent to any
49
<PAGE> 220
transfer or further encumbrance in a manner consistent with the Servicing
Standard. Unless otherwise specified in the related Prospectus Supplement, any
fee collected by or on behalf of the Master Servicer for entering into an
assumption agreement will be retained by or on behalf of the Master Servicer as
additional servicing compensation. See "Certain Legal Aspects of the Mortgage
Loans and the Leases--Due-on-Sale and Due-on-Encumbrance."
Retained Interest; Servicing Compensation and Payment of Expenses
The Prospectus Supplement for a series of Certificates will specify
whether there will be any Retained Interest in the Assets, and, if so, the
initial owner thereof. If so, the Retained Interest will be established on a
loan-by-loan basis and will be specified on an exhibit to the related Agreement.
A "Retained Interest" in an Asset represents a specified portion of the interest
payable thereon. The Retained Interest will be deducted from mortgagor
payments as received and will not be part of the related Trust Fund.
Unless otherwise specified in the related Prospectus Supplement, the
Master Servicer's and a Sub-Servicer's primary servicing compensation with
respect to a series of Certificates will come from the periodic payment to it of
a portion of the interest payment on each Asset. Since any Retained Interest and
a Master Servicer's primary compensation are percentages of the principal
balance of each Asset, such amounts will decrease in accordance with the
amortization of the Assets. The Prospectus Supplement with respect to a series
of Certificates evidencing interests in a Trust Fund that includes Whole Loans
may provide that, as additional compensation, the Master Servicer or the
Sub-Servicers may retain all or a portion of assumption fees, modification fees,
late payment charges or Prepayment Premiums collected from mortgagors and any
interest or other income which may be earned on funds held in the Certificate
Account or any account established by a Sub-Servicer pursuant to the Agreement.
The Master Servicer may, to the extent provided in the related Prospectus
Supplement, pay from its servicing compensation certain expenses incurred in
connection with its servicing and managing of the Assets, including, without
limitation, payment of the fees and disbursements of the Trustee and independent
accountants, payment of expenses incurred in connection with distributions and
reports to Certificateholders, and payment of any other expenses described in
the related Prospectus Supplement. Certain other expenses, including certain
expenses relating to defaults and liquidations on the Whole Loans and, to the
extent so provided in the related Prospectus Supplement, interest thereon at the
rate specified therein, and the fees of any Special Servicer, may be borne by
the Trust Fund.
Evidence as to Compliance
Each Agreement relating to Assets which include Whole Loans will provide
that on or before a specified date in each year, beginning with the first such
date at least six months after the related Cut-off Date, a firm of independent
public accountants will furnish a statement to the Trustee to the effect that,
on the basis of the examination by such firm conducted substantially in
compliance with either the Uniform Single Attestation Program for Mortgage
Bankers or the Audit Program for Mortgages serviced for the Federal Home Loan
Mortgage Corporation ("FHLMC"), the servicing by or on behalf of the Master
Servicer of mortgage loans under pooling and servicing agreements substantially
similar to each other (including the related Agreement) was conducted in
compliance with the terms of such agreements except for any significant
exceptions or errors in records that, in the opinion of the firm, either the
Audit Program for Mortgages serviced for FHLMC, or paragraph 4 of the Uniform
Single Attestation Program for Mortgage Bankers, requires it to report. In
rendering its statement such firm may rely, as to matters relating to the direct
servicing of mortgage loans by Sub-Servicers, upon comparable statements for
examinations conducted substantially in compliance with the Uniform Single
Attestation Program for Mortgage Bankers or the Audit Program for Mortgages
serviced for FHLMC (rendered within one year of such statement) of firms of
independent public accountants with respect to the related Sub-Servicer.
Each such Agreement will also provide for delivery to the Trustee, on or
before a specified date in each year, of an annual statement signed by two
officers of the Master Servicer to the effect that the Master Servicer has
fulfilled its obligations under the Agreement throughout the preceding calendar
year or other specified twelve-month period.
50
<PAGE> 221
Unless otherwise provided in the related Prospectus Supplement, copies of
such annual accountants' statement and such statements of officers will be
obtainable by Certificateholders without charge upon written request to the
Master Servicer at the address set forth in the related Prospectus Supplement.
Certain Matters Regarding a Master Servicer and the Depositor
The Master Servicer, if any, or a servicer for substantially all the Whole
Loans under each Agreement will be named in the related Prospectus Supplement.
The entity serving as Master Servicer (or as such servicer) may be an affiliate
of the Depositor and may have other normal business relationships with the
Depositor or the Depositor's affiliates. Reference herein to the Master Servicer
shall be deemed to be to the servicer of substantially all of the Whole Loans,
if applicable.
Unless otherwise specified in the related Prospectus Supplement, the
related Agreement will provide that the Master Servicer may resign from its
obligations and duties thereunder only upon a determination that its duties
under the Agreement are no longer permissible under applicable law or are in
material conflict by reason of applicable law with any other activities carried
on by it, the other activities of the Master Servicer so causing such a conflict
being of a type and nature carried on by the Master Servicer at the date of the
Agreement. No such resignation will become effective until the Trustee or a
successor servicer has assumed the Master Servicer's obligations and duties
under the Agreement.
Unless otherwise specified in the related Prospectus Supplement, each
Agreement will further provide that neither any Master Servicer, the Depositor
nor any director, officer, employee, or agent of a Master Servicer or the
Depositor will be under any liability to the related Trust Fund or
Certificateholders for any action taken, or for refraining from the taking of
any action, in good faith pursuant to the Agreement; provided, however, that
neither a Master Servicer, the Depositor nor any such person will be protected
against any breach of a representation, warranty or covenant made in such
Agreement, or against any liability specifically imposed thereby, or against any
liability which would otherwise be imposed by reason of willful misfeasance, bad
faith or gross negligence in the performance of obligations or duties thereunder
or by reason of reckless disregard of obligations and duties thereunder. Unless
otherwise specified in the related Prospectus Supplement, each Agreement will
further provide that any Master Servicer, the Depositor and any director,
officer, employee or agent of a Master Servicer or the Depositor will be
entitled to indemnification by the related Trust Fund and will be held harmless
against any loss, liability or expense incurred in connection with any legal
action relating to the Agreement or the Certificates; provided, however, that
such indemnification will not extend to any loss, liability or expense (i)
specifically imposed by such Agreement or otherwise incidental to the
performance of obligations and duties thereunder, including, in the case of a
Master Servicer, the prosecution of an enforcement action in respect of any
specific Whole Loan or Whole Loans (except as any such loss, liability or
expense shall be otherwise reimbursable pursuant to such Agreement); (ii)
incurred in connection with any breach of a representation, warranty or covenant
made in such Agreement; (iii) incurred by reason of misfeasance, bad faith or
gross negligence in the performance of obligations or duties thereunder, or by
reason of reckless disregard of such obligations or duties; (iv) incurred in
connection with any violation of any state or federal securities law; or (v)
imposed by any taxing authority if such loss, liability or expense is not
specifically reimbursable pursuant to the terms of the related Agreement. In
addition, each Agreement will provide that neither any Master Servicer nor the
Depositor will be under any obligation to appear in, prosecute or defend any
legal action which is not incidental to its respective responsibilities under
the Agreement and which in its opinion may involve it in any expense or
liability. Any such Master Servicer or the Depositor may, however, in its
discretion undertake any such action which it may deem necessary or desirable
with respect to the Agreement and the rights and duties of the parties thereto
and the interests of the Certificateholders thereunder. In such event, the legal
expenses and costs of such action and any liability resulting therefrom will be
expenses, costs and liabilities of the Certificateholders, and the Master
Servicer or the Depositor, as the case may be, will be entitled to be reimbursed
therefor and to charge the Certificate Account.
Any person into which the Master Servicer or the Depositor may be merged
or consolidated, or any person resulting from any merger or consolidation to
which the Master Servicer or the Depositor is a party, or any person succeeding
to the business of the Master Servicer or the Depositor, will be the successor
of the Master Servicer or the Depositor, as the case may be, under the related
Agreement.
51
<PAGE> 222
Events of Default
Unless otherwise provided in the related Prospectus Supplement for a Trust
Fund that includes Whole Loans, Events of Default under the related Agreement
will include (i) any failure by the Master Servicer to distribute or cause to be
distributed to Certificateholders, or to remit to the Trustee for distribution
to Certificateholders, any required payment; (ii) any failure by the Master
Servicer duly to observe or perform in any material respect any of its other
covenants or obligations under the Agreement which continues unremedied for
thirty days after written notice of such failure has been given to the Master
Servicer by the Trustee or the Depositor, or to the Master Servicer, the
Depositor and the Trustee by the holders of Certificates evidencing not less
than 25% of the Voting Rights; (iii) any breach of a representation or warranty
made by the Master Servicer under the Agreement which materially and adversely
affects the interests of Certificateholders and which continues unremedied for
thirty days after written notice of such breach has been given to the Master
Servicer by the Trustee or the Depositor, or to the Master Servicer, the
Depositor and the Trustee by the holders of Certificates evidencing not less
than 25% of the Voting Rights; and (iv) certain events of insolvency,
readjustment of debt, marshalling of assets and liabilities or similar
proceedings and certain actions by or on behalf of the Master Servicer
indicating its insolvency or inability to pay its obligations. Material
variations to the foregoing Events of Default (other than to shorten cure
periods or eliminate notice requirements) will be specified in the related
Prospectus Supplement. Unless otherwise specified in the related Prospectus
Supplement, the Trustee shall, not later than the later of 60 days after the
occurrence of any event which constitutes or, with notice or lapse of time or
both, would constitute an Event of Default and five days after certain officers
of the Trustee become aware of the occurrence of such an event, transmit by mail
to the Depositor and all Certificateholders of the applicable series notice of
such occurrence, unless such default shall have been cured or waived.
Rights Upon Event of Default
So long as an Event of Default under an Agreement remains unremedied, the
Depositor or the Trustee may, and at the direction of holders of Certificates
evidencing not less than 51% of the Voting Rights, the Trustee shall, terminate
all of the rights and obligations of the Master Servicer under the Agreement and
in and to the Mortgage Loans (other than as a Certificateholder or as the owner
of any Retained Interest), whereupon the Trustee will succeed to all of the
responsibilities, duties and liabilities of the Master Servicer under the
Agreement (except that if the Trustee is prohibited by law from obligating
itself to make advances regarding delinquent mortgage loans, or if the related
Prospectus Supplement so specifies, then the Trustee will not be obligated to
make such advances) and will be entitled to similar compensation arrangements.
Unless otherwise specified in the related Prospectus Supplement, in the event
that the Trustee is unwilling or unable so to act, it may or, at the written
request of the holders of Certificates entitled to at least 51% of the Voting
Rights, it shall appoint, or petition a court of competent jurisdiction for the
appointment of, a loan servicing institution acceptable to the Rating Agency
with a net worth at the time of such appointment of at least $15,000,000 to act
as successor to the Master Servicer under the Agreement. Pending such
appointment, the Trustee is obligated to act in such capacity. The Trustee and
any such successor may agree upon the servicing compensation to be paid, which
in no event may be greater than the compensation payable to the Master Servicer
under the Agreement.
Unless otherwise described in the related Prospectus Supplement, the
holders of Certificates representing at least 66 2/3% of the Voting Rights
allocated to the respective classes of Certificates affected by any Event of
Default will be entitled to waive such Event of Default; provided, however, that
an Event of Default involving a failure to distribute a required payment to
Certificateholders described in clause (i) under "Events of Default" may be
waived only by all of the Certificateholders. Upon any such waiver of an Event
of Default, such Event of Default shall cease to exist and shall be deemed to
have been remedied for every purpose under the Agreement.
No Certificateholder will have the right under any Agreement to institute
any proceeding with respect thereto unless such holder previously has given to
the Trustee written notice of default and unless the holders of Certificates
evidencing not less than 25% of the Voting Rights have made written request upon
the Trustee to institute such proceeding in its own name as Trustee thereunder
and have offered to the Trustee reasonable indemnity, and the Trustee for sixty
days has neglected or refused to institute any such proceeding. The Trustee,
however, is under no obligation to exercise any of the trusts or powers vested
in it by any Agreement or to make
52
<PAGE> 223
any investigation of matters arising thereunder or to institute, conduct or
defend any litigation thereunder or in relation thereto at the request, order or
direction of any of the holders of Certificates covered by such Agreement,
unless such Certificateholders have offered to the Trustee reasonable security
or indemnity against the costs, expenses and liabilities which may be incurred
therein or thereby.
Amendment
Each Agreement may be amended by the parties thereto without the consent
of any of the holders of Certificates covered by the Agreement, (i) to cure any
ambiguity, (ii) to correct, modify or supplement any provision therein which may
be inconsistent with any other provision therein, (iii) to make any other
provisions with respect to matters or questions arising under the Agreement
which are not inconsistent with the provisions thereof, or (iv) to comply with
any requirements imposed by the Code; provided that such amendment (other than
an amendment for the purpose specified in clause (iv) above) will not (as
evidenced by an opinion of counsel to such effect) adversely affect in any
material respect the interests of any holder of Certificates covered by the
Agreement. Unless otherwise specified in the related Prospectus Supplement, each
Agreement may also be amended by the Depositor, the Master Servicer, if any, and
the Trustee, with the consent of the holders of Certificates affected thereby
evidencing not less than 51% of the Voting Rights, for any purpose; provided,
however, that unless otherwise specified in the related Prospectus Supplement,
no such amendment may (i) reduce in any manner the amount of or delay the timing
of, payments received or advanced on Mortgage Loans which are required to be
distributed on any Certificate without the consent of the holder of such
Certificate, (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 all Certificates of such class or (iii)
modify the provisions of such Agreement described in this paragraph without the
consent of the holders of all Certificates covered by such Agreement then
outstanding. However, with respect to any series of Certificates as to which a
REMIC election is to be made, the Trustee will not consent to any amendment of
the Agreement unless it shall first have received an opinion of counsel to the
effect that such amendment will not result in the imposition of a tax on the
related Trust Fund or cause the related Trust Fund to fail to qualify as a REMIC
at any time that the related Certificates are outstanding.
The Trustee
The Trustee under each Agreement will be named in the related Prospectus
Supplement. The commercial bank, national banking association, banking
corporation or trust company serving as Trustee may have a banking relationship
with the Depositor and its affiliates and with any Master Servicer and its
affiliates.
Duties of the Trustee
The Trustee will make no representations as to the validity or sufficiency
of any Agreement, the Certificates or any Asset or related document and is not
accountable for the use or application by or on behalf of any Master Servicer of
any funds paid to the Master Servicer or its designee or any Special Servicer in
respect of the Certificates or the Assets, or deposited into or withdrawn from
the Certificate Account or any other account by or on behalf of the Master
Servicer or any Special Servicer. If no Event of Default has occurred and is
continuing, the Trustee is required to perform only those duties specifically
required under the related Agreement. However, upon receipt of the various
certificates, reports or other instruments required to be furnished to it, the
Trustee is required to examine such documents and to determine whether they
conform to the requirements of the Agreement.
Certain Matters Regarding the Trustee
Unless otherwise specified in the related Prospectus Supplement, the
Trustee and any director, officer, employee or agent of the Trustee shall be
entitled to indemnification out of the Certificate Account for any loss,
liability or expense (including costs and expenses of litigation, and of
investigation, counsel fees, damages, judgments and amounts paid in settlement)
incurred in connection with the Trustee's (i) enforcing its rights and remedies
and protecting the interests, and enforcing the rights and remedies, of the
Certificateholders during the continuance of an Event of Default, (ii) defending
or prosecuting any legal action in respect of the related Agreement or series of
Certificates, (iii) being the mortgagee of record with respect to the Mortgage
Loans in a
53
<PAGE> 224
Trust Fund and the owner of record with respect to any Mortgaged
Property acquired in respect thereof for the benefit of Certificateholders, or
(iv) acting or refraining from acting in good faith at the direction of the
holders of the related series of Certificates entitled to not less than 25% (or
such higher percentage as is specified in the related Agreement with respect to
any particular matter) of the Voting Rights for such series; provided, however,
that such indemnification will not extend to any loss, liability or expense that
constitutes a specific liability of the Trustee pursuant to the related
Agreement, or to any loss, liability or expense incurred by reason of willful
misfeasance, bad faith or negligence on the part of the Trustee in the
performance of its obligations and duties thereunder, or by reason of its
reckless disregard of such obligations or duties, or as may arise from a breach
of any representation, warranty or covenant of the Trustee made therein.
Resignation and Removal of the Trustee
The Trustee may at any time resign from its obligations and duties under
an Agreement by giving written notice thereof to the Depositor, the Master
Servicer, if any, and all Certificateholders. Upon receiving such notice of
resignation, the Depositor is required promptly to appoint a successor trustee
acceptable to the Master Servicer, if any. If no successor trustee shall have
been so appointed and have accepted appointment within 30 days after the giving
of such notice of resignation, the resigning Trustee may petition any court of
competent jurisdiction for the appointment of a successor trustee.
If at any time the Trustee shall cease to be eligible to continue as such
under the related Agreement, or if at any time the Trustee shall become
incapable of acting, or shall be adjudged bankrupt or insolvent, or a receiver
of the Trustee or of its property shall be appointed, or any public officer
shall take charge or control of the Trustee or of its property or affairs for
the purpose of rehabilitation, conservation or liquidation, then the Depositor
may remove the Trustee and appoint a successor trustee acceptable to the Master
Servicer, if any. Holders of the Certificates of any series entitled to at least
51% of the Voting Rights for such series may at any time remove the Trustee
without cause and appoint a successor trustee.
Any resignation or removal of the Trustee and appointment of a successor
trustee shall not become effective until acceptance of appointment by the
successor trustee.
DESCRIPTION OF CREDIT SUPPORT
General
For any series of Certificates, Credit Support may be provided with
respect to one or more classes thereof or the related Assets. Credit Support may
be in the form of the subordination of one or more classes of Certificates,
letters of credit, insurance policies, guarantees, the establishment of one or
more reserve funds or another method of Credit Support described in the related
Prospectus Supplement, or any combination of the foregoing. If so provided in
the related Prospectus Supplement, any form of Credit Support may be structured
so as to be drawn upon by more than one series to the extent described therein.
Unless otherwise provided in the related Prospectus Supplement for a
series of Certificates, the Credit Support will not provide protection against
all risks of loss and will not guarantee repayment of the entire Certificate
Balance of the Certificates and interest thereon. If losses or shortfalls occur
that exceed the amount covered by Credit Support or that are not covered by
Credit Support, Certificateholders will bear their allocable share of
deficiencies. Moreover, if a form of Credit Support covers more than one series
of Certificates (each, a "Covered Trust"), holders of Certificates evidencing
interests in any of such Covered Trusts will be subject to the risk that such
Credit Support will be exhausted by the claims of other Covered Trusts prior to
such Covered Trust receiving any of its intended share of such coverage.
If Credit Support is provided with respect to one or more classes of
Certificates of a series, or the related Assets, the related Prospectus
Supplement will include a description of (a) the nature and amount of coverage
under such Credit Support, (b) any conditions to payment thereunder not
otherwise described herein, (c) the conditions (if any) under which the amount
of coverage under such Credit Support may be reduced and under which such
54
<PAGE> 225
Credit Support may be terminated or replaced and (d) the material provisions
relating to such Credit Support. Additionally, the related Prospectus Supplement
will set forth certain information with respect to the obligor under any
instrument of Credit Support, including (i) a brief description of its principal
business activities, (ii) its principal place of business, place of
incorporation and the jurisdiction under which it is chartered or licensed to do
business, (iii) if applicable, the identity of regulatory agencies that exercise
primary jurisdiction over the conduct of its business and (iv) its total assets,
and its stockholders' or policyholders' surplus, if applicable, as of the date
specified in the Prospectus Supplement. See "Risk Factors--Credit Support
Limitations."
Subordinate Certificates
If so specified in the related Prospectus Supplement, one or more classes
of Certificates of a series may be Subordinate Certificates. To the extent
specified in the related Prospectus Supplement, the rights of the holders of
Subordinate Certificates to receive distributions of principal and interest from
the Certificate Account on any Distribution Date will be subordinated to such
rights of the holders of Senior Certificates. If so provided in the related
Prospectus Supplement, the subordination of a class may apply only in the event
of (or may be limited to) certain types of losses or shortfalls. The related
Prospectus Supplement will set forth information concerning the amount of
subordination of a class or classes of Subordinate Certificates in a series, the
circumstances in which such subordination will be applicable and the manner, if
any, in which the amount of subordination will be effected.
Cross-Support Provisions
If the Assets for a series are divided into separate groups, each
supporting a separate class or classes of Certificates of a series, credit
support may be provided by cross-support provisions requiring that distributions
be made on Senior Certificates evidencing interests in one group of Mortgage
Assets prior to distributions on Subordinate Certificates evidencing interests
in a different group of Mortgage Assets within the Trust Fund. The Prospectus
Supplement for a series that includes a cross-support provision will describe
the manner and conditions for applying such provisions.
Insurance or Guarantees with Respect to the Whole Loans
If so provided in the Prospectus Supplement for a series of Certificates,
the Whole Loans in the related Trust Fund will be covered for various default
risks by insurance policies or guarantees. A copy of any such material
instrument for a series will be filed with the Commission as an exhibit to a
Current Report on Form 8-K to be filed within 15 days of issuance of the
Certificates of the related series.
Letter of Credit
If so provided in the Prospectus Supplement for a series of Certificates,
deficiencies in amounts otherwise payable on such Certificates or certain
classes thereof will be covered by one or more letters of credit, issued by a
bank or financial institution specified in such Prospectus Supplement (the "L/C
Bank"). Under a letter of credit, the L/C Bank will be obligated to honor draws
thereunder in an aggregate fixed dollar amount, net of unreimbursed payments
thereunder, generally equal to a percentage specified in the related Prospectus
Supplement of the aggregate principal balance of the Mortgage Assets on the
related Cut-off Date or of the initial aggregate Certificate Balance of one or
more classes of Certificates. If so specified in the related Prospectus
Supplement, the letter of credit may permit draws in the event of only certain
types of losses and shortfalls. The amount available under the letter of credit
will, in all cases, be reduced to the extent of the unreimbursed payments
thereunder and may otherwise be reduced as described in the related Prospectus
Supplement. The obligations of the L/C Bank under the letter of credit for each
series of Certificates will expire at the earlier of the date specified in the
related Prospectus Supplement or the termination of the Trust Fund. A copy of
any such letter of credit for a series will be filed with the Commission as an
exhibit to a Current Report on Form 8-K to be filed within 15 days of issuance
of the Certificates of the related series.
55
<PAGE> 226
Insurance Policies and Surety Bonds
If so provided in the Prospectus Supplement for a series of Certificates,
deficiencies in amounts otherwise payable on such Certificates or certain
classes thereof will be covered by insurance policies and/or surety bonds
provided by one or more insurance companies or sureties. Such instruments may
cover, with respect to one or more classes of Certificates of the related
series, timely distributions of interest and/or full distributions of principal
on the basis of a schedule of principal distributions set forth in or determined
in the manner specified in the related Prospectus Supplement. A copy of any such
instrument for a series will be filed with the Commission as an exhibit to a
Current Report on Form 8-K to be filed with the Commission within 15 days of
issuance of the Certificates of the related series.
Reserve Funds
If so provided in the Prospectus Supplement for a series of Certificates,
deficiencies in amounts otherwise payable on such Certificates or certain
classes thereof will be covered by one or more reserve funds in which cash, a
letter of credit, Permitted Investments, a demand note or a combination thereof
will be deposited, in the amounts so specified in such Prospectus Supplement.
The reserve funds for a series may also be funded over time by depositing
therein a specified amount of the distributions received on the related Assets
as specified in the related Prospectus Supplement.
Amounts on deposit in any reserve fund for a series, together with the
reinvestment income thereon, if any, will be applied for the purposes, in the
manner, and to the extent specified in the related Prospectus Supplement. A
reserve fund may be provided to increase the likelihood of timely distributions
of principal of and interest on the Certificates. If so specified in the related
Prospectus Supplement, reserve funds may be established to provide limited
protection against only certain types of losses and shortfalls. Following each
Distribution Date amounts in a reserve fund in excess of any amount required to
be maintained therein may be released from the reserve fund under the conditions
and to the extent specified in the related Prospectus Supplement and will not be
available for further application to the Certificates.
Moneys deposited in any Reserve Funds will be invested in Permitted
Investments, except as otherwise specified in the related Prospectus Supplement.
Unless otherwise specified in the related Prospectus Supplement, any
reinvestment income or other gain from such investments will be credited to the
related Reserve Fund for such series, and any loss resulting from such
investments will be charged to such Reserve Fund. However, such income may be
payable to any related Master Servicer or another service provider as additional
compensation. The Reserve Fund, if any, for a series will not be a part of the
Trust Fund unless otherwise specified in the related Prospectus Supplement.
Additional information concerning any Reserve Fund will be set forth in
the related Prospectus Supplement, including the initial balance of such Reserve
Fund, the balance required to be maintained in the Reserve Fund, the manner in
which such required balance will decrease over time, the manner of funding such
Reserve Fund, the purposes for which funds in the Reserve Fund may be applied to
make distributions to Certificateholders and use of investment earnings from the
Reserve Fund, if any.
Credit Support with respect to MBS
If so provided in the Prospectus Supplement for a series of Certificates,
the MBS in the related Trust Fund and/or the Mortgage Loans underlying such MBS
may be covered by one or more of the types of Credit Support described herein.
The related Prospectus Supplement will specify as to each such form of Credit
Support the information indicated above with respect thereto, to the extent such
information is material and available.
56
<PAGE> 227
CERTAIN LEGAL ASPECTS OF THE MORTGAGE LOANS AND THE LEASES
The following discussion contains general summaries of certain legal
aspects of loans secured by commercial and multifamily residential properties
that are general in nature. Because such legal aspects are governed by
applicable state law (which laws may differ substantially), the summaries do not
purport to be complete nor to reflect the laws of any particular state, nor to
encompass the laws of all states in which the security for the Mortgage Loans is
situated. The summaries are qualified in their entirety by reference to the
applicable federal and state laws governing the Mortgage Loans. See "Description
of the Trust Funds--Assets."
General
All of the Mortgage Loans are loans evidenced by a note or bond and
secured by instruments granting a security interest in real property which may
be mortgages, deeds of trust, security deeds or deeds to secure debt, depending
upon the prevailing practice and law in the state in which the Mortgaged
Property is located. Mortgages, deeds of trust and deeds to secure debt are
herein collectively referred to as "mortgages." Any of the foregoing types of
mortgages will create a lien upon, or grant a title interest in, the subject
property, the priority of which will depend on the terms of the particular
security instrument, as well as separate, recorded, contractual arrangements
with others holding interests in the mortgaged property, the knowledge of the
parties to such instrument as well as the order of recordation of the instrument
in the appropriate public recording office. However, recording does not
generally establish priority over governmental claims for real estate taxes and
assessments and other charges imposed under governmental police powers.
Types of Mortgage Instruments
A mortgage either creates a lien against or constitutes a conveyance of
real property between two parties--a mortgagor (the borrower and usually the
owner of the subject property) and a mortgagee (the lender). In contrast, a deed
of trust is a three-party instrument, among a trustor (the equivalent of a
mortgagor), a trustee to whom the mortgaged property is conveyed, and a
beneficiary (the lender) for whose benefit the conveyance is made. As used in
this Prospectus, unless the context otherwise requires, "mortgagor" includes the
trustor under a deed of trust and a grantor under a security deed or a deed to
secure debt. Under a deed of trust, the mortgagor grants the property,
irrevocably until the debt is paid, in trust, generally with a power of sale as
security for the indebtedness evidenced by the related note. A deed to secure
debt typically has two parties. By executing a deed to secure debt, the grantor
conveys title to, as opposed to merely creating a lien upon, the subject
property to the grantee until such time as the underlying debt is repaid,
generally with a power of sale as security for the indebtedness evidenced by the
related mortgage note. In case the mortgagor under a mortgage is a land trust,
there would be an additional party because legal title to the property is held
by a land trustee under a land trust agreement for the benefit of the mortgagor.
At origination of a mortgage loan involving a land trust, the mortgagor executes
a separate undertaking to make payments on the mortgage note. The mortgagee's
authority under a mortgage, the trustee's authority under a deed of trust and
the grantee's authority under a deed to secure debt are governed by the express
provisions of the mortgage, the law of the state in which the real property is
located, certain federal laws (including, without limitation, the Soldiers' and
Sailors' Civil Relief Act of 1940) and, in some cases, in deed of trust
transactions, the directions of the beneficiary.
Interest in Real Property
The real property covered by a mortgage, deed of trust, security deed or
deed to secure debt is most often the fee estate in land and improvements.
However, such an instrument may encumber other interests in real property such
as a tenant's interest in a lease of land or improvements, or both, and the
leasehold estate created by such lease. An instrument covering an interest in
real property other than the fee estate requires special provisions in the
instrument creating such interest or in the mortgage, deed of trust, security
deed or deed to secure debt, to protect the mortgagee against termination of
such interest before the mortgage, deed of trust, security deed or deed to
secure debt is paid. Unless otherwise specified in the Prospectus Supplement,
the Depositor or the Asset Seller will make certain representations and
warranties in the Agreement with respect to the Mortgage Loans which are secured
57
<PAGE> 228
by an interest in a leasehold estate. Such representation and warranties will be
set forth in the Prospectus Supplement if applicable.
Leases and Rents
Mortgages that encumber income-producing property often contain an
assignment of rents and leases, pursuant to which the mortgagor assigns its
right, title and interest as landlord under each lease and the income derived
therefrom to the lender, while the mortgagor retains a revocable license to
collect the rents for so long as there is no default. Under such assignments,
the mortgagor typically assigns its right, title and interest as lessor under
each lease and the income derived therefrom to the mortgagee, while retaining a
license to collect the rents for so long as there is no default under the
mortgage loan documentation. The manner of perfecting the mortgagee's interest
in rents may depend on whether the mortgagor's assignment was absolute or one
granted as security for the loan. Failure to properly perfect the mortgagee's
interest in rents may result in the loss of substantial pool of funds, which
could otherwise serve as a source of repayment for such loan. If the mortgagor
defaults, the license terminates and the lender is entitled to collect the
rents. Local law may require that the lender take possession of the property
and/or obtain a court-appointed receiver before becoming entitled to collect the
rents. In most states, hotel and motel room revenues are considered accounts
receivable under the UCC; generally these revenues are either assigned by the
mortgagor, which remains entitled to collect such revenues absent a default, or
pledged by the mortgagor, as security for the loan. In general, the lender must
file financing statements in order to perfect its security interest in the
revenues and must file continuation statements, generally every five years, to
maintain perfection of such security interest. Even if the lender's security
interest in room revenues is perfected under the UCC, the lender will generally
be required to commence a foreclosure or otherwise take possession of the
property in order to collect the room revenues after a default.
Even after a foreclosure, the potential rent payments from the property
may be less than the periodic payments that had been due under the mortgage. For
instance, the net income that would otherwise be generated from the property may
be less than the amount that would have been needed to service the mortgage debt
if the leases on the property are at below-market rents, or as the result of
excessive maintenance, repair or other obligations which a lender succeeds to as
landlord.
Lenders that actually take possession of the property, however, may incur
potentially substantial risks attendant to being a mortgagee in possession. Such
risks include liability for environmental clean-up costs and other risks
inherent in property ownership. See "Environmental Legislation" below.
Personalty
Certain types of Mortgaged Properties, such as hotels, motels and
industrial plants, are likely to derive a significant part of their value from
personal property which does not constitute "fixtures" under applicable state
real property law and, hence, would not be subject to the lien of a mortgage.
Such property is generally pledged or assigned as security to the lender under
the UCC. In order to perfect its security interest therein, the lender generally
must file UCC financing statements and, to maintain perfection of such security
interest, file continuation statements generally every five years.
Foreclosure
General
Foreclosure is a legal procedure that allows the mortgagee to recover its
mortgage debt by enforcing its rights and available legal remedies under the
mortgage. If the mortgagor defaults in payment or performance of its obligations
under the note or mortgage, the mortgagee has the right to institute foreclosure
proceedings to sell the mortgaged property at public auction to satisfy the
indebtedness.
Foreclosure procedures with respect to the enforcement of a mortgage vary
from state to state. Two primary methods of foreclosing a mortgage are judicial
foreclosure and non-judicial foreclosure pursuant to a power
58
<PAGE> 229
of sale granted in the mortgage instrument. There are several other foreclosure
procedures available in some states that are either infrequently used or
available only in certain limited circumstances, such as strict foreclosure.
Judicial Foreclosure
A judicial foreclosure proceeding is conducted in a court having
jurisdiction over the mortgaged property. Generally, the action is initiated by
the service of legal pleadings upon all parties having a subordinate interest of
record in the real property and all parties in possession of the property, under
leases or otherwise, whose interests are subordinate to the mortgage. Delays in
completion of the foreclosure may occasionally result from difficulties in
locating defendants. When the lender's right to foreclose is contested, the
legal proceedings can be time-consuming. Upon successful completion of a
judicial foreclosure proceeding, the court generally issues a judgment of
foreclosure and appoints a referee or other officer to conduct a public sale of
the mortgaged property, the proceeds of which are used to satisfy the judgment.
Such sales are made in accordance with procedures that vary from state to state.
Equitable Limitations on Enforceability of Certain Provisions
United States courts have traditionally imposed general equitable
principles to limit the remedies available to a mortgagee in connection with
foreclosure. These equitable principles are generally designed to relieve the
mortgagor from the legal effect of mortgage defaults, to the extent that such
effect is perceived as harsh or unfair. Relying on such principles, a court may
alter the specific terms of a loan to the extent it considers necessary to
prevent or remedy an injustice, undue oppression or overreaching, or may require
the lender to undertake affirmative and expensive actions to determine the cause
of the mortgagor's default and the likelihood that the mortgagor will be able to
reinstate the loan. In some cases, courts have substituted their judgment for
the lender's and have required that lenders reinstate loans or recast payment
schedules in order to accommodate mortgagors who are suffering from a temporary
financial disability. In other cases, courts have limited the right of the
lender to foreclose if the default under the mortgage is not monetary, e.g., the
mortgagor failed to maintain the mortgaged property adequately or the mortgagor
executed a junior mortgage on the mortgaged property. The exercise by the court
of its equity powers will depend on the individual circumstances of each case
presented to it. Finally, some courts have been faced with the issue of whether
federal or state constitutional provisions reflecting due process concerns for
adequate notice require that a mortgagor receive notice in addition to
statutorily-prescribed minimum notice. For the most part, these cases have
upheld the reasonableness of the notice provisions or have found that a public
sale under a mortgage providing for a power of sale does not involve sufficient
state action to afford constitutional protections to the mortgagor.
A foreclosure action is subject to most of the delays and expenses of
other lawsuits if defenses are raised or counterclaims are interposed, and
sometimes require several years to complete. Moreover, as discussed below, a
non-collusive, regularly conducted foreclosure sale may be challenged as a
fraudulent conveyance, regardless of the parties' intent, if a court determines
that the sale was for less than fair consideration and such sale occurred while
the mortgagor was insolvent (or the mortgagor was rendered insolvent as a result
of such sale) and within one year (or within the state statute of limitations if
the trustee in bankruptcy elects to proceed under state fraudulent conveyance
law) of the filing of bankruptcy.
Non-Judicial Foreclosure/Power of Sale
Foreclosure of a deed of trust is generally accomplished by a non-judicial
trustee's sale pursuant to the power of sale granted in the deed of trust. A
power of sale is typically granted in a deed of trust. It may also be contained
in any other type of mortgage instrument. A power of sale allows a non-judicial
public sale to be conducted generally following a request from the
beneficiary/lender to the trustee to sell the property upon any default by the
mortgagor under the terms of the mortgage note or the mortgage instrument and
after notice of sale is given in accordance with the terms of the mortgage
instrument, as well as applicable state law. In some states, prior to such sale,
the trustee under a deed of trust must record a notice of default and notice of
sale and send a copy to the mortgagor and to any other party who has recorded a
request for a copy of a notice of default and notice of sale. In addition, in
some states the trustee must provide notice to any other party having an
interest of record
59
<PAGE> 230
in the real property, including junior lienholders. A notice of sale must be
posted in a public place and, in most states, published for a specified period
of time in one or more newspapers. The mortgagor or junior lienholder may then
have the right, during a reinstatement period required in some states, to cure
the default by paying the entire actual amount in arrears (without acceleration)
plus the expenses incurred in enforcing the obligation. In other states, the
mortgagor or the junior lienholder is not provided a period to reinstate the
loan, but has only the right to pay off the entire debt to prevent the
foreclosure sale. Generally, the procedure for public sale, the parties entitled
to notice, the method of giving notice and the applicable time periods are
governed by state law and vary among the states. Foreclosure of a deed to secure
debt is also generally accomplished by a non-judicial sale similar to that
required by a deed of trust, except that the lender or its agent, rather than a
trustee, is typically empowered to perform the sale in accordance with the terms
of the deed to secure debt and applicable law.
Public Sale
A third party may be unwilling to purchase a mortgaged property at a
public sale because of the difficulty in determining the value of such property
at the time of sale, due to, among other things, redemption rights which may
exist and the possibility of physical deterioration of the property during the
foreclosure proceedings. For these reasons, it is common for the lender to
purchase the mortgaged property for an amount equal to or less than the
underlying debt and accrued and unpaid interest plus the expenses of
foreclosure. Generally, state law controls the amount of foreclosure costs and
expenses which may be recovered by a lender. Thereafter, subject to the
mortgagor's right in some states to remain in possession during a redemption
period, if applicable, the lender will become the owner of the property and have
both the benefits and burdens of ownership of the mortgaged property. For
example, the lender will have the obligation to pay debt service on any senior
mortgages, to pay taxes, obtain casualty insurance and to make such repairs at
its own expense as are necessary to render the property suitable for sale.
Frequently, the lender employs a third party management company to manage and
operate the property. The costs of operating and maintaining a commercial or
multifamily residential property may be significant and may be greater than the
income derived from that property. The costs of management and operation of
those mortgaged properties which are hotels, motels, restaurants, nursing or
convalescent homes or hospitals may be particularly significant because of the
expertise, knowledge and, with respect to nursing or convalescent homes or
hospitals, regulatory compliance, required to run such operations and the effect
which foreclosure and a change in ownership may have on the public's and the
industry's (including franchisors') perception of the quality of such
operations. The lender will commonly obtain the services of a real estate broker
and pay the broker's commission in connection with the sale of the property.
Depending upon market conditions, the ultimate proceeds of the sale of the
property may not equal the lender's investment in the property. Moreover, a
lender commonly incurs substantial legal fees and court costs in acquiring a
mortgaged property through contested foreclosure and/or bankruptcy proceedings.
Furthermore, a few states require that any environmental contamination at
certain types of properties be cleaned up before a property may be resold. In
addition, a lender may be responsible under federal or state law for the cost of
cleaning up a mortgaged property that is environmentally contaminated. See
"Environmental Legislation." Generally state law controls the amount of
foreclosure expenses and costs, including attorneys' fees, that may be recovered
by a lender.
A junior mortgagee may not foreclose on the property securing the junior
mortgage unless it forecloses subject to senior mortgages and any other prior
liens, in which case it may be obliged to make payments on the senior
mortgages to avoid their foreclosure. In addition, in the event that the
foreclosure of a junior mortgage triggers the enforcement of a "due-on-sale"
clause contained in a senior mortgage, the junior mortgagee may be required to
pay the full amount of the senior mortgage to avoid its foreclosure.
Accordingly, with respect to those Mortgage Loans, if any, that are junior
mortgage loans, if the lender purchases the property the lender's title will be
subject to all senior mortgages, prior liens and certain governmental liens.
The proceeds received by the referee or trustee from the sale are applied
first to the costs, fees and expenses of sale and then in satisfaction of the
indebtedness secured by the mortgage under which the sale was conducted. Any
proceeds remaining after satisfaction of senior mortgage debt are generally
payable to the holders of junior mortgages and other liens and claims in order
of their priority, whether or not the mortgagor is in default. Any additional
proceeds are generally payable to the mortgagor. The payment of the proceeds to
the holders of
60
<PAGE> 231
junior mortgages may occur in the foreclosure action of the senior mortgage or a
subsequent ancillary proceeding or may require the institution of separate legal
proceedings by such holders.
REO Properties
If title to any Mortgaged Property is acquired by the Trustee on behalf of
the Certificateholders, the Master Servicer or any related Sub-servicer or the
Special Servicer, on behalf of such holders, will be required to sell the
Mortgaged Property prior to the close of the third calendar year following the
year of acquisition of such Mortgaged Property by the Trust Fund, unless (i) the
Internal Revenue Service grants an extension of time to sell such property (an
"REO Extension") or (ii) it obtains an opinion of counsel generally to the
effect that the holding of the property beyond the close of the third calendar
year after its acquisition will not result in the imposition of a tax on the
Trust Fund or cause any REMIC created pursuant to the Pooling and Servicing
Agreement to fail to qualify as a REMIC under the Code. Subject to the
foregoing, the Master Servicer or any related Sub-servicer or the Special
Servicer will generally be required to solicit bids for any Mortgaged Property
so acquired in such a manner as will be reasonably likely to realize a fair
price for such property. The Master Servicer or any related Sub-servicer or the
Special Servicer may retain an independent contractor to operate and manage any
REO Property; however, the retention of an independent contractor will not
relieve the Master Servicer or any related Sub-servicer or the Special Servicer
of its obligations with respect to such REO Property.
In general, the Master Servicer or any related Sub-servicer or the Special
Servicer or an independent contractor employed by the Master Servicer or any
related Sub-servicer or the Special Servicer at the expense of the Trust Fund
will be obligated to operate and manage any Mortgaged Property acquired as REO
Property in a manner that would, to the extent commercially feasible, maximize
the Trust Fund's net after-tax proceeds from such property. After the Master
Servicer or any related Sub-servicer or the Special Servicer reviews the
operation of such property and consults with the Trustee to determine the Trust
Fund's federal income tax reporting position with respect to the income it is
anticipated that the Trust Fund would derive from such property, the Master
Servicer or any related Sub-servicer or the Special Servicer could determine
(particularly in the case of an REO Property that is a hospitality or
residential health care facility) that it would not be commercially feasible to
manage and operate such property in a manner that would avoid the imposition of
a tax on "net income from foreclosure property," within the meaning of Section
857(b)(4)(B) of the Code (an "REO Tax") at the highest marginal corporate tax
rate (currently 35%). The determination as to whether income from an REO
Property would be subject to an REO Tax will depend on the specific facts and
circumstances relating to the management and operation of each REO Property. Any
REO Tax imposed on the Trust Fund's income from an REO Property would reduce the
amount available for distribution to Certificateholders. Certificateholders are
advised to consult their tax advisors regarding the possible imposition of REO
Taxes in connection with the operation of commercial REO Properties by REMICs.
See "Certain Federal Income Tax Consequences" herein and "Certain Federal Income
Tax Consequences-REMICs" in the Prospectus.
Rights of Redemption
The purposes of a foreclosure action are to enable the mortgagee to
realize upon its security and to bar the mortgagor, and all persons who have an
interest in the property which is subordinate to the mortgage being foreclosed,
from exercise of their "equity of redemption." The doctrine of equity of
redemption provides that, until the property covered by a mortgage has been sold
in accordance with a properly conducted foreclosure and foreclosure sale, those
having an interest which is subordinate to that of the foreclosing mortgagee
have an equity of redemption and may redeem the property by paying the entire
debt with interest. In addition, in some states, when a foreclosure action has
been commenced, the redeeming party must pay certain costs of such action. Those
having an equity of redemption must generally be made parties and joined in the
foreclosure proceeding in order for their equity of redemption to be cut off and
terminated.
The equity of redemption is a common-law (non-statutory) right which
exists prior to completion of the foreclosure, is not waivable by the mortgagor,
must be exercised prior to foreclosure sale and should be distinguished from the
post-sale statutory rights of redemption. In some states, after sale pursuant to
a deed of trust or foreclosure of a mortgage, the mortgagor and foreclosed
junior lienors are given a statutory period in which to
61
<PAGE> 232
redeem the property from the foreclosure sale. In some states, statutory
redemption may occur only upon payment of the foreclosure sale price. In other
states, redemption may be authorized if the former mortgagor pays only a portion
of the sums due. The effect of a statutory right of redemption is to diminish
the ability of the lender to sell the foreclosed property. The exercise of a
right of redemption would defeat the title of any purchaser from a foreclosure
sale or sale under a deed of trust. Consequently, the practical effect of the
redemption right is to force the lender to maintain the property and pay the
expenses of ownership until the redemption period has expired. In some states, a
post-sale statutory right of redemption may exist following a judicial
foreclosure, but not following a trustee's sale under a deed of trust.
Under the REMIC Provisions currently in effect, property acquired by
foreclosure generally must not be held beyond the close of the third calendar
year following the year of acquisition. Unless otherwise provided in the related
Prospectus Supplement, with respect to a series of Certificates for which an
election is made to qualify the Trust Fund or a part thereof as a REMIC, the
Agreement will permit foreclosed property to be held beyond the close of the
third calendar year following the year of acquisition if the Internal Revenue
Service grants an extension of time within which to sell such property or
independent counsel renders an opinion to the effect that holding such property
for such additional period is permissible under the REMIC Provisions.
Anti-Deficiency Legislation
Some or all of the Mortgage Loans may be nonrecourse loans, as to which
recourse may be had only against the specific property securing the related
Mortgage Loan and a personal money judgment may not be obtained against the
mortgagor. Even if a mortgage loan by its terms provides for recourse to the
mortgagor, some states impose prohibitions or limitations on such recourse. For
example, statutes in some states limit the right of the lender to obtain a
deficiency judgment against the mortgagor following foreclosure or sale under a
deed of trust. A deficiency judgment would be a personal judgment against the
former mortgagor equal to the difference between the net amount realized upon
the public sale of the real property and the amount due to the lender. Some
states require the lender to exhaust the security afforded under a mortgage by
foreclosure in an attempt to satisfy the full debt before bringing a personal
action against the mortgagor. In certain other states, the lender has the option
of bringing a personal action against the mortgagor on the debt without first
exhausting such security; however, in some of these states, the lender,
following judgment on such personal action, may be deemed to have elected a
remedy and may be precluded from exercising remedies with respect to the
security. In some cases, a lender will be precluded from exercising any
additional rights under the note or mortgage if it has taken any prior
enforcement action. Consequently, the practical effect of the election
requirement, in those states permitting such election, is that lenders will
usually proceed against the security first rather than bringing a personal
action against the mortgagor. Finally, other statutory provisions limit any
deficiency judgment against the former mortgagor following a judicial sale to
the excess of the outstanding debt over the fair market value of the property at
the time of the public sale. The purpose of these statutes is generally to
prevent a lender from obtaining a large deficiency judgment against the former
mortgagor as a result of low or no bids at the judicial sale.
Leasehold Risks
Mortgage Loans may be secured by a mortgage on a ground lease. Leasehold
mortgages are subject to certain risks not associated with mortgage loans
secured by the fee estate of the mortgagor. The most significant of
these risks is that the ground lease creating the leasehold estate could
terminate, leaving the leasehold mortgagee without its security. The ground
lease may terminate if, among other reasons, the ground lessee breaches or
defaults in its obligations under the ground lease or there is a bankruptcy of
the ground lessee or the ground lessor. This risk may be minimized if the ground
lease contains certain provisions protective of the mortgagee, but the ground
leases that secure Mortgage Loans may not contain some of these protective
provisions, and mortgages may not contain the other protections discussed in the
next paragraph. Protective ground lease provisions include the right of the
leasehold mortgagee to receive notices from the ground lessor of any defaults by
the mortgagor; the right to cure such defaults, with adequate cure periods; if a
default is not susceptible of cure by the leasehold mortgagee, the right to
acquire the leasehold estate through foreclosure or otherwise; the ability of
the ground lease to be assigned to and by the leasehold mortgagee or purchaser
at a foreclosure sale and for the concomitant release of the ground lessee's
liabilities thereunder; and the right of the leasehold mortgagee to enter into a
new ground lease
62
<PAGE> 233
with the ground lessor on the same terms and conditions as the old ground lease
in the event of a termination thereof.
In addition to the foregoing protections, a leasehold mortgagee may
require that the ground lease or leasehold mortgage prohibit the ground lessee
from treating the ground lease as terminated in the event of the ground lessor's
bankruptcy and rejection of the ground lease by the trustee for the
debtor-ground lessor. As further protection, a leasehold mortgage may provide
for the assignment of the debtor-ground lessee's right to reject a lease
pursuant to Section 365 of the Bankruptcy Reform Act of 1978, as amended (Title
11 of the United States Code) (the "Bankruptcy Code"), although the
enforceability of such clause has not been established. Without the protections
described above, a leasehold mortgagee may lose the collateral securing its
leasehold mortgage. In addition, terms and conditions of a leasehold mortgage
are subject to the terms and conditions of the ground lease. Although certain
rights given to a ground lessee can be limited by the terms of a leasehold
mortgage, the rights of a ground lessee or a leasehold mortgagee with respect
to, among other things, insurance, casualty and condemnation will be governed by
the provisions of the ground lease.
Bankruptcy Laws
The Bankruptcy Code and related state laws may interfere with or affect
the ability of a lender to realize upon collateral and/or to enforce a
deficiency judgment. For example, under the Bankruptcy Code, virtually all
actions (including foreclosure actions and deficiency judgment proceedings) are
automatically stayed upon the filing of the bankruptcy petition, and, usually,
no interest or principal payments are made during the course of the bankruptcy
case. The delay and the consequences thereof caused by such automatic stay can
be significant. Also, under the Bankruptcy Code, the filing of a petition in
bankruptcy by or on behalf of a junior lienor may stay the senior lender from
taking action to foreclose out such junior lien.
Under the Bankruptcy Code, provided certain substantive and procedural
safeguards for the lender are met, the amount and terms of a mortgage secured by
property of the debtor may be modified under certain circumstances. In many
jurisdictions, the outstanding amount of the loan secured by the real property
may be reduced to the then-current value of the property (with a corresponding
partial reduction of the amount of lender's security interest) pursuant to a
confirmed plan or lien avoidance proceeding, thus leaving the lender a general
unsecured creditor for the difference between such value and the outstanding
balance of the loan. Other modifications may include the reduction in the amount
of each scheduled payment, which reduction may result from a reduction in the
rate of interest and/or the alteration of the repayment schedule (with or
without affecting the unpaid principal balance of the loan), and/or an extension
(or reduction) of the final maturity date. Some courts with federal bankruptcy
jurisdiction have approved plans, based on the particular facts of the
reorganization case, that effected the curing of a mortgage loan default by
paying arrearages over a number of years. Also, under federal bankruptcy law, a
bankruptcy court may permit a debtor through its rehabilitative plan to
de-accelerate a secured loan and to reinstate the loan even though the lender
accelerated the mortgage loan and final judgment of foreclosure had been entered
in state court (provided no sale of the property had yet occurred) prior to the
filing of the debtor's petition. This may be done even if the full amount due
under the original loan is never repaid.
Federal bankruptcy law provides generally that rights and obligation under
an unexpired lease of the debtor/lessee may not be terminated or modified at any
time after the commencement of a case under the Bankruptcy Code solely on the
basis of a provision in the lease to such effect or because of certain other
similar events. This prohibition on so-called "ipso facto clauses" could limit
the ability of the Trustee for a series of Certificates to exercise certain
contractual remedies with respect to the Leases. In addition, Section 362 of the
Bankruptcy Code operates as an automatic stay of, among other things, any act to
obtain possession of property from a debtor's estate, which may delay a
Trustee's exercise of such remedies for a related series of Certificates in the
event that a related Lessee or a related mortgagor becomes the subject of a
proceeding under the Bankruptcy Code. For example, a mortgagee would be stayed
from enforcing a Lease Assignment by a mortgagor related to a Mortgaged Property
if the related mortgagor was in a bankruptcy proceeding. The legal proceedings
necessary to resolve the issues could be time-consuming and might result in
significant delays in the receipt of the assigned rents. Similarly, the filing
of a petition in bankruptcy by or on behalf of a Lessee of a Mortgaged Property
would result in a stay against the commencement or continuation of any state
court proceeding for past due rent, for accelerated rent, for damages
63
<PAGE> 234
or for a summary eviction order with respect to a default under the Lease that
occurred prior to the filing of the Lessee's petition. Rents and other proceeds
of a Mortgage Loan may also escape an assignment thereof if the assignment is
not fully perfected under state law prior to commencement of the bankruptcy
proceeding. See "--Leases and Rents" above.
In addition, the Bankruptcy Code generally provides that a trustee or
debtor-in-possession may, subject to approval of the court, (a) assume the lease
and retain it or assign it to a third party or (b) reject the lease. If the
lease is assumed, the trustee in bankruptcy on behalf of the lessee, or the
lessee as debtor-in-possession, or the assignee, if applicable, must cure any
defaults under the lease, compensate the lessor for its losses and provide the
lessor with "adequate assurance" of future performance. Such remedies may be
insufficient, however, as the lessor may be forced to continue under the lease
with a lessee that is a poor credit risk or an unfamiliar tenant if the lease
was assigned, and any assurances provided to the lessor may, in fact, be
inadequate. If the lease is rejected, such rejection generally constitutes a
breach of the executory contract or unexpired lease immediately before the date
of filing the petition. As a consequence, the other party or parties to such
lease, such as the mortgagor, as lessor under a Lease, would have only an
unsecured claim against the debtor for damages resulting from such breach, which
could adversely affect the security for the related Mortgage Loan. In addition,
pursuant to Section 502(b)(6) of the Bankruptcy Code, a lessor's damages for
lease rejection in respect of future rent installments are limited to the rent
reserved by the lease, without acceleration, for the greater of one year or 15%,
not to exceed three years, of the remaining term of the lease.
If a trustee in bankruptcy on behalf of a lessor, or a lessor as
debtor-in-possession, rejects an unexpired lease of real property, the lessee
may treat such lease as terminated by such rejection or, in the alternative, the
lessee may remain in possession of the leasehold for the balance of such term
and for any renewal or extension of such term that is enforceable by the lessee
under applicable nonbankruptcy law. The Bankruptcy Code provides that if a
lessee elects to remain in possession after such a rejection of a lease, the
lessee may offset against rents reserved under the lease for the balance of the
term after the date of rejection of the lease, and any such renewal or extension
thereof, any damages occurring after such date caused by the nonperformance of
any obligation of the lessor under the lease after such date. To the extent
provided in the related Prospectus Supplement, the Lessee will agree under
certain Leases to pay all amounts owing thereunder to the Master Servicer
without offset. To the extent that such a contractual obligation remains
enforceable against the Lessee, the Lessee would not be able to avail itself of
the rights of offset generally afforded to lessees of real property under the
Bankruptcy Code.
In a bankruptcy or similar proceeding of a mortgagor, action may be taken
seeking the recovery, as a preferential transfer or on other grounds, of any
payments made by the mortgagor, or made directly by the related Lessee, under
the related Mortgage Loan to the Trust Fund. Payments on long-term debt may be
protected from recovery as preferences if they are payments in the ordinary
course of business made on debts incurred in the ordinary course of business.
Whether any particular payment would be protected depends upon the facts
specific to a particular transaction.
A trustee in bankruptcy, in some cases, may be entitled to collect its
costs and expenses in preserving or selling the mortgaged property ahead of
payment to the lender. In certain circumstances, a debtor in bankruptcy may have
the power to grant liens senior to the lien of a mortgage, and analogous state
statutes and general principles of equity may also provide a mortgagor with
means to halt a foreclosure proceeding or sale and to force a restructuring of a
mortgage loan on terms a lender would not otherwise accept. Moreover, the laws
of certain states also give priority to certain tax liens over the lien of a
mortgage or deed of trust. Under the Bankruptcy Code, if the court finds that
actions of the mortgagee have been unreasonable, the lien of the related
mortgage may be subordinated to the claims of unsecured creditors.
To the extent described in the related Prospectus Supplement, certain of
the Mortgagors may be partnerships. The laws governing limited partnerships in
certain states provide that the commencement of a case under the Bankruptcy Code
with respect to a general partner will cause a person to cease to be a general
partner of the limited partnership, unless otherwise provided in writing in the
limited partnership agreement. This provision may be construed as an "ipso
facto" clause and, in the event of the general partner's bankruptcy, may not be
enforceable. To the extent described in the related Prospectus Supplement,
certain limited partnership agreements
64
<PAGE> 235
of the Mortgagors may provide that the commencement of a case under the
Bankruptcy Code with respect to the related general partner constitutes an event
of withdrawal (assuming the enforceability of the clause is not challenged in
bankruptcy proceedings or, if challenged, is upheld) that might trigger the
dissolution of the limited partnership, the winding up of its affairs and the
distribution of its assets, unless (i) at the time there was at least one other
general partner and the written provisions of the limited partnership permit the
business of the limited partnership to be carried on by the remaining general
partner and that general partner does so or (ii) the written provisions of the
limited partnership agreement permit the limited partner to agree within a
specified time frame (often 60 days) after such withdrawal to continue the
business of the limited partnership and to the appointment of one or more
general partners and the limited partners do so. In addition, the laws governing
general partnerships in certain states provide that the commencement of a case
under the Bankruptcy Code or state bankruptcy laws with respect to a general
partner of such partnerships triggers the dissolution of such partnership, the
winding up of its affairs and the distribution of its assets. Such state laws,
however, may not be enforceable or effective in a bankruptcy case. The
dissolution of a Mortgagor, the winding up of its affairs and the distribution
of its assets could result in an acceleration of its payment obligation under a
related Mortgage Loan, which may reduce the yield on the related series of
Certificates in the same manner as a principal prepayment.
In addition, the bankruptcy of the general partner of a Mortgagor that is
a partnership may provide the opportunity for a trustee in bankruptcy for such
general partner, such general partner as a debtor-in-possession, or a creditor
of such general partner to obtain an order from a court consolidating the assets
and liabilities of the general partner with those of the Mortgagor pursuant to
the doctrines of substantive consolidation or piercing the corporate veil. In
such a case, the respective Mortgaged Property, for example, would become
property of the estate of such bankrupt general partner. Not only would the
Mortgaged Property be available to satisfy the claims of creditors of such
general partner, but an automatic stay would apply to any attempt by the Trustee
to exercise remedies with respect to such Mortgaged Property. However, such an
occurrence should not affect the Trustee's status as a secured creditor with
respect to the Mortgagor or its security interest in the Mortgaged Property.
Junior Mortgages; Rights of Senior Mortgagees or Beneficiaries
To the extent specified in the related Prospectus Supplement, some of the
Mortgage Loans for a series will be secured by junior mortgages or deeds of
trust which are subordinated to senior mortgages or deeds of trust held by other
lenders or institutional investors. The rights of the Trust Fund (and therefore
the related Certificateholders), as beneficiary under a junior deed of trust or
as mortgagee under a junior mortgage, are subordinate to those of the mortgagee
or beneficiary under the senior mortgage or deed of trust, including the prior
rights of the senior mortgagee or beneficiary to receive rents, hazard insurance
and condemnation proceeds and to cause the Mortgaged Property securing the
Mortgage Loan to be sold upon default of the Mortgagor or trustor, thereby
extinguishing the junior mortgagee's or junior beneficiary's lien unless the
Master Servicer or Special Servicer, as applicable, asserts its subordinate
interest in a Mortgaged Property in foreclosure litigation or satisfies the
defaulted senior loan. As discussed more fully below, in many states a junior
mortgagee or beneficiary may satisfy a defaulted senior loan in full, or may
cure such default and bring the senior loan current, in either event adding the
amounts expended to the balance due on the junior loan. Absent a provision in
the senior mortgage, no notice of default is required to be given to the junior
mortgagee unless otherwise required by law.
The form of the mortgage or deed of trust used by many institutional
lenders confers on the mortgagee or beneficiary the right both to receive all
proceeds collected under any hazard insurance policy and all awards made in
connection with any condemnation proceedings, and to apply such proceeds and
awards to any indebtedness secured by the mortgage or deed of trust, in such
order as the mortgagee or beneficiary may determine. Thus, in the event
improvements on the property are damaged or destroyed by fire or other casualty,
or in the event the property is taken by condemnation, the mortgagee or
beneficiary under the senior mortgage or deed of trust will have the prior right
to collect any insurance proceeds payable under the hazard insurance policy and
any award of damages in connection with the condemnation and to apply the same
to the indebtedness secured by the senior mortgage or deed of trust. Proceeds in
excess of the amount of senior mortgage indebtedness will, in most cases, be
applied to the indebtedness of a junior mortgage or trust deed. The laws of
certain states may limit the ability of mortgagees or beneficiaries to apply the
proceeds of hazard insurance and partial condemnation awards to the secured
indebtedness. In such states, the mortgagor or trustor must be allowed to use
the proceeds of hazard
65
<PAGE> 236
insurance to repair the damage unless the security of the mortgagee or
beneficiary has been impaired. Similarly, in certain states, the mortgagee or
beneficiary is entitled to the award for a partial condemnation of the real
property security only to the extent that its security is impaired.
The form of mortgage or deed of trust used by many institutional lenders
typically contains a "future advance" clause, which provides in essence, that
additional amounts advanced to or on behalf of the mortgagor or trustor by the
mortgagee or beneficiary are to be secured by the mortgage or deed of trust.
While such a clause is valid under the laws of most states, the priority of any
advance made under the clause depends, in some states, on whether the advance
was an "obligatory" or "optional" advance. If the mortgagee or beneficiary is
obligated to advance the additional amounts, the advance may be entitled to
receive the same priority as amounts initially made under the mortgage or deed
of trust, notwithstanding that there may be intervening junior mortgages or
deeds of trust and other liens between the date of recording of the mortgage or
deed of trust and the date of the future advance, and notwithstanding that the
mortgagee or beneficiary had actual knowledge of such intervening junior
mortgages or deeds of trust and other liens at the time of the advance. Where
the mortgagee or beneficiary is not obligated to advance the additional amounts
and has actual knowledge of the intervening junior mortgages or deeds of trust
and other liens, the advance may be subordinated to such intervening junior
mortgages or deeds of trust and other liens. Priority of advances under a
"future advance" clause rests, in many other states, on state law giving
priority to all advances made under the loan agreement up to a "credit limit"
amount stated in the recorded mortgage.
Another provision typically found in the form of the mortgage or deed of
trust used by many institutional lenders obligates the mortgagor or trustor to
pay before delinquency all taxes and assessments on the property and, when due,
all encumbrances, charges and liens on the property which appear prior to the
mortgage or deed of trust, to provide and maintain fire insurance on the
property, to maintain and repair the property and not to commit or permit any
waste thereof, and to appear in and defend any action or proceeding purporting
to affect the property or the rights of the mortgagee or beneficiary under the
mortgage or deed of trust. Upon a failure of the mortgagor or trustor to perform
any of these obligations, the mortgagee or beneficiary is given the right under
the mortgage or deed of trust to perform the obligation itself, at its election,
with the mortgagor or trustor agreeing to reimburse the mortgagee or beneficiary
on behalf of the mortgagor or trustor. All sums so expended by the mortgagee or
beneficiary become part of the indebtedness secured by the mortgage or deed of
trust.
The form of mortgage or deed of trust used by many institutional lenders
typically requires the mortgagor or trustor to obtain the consent of the
mortgagee or beneficiary in respect of actions affecting the mortgaged property,
including, without limitation, leasing activities (including new leases and
termination or modification of existing leases), alterations and improvements to
buildings forming a part of the mortgaged property and management and leasing
agreements for the mortgaged property. Tenants will often refuse to execute a
lease unless the mortgagee or beneficiary executes a written agreement with the
tenant not to disturb the tenant's possession of its premises in the event of a
foreclosure. A senior mortgagee or beneficiary may refuse to consent to matters
approved by a junior mortgagee or beneficiary with the result that the value of
the security for the junior mortgage or deed of trust is diminished. For
example, a senior mortgagee or beneficiary may decide not to approve the lease
or to refuse to grant a tenant a non-disturbance agreement. If, as a result, the
lease is not executed, the value of the mortgaged property may be diminished.
Environmental Legislation
Real property pledged as security to a lender may be subject to unforeseen
environmental liabilities. Of particular concern may be those Mortgaged
Properties which are, or have been, the site of manufacturing, industrial or
disposal activity. Such environmental liabilities may give rise to (i) a
diminution in value of property securing any Mortgage Loan, (ii) limitation on
the ability to foreclose against such property or (iii) in certain
circumstances, as more fully described below, liability for clean-up costs or
other remedial actions, which liability could exceed the value of the principal
balance of the related Mortgage Loan or of such Mortgaged Property.
Under the laws of many states, contamination on a property may give rise
to a lien on the property for cleanup costs. In several states, such a lien has
priority over all existing liens (a "superlien") including those of
66
<PAGE> 237
existing mortgages; in these states, the lien of a mortgage contemplated by this
transaction may lose its priority to such a superlien.
The presence of hazardous or toxic substances, or the failure to remediate
such property properly, may adversely affect the market value of the property,
as well as the owner's ability to sell or use the real estate or to borrow using
the real estate as collateral. In addition, certain environmental laws and
common law principles govern the responsibility for the removal, encapsulation
or disturbance of asbestos containing materials ("ACMs") when these ACMs are in
poor condition or when a property with ACMs is undergoing repair, renovation or
demolition. Such laws could also be used to impose liability upon owners and
operators of real properties for release of ACMs into the air that cause
personal injury or other damage. In addition to cleanup and natural resource
damages actions brought by federal, state, and local agencies and private
parties, the presence of hazardous substances on a property may lead to claims
of personal injury, property damage, or other claims by private plaintiffs.
Under the federal Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended ("CERCLA"), and under the law of certain
states, a secured party which takes a deed-in-lieu of foreclosure, purchases a
mortgaged property at a foreclosure sale, or operates a Mortgaged Property may
become liable in some circumstances either to the government or to private
parties for cleanup costs, even if the lender does not cause or contribute to
the contamination. Liability under some federal or state statutes may not be
limited to the original or unamortized principal balance of a loan or to the
value of the property securing a loan. CERCLA imposes strict, as well as joint
and several, liability on several classes of potentially responsible parties,
including current owners and operators of the property, regardless of whether
they caused or contributed to the contamination. Many states have laws similar
to CERCLA.
Lenders may be held liable under CERCLA as owners or operators. Excluded
from CERCLA's definition of "owner or operator," however, is a person "who
without participating in the management of the facility, holds indicia of
ownership primarily to protect his security interest." This exemption for
holders of a security interest such as a secured lender applies only in
circumstances where the lender acts to protect its security interest in the
contaminated facility or property. Thus, if a lender's activities encroach on
the actual management of such facility or property, the lender faces potential
liability as an "owner or operator" under CERCLA. Similarly, when a lender
forecloses and takes title to a contaminated facility or property (whether it
holds the facility or property as an investment or leases it to a third party),
the lender may incur potential CERCLA liability.
Whether actions taken by a lender would constitute such an encroachment on
the actual management of a facility or property, so as to render the secured
creditor exemption unavailable to the lender has been a matter of judicial
interpretation of the statutory language, and court decisions have historically
been inconsistent.
This scope of the secured creditor exemption has been clarified by the
enactment of the Asset Conservation, Lender Liability and Deposit Insurance
Protection Act of 1996 (the "Asset Conservation Act"), which was signed into law
by President Clinton on September 30, 1996, and which lists permissible actions
that may be undertaken by a lender holding security in a contaminated facility
without exceeding the bounds of the secured creditor exemption, subject to
certain conditions and limitations. The Asset Conservation Act provides that in
order to be deemed to have participated in the management of a secured property,
a lender must actually participate in the operational affairs of
the property or the borrower. The Asset Conservation Act also provides that a
lender will continue to have the benefit of the secured creditor exemption even
if it forecloses on a mortgaged property, purchases it at a foreclosure sale or
accepts a deed-in-lieu of foreclosure provided that the lender seeks to sell the
mortgaged property at the earliest practicable commercially reasonable time on
commercially reasonable terms. The protections afforded lenders under the Asset
Conversion Act are subject to terms and conditions that have not been clarified
by the courts.
The secured creditor exemption does not protect a lender from liability
under CERCLA in cases where the lender arranges for disposal of hazardous
substances or for transportation of hazardous substances. In addition, the
secured creditor exemption does not govern liability for cleanup costs under
federal laws other than CERCLA. CERCLA's jurisdiction extends to the
investigation and remediation of releases of "hazardous substances." The
definition of "hazardous substances" under CERCLA specifically excludes
petroleum products. Therefore, a federal
67
<PAGE> 238
statute of particular significance is Subtitle I of the Resource Conservation
and Recovery Act ("RCRA"), which governs the operation and management of
underground petroleum storage tanks. Under the Asset Conservation Act, the
holders of security interests in underground storage tanks or properties
containing such tanks are accorded protections similar to the protections
accorded to lenders under CERCLA. It should be noted, however, that liability
for cleanup of petroleum contamination may be governed by state law, which may
not provide for any specific protection for secured creditors.
In a few states, transfer of some types of properties is conditioned upon
clean up of contamination prior to transfer. In these cases, a lender that
becomes the owner of a property through foreclosure, deed-in-lieu of foreclosure
or otherwise, may be required to cleanup the contamination before selling or
otherwise transferring the property.
Beyond statute-based environmental liability, there exist common law
causes of action (for example, actions based on nuisance or on toxic tort
resulting in death, personal injury or damage to property) related to hazardous
environmental conditions on a property. While it may be more difficult to hold a
lender liable in such cases, unanticipated or uninsurable liabilities of the
borrower may jeopardize the borrower's ability to meet its loan obligations.
If a lender is or becomes liable, it may bring an action for contribution
against the owner or operator who created the environmental hazard, but that
person or entity may be bankrupt or otherwise judgment proof. It is possible
that cleanup costs could become a liability of the Trust Fund and occasion a
loss to Certificateholders in certain circumstances described above if such
remedial costs were incurred.
Unless otherwise provided in the related Prospectus Supplement, the
Warrantying Party with respect to any Whole Loan included in a Trust Fund for a
particular series of Certificates will represent that a "Phase I Assessment" as
described in and meeting the requirements of the then current version of
Chapter 5 of the Federal National Mortgage Association ("FNMA") Multifamily
Guide has been received and reviewed. In addition, unless otherwise provided in
the related Prospectus Supplement, the related Agreement will provide that the
Master Servicer, acting on behalf of the Trustee, may not acquire title to a
Mortgaged Property or take over its operation unless the Master Servicer has
previously determined, based on a report prepared by a person who regularly
conducts environmental audits, that: (i) such Mortgaged Property is in
compliance with applicable environmental laws, and there are no circumstances
present at the Mortgaged Property relating to the use, management or disposal
of any hazardous substances, hazardous materials, wastes, or petroleum based
materials for which investigation, testing, monitoring, containment, clean-up
or remediation could be required under any federal, state or local law or
regulation; or (ii) if such Mortgaged Property is not so in compliance or such
circumstances are so present, then it would be in the best economic interest of
the Trust Fund to acquire title to the Mortgaged Property and further to take
such actions as would be necessary and appropriate to effect such compliance
and/or respond to such circumstances. This requirement effectively precludes
enforcement of the security for the related Mortgage Note until a satisfactory
environmental inquiry is undertaken or any required remedial action is provided
for, reducing the likelihood that a given Trust Fund will become liable for any
condition or circumstance that may give rise to any environmental claim (an
"Environmental Hazard Condition") affecting a Mortgaged Property, but making it
more difficult to realize on the security for the Mortgage Loan. However, there
can be no assurance that any environmental assessment obtained by the Master
Servicer or a Special Servicer, as the case may be, will detect all possible
Environmental Hazard Conditions or that the other requirements of the
Agreement, even if fully observed by the Master Servicer or Special Servicer,
as the case may be, will in fact insulate a given Trust Fund from liability for
Environmental Hazard Conditions. See "Description of the
Agreements--Realization Upon Defaulted Whole Loans."
Unless otherwise specified in the related Prospectus Supplement, the
Depositor generally will not have determined whether environmental assessments
have been conducted with respect to the Mortgaged Properties relating to the
Mortgage Loans included in the Mortgage Pool for a Series, and it is likely that
any environmental assessments which would have been conducted with respect to
any of the Mortgaged Properties would have been conducted at the time of the
origination of the related Mortgage Loans and not thereafter. If specified in
the related Prospectus Supplement, a Warrantying Party will represent and
warrant that, as of the date of initial issuance of
68
<PAGE> 239
the Certificates of a Series or as of another specified date, no related
Mortgaged Property is affected by a Disqualifying Condition (as defined below).
In the event that, following a default in payment on a Mortgage Loan that
continues for 60 days, (i) the environmental inquiry conducted by the Master
Servicer or Special Servicer, as the case may be, prior to any foreclosure
indicates the presence of a Disqualifying Condition that arose prior to the date
of initial issuance of the Certificates of a Series and (ii) the Master Servicer
or the Special Servicer certify that it has acted in compliance with the
Servicing Standard and has not, by any action, created, caused or contributed to
a Disqualifying Condition the Warrantying Party, at its option, will reimburse
the Trust Fund, cure such Disqualifying Condition or repurchase or substitute
the affected Whole Loan, as described under "Description of the
Agreements--Representations and Warranties; Repurchases." No such person will
however, be responsible for any Disqualifying Condition which may arise on a
Mortgaged Property after the date of initial issuance of the Certificates of the
related Series, whether due to actions of the Mortgagor, the Master Servicer,
the Special Servicer or any other person. It may not always be possible to
determine whether a Disqualifying Condition arose prior or subsequent to the
date of the initial issuance of the Certificates of a Series.
A "Disqualifying Condition" is defined generally as a condition, existing
as a result of, or arising from, the presence of Hazardous Materials (as defined
below) on a Mortgaged Property, such that the Mortgage Loan secured by the
affected Mortgaged Property would be ineligible, solely by reason of such
condition, for purchase by FNMA under the relevant provisions of FNMA's
Multifamily Seller/Servicer Guide in effect as of the date of initial issuance
of the Certificates of such series, including a condition that would constitute
a material violation of applicable federal state or local law in effect as of
their date of initial issuance of the Certificates of such series.
"Hazardous Materials" are generally defined under several federal and
state statutes, and include dangerous toxic or hazardous pollutants, chemicals,
wastes or substances, including, without limitation, those so identified
pursuant to CERCLA and RCRA, and specifically including, asbestos and asbestos
containing materials, polychlorinated biphenyls, radon gas, petroleum and
petroleum products, urea formaldehyde and any substances classified as being "in
inventory," "usable work in process" or similar classification which would, if
classified as unusable, be included in the foregoing definition.
Due-on-Sale and Due-on-Encumbrance
Certain of the Mortgage Loans may contain due-on-sale and
due-on-encumbrance clauses. These clauses generally provide that the lender may
accelerate the maturity of the loan if the mortgagor sells or otherwise
transfers or encumbers the related Mortgaged Property. Certain of these clauses
may provide that, upon an attempted breach thereof by the mortgagor of an
otherwise non-recourse loan, the mortgagor becomes personally liable for the
mortgage debt. The enforceability of due-on-sale clauses has been the subject of
legislation or litigation in many states and, in some cases, the enforceability
of these clauses was limited or denied. However, with respect to certain loans
the Garn-St Germain Depository Institutions Act of 1982 preempts state
constitutional, statutory and case law that prohibits the enforcement of
due-on-sale clauses and permits lenders to enforce these clauses in accordance
with their terms subject to certain limited exceptions. Unless otherwise
provided in the related Prospectus Supplement, a Master Servicer, on behalf of
the Trust Fund, will determine whether to exercise any right the Trustee may
have as mortgagee to accelerate payment of any such Mortgage Loan or to withhold
its consent to any transfer or further encumbrance in a manner consistent with
the Servicing Standard.
In addition, under federal bankruptcy laws, due-on-sale clauses may not be
enforceable in bankruptcy proceedings and may, under certain circumstances, be
eliminated in any modified mortgage resulting from such bankruptcy proceeding.
Subordinate Financing
Where a mortgagor encumbers mortgaged property with one or more junior
liens, the senior lender is subjected to additional risk. First, the mortgagor
may have difficulty servicing and repaying multiple loans. In addition, if the
junior loan permits recourse to the mortgagor (as junior loans often do) and the
senior loan does not, a mortgagor may be more likely to repay sums due on the
junior loan than those on the senior loan. Second, acts of the senior lender
that prejudice the junior lender or impair the junior lender's security may
create a superior
69
<PAGE> 240
equity in favor of the junior lender. For example, if the mortgagor and the
senior lender agree to an increase in the principal amount of or the interest
rate payable on the senior loan, the senior lender may lose its priority to the
extent any existing junior lender is harmed or the mortgagor is additionally
burdened. Third, if the mortgagor defaults on the senior loan and/or any junior
loan or loans, the existence of junior loans and actions taken by junior lenders
can impair the security available to the senior lender and can interfere with or
delay the taking of action by the senior lender. Moreover, the bankruptcy of a
junior lender may operate to stay foreclosure or similar proceedings by the
senior lender.
Default Interest, Prepayment Charges and Prepayments
Forms of notes and mortgages used by lenders may contain provisions
obligating the mortgagor to pay a late charge or additional interest if payments
are not timely made, and in some circumstances may provide for prepayment fees
or yield maintenance penalties if the obligation is paid prior to maturity or
prohibit such prepayment for a specified period. In certain states, there are or
may be specific limitations upon the late charges which a lender may collect
from a mortgagor for delinquent payments. Certain states also limit the amounts
that a lender may collect from a mortgagor as an additional charge if the loan
is prepaid. The enforceability, under the laws of a number of states of
provisions providing for prepayment fees or penalties upon, or prohibition of,
an involuntary prepayment is unclear, and no assurance can be given that, at the
time a Prepayment Premium is required to be made on a Mortgage Loan in
connection with an involuntary prepayment, the obligation to make such payment,
or the provisions of any such prohibition, will be enforceable under applicable
state law. The absence of a restraint on prepayment, particularly with respect
to Mortgage Loans having higher Mortgage Rates, may increase the likelihood of
refinancing or other early retirements of the Mortgage Loans.
Acceleration on Default
Unless otherwise specified in the related prospectus Supplement, some of
the Mortgage Loans included in the Mortgage Pool for a Series will include a
"debt-acceleration" clause, which permits the lender to accelerate the full debt
upon a monetary or nonmonetary default of the Mortgagor. The courts of all
states will enforce clauses providing for acceleration in the event of a
material payment default after giving effect to any appropriate notices. The
equity courts of the state, however, may refuse to foreclose a mortgage or deed
of trust when an acceleration of the indebtedness would be inequitable or unjust
or the circumstances would render the acceleration unconscionable. Furthermore,
in some states, the mortgagor may avoid foreclosure and reinstate an accelerated
loan by paying only the defaulted amounts and the costs and attorneys' fees
incurred by the lender in collecting such defaulted payments.
Applicability of Usury Laws
Title V of the Depository Institutions Deregulation and Monetary Control
Act of 1980, enacted in March 1980 ("Title V"), provides that state usury
limitations shall not apply to certain types of residential (including
multifamily but not other commercial) first mortgage loans originated by certain
lenders after March 31, 1980. A similar federal statute was in effect with
respect to mortgage loans made during the first three months of 1980. The
statute authorized any state to reimpose interest rate limits by adopting,
before April 1, 1983, a law or constitutional provision that expressly rejects
application of the federal law. In addition, even where Title V is not so
rejected, any state is authorized by the law to adopt a provision limiting
discount points or other charges on mortgage loans covered by Title V. Certain
states have taken action to reimpose interest rate limits and/or to limit
discount points or other charges.
The Depositor has been advised by counsel that a court interpreting Title
V would hold that residential first mortgage loans that are originated on or
after January 1, 1980 are subject to federal preemption. Therefore, in a state
that has not taken the requisite action to reject application of Title V or to
adopt a provision limiting discount points or other charges prior to origination
of such mortgage loans, any such limitation under such state's usury law would
not apply to such mortgage loans.
70
<PAGE> 241
In any state in which application of Title V has been expressly rejected
or a provision limiting discount points or other charges is adopted, no Mortgage
Loan originated after the date of such state action will be eligible for
inclusion in a Trust Fund unless (i) such Mortgage Loan provides for such
interest rate, discount points and charges as are permitted in such state or
(ii) such Mortgage Loan provides that the terms thereof shall be construed in
accordance with the laws of another state under which such interest rate,
discount points and charges would not be usurious and the mortgagor's counsel
has rendered an opinion that such choice of law provision would be given effect.
Statutes differ in their provisions as to the consequences of a usurious
loan. One group of statutes requires the lender to forfeit the interest due
above the applicable limit or impose a specified penalty. Under this statutory
scheme, the mortgagor may cancel the recorded mortgage or deed of trust upon
paying its debt with lawful interest, and the lender may foreclose, but only for
the debt plus lawful interest. A second group of statutes is more severe. A
violation of this type of usury law results in the invalidation of the
transaction, thereby permitting the mortgagor to cancel the recorded mortgage or
deed of trust without any payment or prohibiting the lender from foreclosing.
Certain Laws and Regulations; Types of Mortgaged Properties
The Mortgaged Properties will be subject to compliance with various
federal, state and local statutes and regulations. Failure to comply (together
with an inability to remedy any such failure) could result in material
diminution in the value of a Mortgage Property which could, together with the
possibility of limited alternative uses for a particular Mortgaged Property
(e.g., a nursing or convalescent home or hospital), result in a failure to
realize the full principal amount of the related Mortgage Loan. Mortgages on
Mortgaged Properties which are owned by the Mortgagor under a condominium form
of ownership are subject to the declaration, by-laws and other rules and
regulations of the condominium association. Mortgaged Properties which are
hotels or motels may present additional risk in that hotels and motels are
typically operated pursuant to franchise, management and operating agreements
which may be terminable by the operator, and the transferability of the hotel's
operating, liquor and other licenses to the entity acquiring the hotel either
through purchases or foreclosure is subject to the vagaries of local law
requirements. In addition, Mortgaged Properties which are multifamily
residential properties may be subject to rent control laws, which could impact
the future cash flows of such properties.
Americans With Disabilities Act
Under Title III of the Americans with Disabilities Act of 1990 and rules
promulgated thereunder (collectively, the "ADA"), in order to protect
individuals with disabilities, public accommodations (such as hotels,
restaurants, shopping centers, hospitals, schools and social service center
establishments) must remove architectural and communication barriers which are
structural in nature from existing places of public accommodation to the extent
"readily achievable." In addition, under the ADA, alterations to a place of
public accommodation or a commercial facility are to be made so that, to the
maximum extent feasible, such altered portions are readily accessible to and
usable by disabled individuals. The "readily achievable" standard takes into
account, among other factors, the financial resources of the affected site,
owner, landlord or other applicable person. In addition to imposing a possible
financial burden on the Mortgagor in its capacity as owner or landlord, the ADA
may also impose such requirements on a foreclosing lender who succeeds to the
interest of the Mortgagor as owner of landlord. Furthermore, since the "readily
achievable" standard may vary depending on the financial condition of the owner
or landlord, a foreclosing lender who is financially more capable than the
Mortgagor of complying with the requirements of the ADA may be subject to
more stringent requirements than those to which the Mortgagor is subject.
Soldiers' and Sailors' Civil Relief Act of 1940
Under the terms of the Soldiers' and Sailors' Civil Relief Act of 1940, as
amended (the "Relief Act"), a mortgagor who enters military service after the
origination of such mortgagor's Mortgage Loan (including a mortgagor who was in
reserve status and is called to active duty after origination of the Mortgage
Loan), may not be charged interest (including fees and charges) above an annual
rate of 6% during the period of such mortgagor's active duty status, unless a
court orders otherwise upon application of the lender. The Relief Act applies to
71
<PAGE> 242
mortgagors who are members of the Army, Navy, Air Force, Marines, National
Guard, Reserves, Coast Guard and officers of the U.S. Public Health Service
assigned to duty with the military. Because the Relief Act applies to mortgagors
who enter military service (including reservists who are called to active duty)
after origination of the related Mortgage Loan, no information can be provided
as to the number of loans that may be affected by the Relief Act. Application of
the Relief Act would adversely affect, for an indeterminate period of time, the
ability of any servicer to collect full amounts of interest on certain of the
Mortgage Loans. Any shortfalls in interest collections resulting from the
application of the Relief Act would result in a reduction of the amounts
distributable to the holders of the related series of Certificates, and would
not be covered by advances or, unless otherwise specified in the related
Prospectus Supplement, any form of Credit Support provided in connection with
such Certificates. In addition, the Relief Act imposes limitations that would
impair the ability of the servicer to foreclose on an affected Mortgage Loan
during the mortgagor's period of active duty status, and, under certain
circumstances, during an additional three month period thereafter. Thus, in the
event that such a Mortgage Loan goes into default, there may be delays and
losses occasioned thereby.
Forfeitures in Drug and RICO Proceedings
Federal law provides that property owned by persons convicted of
drug-related crimes or of criminal violations of the Racketeer Influenced and
Corrupt Organizations ("RICO") statute can be seized by the government if the
property was used in, or purchased with the proceeds of, such crimes. Under
procedures contained in the Comprehensive Crime Control Act of 1984 (the "Crime
Control Act"), the government may seize the property even before conviction. The
government must publish notice of the forfeiture proceeding and may give notice
to all parties "known to have an alleged interest in the property," including
the holders of mortgage loans.
A lender may avoid forfeiture of its interest in the property if it
establishes that: (i) its mortgage was executed and recorded before commission
of the crime upon which the forfeiture is based, or (ii) the lender was, at the
time of execution of the mortgage, "reasonably without cause to believe" that
the property was used in, or purchased with the proceeds of, illegal drug or
RICO activities.
72
<PAGE> 243
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following summary of the anticipated material federal income tax
consequences of the purchase, ownership and disposition of Offered Certificates
is based on the advice of Sidley & Austin or Latham & Watkins or Brown & Wood
LLP or such other counsel as may be specified in the related Prospectus
Supplement, counsel to the Depositor. This summary is based on laws,
regulations, including the REMIC regulations promulgated by the Treasury
Department (the "REMIC Regulations"), rulings and decisions now in effect or
(with respect to regulations) proposed, all of which are subject to change
either prospectively or retroactively. This summary does not address the federal
income tax consequences of an investment in Certificates applicable to all
categories of investors, some of which (for example, banks and insurance
companies) may be subject to special rules. Prospective investors should consult
their tax advisors regarding the federal, state, local and any other tax
consequences to them of the purchase, ownership and disposition of Certificates.
General
The federal income tax consequences to Certificateholders will vary
depending on whether an election is made to treat the Trust Fund relating to a
particular Series of Certificates as a REMIC under the Code. The Prospectus
Supplement for each Series of Certificates will specify whether a REMIC election
will be made.
Grantor Trust Funds
If a REMIC election is not made, Sidley & Austin or Latham & Watkins or
Brown & Wood LLP or Cadwalader, Wickersham & Taft or such other counsel as may
be specified in the related Prospectus Supplement will deliver its opinion that
the Trust Fund will not be classified as an association taxable as a corporation
and that each such Trust Fund will be classified as a grantor trust under
subpart E, Part I of subchapter J of Chapter 1 of Subtitle A of the Code. In
this case, owners of Certificates will be treated for federal income tax
purposes as owners of a portion of the Trust Fund's assets as described below.
a. Single Class of Grantor Trust Certificates
Characterization. The Trust Fund may be created with one class of Grantor
Trust Certificates. In this case, each Grantor Trust Certificateholder will be
treated as the owner of a pro rata undivided interest in the interest and
principal portions of the Trust Fund represented by the Grantor Trust
Certificates and will be considered the equitable owner of a pro rata undivided
interest in each of the Mortgage Assets in the Pool. Any amounts received by a
Grantor Trust Certificateholder in lieu of amounts due with respect to any
Mortgage Asset because of a default or delinquency in payment will be treated
for federal income tax purposes as having the same character as the payments
they replace.
Each Grantor Trust Certificateholder will be required to report on its
federal income tax return in accordance with such Grantor Trust
Certificateholder's method of accounting its pro rata share of the entire income
from the Mortgage Loans in the Trust Fund represented by Grantor Trust
Certificates, including interest, original issue discount ("OID"), if any,
prepayment fees, assumption fees, any gain recognized upon an assumption and
late payment charges received by the Master Servicer. Under Code Sections 162 or
212 each Grantor Trust Certificateholder will be entitled to deduct its pro rata
share of servicing fees, prepayment fees, assumption fees, any loss recognized
upon an assumption and late payment charges retained by the Master Servicer,
provided that such amounts are reasonable compensation for services rendered to
the Trust Fund. Grantor Trust Certificateholders that are individuals, estates
or trusts will be entitled to deduct their share of expenses as itemized
deductions only to the extent such expenses plus all other Code Section 212
expenses exceed two percent of its adjusted gross income. In addition, the
amount of itemized deductions otherwise allowable for the taxable year for an
individual whose adjusted gross income exceeds the applicable amount under Code
Section 68(b) (which amount will be adjusted for inflation) will be reduced by
the lesser of (i) 3% of the excess of adjusted gross income over the applicable
amount and (ii) 80% of the amount of itemized deductions otherwise allowable for
such taxable year. In general, a Grantor Trust Certificateholder using the cash
method of accounting must take into account its pro rata share of income as and
deductions as and when collected by or paid to the Master Servicer or, with
respect to
73
<PAGE> 244
original issue discount or certain other income items for which the
Certificateholder has made an election, as such amounts are accrued by the Trust
Fund on a constant interest basis, and will be entitled to claim its pro rata
share of deductions (subject to the foregoing limitations) when such amounts are
paid or such Certificateholder would otherwise be entitled to claim such
deductions had it held the Mortgage Assets directly. A Grantor Trust
Certificateholder using an accrual method of accounting must take into account
its pro rata share of income as payment becomes due or is made to the Master
Servicer, whichever is earlier and may deduct its pro rata share of expense
items (subject to the foregoing limitations) when such amounts are paid or such
Certificateholder otherwise would be entitled to claim such deductions had it
held the Mortgage Assets directly. If the servicing fees paid to the Master
Servicer are deemed to exceed reasonable servicing compensation, the amount of
such excess could be considered as an ownership interest retained by the Master
Servicer (or any person to whom the Master Servicer assigned for value all or a
portion of the servicing fees) in a portion of the interest payments on the
Mortgage Assets. The Mortgage Assets would then be subject to the "coupon
stripping" rules of the Code discussed below.
Unless otherwise specified in the related Prospectus Supplement or
otherwise provided below, as to each Series of Certificates, counsel to the
Depositor will have advised the Depositor that:
(i) a Grantor Trust Certificate owned by a "domestic building and loan
association" within the meaning of Code Section 7701(a)(19) representing
principal and interest payments on Mortgage Assets will be considered to
represent "loans . . . secured by an interest in real property which is
. . . residential property" within the meaning of Code Section
7701(a)(19)(C)(v), to the extent that the Mortgage Assets represented by
that Grantor Trust Certificate are of a type described in such Code
section;
(ii) a Grantor Trust Certificate owned by a real estate investment trust
representing an interest in Mortgage Assets will be considered to
represent "real estate assets" within the meaning of Code Section
856(c)(4)(A), and interest income on the Mortgage Assets will be
considered "interest on obligations secured by mortgages on real property"
within the meaning of Code Section 856(c)(3)(B), to the extent that the
Mortgage Assets represented by that Grantor Trust Certificate are of a
type described in such Code section; and
(iii) a Grantor Trust Certificate owned by a REMIC will represent
"obligation[s] . . . which [are] principally secured by an interest in
real property" within the meaning of Code Section 860G(a)(3).
The Small Business Job Protection Act of 1996, as part of the repeal of
the bad debt reserve method for thrift institutions, repealed the application of
Code Section 593(d) to any taxable year beginning after December 31, 1995.
Stripped Bonds and Coupons. Certain Trust Funds may consist of Government
Securities that constitute "stripped bonds" or "stripped coupons" as those terms
are defined in section 1286 of the Code, and, as a result, such assets would be
subject to the stripped bond provisions of the Code. Under these rules, such
Government Securities are treated as having original issue discount based on the
purchase price and the stated redemption price at maturity of each Security. As
such, Grantor Trust Certificateholders would be required to include in income
their pro rata share of the original issue discount on each Government Security
recognized in any given year on an economic accrual basis even if the Grantor
Trust Certificateholder is a cash method taxpayer. Accordingly, the sum of the
income includible to the Grantor Trust Certificateholder in any taxable year may
exceed amounts actually received during such year.
Premium. The price paid for a Grantor Trust Certificate by a holder will
be allocated to such holder's undivided interest in each Mortgage Asset based on
each Mortgage Asset's relative fair market value, so that such holder's
undivided interest in each Mortgage Asset will have its own tax basis. A Grantor
Trust Certificateholder that acquires an interest in Mortgage Assets at a
premium may elect to amortize such premium under a constant interest method,
provided that the underlying mortgage loans with respect to such Mortgage Assets
were originated after September 27, 1985. Premium allocable to mortgage loans
originated on or before September 27, 1985 should be allocated among the
principal payments on such mortgage loans and allowed as an ordinary deduction
as principal payments are made. Amortizable bond premium will be treated as an
offset to interest income on such Grantor Trust
74
<PAGE> 245
Certificate. The basis for such Grantor Trust Certificate will be reduced to the
extent that amortizable premium is applied to offset interest payments. It is
not clear whether a reasonable prepayment assumption should be used in computing
amortization of premium allowable under Code Section 171. A Certificateholder
that makes this election for a Mortgage Asset or any other debt instrument that
is acquired at a premium will be deemed to have made an election to amortize
bond premium with respect to all debt instruments having amortizable bond
premium that such Certificateholder acquires during the year of the election or
thereafter.
If a premium is not subject to amortization using a reasonable prepayment
assumption, the holder of a Grantor Trust Certificate representing an interest
in a Mortgage Asset or Mortgage Loan acquired at a premium should recognize a
loss if a Mortgage Loan (or an underlying mortgage loan with respect to a
Mortgage Asset) prepays in full, equal to the difference between the portion of
the prepaid principal amount of such Mortgage Loan (or underlying mortgage loan)
that is allocable to the Certificate and the portion of the adjusted basis of
the Certificate that is allocable to such Mortgage Loan (or underlying mortgage
loan). If a reasonable prepayment assumption is used to amortize such premium,
it appears that such a loss would be available, if at all, only if prepayments
have occurred at a rate faster than the reasonable assumed prepayment rate. It
is not clear whether any other adjustments would be required to reflect
differences between an assumed prepayment rate and the actual rate of
prepayments.
On December 30, 1997, the Internal Revenue Service (the "IRS") issued
final regulations (the "Amortizable Bond Premium Regulations") dealing with
amortizable bond premium. These regulations, which generally are effective for
bonds issued or acquired on or after March 2, 1998 (or, for holders making an
election for the taxable year that includes March 2, 1998 or any subsequent
taxable year, shall apply to bonds held on or after the first day of the taxable
year of the election). The Amortizable Bond Premium Regulations specifically do
not apply to prepayable debt instruments or any pool of debt instruments the
yield on which may be affected by prepayments, such as the Trust Fund, which are
subject to Section 1272(a)(6) of the Code. Absent further guidance from the IRS
and unless otherwise specified in the related Prospectus Supplement, the Trustee
will account for amortizable bond premium in the manner described above.
Prospective purchasers should consult their tax advisors regarding amortizable
bond premium and the Amortizable Bond Premium Regulations.
Original Issue Discount. The IRS has stated in published rulings that, in
circumstances similar to those described herein, the special rules of the Code
relating to original issue discount ("OID") (currently Code Sections 1271
through 1273 and 1275) and Treasury regulations issued on January 27, 1994,
under such Sections (the "OID Regulations"), will be applicable to a Grantor
Trust Certificateholder's interest in those Mortgage Assets meeting the
conditions necessary for these sections to apply. Rules regarding periodic
inclusion of OID income are applicable to mortgages of corporations originated
after May 27, 1969, mortgages of noncorporate mortgagors (other than
individuals) originated after July 1, 1982, and mortgages of individuals
originated after March 2, 1984. Such OID could arise by the financing of points
or other charges by the originator of the mortgages in an amount greater than a
statutory de minimis exception to the extent that the points are not currently
deductible under applicable Code provisions or are not for services provided by
the lender. OID generally must be reported as ordinary gross income as it
accrues under a constant interest method. See "--Multiple Classes of Grantor
Trust Certificates--Accrual of Original Issue Discount" below.
Market Discount. A Grantor Trust Certificateholder that acquires an
undivided interest in Mortgage Assets may be subject to the market discount
rules of Code Sections 1276 through 1278 to the extent an undivided interest in
a Mortgage Asset is considered to have been purchased at a "market discount."
Generally, the amount of market discount is equal to the excess of the portion
of the principal amount of such Mortgage Asset allocable to such holder's
undivided interest over such holder's tax basis in such interest. Market
discount with respect to a Grantor Trust Certificate will be considered to be
zero if the amount allocable to the Grantor Trust Certificate is less than 0.25%
of the Grantor Trust Certificate's stated redemption price at maturity
multiplied by the weighted average maturity remaining after the date of
purchase. Treasury regulations implementing the market discount rules have not
yet been issued; therefore, investors should consult their own tax advisors
regarding the application of these rules and the advisability of making any of
the elections allowed under Code Sections 1276 through 1278.
75
<PAGE> 246
The Code provides that any principal payment (whether a scheduled payment
or a prepayment) or any gain on disposition of a market discount bond acquired
by the taxpayer after October 22, 1986 shall be treated as ordinary income to
the extent that it does not exceed the accrued market discount at the time of
such payment. The amount of accrued market discount for purposes of determining
the tax treatment of subsequent principal payments or dispositions of the market
discount bond is to be reduced by the amount so treated as ordinary income.
The Code also grants the Treasury Department authority to issue
regulations providing for the computation of accrued market discount on debt
instruments, the principal of which is payable in more than one installment.
While the Treasury Department has not yet issued regulations, rules described in
the relevant legislative history will apply. Under those rules, the holder of a
market discount bond may elect to accrue market discount either on the basis of
a constant interest rate or according to one of the following methods. If a
Grantor Trust Certificate is issued with OID, the amount of market discount that
accrues during any accrual period would be equal to the product of (i) the total
remaining market discount and (ii) a fraction, the numerator of which is the OID
accruing during the period and the denominator of which is the total remaining
OID at the beginning of the accrual period. For Grantor Trust Certificates
issued without OID, the amount of market discount that accrues during a period
is equal to the product of (i) the total remaining market discount and (ii) a
fraction, the numerator of which is the amount of stated interest paid during
the accrual period and the denominator of which is the total amount of stated
interest remaining to be paid at the beginning of the accrual period. For
purposes of calculating market discount under any of the above methods in the
case of instruments (such as the Grantor Trust Certificates) that provide for
payments that may be accelerated by reason of prepayments of other obligations
securing such instruments, the same prepayment assumption applicable to
calculating the accrual of OID will apply. Because the regulations described
above have not been issued, it is impossible to predict what effect those
regulations might have on the tax treatment of a Grantor Trust Certificate
purchased at a discount or premium in the secondary market.
A holder who acquired a Grantor Trust Certificate at a market discount
also may be required to defer a portion of its interest deductions for the
taxable year attributable to any indebtedness incurred or continued to purchase
or carry such Grantor Trust Certificate purchased with market discount. For
these purposes, the de minimis rule referred to above applies. Any such deferred
interest expense would not exceed the market discount that accrues during such
taxable year and is, in general, allowed as a deduction not later than the year
in which such market discount is includible in income. If such holder elects 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, the
interest deferral rule described above will not apply.
Election to Treat All Interest as OID. The OID Regulations permit a
Certificateholder to elect to accrue all interest, discount (including de
minimis market or original issue discount) and premium in income as interest,
based on a constant yield method for Certificates acquired on or after April 4,
1994. If such an election were to be made with respect to a Grantor Trust
Certificate with market discount, the Certificateholder would be deemed to have
made an election to include in income currently market discount with respect to
all other debt instruments having market discount that such Certificateholder
acquires during the year of the election or thereafter. Similarly, a
Certificateholder that makes this election for a Certificate that is acquired at
a premium will be deemed to have made an election to amortize bond premium with
respect to all debt instruments having amortizable bond premium that such
Certificateholder owns or acquires. See "--Premium" herein. The election to
accrue interest, discount and premium on a constant yield method with respect to
a Certificate is irrevocable without consent of the IRS.
Anti-Abuse Rule. The IRS can apply or depart from the rules contained in
the OID Regulations as necessary or appropriate to achieve a reasonable result
where a principal purpose in structuring a Mortgage Asset, Mortgage Loan or
Grantor Trust Certificate or applying the otherwise applicable rules is to
achieve a result that is unreasonable in light of the purposes of the applicable
statutes (which generally are intended to achieve the clear reflection of income
for both issuers and holders of debt instruments).
76
<PAGE> 247
b. Multiple Classes of Grantor Trust Certificates
1. Stripped Bonds and Stripped Coupons
Pursuant to Code Section 1286, the separation of ownership of the right to
receive some or all of the interest payments on an obligation from ownership of
the right to receive some or all of the principal payments results in the
creation of "stripped bonds" with respect to principal payments and "stripped
coupons" with respect to interest payments. For purposes of Code Sections 1271
through 1288, Code Section 1286 treats a stripped bond or a stripped coupon as
an obligation issued on the date that such stripped interest is created. If a
Trust Fund is created with two classes of Grantor Trust Certificates, one class
of Grantor Trust Certificates may represent the right to principal and interest,
or principal only, on all or a portion of the Mortgage Assets (the "Stripped
Bond Certificates"), while the second class of Grantor Trust Certificates may
represent the right to some or all of the interest on such portion (the
"Stripped Coupon Certificates").
Servicing fees in excess of reasonable servicing fees ("excess servicing")
will be treated under the stripped bond rules. If the excess servicing fee is
less than 100 basis points (i.e., 1% interest on the Mortgage Asset principal
balance) or the Certificates are initially sold with a de minimis discount
(assuming no prepayment assumption is required), any non-de minimis discount
arising from a subsequent transfer of the Certificates should be treated as
market discount. The IRS appears to require that reasonable servicing fees be
calculated on a Mortgage Asset by Mortgage Asset basis, which could result in
some Mortgage Assets being treated as having more than 100 basis points of
interest stripped off. See "--Non-REMIC Certificates" and "Multiple Classes of
Grantor Trust Certificates--Stripped Bonds and Stripped Coupons" herein.
Although not entirely clear, a Stripped Bond Certificate generally should
be treated as an interest in Mortgage Assets issued on the day such Certificate
is purchased for purposes of calculating any OID. Generally, if the discount on
a Mortgage Asset is larger than a de minimis amount (as calculated for purposes
of the OID rules) a purchaser of such a Certificate will be required to accrue
the discount under the OID rules of the Code. See "--Non-REMIC Certificates" and
"--Single Class of Grantor Trust Certificates--Original Issue Discount" herein.
However, a purchaser of a Stripped Bond Certificate will be required to account
for any discount on the Mortgage Assets as market discount rather than OID if
either (i) the amount of OID with respect to the Mortgage Assets is treated as
zero under the OID de minimis rule when the Certificate was stripped or (ii) no
more than 100 basis points (including any amount of servicing fees in excess of
reasonable servicing fees) is stripped off of the Trust Fund's Mortgage Assets.
Pursuant to Revenue Procedure 91-49, issued on August 8, 1991, purchasers of
Stripped Bond Certificates using an inconsistent method of accounting must
change their method of accounting and request the consent of the IRS to the
change in their accounting method on a statement attached to their first timely
tax return filed after August 8, 1991.
The precise tax treatment of Stripped Coupon Certificates is substantially
uncertain. The Code could be read literally to require that OID computations be
made for each payment from each Mortgage Asset. Unless otherwise specified in
the related prospectus supplement, all payments from a Mortgage Asset underlying
a Stripped Coupon Certificate will be treated as a single installment obligation
subject to the OID rules of the Code, in which case, all payments from such
Mortgage Asset would be included in the Mortgage Asset's stated redemption price
at maturity for purposes of calculating income on such Certificate under the OID
rules of the Code.
It is unclear under what circumstances, if any, the prepayment of Mortgage
Assets will give rise to a loss to the holder of a Stripped Bond Certificate
purchased at a premium or a Stripped Coupon Certificate. If such Certificate is
treated as a single instrument (rather than an interest in discrete mortgage
loans) and the effect of prepayments is taken into account in computing yield
with respect to such Grantor Trust Certificate, it appears that no loss will be
available as a result of any particular prepayment unless prepayments occur at a
rate sufficiently faster than the assumed prepayment rate so that the
Certificateholder will not recover its investment. However, if such Certificate
is treated as an interest in discrete Mortgage Assets, or if no prepayment
assumption is used, then when a Mortgage Asset is prepaid, the holder of such
Certificate should be able to recognize a loss equal to the portion of the
adjusted issue price of such Certificate that is allocable to such Mortgage
Asset.
77
<PAGE> 248
Holders of Stripped Bond Certificates and Stripped Coupon Certificates are
urged to consult with their own tax advisors regarding the proper treatment of
these Certificates for federal income tax purposes.
Treatment of Certain Owners. Several Code sections provide beneficial
treatment to certain taxpayers that invest in Mortgage Assets of the type that
make up the Trust Fund. With respect to these Code sections, no specific legal
authority exists regarding whether the character of the Grantor Trust
Certificates, for federal income tax purposes, will be the same as that of the
underlying Mortgage Assets. While Code Section 1286 treats a stripped obligation
as a separate obligation for purposes of the Code provisions addressing OID, it
is not clear whether such characterization would apply with regard to these
other Code sections. Although the issue is not free from doubt, each class of
Grantor Trust Certificates, unless otherwise specified in the related Prospectus
Supplement, should be considered to represent "real estate assets" within the
meaning of Code Section 856(c)(4)(A) and "loans . . . secured by, an interest in
real property which is . . . residential real property" within the meaning of
Code Section 7701(a)(19)(C)(v), and interest income attributable to Grantor
Trust Certificates should be considered to represent "interest on obligations
secured by mortgages on real property" within the meaning of Code Section
856(c)(3)(B), provided that in each case the underlying Mortgage Assets and
interest on such Mortgage Assets qualify for such treatment. Prospective
purchasers to which such characterization of an investment in Certificates is
material should consult their own tax advisors regarding the characterization of
the Grantor Trust Certificates and the income therefrom. Grantor Trust
Certificates will be "obligation[s] . . . which [are] principally secured by an
interest in real property" within the meaning of Code Section 860G(a)(3)(A).
2. Grantor Trust Certificates Representing Interests in Loans Other Than
ARM Loans
The original issue discount rules of Code Sections 1271 through 1275 will
be applicable to a Certificateholder's interest in those Mortgage Assets as to
which the conditions for the application of those sections are met. Rules
regarding periodic inclusion of original issue discount in income are applicable
to mortgages of corporations originated after May 27, 1969, mortgages of
noncorporate mortgagors (other than individuals) originated after July 1, 1982,
and mortgages of individuals originated after March 2, 1984. Under the OID
Regulations, such original issue discount could arise by the charging of points
by the originator of the mortgage in an amount greater than the statutory de
minimis exception, including a payment of points that is currently deductible by
the borrower under applicable Code provisions, or under certain circumstances,
by the presence of "teaser" rates on the Mortgage Assets. OID on each Grantor
Trust Certificate must be included in the owner's ordinary income for federal
income tax purposes as it accrues, in accordance with a constant interest method
that takes into account the compounding of interest, in advance of receipt of
the cash attributable to such income. The amount of OID required to be included
in an owner's income in any taxable year with respect to a Grantor Trust
Certificate representing an interest in Mortgage Assets other than Mortgage
Assets with interest rates that adjust periodically ("ARM Loans") likely will be
computed as described below under "--Accrual of Original Issue Discount." The
following discussion is based in part on the OID Regulations and in part on the
provisions of the Tax Reform Act of 1986 (the "1986 Act"). The OID Regulations
generally are effective for debt instruments issued on or after April 4, 1994,
but may be relied upon as authority with respect to debt instruments, such as
the Grantor Trust Certificates, issued after December 21, 1992. Alternatively,
proposed Treasury regulations issued December 21, 1992 may be treated as
authority for debt instruments issued after December 21, 1992 and prior to April
4, 1994, and proposed Treasury regulations issued in 1986 and 1991 may be
treated as authority for instruments issued before December 21, 1992. In
applying these dates, the issue date of the Mortgage Assets should be used, or,
in the case of Stripped Bond Certificates or Stripped Coupon Certificates, the
date such Certificates are acquired. The holder of a Certificate should be
aware, however, that neither the proposed OID Regulations nor the OID
Regulations adequately address certain issues relevant to prepayable securities.
Under the Code, the Mortgage Assets underlying the Grantor Trust
Certificate will be treated as having been issued on the date they were
originated with an amount of OID equal to the excess of such Mortgage Asset's
stated redemption price at maturity over its issue price. The issue price of a
Mortgage Asset is generally the amount lent to the mortgagee, which may be
adjusted to take into account certain loan origination fees. The stated
redemption price at maturity of a Mortgage Asset is the sum of all payments to
be made on such Mortgage Asset other than payments that are treated as qualified
stated interest payments. The accrual of this OID, as described below under
"--Accrual of Original Issue Discount," will, unless otherwise specified in the
related Prospectus
78
<PAGE> 249
Supplement, utilize the original yield to maturity of the Grantor Trust
Certificate calculated based on a reasonable assumed prepayment rate for the
mortgage loans underlying the Grantor Trust Certificates (the "Prepayment
Assumption") on the issue date of such Grantor Trust Certificate, and will take
into account events that occur during the calculation period. The Prepayment
Assumption will be determined in the manner prescribed by regulations that have
not yet been issued. In the absence of such regulations, the Prepayment
Assumption used will be the prepayment assumption that is used in determining
the offering price of such Certificate. No representation is made that any
Certificate will prepay at the Prepayment Assumption or at any other rate. The
prepayment assumption contained in the Code literally only applies to debt
instruments collateralized by other debt instruments that are subject to
prepayment rather than direct ownership interests in such debt instruments, such
as the Certificates represent. However, no other legal authority provides
guidance with regard to the proper method for accruing OID on obligations that
are subject to prepayment, and, until further guidance is issued, the Master
Servicer intends to calculate and report OID under the method described below.
Accrual of Original Issue Discount. Generally, the owner of a Grantor
Trust Certificate must include in gross income the sum of the "daily portions,"
as defined below, of the OID on such Grantor Trust Certificate for each day on
which it owns such Certificate, including the date of purchase but excluding the
date of disposition. In the case of an original owner, the daily portions of OID
with respect to each component generally will be determined as set forth under
the OID Regulations. A calculation will be made by the Master Servicer or such
other entity specified in the related Prospectus Supplement of the portion of
OID that accrues during each successive monthly accrual period (or shorter
period from the date of original issue) that ends on the day in the calendar
year corresponding to each of the Distribution Dates on the Grantor Trust
Certificates (or the day prior to each such date). This will be done, in the
case of each full month accrual period, by (i) adding (a) the present value at
the end of the accrual period (determined by using as a discount factor the
original yield to maturity of the respective component under the Prepayment
Assumption) of all remaining payments to be received under the Prepayment
Assumption on the respective component and (b) any payments included in the
stated redemption price at maturity received during such accrual period, and
(ii) subtracting from that total the "adjusted issue price" of the respective
component at the beginning of such accrual period. The adjusted issue price of a
Grantor Trust Certificate at the beginning of the first accrual period is its
issue price; the adjusted issue price of a Grantor Trust Certificate at the
beginning of a subsequent accrual period is the adjusted issue price at the
beginning of the immediately preceding accrual period plus the amount of OID
allocable to that accrual period reduced by the amount of any payment other than
a payment of qualified stated interest made at the end of or during that accrual
period. The OID accruing during such accrual period will then be divided by the
number of days in the period to determine the daily portion of OID for each day
in the period. With respect to an initial accrual period shorter than a full
monthly accrual period, the daily portions of OID must be determined according
to an appropriate allocation under any reasonable method.
Original issue discount generally must be reported as ordinary gross
income as it accrues under a constant interest method that takes into account
the compounding of interest as it accrues rather than when received. However,
the amount of original issue discount includible in the income of a holder of an
obligation is reduced when the obligation is acquired after its initial issuance
at a price greater than the sum of the original issue price and the previously
accrued original issue discount, less prior payments of principal. Accordingly,
if such Mortgage Assets acquired by a Certificateholder are purchased at a price
equal to the then unpaid principal amount of such Mortgage Asset, no original
issue discount attributable to the difference between the issue price and the
original principal amount of such Mortgage Asset (i.e. points) will be
includible by such holder. Other original issue discount on the Mortgage Assets
(e.g., that arising from a "teaser" rate) would still need to be accrued.
3. Grantor Trust Certificates Representing Interests in ARM Loans
The OID Regulations do not address the treatment of instruments, such as
the Grantor Trust Certificates, which represent interests in ARM Loans.
Additionally, the IRS has not issued guidance under the Code's coupon stripping
rules with respect to such instruments. In the absence of any authority, the
Master Servicer will report OID on Grantor Trust Certificates attributable to
ARM Loans ("Stripped ARM Obligations") to holders in a manner it
believes is consistent with the rules described above under the heading
"--Grantor Trust Certificates Representing Interests in Loans Other Than ARM
Loans" and with the OID Regulations. In general, application of these rules
79
<PAGE> 250
may require inclusion of income on a Stripped ARM Obligation in advance of the
receipt of cash attributable to such income. Further, the addition of interest
deferred by reason of negative amortization ("Deferred Interest") to the
principal balance of an ARM Loan may require the inclusion of such amount in the
income of the Grantor Trust Certificateholder when such amount accrues.
Furthermore, the addition of Deferred Interest to the Grantor Trust
Certificate's principal balance will result in additional income (including
possibly OID income) to the Grantor Trust Certificateholder over the remaining
life of such Grantor Trust Certificates.
Because the treatment of Stripped ARM Obligations is uncertain, investors
are urged to consult their tax advisors regarding how income will be includible
with respect to such Certificates.
c. Sale or Exchange of a Grantor Trust Certificate
Sale or exchange of a Grantor Trust Certificate prior to its maturity will
result in gain or loss equal to the difference, if any, between the amount
received and the owner's adjusted basis in the Grantor Trust Certificate. Such
adjusted basis generally will equal the seller's purchase price for the Grantor
Trust Certificate, increased by the OID included in the seller's gross income
with respect to the Grantor Trust Certificate, and reduced by principal payments
on the Grantor Trust Certificate previously received by the seller. Such gain or
loss will be capital gain or loss to an owner for which a Grantor Trust
Certificate is a "capital asset" within the meaning of Code Section 1221, and
will be long-term or short-term depending on whether the Grantor Trust
Certificate has been owned for the long-term capital gain holding period
(currently more than one year). Lower capital gains rates generally will apply
to individuals who hold Grantor Trust Certificates for more than 18 months.
It is possible that capital gain realized by holders of one or more
classes of Grantor Trust Certificates could be considered gain realized upon the
disposition of property that was part of a "conversion transaction." A sale of a
Grantor Trust Certificate will be part of a conversion transaction if
substantially all of the holder's expected return is attributable to the time
value of the holder's net investment, and (i) the holder entered the contract to
sell the Grantor Trust Certificate substantially contemporaneously with
acquiring the Grantor Trust Certificate, (ii) the Grantor Trust Certificate is
part of a straddle, (iii) the Grantor Trust Certificate is marketed or sold as
producing capital gain, or (iv) other transactions to be specified in Treasury
regulations that have not yet been issued. If the sale or other disposition of a
Grantor Trust Certificate is part of a conversion transaction, all or any
portion of the gain realized upon the sale or other disposition would be treated
as ordinary income instead of capital gain.
Grantor Trust Certificates will be "evidences of indebtedness" within the
meaning of Code Section 582(c)(1), so that gain or loss recognized from the sale
of a Grantor Trust Certificate by a bank or a thrift institution to which such
section applies will be treated as ordinary income or loss.
d. Non-U.S. Persons
Generally, to the extent that a Grantor Trust Certificate evidences
ownership in underlying Mortgage Assets that were issued on or before July 18,
1984, interest or OID paid by the person required to withhold tax under Code
Section 1441 or 1442 to (i) an owner that is not a U.S. Person (as defined
below) or (ii) a Grantor Trust Certificateholder holding on behalf of an owner
that is not a U.S. Person will be subject to federal income tax, collected by
withholding, at a rate of 30% or such lower rate as may be provided for interest
by an applicable tax treaty, unless such income is effectively connected with a
U.S. trade or business of such owner or beneficial owner. Accrued OID recognized
by the owner on the sale or exchange of such a Grantor Trust Certificate also
will be subject to federal income tax at the same rate. Generally, such payments
would not be subject to withholding to the extent that a Grantor Trust
Certificate evidences ownership in Mortgage Assets issued after July 18, 1984,
by natural persons if such Grantor Trust Certificateholder complies with certain
identification requirements (including delivery of a statement, signed by the
Grantor Trust Certificateholder under penalties of perjury, certifying that such
Grantor Trust Certificateholder is not a U.S. Person and providing the name and
address of such Grantor Trust Certificateholder). To the extent payments to
Grantor Trust Certificateholders that are not U.S. Persons are payments of
"contingent interest" on the underlying Mortgage Assets, or such Grantor Trust
Certificateholder is ineligible for the exemption described in the preceding
sentence, the 30% withholding tax will apply unless such withholding taxes are
reduced or eliminated by an applicable tax treaty and such holder meets the
eligibility and
80
<PAGE> 251
certification requirements necessary to obtain the benefits of such treaty.
Additional restrictions apply to Mortgage Assets where the mortgagor is not a
natural person in order to qualify for the exemption from withholding. If
capital gain derived from the sale, retirement or other disposition of a Grantor
Trust Certificate is effectively connected with a U.S. trade or business of a
Grantor Trust Certificateholder that is not a U.S. Person, such
Certificateholder will be taxed on the net gain under the graduated U.S. federal
income tax rates applicable to U.S. Persons (and, with respect to Grantor Trust
Certificates held by or on behalf of corporations, also may be subject to branch
profits tax). In addition, if the Trust Fund acquires a United States real
property interest through foreclosure, deed in lieu of foreclosure or otherwise
on a Mortgage Asset secured by such an interest (which for this purpose includes
real property located in the United States and the Virgin Islands), a Grantor
Trust Certificateholder that is not a U.S. Person will potentially be subject to
federal income tax on any gain attributable to such real property interest that
is allocable to such holder. Non-U.S. Persons should consult their tax advisors
regarding the application to them of the foregoing rules.
As used herein, a "U.S. Person" means a citizen or resident of the United
States, a corporation or a partnership organized in or under the laws of the
United States or any political subdivision thereof (other than a partnership
that is not treated as a U.S. Person under any applicable Treasury regulations),
an estate the income of which from sources outside the United States is
includible in gross income for federal income tax purposes regardless of its
connection with the conduct of a trade or business within the United States or a
trust if a court within the United States is able to exercise primary
supervision of the administration of the trust and one or more U.S. Persons have
the authority to control all substantial decisions of the trust. In addition,
certain trusts treated as U.S. Persons before August 20, 1996 may elect to
continue to be so treated to the extent provided in regulations.
e. Information Reporting and Backup Withholding
The Master Servicer will furnish or make available, within a reasonable
time after the end of each calendar year, to each person who was a
Certificateholder at any time during such year, such information as may be
deemed necessary or desirable to assist Certificateholders in preparing their
federal income tax returns, or to enable holders to make such information
available to beneficial owners or financial intermediaries that hold such
Certificates as nominees on behalf of beneficial owners. If a holder, beneficial
owner, financial intermediary or other recipient of a payment on behalf of a
beneficial owner fails to supply a certified taxpayer identification number or
if the Secretary of the Treasury determines that such person has not reported
all interest and dividend income required to be shown on its federal income tax
return, 31% backup withholding may be required with respect to any payments to
registered owners who are not "exempt recipients." In addition, upon the sale of
a Grantor Trust Certificate to (or through) a broker, the broker must withhold
31% of the entire purchase price, unless either (i) the broker determines that
the seller is a corporation or other exempt recipient, or (ii) the seller
provides, in the required manner, certain identifying information and, in the
case of a non-U.S. Person, certifies that such seller is a Non-U.S. Person, and
certain other conditions are met. Such as sale must also be reported by the
broker to the IRS, unless either (a) the broker determines that the seller is an
exempt recipient or (b) the seller certifies its non-U.S. Person status (and
certain other conditions are met). Certification of the registered owner's
non-U.S. Person status normally would be made on IRS Form W-8 under penalties of
perjury, although in certain cases it may be possible to submit other
documentary evidence. Any amounts deducted and withheld from a distribution to a
recipient would be allowed as a credit against such recipient's federal income
tax liability.
On October 6, 1997, the Treasury Department issued new regulations (the
"New Regulations") which make certain modifications to the withholding, backup
withholding and information reporting rules described above. The New Regulations
attempt to unify certification requirements and modify reliance standards. The
New Regulations will generally be effective for payments made after December 31,
1998, subject to certain transition rules. Prospective investors are urged to
consult their own tax advisors regarding the New Regulations.
REMICs
The Trust Fund relating to a Series of Certificates may elect to be
treated as a REMIC. Qualification as a REMIC requires ongoing compliance with
certain conditions. Although a REMIC is not generally subject to federal income
tax (see, however "--Taxation of Owners of REMIC Residual Certificates" and
"--Prohibited
81
<PAGE> 252
Transactions" below), if a Trust Fund with respect to which a REMIC election is
made fails to comply with one or more of the ongoing requirements of the Code
for REMIC status during any taxable year, including the implementation of
restrictions on the purchase and transfer of the residual interests in a REMIC
as described below under "Taxation of Owners of REMIC Residual Certificates,"
the Code provides that a Trust Fund will not be treated as a REMIC for such year
and thereafter. In that event, such entity may be taxable as a separate
corporation, and the related Certificates (the "REMIC Certificates") may not be
accorded the status or given the tax treatment described below. While the Code
authorizes the Treasury Department to issue regulations providing relief in the
event of an inadvertent termination of the status of a trust fund as a REMIC, no
such regulations have been issued. Any such relief, moreover, may be accompanied
by sanctions, such as the imposition of a corporate tax on all or a portion of
the REMIC's income for the period in which the requirements for such status are
not satisfied. With respect to each Trust Fund that elects REMIC status, Sidley
& Austin or Latham & Watkins or Brown & Wood LLP or or Cadwalader, Wickersham &
Taft or such other counsel as may be specified in the related Prospectus
Supplement will deliver its opinion generally to the effect that, under then
existing law and assuming compliance with all provisions of the related Pooling
and Servicing Agreement, such Trust Fund will qualify as a REMIC, and the
related Certificates will be considered to be regular interests ("REMIC Regular
Certificates") or a sole class of residual interests ("REMIC Residual
Certificates") in the REMIC. The related Prospectus Supplement for each Series
of Certificates will indicate whether the Trust Fund will make a REMIC election
and whether a class of Certificates will be treated as a regular or residual
interest in the REMIC.
A "qualified mortgage" for REMIC purposes is any obligation (including
certificates of participation in such an obligation and any "regular interest"
in another REMIC) that is principally secured by an interest in real property
and that is transferred to the REMIC within a prescribed time period in exchange
for regular or residual interests in the REMIC.
In general, with respect to each Series of Certificates for which a REMIC
election is made, (i) Certificates held by a thrift institution taxed as a
"domestic building and loan association" will constitute assets described in
Code Section 7701(a)(19)(C); (ii) Certificates held by a real estate investment
trust will constitute "real estate assets" within the meaning of Code Section
856(c)(4)(A); and (iii) interest on Certificates held by a real estate
investment trust will be considered "interest on obligations secured by
mortgages on real property" within the meaning of Code Section 856(c)(3)(B). If
less than 95% of the REMIC's assets are assets qualifying under any of the
foregoing Code sections, the Certificates will be qualifying assets only to the
extent that the REMIC's assets are qualifying assets.
Tiered REMIC Structures. For certain Series of Certificates, two or more
separate elections may be made to treat designated portions of the related Trust
Fund as REMICs (respectively, the "Subsidiary REMIC" and the "Master REMIC") for
federal income tax purposes. Upon the issuance of any such Series of
Certificates, Sidley & Austin or Latham & Watkins or Brown & Wood LLP or
Cadwalader, Wickersham & Taft or such other counsel as may be specified in the
related Prospectus Supplement, counsel to the Depositor, will deliver its
opinion generally to the effect that, assuming compliance with all provisions of
the related Agreement, the Master REMIC as well as any Subsidiary REMIC will
each qualify as a REMIC, and the REMIC Certificates issued by the Master REMIC
and the Subsidiary REMIC or REMICs, respectively, will be considered to evidence
ownership of regular interests ("REMIC Regular Certificates") or residual
interests ("REMIC Residual Certificates") in the related REMIC within the
meaning of the REMIC provisions.
Other than the residual interest in a Subsidiary REMIC, only REMIC
Certificates issued by the Master REMIC will be offered hereunder. The
Subsidiary REMIC or REMICs and the Master REMIC will be treated as one REMIC
solely for purposes of determining whether the REMIC Certificates will be (i)
"real estate assets" within the meaning of Section 856(c)(4)(A) of the Code;
(ii) "loans secured by an interest in real property" under Section
7701(a)(19)(C) of the Code; and (iii) whether the income on such Certificates is
interest described in Section 856(c)(3)(B) of the Code.
a. Taxation of Owners of REMIC Regular Certificates
General. Except as otherwise stated in this discussion, REMIC Regular
Certificates will be treated for federal income tax purposes as debt instruments
issued by the REMIC and not as ownership interests in the REMIC
82
<PAGE> 253
or its assets. Moreover, holders of REMIC Regular Certificates that otherwise
report income under a cash method of accounting will be required to report
income with respect to REMIC Regular Certificates under an accrual method.
Original Issue Discount and Premium. The REMIC Regular Certificates may be
issued with OID. Generally, such OID, if any, will equal the difference between
the "stated redemption price at maturity" of a REMIC Regular Certificate and its
"issue price." Holders of any class of Certificates issued with OID will be
required to include such OID in gross income for federal income tax purposes as
it accrues, in accordance with a constant interest method based on the
compounding of interest as it accrues rather than in accordance with receipt of
the interest payments. The following discussion is based in part on the OID
Regulations and in part on the provisions of the Tax Reform Act of 1986 (the
"1986 Act"). Holders of REMIC Regular Certificates (the "REMIC Regular
Certificateholders") should be aware, however, that the OID Regulations do not
adequately address certain issues relevant to prepayable securities, such as the
REMIC Regular Certificates.
Rules governing OID are set forth in Code Sections 1271 through 1273 and
1275. These rules require that the amount and rate of accrual of OID be
calculated based on the Prepayment Assumption and the anticipated reinvestment
rate, if any, relating to the REMIC Regular Certificates and prescribe a method
for adjusting the amount and rate of accrual of such discount where the actual
prepayment rate differs from the Prepayment Assumption. Under the Code, the
Prepayment Assumption must be determined in the manner prescribed by
regulations, which regulations have not yet been issued. The legislative history
of the 1986 Act (the "Legislative History") provides, however, that Congress
intended the regulations to require that the Prepayment Assumption be the
prepayment assumption that is used in determining the initial offering price of
such REMIC Regular Certificates. The Prospectus Supplement for each Series of
REMIC Regular Certificates will specify the Prepayment Assumption to be used for
the purpose of determining the amount and rate of accrual of OID. No
representation is made that the REMIC Regular Certificates will prepay at the
Prepayment Assumption or at any other rate.
In general, each REMIC Regular Certificate will be treated as a single
installment obligation issued with an amount of OID equal to the excess of its
"stated redemption price at maturity" over its "issue price." The issue price of
a REMIC Regular Certificate is the first price at which a substantial amount of
REMIC Regular Certificates of that class are first sold to the public (excluding
bond houses, brokers, underwriters or wholesalers). If less than a substantial
amount of a particular class of REMIC Regular Certificates is sold for cash on
or prior to the date of their initial issuance (the "Closing Date"), the issue
price for such class will be treated as the fair market value of such class on
the Closing Date. The issue price of a REMIC Regular Certificate also includes
the amount paid by an initial Certificateholder for accrued interest that
relates to a period prior to the issue date of the REMIC Regular Certificate.
The stated redemption price at maturity of a REMIC Regular Certificate includes
the original principal amount of the REMIC Regular Certificate, but generally
will not include distributions of interest if such distributions constitute
"qualified stated interest." Qualified stated interest generally means interest
payable at a single fixed rate or qualified variable rate (as described below)
provided that such interest payments are unconditionally payable at intervals of
one year or less during the entire term of the REMIC Regular Certificate.
Interest is payable at a single fixed rate only if the rate appropriately takes
into account the length of the interval between payments. Distributions of
interest on REMIC Regular Certificates with respect to which Deferred Interest
will accrue will not constitute qualified stated interest payments, and the
stated redemption price at maturity of such REMIC Regular Certificates includes
all distributions of interest as well as principal thereon.
Where the interval between the issue date and the first Distribution Date
on a REMIC 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 below. The OID Regulations suggest that all interest on a long first
period REMIC Regular Certificate that is issued with non-de minimis OID, as
determined under the foregoing rule, will be treated as OID. Where the interval
between the issue date and the first Distribution Date on a REMIC 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.
83
<PAGE> 254
REMIC Regular Certificateholders should consult their own tax advisors to
determine the issue price and stated redemption price at maturity of a REMIC
Regular Certificate.
Under the de minimis rule, OID on a REMIC Regular Certificate will be
considered to be zero if such OID is less than 0.25% of the stated redemption
price at maturity of the REMIC Regular Certificate multiplied by the weighted
average maturity of the REMIC Regular Certificate. For this purpose, the
weighted average maturity of the REMIC Regular Certificate is computed as the
sum of the amounts determined by multiplying the number of full years (i.e.,
rounding down partial years) from the issue date until each distribution in
reduction of stated redemption price at maturity is scheduled to be made by a
fraction, the numerator of which is the amount of each distribution included in
the stated redemption price at maturity of the REMIC Regular Certificate and the
denominator of which is the stated redemption price at maturity of the REMIC
Regular Certificate. Although currently unclear, it appears that the schedule of
such distributions should be determined in accordance with the Prepayment
Assumption. The Prepayment Assumption with respect to a Series of REMIC Regular
Certificates will be set forth in the related Prospectus Supplement. Holders
generally must report de minimis OID pro rata as principal payments are
received, and such income will be capital gain if the REMIC Regular Certificate
is held as a capital asset. However, accrual method holders may elect to accrue
all de minimis OID as well as market discount under a constant interest method.
The Prospectus Supplement with respect to a Trust Fund may provide for
certain REMIC Regular Certificates to be issued at prices significantly
exceeding their principal amounts or based on notional principal balances (the
"Super-Premium Certificates"). The income tax treatment of such REMIC Regular
Certificates is not entirely certain. For information reporting purposes, the
Trust Fund intends to take the position that the stated redemption price at
maturity of such REMIC Regular Certificates is the sum of all payments to be
made on such REMIC Regular Certificates determined under the Prepayment
Assumption, with the result that such REMIC Regular Certificates would be issued
with OID. The calculation of income in this manner could result in negative
original issue discount (which delays future accruals of OID rather than being
immediately deductible) when prepayments on the Mortgage Assets exceed those
estimated under the Prepayment Assumption. The IRS might contend, however, that
certain contingent payment rules contained in final regulations issued on June
11, 1996, with respect to original issue discount, should apply to such
Certificates. Although such rules are not applicable to instruments governed by
Code Section 1272(a)(6), they represent the only guidance regarding the current
views of the IRS with respect to contingent payment instruments. These proposed
regulations, if applicable, generally would require holders of Regular Interest
Certificates to take the payments considered contingent interest payments into
income on a yield to maturity basis in accordance with a schedule of projected
payments provided by the Depositor and to make annual adjustments to income to
account for the difference between actual payments received and projected
payment amounts accrued. In the alternative, the IRS could assert that the
stated redemption price at maturity of such REMIC Regular Certificates should be
limited to their principal amount (subject to the discussion below under
"--Accrued Interest Certificates"), so that such REMIC Regular Certificates
would be considered for federal income tax purposes to be issued at a premium.
If such a position were to prevail, the rules described below under "--Taxation
of Owners of REMIC Regular Certificates--Premium" would apply. It is unclear
when a loss may be claimed for any unrecovered basis for a Super-Premium
Certificate. It is possible that a holder of a Super-Premium Certificate may
only claim a loss when its remaining basis exceeds the maximum amount of future
payments, assuming no further prepayments or when the final payment is received
with respect to such Super-Premium Certificate.
Under the REMIC Regulations, if the issue price of a REMIC Regular
Certificate (other than REMIC Regular Certificate based on a notional amount)
does not exceed 125% of its actual principal amount, the interest rate is not
considered disproportionately high. Accordingly, such REMIC Regular Certificate
generally should not be treated as a Super-Premium Certificate and the rules
described below under "--REMIC Regular Certificates--Premium" should apply.
However, it is possible that holders of REMIC Regular Certificates issued at a
premium, even if the premium is less than 25% of such Certificate's actual
principal balance, will be required to amortize the premium under an original
issue discount method or contingent interest method even though no election
under Code Section 171 is made to amortize such premium.
84
<PAGE> 255
Generally, a REMIC Regular Certificateholder must include in gross income
the "daily portions," as determined below, of the OID that accrues on a REMIC
Regular Certificate for each day a Certificateholder holds the REMIC Regular
Certificate, including the purchase date but excluding the disposition date. In
the case of an original holder of a REMIC Regular Certificate, a calculation
will be made of the portion of the OID that accrues during each successive
period ("an accrual period") that ends on the day in the calendar year
corresponding to a Distribution Date (or if Distribution Dates are on the first
day or first business day of the immediately preceding month, interest may be
treated as payable on the last day of the immediately preceding month) and
begins on the day after the end of the immediately preceding accrual period (or
on the issue date in the case of the first accrual period). This will be done,
in the case of each full accrual period, by (i) adding (a) the present value at
the end of the accrual period (determined by using as a discount factor the
original yield to maturity of the REMIC Regular Certificates as calculated under
the Prepayment Assumption) of all remaining payments to be received on the REMIC
Regular Certificates under the Prepayment Assumption and (b) any payments
included in the stated redemption price at maturity received during such accrual
period, and (ii) subtracting from that total the adjusted issue price of the
REMIC Regular Certificates at the beginning of such accrual period. The adjusted
issue price of a REMIC Regular Certificate at the beginning of the first accrual
period is its issue price; the adjusted issue price of a REMIC Regular
Certificate at the beginning of a subsequent accrual period is the adjusted
issue price at the beginning of the immediately preceding accrual period plus
the amount of OID allocable to that accrual period and reduced by the amount of
any payment other than a payment of qualified stated interest made at the end of
or during that accrual period. The OID accrued during an accrual period will
then be divided by the number of days in the period to determine the daily
portion of OID for each day in the accrual period. The calculation of OID under
the method described above will cause the accrual of OID to either increase or
decrease (but never below zero) in a given accrual period to reflect the fact
that prepayments are occurring faster or slower than under the Prepayment
Assumption. With respect to an initial accrual period shorter than a full
accrual period, the daily portions of OID may be determined according to an
appropriate allocation under any reasonable method.
A subsequent purchaser of a REMIC Regular Certificate issued with OID who
purchases the REMIC Regular Certificate at a cost less than the remaining stated
redemption price at maturity will also be required to include in gross income
the sum of the daily portions of OID on that REMIC Regular Certificate. In
computing the daily portions of OID for such a purchaser (as well as an initial
purchaser that purchases at a price higher than the adjusted issue price but
less than the stated redemption price at maturity), however, the daily portion
is reduced by the amount that would be the daily portion for such day (computed
in accordance with the rules set forth above) multiplied by a fraction, the
numerator of which is the amount, if any, by which the price paid by such holder
for that REMIC Regular Certificate exceeds the following amount: (a) the sum of
the issue price plus the aggregate amount of OID that would have been includible
in the gross income of an original REMIC Regular Certificateholder (who
purchased the REMIC Regular Certificate at its issue price), less (b) any prior
payments included in the stated redemption price at maturity, and the
denominator of which is the sum of the daily portions for that REMIC Regular
Certificate for all days beginning on the date after the purchase date and
ending on the maturity date computed under the Prepayment Assumption. A holder
who pays an acquisition premium instead may elect to accrue OID by treating the
purchase as a purchase at original issue.
Variable Rate REMIC Regular Certificates. REMIC Regular Certificates may
provide for interest based on a variable rate. Interest based on a variable rate
will constitute qualified stated interest and not contingent interest if,
generally, (i) such interest is unconditionally payable at least annually, (ii)
the issue price of the debt instrument does not exceed the total noncontingent
principal payments and (iii) interest is based on a "qualified floating rate,"
an "objective rate," a combination of a single fixed rate and one or more
"qualified floating rates," one "qualified inverse floating rate," or a
combination of "qualified floating rates "--that do not operate in a manner that
significantly accelerates or defers interest payments on such REMIC Regular
Certificates.
The amount of OID with respect to a REMIC Regular Certificate bearing a
variable rate of interest will accrue in the manner described above under
"--Original Issue Discount and Premium" by assuming generally that the index
used for the variable rate will remain fixed throughout the term of the
Certificate. Appropriate adjustments are made for the actual variable rate.
85
<PAGE> 256
Although unclear at present, the Depositor intends to treat interest on a
REMIC Regular Certificate that is a weighted average of the net interest rates
on Mortgage Loans as qualified stated interest. In such case, the weighted
average rate used to compute the initial pass-through rate on the REMIC Regular
Certificates will be deemed to be the index in effect through the life of the
REMIC Regular Certificates. It is possible, however, that the IRS may treat some
or all of the interest on REMIC Regular Certificates with a weighted average
rate as taxable under the rules relating to obligations providing for contingent
payments. Such treatment may effect the timing of income accruals on such REMIC
Regular Certificates.
Election to Treat All Interest as OID. The OID Regulations permit a
Certificateholder to elect to accrue all interest, discount (including de
minimis market discount or original issue discount) and premium in income as
interest, based on a constant yield method. If such an election were to be made
with respect to a REMIC Regular Certificate with market discount, the
Certificateholder would be deemed to have made an election to include in income
currently market discount with respect to all other debt instruments having
market discount that such Certificateholder acquires during the year of the
election or thereafter. Similarly, a Certificateholder that makes this election
for a Certificate that is acquired at a premium will be deemed to have made an
election to amortize bond premium with respect to all debt instruments having
amortizable bond premium that such Certificateholder owns or acquires. See
"--REMIC Regular Certificates--Premium" herein. The election to accrue interest,
discount and premium on a constant yield method with respect to a Certificate is
irrevocable without the consent of the IRS.
Market Discount. A purchaser of a REMIC Regular Certificate may also be
subject to the market discount provisions of Code Sections 1276 through 1278.
Under these provisions and the OID Regulations, "market discount" equals the
excess, if any, of (i) the REMIC Regular Certificate's stated principal amount
or, in the case of a REMIC Regular Certificate with OID, the adjusted issue
price (determined for this purpose as if the purchaser had purchased such REMIC
Regular Certificate from an original holder) over (ii) the price for such REMIC
Regular Certificate paid by the purchaser. A Certificateholder that purchases a
REMIC Regular Certificate at a market discount will recognize income upon
receipt of each distribution representing amounts included in such certificate's
stated redemption price at maturity. In particular, under Section 1276 of the
Code such a holder generally will be required to allocate each such distribution
first to accrued market discount not previously included in income, and to
recognize ordinary income to that extent. A Certificateholder may elect to
include market discount in income currently as it accrues rather than including
it on a deferred basis in accordance with the foregoing. If made, such election
will apply to all market discount bonds acquired by such Certificateholder on or
after the first day of the first taxable year to which such election applies.
Market discount with respect to a REMIC Regular Certificate will be
considered to be zero if the amount allocable to the REMIC Regular Certificate
is less than 0.25% of such REMIC Regular Certificate's stated redemption price
at maturity multiplied by such REMIC Regular Certificate's weighted average
maturity remaining after the date of purchase. If market discount on a REMIC
Regular Certificate is considered to be zero under this rule, the actual amount
of market discount must be allocated to the remaining principal payments on the
REMIC Regular Certificate, and gain equal to such allocated amount will be
recognized when the corresponding principal payment is made. Treasury
regulations implementing the market discount rules have not yet been issued;
therefore, investors should consult their own tax advisors regarding the
application of these rules and the advisability of making any of the elections
allowed under Code Sections 1276 through 1278.
The Code provides that any principal payment (whether a scheduled payment
or a prepayment) or any gain on disposition of a market discount bond acquired
by the taxpayer after October 22, 1986, shall be treated as ordinary income to
the extent that it does not exceed the accrued market discount at the time of
such payment. The amount of accrued market discount for purposes of determining
the tax treatment of subsequent principal payments or dispositions of the market
discount bond is to be reduced by the amount so treated as ordinary income.
The Code also grants authority to the Treasury Department to issue
regulations providing for the computation of accrued market discount on debt
instruments, the principal of which is payable in more than one installment.
Until such time as regulations are issued by the Treasury, rules described in
the Legislative History will apply. Under those rules, the holder of a market
discount bond may elect to accrue market discount either on the basis of a
constant interest method rate or according to one of the following methods. For
REMIC Regular
86
<PAGE> 257
Certificates issued with OID, the amount of market discount that accrues during
a period is equal to the product of (i) the total remaining market discount and
(ii) a fraction, the numerator of which is the OID accruing during the period
and the denominator of which is the total remaining OID at the beginning of the
period. For REMIC Regular Certificates issued without OID, the amount of market
discount that accrues during a period is equal to the product of (a) the total
remaining market discount and (b) a fraction, the numerator of which is the
amount of stated interest paid during the accrual period and the denominator of
which is the total amount of stated interest remaining to be paid at the
beginning of the period. For purposes of calculating market discount under any
of the above methods in the case of instruments (such as the REMIC Regular
Certificates) that provide for payments that may be accelerated by reason of
prepayments of other obligations securing such instruments, the same Prepayment
Assumption applicable to calculating the accrual of OID will apply.
A holder who acquired a REMIC Regular Certificate at a market discount
also may be required to defer a portion of its interest deductions for the
taxable year attributable to any indebtedness incurred or continued to purchase
or carry such Certificate purchased with market discount. For these purposes,
the de minimis rule referred to above applies. Any such deferred interest
expense would not exceed the market discount that accrues during such taxable
year and is, in general, allowed as a deduction not later than the year in which
such market discount is includible in income. If such holder elects 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, the
interest deferral rule described above will not apply.
Premium. A purchaser of a REMIC Regular Certificate that purchases the
REMIC Regular Certificate at a cost (not including accrued qualified stated
interest) greater than its remaining stated redemption price at maturity will be
considered to have purchased the REMIC Regular Certificate at a premium and may
elect to amortize such premium under a constant yield method. A
Certificateholder that makes this election for a Certificate that is acquired at
a premium will be deemed to have made an election to amortize bond premium with
respect to all debt instruments having amortizable bond premium that such
Certificateholder acquires during the year of the election or thereafter. It is
not clear whether the Prepayment Assumption would be taken into account in
determining the life of the REMIC Regular Certificate for this purpose. However,
the Legislative History states that the same rules that apply to accrual of
market discount (which rules require use of a Prepayment Assumption in accruing
market discount with respect to REMIC Regular Certificates without regard to
whether such Certificates have OID) will also apply in amortizing bond premium
under Code Section 171. The Code provides that amortizable bond premium will be
allocated among the interest payments on such REMIC Regular Certificates and
will be applied as an offset against such interest payment. On June 27, 1996,
the IRS published in the Federal Register proposed regulations on the
amortization of bond premium. The foregoing discussion is based in part on such
proposed regulations. On December 30, 1997, the IRS issued the Amortizable Bond
Premium Regulations, which generally are effective for bonds acquired on or
after March 2, 1998 or, for holders making an election to amortize bond premium
as described above for the taxable year that includes March 2, 1998 or any
subsequent taxable year, will apply to bonds held on or after the first day of
the taxable year in which the election is made. Neither the proposed regulations
nor the final regulations, by their express terms, apply to prepayable
securities described in Section 1272(a)(6) of the Code, such as the REMIC
Regular Certificates. Certificateholders should consult their tax advisors
regarding the possibility of making an election to amortize any such bond
premium.
Deferred Interest. Certain classes of REMIC Regular Certificates may
provide for the accrual of Deferred Interest with respect to one or more ARM
Loans. Any Deferred Interest that accrues with respect to a class of REMIC
Regular Certificates will constitute income to the holders of such Certificates
prior to the time distributions of cash with respect to such Deferred Interest
are made. It is unclear, under the OID Regulations, whether any of the interest
on such Certificates will constitute qualified stated interest or whether all or
a portion of the interest payable on such Certificates must be included in the
stated redemption price at maturity of the Certificates and accounted for as OID
(which could accelerate such inclusion). Interest on REMIC Regular Certificates
must in any event be accounted for under an accrual method by the holders of
such Certificates and, therefore, applying the latter analysis
may result only in a slight difference in the timing of the inclusion in income
of interest on such REMIC Regular Certificates.
87
<PAGE> 258
Sale, Exchange or Redemption. If a REMIC Regular Certificate is sold,
exchanged, redeemed or retired, the seller will recognize gain or loss equal to
the difference between the amount realized on the sale, exchange, redemption, or
retirement and the seller's adjusted basis in the REMIC Regular Certificate.
Such adjusted basis generally will equal the cost of the REMIC Regular
Certificate to the seller, increased by any OID and market discount included in
the seller's gross income with respect to the REMIC Regular 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 a REMIC Regular Certificate will recognize gain equal to
the excess, if any, of the amount of the payment over an allocable portion of
the holder's adjusted basis in the REMIC Regular Certificate. A REMIC Regular
Certificateholder who receives a final payment that is less than the holder's
adjusted basis in the REMIC Regular Certificate will generally recognize a loss.
Except as provided in the following paragraph and as provided under "--Market
Discount" above, any such gain or loss will be capital gain or loss, provided
that the REMIC Regular 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 a REMIC 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 includible in such holder's income with respect to the REMIC
Regular Certificate had income accrued thereon at a rate equal to 110% of the
AFR as defined in Code Section 1274(d) determined as of the date of purchase of
such REMIC Regular Certificate, over (ii) the amount actually includible in such
holder's income. Gain from the sale or other disposition of a REMIC Regular
Certificate that might otherwise be capita gain will be treated as ordinary
income if the REMIC Regular Certificate is held as part of a "conversion
transaction" as defined in Code section 1258(c), up to the amount of interest
that would have accrued on the REMIC Regular Certificateholder's net investment
in the conversion transaction at 120% of the appropriate applicable federal rate
under Code section 1274(d) in effect at the time the taxpayer entered into the
transaction minus any amount previously treated as ordinary income with respect
to any prior disposition of property that was held as part of such transaction,
or if the REMIC Regular Certificate is held as part of a straddle. Potential
investors should consult their tax advisors with respect to tax consequences of
ownership and disposition of an investment in REMIC Regular Certificates in
their particular circumstances.
It is possible that capital gain realized by holders of one or more
classes of REMIC Regular Certificates could be considered gain realized upon the
disposition of property that was part of a "conversion transaction." A sale of a
REMIC Regular Certificate will be part of a "conversion transaction" if
substantially all of the holder's expected return is attributable to the time
value of the holder's net investment, and (i) the holder entered the contract to
sell the REMIC Regular Certificate substantially contemporaneously with
acquiring the REMIC Regular Certificate, (ii) the REMIC Regular Certificate is
part of a straddle, (iii) the REMIC Regular Certificate is marketed or sold as
producing capital gains, or (iv) other transactions to be specified in Treasury
regulations that have not yet been issued. If the sale or other disposition of a
REMIC Regular Certificate is part of a conversion transaction, all or a portion
of the gain realized upon the sale or other disposition of the REMIC Regular
Certificate would be treated as ordinary income instead of capital gain.
The Certificates will be "evidences of indebtedness" within the meaning of
Code Section 582(c)(1), so that gain or loss recognized from the sale of a REMIC
Regular Certificate by a bank or a thrift institution to which such section
applies will be ordinary income or loss.
The REMIC Regular Certificate information reports will include a statement
of the adjusted issue price of the REMIC Regular Certificate at the beginning of
each accrual period. In addition, the reports will include information necessary
to compute the accrual of any market discount that may arise upon secondary
trading of REMIC Regular Certificates. Because exact computation of the accrual
of market discount on a constant yield method would require information relating
to the holder's purchase price which the REMIC may not have, it appears that the
information reports will only provide information pertaining to the appropriate
proportionate method of accruing market discount.
88
<PAGE> 259
The Taxpayer Relief Act of 1997 (the "Act") reduces the maximum rates on
long-term capital gains recognized on capital assets held by individual
taxpayers for more than eighteen months as of the date of disposition (and would
further reduce the maximum rates on such gains in the year 2001 and thereafter
for certain individual taxpayers who meet specified conditions). The capital
gains rate for capital assets held by individual taxpayers for more than twelve
months but not more than eighteen months was not changed by the Act. The Act
does not change the capital gains rates for corporations. Prospective investors
should consult their own tax advisors concerning these tax law changes.
Accrued Interest Certificates. Certain of the REMIC Regular Certificates
("Payment Lag Certificates") may provide for payments of interest based on a
period that corresponds to the interval between Distribution Dates but that ends
prior to each such Distribution Date. The period between the Closing Date for
Payment Lag Certificates and their first Distribution Date may or may not exceed
such interval. Purchasers of Payment Lag Certificates for which the period
between the Closing Date and the first Distribution Date does not exceed such
interval could pay upon purchase of the REMIC Regular Certificates accrued
interest in excess of the accrued interest that would be paid if the interest
paid on the Distribution Date were interest accrued from Distribution Date to
Distribution Date. If a portion of the initial purchase price of a REMIC Regular
Certificate is allocable to interest that has accrued prior to the issue date
("pre-issuance accrued interest") and the REMIC Regular Certificate provides for
a payment of stated interest on the first payment date (and the first payment
date is within one year of the issue date) that equals or exceeds the amount of
the pre-issuance accrued interest, then the REMIC Regular Certificate's issue
price may be computed by subtracting from the issue price the amount of
pre-issuance accrued interest, rather than as an amount payable on the REMIC
Regular Certificate. However, it is unclear under this method how the OID
Regulations treat interest on Payment Lag Certificates. Therefore, in the case
of a Payment Lag Certificate, the Trust Fund intends to include accrued interest
in the issue price and report interest payments made on the first Distribution
Date as interest to the extent such payments represent interest for the number
of days that the Certificateholder has held such Payment Lag Certificate during
the first accrual period.
Investors should consult their own tax advisors concerning the treatment
for federal income tax purposes of Payment Lag Certificates.
Non-Interest Expenses of the REMIC. Under temporary Treasury regulations,
if the REMIC is considered to be a "single-class REMIC," a portion of the
REMIC's servicing, administrative and other non-interest expenses will be
allocated as a separate item to those REMIC Regular Certificateholders that are
"pass-through interest holders." Certificateholders that are pass-through
interest holders should consult their own tax advisors about the impact of these
rules on an investment in the REMIC Regular Certificates. See "Pass-Through of
Non-Interest Expenses of the REMIC" under "Taxation of Owners of REMIC Residual
Certificates" below.
Effects of Defaults, Delinquencies and Losses. Certain Series of
Certificates may contain one or more classes of Subordinated Certificates, and
in the event there are defaults or delinquencies on the Mortgage Assets, amounts
that would otherwise be distributed on the Subordinated Certificates may instead
be distributed on the Senior Certificates. Subordinated Certificateholders
nevertheless will be required to report income with respect to such Certificates
under an accrual method without giving effect to delays and reductions in
distributions on such Subordinated Certificates attributable to defaults and
delinquencies on the Mortgage Assets, except to the extent that it can be
established that such amounts are uncollectible. As a result, the amount of
income reported by a Subordinated Certificateholder 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 Subordinated Certificate is reduced as a result of defaults
and delinquencies on the Mortgage Assets.
Although not entirely clear, it appears that holders of REMIC Regular
Certificates that are corporations should in general be allowed to deduct as an
ordinary loss any loss sustained during the taxable year on account of any such
Certificates becoming wholly or partially worthless, and that, in general,
holders of Certificates that are not corporations should be allowed to deduct as
a short-term capital loss any loss sustained during the taxable year on account
of any such Certificates becoming wholly worthless. Potential investors and
holders of the Certificates are urged to consult their own tax advisors
regarding the appropriate timing, amount and character of any loss
89
<PAGE> 260
sustained with respect to such Certificates, including any loss resulting from
the failure to recover previously accrued interest or discount income. Special
loss rules are applicable to banks and thrift institutions, including rules
regarding reserves for bad debts. Such taxpayers are advised to consult their
tax advisors regarding the treatment of losses on Certificates.
Non-U.S. Persons. Generally, payments of interest (including any payment
with respect to accrued OID) on the REMIC Regular Certificates to a REMIC
Regular Certificateholder who is not a U.S. Person and is not engaged in a trade
or business within the United States will not be subject to federal withholding
tax if (i) such REMIC Regular Certificateholder does not actually or
constructively own 10 percent or more of the combined voting power of all
classes of equity in the issuer; (ii) such REMIC Regular Certificateholder is
not a controlled foreign corporation (within the meaning of Code Section 957)
related to the issuer; and (iii) such REMIC Regular Certificateholder complies
with certain identification requirements (including delivery of a statement,
signed by the REMIC Regular Certificateholder under penalties of perjury,
certifying that such REMIC Regular Certificateholder is a foreign person and
providing the name and address of such REMIC Regular Certificateholder). If a
REMIC Regular Certificateholder is not exempt from withholding, distributions of
interest to such holder, including distributions in respect of accrued OID, may
be subject to a 30% withholding tax, subject to reduction under any applicable
tax treaty. If the interest on a REMIC Regular Certificate is effectively
connected with the conduct by the Non-U.S. REMIC Regular Certificateholder of a
trade or business within the United States, then the Non-U.S. REMIC Regular
Certificateholder will be subject to U.S. income tax at regular graduated rates.
Such a Non-U.S. REMIC Regular Certificateholder also may be subject to the
branch profits tax.
Further, a REMIC Regular Certificate will not be included in the estate of
a non-resident alien individual that does not actually or constructively own 10%
or more of the combined voting power of all classes of equity in the Issuer and
will not be subject to United States estate taxes. However, Certificateholders
who are non-resident alien individuals should consult their tax advisors
concerning this question.
REMIC Regular Certificateholders who are not U.S. Persons and persons
related to such holders should not acquire any REMIC Residual Certificates, and
holders of REMIC Residual Certificates (the "REMIC Residual Certificateholder")
and persons related to REMIC Residual Certificateholders should not acquire any
REMIC Regular Certificates without consulting their tax advisors as to the
possible adverse tax consequences of doing so. In addition, the IRS may assert
that non-U.S Persons that own directly or indirectly, a greater than 10%
interest in any Mortgagor, and foreign corporations that are "controlled foreign
corporations" as to the United States of which such a Mortgagor is a "United
States shareholder" within the meaning of Section 951(b) of the Code, are
subject to United States withholding tax on interest distributed to them to the
extent of interest concurrently paid by the related Mortgagor.
For these purposes, a "U.S. Person" means a citizen or resident of the
United States, a corporation, partnership or other entity created or organized
in, or under the laws of, the United States or any political subdivision
thereof, an estate the income of which from sources without the United States is
includible in gross income for United States federal income tax purposes
regardless of its connection with the conduct of a trade or business or a trust
as to which (i) a court in the United States is able to exercise primary
supervision over its administration and (ii) one or more U.S. Persons have the
right to control all substantial decisions of the trust.
Information Reporting and Backup Withholding. The Master Servicer will
furnish or make available, within a reasonable time after the end of each
calendar year, to each person who was a REMIC Regular Certificateholder at any
time during such year, such information as may be deemed necessary or desirable
to assist REMIC Regular Certificateholders in preparing their federal income tax
returns, or to enable holders to make such information available to beneficial
owners or financial intermediaries that hold such Regular Certificates on
behalf of beneficial owners. If a holder, beneficial owner, financial
intermediary or other recipient of a payment on behalf of a beneficial owner
fails to supply a certified taxpayer identification number or if the Secretary
of the Treasury determines that such person has not reported all interest and
dividend income required to be shown on its federal income tax return, 31%
backup withholding may be required with respect to any payments with respect to
any payments to registered owners who are not "exempt recipients." In addition,
upon the sale of a REMIC Regular Certificate to (or through) a broker, the
broker must withhold 31% of the entire purchase price, unless either (i)
90
<PAGE> 261
the broker determines that the seller is a corporation or other exempt
recipient, or (ii) the seller provides, in the required manner, certain
identifying information and, in the case of a non-U.S. Person, certifies that
such seller is a Non-U.S. Person, and certain other conditions are met. Such as
sale must also be reported by the broker to the IRS, unless either (a) the
broker determines that the seller is an exempt recipient or (b) the seller
certifies its non-U.S. Person status (and certain other conditions are met).
Certification of the registered owner's non-U.S. Person status normally would be
made on IRS Form W-8 under penalties of perjury, although in certain cases it
may be possible to submit other documentary evidence. Any amounts deducted and
withheld from a distribution to a recipient would be allowed as a credit against
such recipient's federal income tax liability.
On October 6, 1997, the Treasury Department issued the New Regulations,
which make certain modifications to the withholding, backup withholding and
information reporting rules described above. The New Regulations attempt to
unify certification requirements and modify reliance standards. The New
Regulations will generally be effective for payments made after December 31,
1998, subject to certain transition rules. Prospective investors are urged to
consult their own tax advisors regarding the New Regulations.
b. Taxation of Owners of REMIC Residual Certificates
Allocation of the Income of the REMIC to the REMIC Residual Certificates.
The REMIC will not be subject to federal income tax except with respect to
income from prohibited transactions and certain other transactions. See
"--Prohibited Transactions and Other Taxes" below. Instead, each original holder
of a REMIC Residual Certificate will report on its federal income tax return, as
ordinary income, its share of the taxable income of the REMIC for each day
during the taxable year on which such holder owns any REMIC Residual
Certificates. The taxable income of the REMIC for each day will be determined by
allocating the taxable income of the REMIC for each calendar quarter ratably to
each day in the quarter. Such a holder's share of the taxable income of the
REMIC for each day will be based on the portion of the outstanding REMIC
Residual Certificates that such holder owns on that day. The taxable income of
the REMIC will be determined under an accrual method and will be taxable to the
holders of REMIC Residual Certificates without regard to the timing or amounts
of cash distributions by the REMIC. Ordinary income derived from REMIC Residual
Certificates will be "portfolio income" for purposes of the taxation of
taxpayers subject to the limitations on the deductibility of "passive losses."
As residual interests, the REMIC Residual Certificates will be subject to tax
rules, described below, that differ from those that would apply if the REMIC
Residual Certificates were treated for federal income tax purposes as direct
ownership interests in the Certificates or as debt instruments issued by the
REMIC.
A REMIC Residual Certificateholder may be required to include taxable
income from the REMIC Residual Certificate in excess of the cash distributed.
For example, a structure where principal distributions are made serially on
regular interests (that is, a fast-pay, slow-pay structure) may generate such a
mismatching of income and cash distributions (that is, "phantom income"). This
mismatching may be caused by the use of certain required tax accounting methods
by the REMIC, variations in the prepayment rate of the underlying Mortgage
Assets and certain other factors. Depending upon the structure of a particular
transaction, the aforementioned factors may significantly reduce the after-tax
yield of a REMIC Residual Certificate to a REMIC Residual Certificateholder or
cause the REMIC Residual Certificate to have negative "value." Investors should
consult their own tax advisors concerning the federal income tax treatment of a
REMIC Residual Certificate and the impact of such tax treatment on the after-tax
yield of a REMIC Residual Certificate.
A subsequent REMIC Residual Certificateholder also will report on its
federal income tax return amounts representing a daily share of the taxable
income of the REMIC for each day that such REMIC Residual Certificateholder owns
such REMIC Residual Certificate. Those daily amounts generally would equal the
amounts that would have been reported for the same days by an original REMIC
Residual Certificateholder, as described above. The Legislative History
indicates that certain adjustments may be appropriate to reduce (or increase)
the income of a subsequent holder of a REMIC Residual Certificate that purchased
such REMIC Residual Certificate at a price greater than (or less than) the
adjusted basis such REMIC Residual Certificate would have in the hands of an
original REMIC Residual Certificateholder. See "--Sale or Exchange of REMIC
Residual Certificates" below. It is not clear, however, whether such adjustments
will in fact be permitted or required and, if so, how they would be made. The
REMIC Regulations do not provide for any such adjustments.
91
<PAGE> 262
Taxable Income of the REMIC Attributable to Residual Interests. The
taxable income of the REMIC will reflect a netting of (i) the income from the
Mortgage Assets and the REMIC's other assets and (ii) the deductions allowed to
the REMIC for interest and OID on the REMIC Regular Certificates and, except as
described above under "--Taxation of Owners of REMIC Regular
Certificates--Non-Interest Expenses of the REMIC," other expenses. 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
limitations 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. The REMIC's gross income
includes interest, original issue discount income, and market discount income,
if any, on the Mortgage Loans, reduced by amortization of any premium on the
Mortgage Loans, plus income on reinvestment of cash flows and reserve assets,
plus any cancellation of indebtedness income upon allocation of realized losses
to the REMIC Regular Certificates. Note that the timing of cancellation of
indebtedness income recognized by REMIC Residual Certificateholders resulting
from defaults and delinquencies on Mortgage Assets may differ from the time of
the actual loss on the Mortgage Asset. The REMIC's deductions include interest
and original issue discount expense on the REMIC Regular Certificates, servicing
fees on the Mortgage Loans, other administrative expenses of the REMIC and
realized losses on the Mortgage Loans. The requirement that REMIC Residual
Certificateholders report their pro rata share of taxable income or net loss of
the REMIC will continue until there are no Certificates of any class of the
related Series outstanding.
For purposes of determining its taxable income, the REMIC will have an
initial aggregate tax basis in its assets equal to the sum of the issue prices
of the REMIC Regular Certificates and the REMIC Residual Certificates (or, if a
class of Certificates is not sold initially, its fair market value). Such
aggregate basis will be allocated among the Mortgage Assets and other assets of
the REMIC in proportion to their respective fair market value. A Mortgage Asset
will be deemed to have been acquired with discount or premium to the extent that
the REMIC's basis therein is less than or greater than its principal balance,
respectively. Any such discount (whether market discount or OID) will be
includible in the income of the REMIC as it accrues, in advance of receipt of
the cash attributable to such income, under a method similar to the method
described above for accruing OID on the REMIC Regular Certificates. The REMIC
may elect under Code Section 171 to amortize any premium on the Mortgage Assets.
Premium on any Mortgage Asset to which such election applies would be amortized
under a constant yield method. It is not clear whether the yield of a Mortgage
Asset would be calculated for this purpose based on scheduled payments or taking
account of the Prepayment Assumption. Additionally, such an election would not
apply to the yield with respect to any underlying mortgage loan originated on or
before September 27, 1985. Instead, premium with respect to such a mortgage loan
would be allocated among the principal payments thereon and would be deductible
by the REMIC as those payments become due.
The REMIC will be allowed a deduction for interest and OID on the REMIC
Regular Certificates. The amount and method of accrual of OID will be calculated
for this purpose in the same manner as described above with respect to REMIC
Regular Certificates except that the 0.25% per annum de minimis rule and
adjustments for subsequent holders described therein will not apply.
A REMIC Residual Certificateholder will not be permitted to amortize the
cost of the REMIC Residual Certificate as an offset to its share of the REMIC's
taxable income. However, REMIC taxable income will not include cash received by
the REMIC that represents a recovery of the REMIC's basis in its assets, and, as
described above, the issue price of the REMIC Residual Certificates will be
added to the issue price of the REMIC Regular Certificates in determining the
REMIC's initial basis in its assets. See "--Sale or Exchange of REMIC Residual
Certificates" below. For a discussion of possible adjustments to income of a
subsequent holder of a REMIC Residual Certificate to reflect any difference
between the actual cost of such REMIC Residual Certificate to such holder and
the adjusted basis such REMIC Residual Certificate would have in the hands of an
original REMIC Residual Certificateholder, see "--Allocation of the Income of
the REMIC to the REMIC Residual Certificates" above.
Net Losses of the REMIC. The REMIC will have a net loss for any calendar
quarter in which its deductions exceed its gross income. Such net loss would be
allocated among the REMIC Residual Certificateholders in the same manner as the
REMIC's taxable income. The net loss allocable to any REMIC Residual Certificate
will not be deductible by the holder to the extent that such net loss exceeds
such holder's adjusted basis in such REMIC
92
<PAGE> 263
Residual Certificate. Any net loss that is not currently deductible by reason of
this limitation may only be used by such REMIC Residual Certificateholder to
offset its share of the REMIC's taxable income in future periods (but not
otherwise). The ability of REMIC Residual Certificateholders that are
individuals or closely held corporations to deduct net losses may be subject to
additional limitations under the Code.
Mark to Market Rules. Prospective purchasers of a REMIC Residual
Certificate should be aware that the IRS has finalized regulations (the
"Mark-to-Market Regulations") which provide that a REMIC Residual Certificate
acquired after January 3, 1995 cannot be marked to market. The Mark-to-Market
Regulations replaced 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.
Pass-Through of Non-Interest Expenses of the REMIC. As a general rule, all
of the fees and expenses of a REMIC will be taken into account by holders of the
REMIC Residual Certificates. In the case of a single class REMIC, however, the
expenses and a matching amount of additional income will be allocated, under
temporary Treasury regulations, among the REMIC Regular Certificateholders and
the REMIC Residual Certificateholders on a daily basis in proportion to the
relative amounts of income accruing to each Certificateholder on that day. In
general terms, a single class REMIC is one that either (i) would qualify, under
existing Treasury regulations, as a grantor trust if it were not a REMIC
(treating all interests as ownership interests, even if they would be classified
as debt for federal income tax purposes) or (ii) is similar to such a trust and
is structured with the principal purpose of avoiding the single class REMIC
rules. Unless otherwise stated in the applicable Prospectus Supplement, the
expenses of the REMIC will be allocated to holders of the related REMIC Residual
Certificates in their entirety and not to holders of the related REMIC Regular
Certificates.
In the case of individuals (or trusts, estates or other persons that
compute their income in the same manner as individuals) who own an interest in a
REMIC Regular Certificate or a REMIC Residual Certificate directly or through a
pass-through interest holder that is required to pass miscellaneous itemized
deductions through to its owners or beneficiaries (e.g. a partnership, an S
corporation or a grantor trust), such expenses will be deductible under Code
Section 67 only to the extent that such expenses, plus other "miscellaneous
itemized deductions" of the individual, exceed 2% of such individual's adjusted
gross income. In addition, Code Section 68 provides that the amount of itemized
deductions otherwise allowable for an individual whose adjusted gross income
exceeds a certain amount (the "Applicable Amount") will be reduced by the lesser
of (i) 3% of the excess of the individual's adjusted gross income over the
Applicable Amount or (ii) 80% of the amount of itemized deductions otherwise
allowable for the taxable year. The amount of additional taxable income
recognized by REMIC Residual Certificateholders who are subject to the
limitations of either Code Section 67 or Code Section 68 may be substantial.
Further, holders (other than corporations) subject to the alternative minimum
tax may not deduct miscellaneous itemized deductions in determining such
holders' alternative minimum taxable income. The REMIC is required to report to
each pass-through interest holder and to the IRS such holder's allocable share,
if any, of the REMIC's non-interest expenses. 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. Accordingly, investment in REMIC Residual Certificates will in general
not be suitable for individuals or for certain pass-through entities, such as
partnerships and S corporations, that have individuals as partners or
shareholders.
Excess Inclusions. A portion of the income on a REMIC Residual Certificate
(referred to in the Code as an "excess inclusion") for any calendar quarter will
be subject to federal income tax in all events. Thus, for example, an excess
inclusion (i) may not, except as described below, be offset by any unrelated
losses, deductions or loss carryovers of a REMIC Residual Certificateholder;
(ii) will be treated as "unrelated business taxable income" within the meaning
of Code Section 512 if the REMIC Residual Certificateholder is a pension fund or
any other organization that is subject to tax only on its unrelated business
taxable income (see "--Tax-Exempt Investors" below); and (iii) is not eligible
for any reduction in the rate of withholding tax in the case of a REMIC Residual
Certificateholder that is a foreign investor. See "--Non-U.S. Persons" below.
Except as discussed in the following paragraph, with respect to any REMIC
Residual Certificateholder, the excess inclusions for any calendar quarter is
the excess, if any, of (i) the income of such REMIC Residual Certificateholder
for that calendar quarter from its REMIC Residual Certificate over (ii) the sum
of the "daily
93
<PAGE> 264
accruals" (as defined below) for all days during the calendar quarter on which
the REMIC Residual Certificateholder holds such REMIC Residual Certificate. For
this purpose, the daily accruals with respect to a REMIC Residual Certificate
are determined by allocating to each day in the calendar quarter its ratable
portion of the product of the "adjusted issue price" (as defined below) of the
REMIC Residual Certificate at the beginning of the calendar quarter and 120
percent of the "Federal long-term rate" in effect at the time the REMIC Residual
Certificate is issued. For this purpose, the "adjusted issue price" of a REMIC
Residual Certificate at the beginning of any calendar quarter equals the issue
price of the REMIC Residual Certificate, increased by the amount of daily
accruals for all prior quarters, and decreased (but not below zero) by the
aggregate amount of payments made on the REMIC Residual Certificate before the
beginning of such quarter. The "federal long-term 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 IRS.
In the case of any REMIC Residual Certificates held by a real estate
investment trust, the aggregate excess inclusions with respect to such REMIC
Residual Certificates, reduced (but not below zero) by the real estate
investment trust taxable income (within the meaning of Code Section 857(b)(2),
excluding any net capital gain), will be allocated among the shareholders of
such trust in proportion to the dividends received by such shareholders from
such trust, and any amount so allocated will be treated as an excess inclusion
with respect to a REMIC Residual Certificate as if held directly by such
shareholder. Regulated investment companies, common trust funds and certain
cooperatives are subject to similar rules.
The Small Business Job Protection Act of 1996 has eliminated the special
rule permitting Section 593 institutions ("thrift institutions") to use net
operating losses and other allowable deductions to offset their excess inclusion
income from REMIC residual certificates that have "significant value" within the
meaning of the REMIC Regulations, effective for taxable years beginning after
December 31, 1995, except with respect to residual certificates continuously
held by a thrift institution since November 1, 1995.
In addition, the Small Business Job Protection Act of 1996 provides three
rules for determining the effect on excess inclusions on the alternative minimum
taxable income of a residual holder. First, alternative minimum taxable income
for such residual holder is determined without regard to the special rule that
taxable income cannot be less than excess inclusions. Second, the amount of any
alternative minimum tax net operating loss deductions must be computed without
regard to any excess inclusions. Third, a residual holder's alternative minimum
taxable income for a tax year cannot be less than excess inclusions for the
year. The effect of this last statutory amendment is to prevent the use of
nonrefundable tax credits to reduce a taxpayer's income tax below its tentative
minimum tax computed only on excess inclusions. These rules are effective for
tax years beginning after December 31, 1986, unless a residual holder elects to
have such rules apply only to tax years beginning after August 20, 1996.
Payments. Any distribution made on a REMIC Residual Certificate to a REMIC
Residual Certificateholder will be treated as a non-taxable return of capital to
the extent it does not exceed the REMIC Residual Certificateholder's adjusted
basis in such REMIC Residual Certificate. To the extent a distribution exceeds
such adjusted basis, it will be treated as gain from the sale of the REMIC
Residual Certificate.
Sale or Exchange of REMIC Residual Certificates. If a REMIC Residual
Certificate is sold or exchanged, the seller will generally recognize gain or
loss equal to the difference between the amount realized on the sale or exchange
and its adjusted basis in the REMIC Residual Certificate (except that the
recognition of loss may be limited under the "wash sale" rules described below).
A holder's adjusted basis in a REMIC Residual Certificate generally equals the
cost of such REMIC Residual Certificate to such REMIC Residual
Certificateholder, increased by the taxable income of the REMIC that was
included in the income of such REMIC Residual Certificateholder with respect to
such REMIC Residual Certificate, and decreased (but not below zero) by the net
losses that have been allowed as deductions to such REMIC Residual
Certificateholder with respect to such REMIC Residual Certificate and by the
distributions received thereon by such REMIC Residual Certificateholder. In
general, any such gain or loss will be capital gain or loss provided the REMIC
Residual Certificate is held as a capital asset. However, REMIC Residual
Certificates will be "evidences of indebtedness" within the meaning of Code
Section 582(c)(1), so that gain or loss recognized from sale of a REMIC Residual
Certificate by a bank or thrift institution to which such section applies would
be ordinary income or loss. In addition, a transfer of a REMIC Residual
Certificate that
94
<PAGE> 265
is a "noneconomic residual interest" may be subject to different rules. See
"--Tax Related Restrictions on Transfers of REMIC Residual
Certificates--Noneconomic REMIC Residual Certificates" below.
Except as provided in Treasury regulations yet to be issued, if the seller
of a REMIC Residual Certificate reacquires such REMIC Residual Certificate, or
acquires any other REMIC Residual Certificate, any residual interest in another
REMIC or similar interest in a "taxable mortgage pool" (as defined in Code
Section 7701(i)) during the period beginning six months before, and ending six
months after, the date of such sale, such sale will be subject to the "wash
sale" rules of Code Section 1091. In that event, any loss realized by the REMIC
Residual Certificateholder on the sale will not be deductible, but, instead,
will increase such REMIC Residual Certificateholder's adjusted basis in the
newly acquired asset.
The Act reduces the maximum rates on long-term capital gains recognized on
capital assets held by individual taxpayers for more than eighteen months as of
the date of disposition (and would further reduce the maximum rates on such
gains in the year 2001 and thereafter for certain individual taxpayers who meet
specified conditions). The capital gains rate for capital assets held by
individual taxpayers for more than twelve months but not more than eighteen
months was not changed by the Act. The Act does not change the capital gains
rates for corporations. Prospective investors should consult their own tax
advisors concerning these tax law changes.
Prohibited Transactions and Other Taxes
The Code imposes a tax on REMICs equal to 100% of the net income derived
from "prohibited transactions" (the "Prohibited Transactions Tax"). In general,
subject to certain specified exceptions, a prohibited transaction means the
disposition of a Mortgage Asset, the receipt of income from a source other than
a Mortgage Asset or certain other permitted investments, the receipt of
compensation for services, or gain from the disposition of an asset purchased
with the payments on the Mortgage Assets for temporary investment pending
distribution on the Certificates. It is not anticipated that the Trust Fund for
any Series of Certificates will engage in any prohibited transactions in which
it would recognize a material amount of net income.
In addition, certain contributions to a Trust Fund as to which an election
has been made to treat such Trust Fund as a REMIC made after the day on which
such Trust Fund issues all of its interests could result in the imposition of a
tax on the Trust Fund equal to 100% of the value of the contributed property
(the "Contributions Tax"). No Trust Fund for any Series of Certificates will
accept contributions that would subject it to such tax.
In addition, a Trust Fund as to which an election has been made to treat
such Trust Fund as a REMIC may also be subject to federal income tax at the
highest corporate rate on "net income from foreclosure property," determined by
reference to the rules applicable to real estate investment trusts. "Net income
from foreclosure property" generally means income from foreclosure property
other than qualifying income for a real estate investment trust.
Where any Prohibited Transactions Tax, Contributions Tax, tax on net
income from foreclosure property or state or local income or franchise tax that
may be imposed on a REMIC relating to any Series of Certificates arises out of
or results from (i) a breach of the related Servicer's, Trustee's or Depositor's
obligations, as the case may be, under the related Agreement for such Series,
such tax will be borne by such Servicer, Trustee or Depositor, as the case may
be, out of its own funds or (ii) the Depositor's obligation to repurchase a
Mortgage Loan, such tax will be borne by the Depositor. In the event that such
Servicer, Trustee or Depositor, as the case may be, fails to pay or is not
required to pay any such tax as provided above, such tax will be payable out of
the Trust Fund for such Series and will result in a reduction in amounts
available to be distributed to the Certificateholders of such Series.
Liquidation and Termination
If the REMIC adopts a plan of complete liquidation, within the meaning of
Code Section 860F(a)(4)(A)(i), which may be accomplished by designating in the
REMIC's final tax return a date on which such adoption is deemed to occur, and
sells all of its assets (other than cash) within a 90-day period beginning on
such date, the
95
<PAGE> 266
REMIC will not be subject to any Prohibited Transaction Tax, provided that the
REMIC credits or distributes in liquidation all of the sale proceeds plus its
cash (other than the amounts retained to meet claims) to holders of Regular and
REMIC Residual Certificates within the 90-day period.
The REMIC will terminate shortly following the retirement of the REMIC
Regular Certificates. If a REMIC Residual Certificateholder's adjusted basis in
the REMIC Residual Certificate exceeds the amount of cash distributed to such
REMIC Residual Certificateholder in final liquidation of its interest, then it
would appear that the REMIC Residual Certificateholder would be entitled to a
loss equal to the amount of such excess. It is unclear whether such a loss, if
allowed, will be a capital loss or an ordinary loss.
Administrative Matters
Solely for the purpose of the administrative provisions of the Code, the
REMIC generally will be treated as a partnership and the REMIC Residual
Certificateholders will be treated as the partners. Certain information will be
furnished quarterly to each REMIC Residual Certificateholder who held a REMIC
Residual Certificate on any day in the previous calendar quarter.
Each REMIC Residual Certificateholder is required to treat items on its
return consistently with their treatment on the REMIC's return, unless the REMIC
Residual Certificateholder either files a statement identifying the
inconsistency or establishes that the inconsistency resulted from incorrect
information received from the REMIC. The IRS may assert a deficiency resulting
from a failure to comply with the consistency requirement without instituting an
administrative proceeding at the REMIC level. The REMIC does not intend to
register as a tax shelter pursuant to Code Section 6111 because it is not
anticipated that the REMIC will have a net loss for any of the first five
taxable years of its existence. Any person that holds a REMIC Residual
Certificate as a nominee for another person may be required to furnish the
REMIC, in a manner to be provided in Treasury regulations, with the name and
address of such person and other information.
Tax-Exempt Investors
Any REMIC Residual Certificateholder that is a pension fund or other
entity that is subject to federal income taxation only on its "unrelated
business taxable income" within the meaning of Code Section 512 will be subject
to such tax on that portion of the distributions received on a REMIC Residual
Certificate that is considered an excess inclusion. See "--Taxation of Owners of
REMIC Residual Certificates--Excess Inclusions" above.
Residual Certificate Payments--Non-U.S. Persons
Amounts paid to REMIC Residual Certificateholders who are not U.S. Persons
(see "--Taxation of Owners of REMIC Regular Certificates--Non-U.S. Persons"
above) are treated as interest for purposes of the 30% (or lower treaty rate)
United States withholding tax. Amounts distributed to holders of REMIC Residual
Certificates should qualify as "portfolio interest," subject to the conditions
described in "--Taxation of Owners of REMIC Regular Certificates" above, but
only to the extent that the underlying mortgage loans were originated after July
18, 1984. Furthermore, the rate of withholding on any income on a REMIC Residual
Certificate that is excess inclusion income will not be subject to reduction
under any applicable tax treaties. See "--Taxation of Owners of REMIC Residual
Certificates--Excess Inclusions" above. If the portfolio interest exemption is
unavailable, such amount will be subject to United States withholding tax when
paid or otherwise distributed (or when the REMIC Residual Certificate is
disposed of) under rules similar to those for withholding upon disposition of
debt instruments that have OID. The Code, however, grants the Treasury
Department authority to issue regulations requiring that those amounts be taken
into account earlier than otherwise provided where necessary to prevent
avoidance of tax (for example, where the REMIC Residual Certificates do not have
significant value). See "--Taxation of Owners of REMIC Residual
Certificates--Excess Inclusions" above. If the amounts paid to REMIC Residual
Certificateholders that are not U.S. Persons are effectively connected with
their conduct of a trade or business within the United States, the 30% (or lower
treaty rate) withholding will not apply. Instead, the amounts paid to such
non-U.S. Person will be subject to U.S. federal income taxation at regular
graduated rates. For special restrictions
96
<PAGE> 267
on the transfer of REMIC Residual Certificates, see "--Tax-Related Restrictions
on Transfers of REMIC Residual Certificates" below.
REMIC Regular Certificateholders and persons related to such holders
should not acquire any REMIC Residual Certificates, and REMIC Residual
Certificateholders and persons related to REMIC Residual Certificateholders
should not acquire any REMIC Regular Certificates, without consulting their tax
advisors as to the possible adverse tax consequences of such acquisition.
Tax-Related Restrictions on Transfers of REMIC Residual Certificates
Disqualified Organizations. An entity may not qualify as a REMIC unless
there are reasonable arrangements designed to ensure that residual interests in
such entity are not held by "disqualified organizations" (as defined below).
Further, a tax is imposed on the transfer of a residual interest in a REMIC to a
"disqualified organization." The amount of the tax equals the product of (A) an
amount (as determined under the REMIC Regulations) equal to the present value of
the total anticipated "excess inclusions" with respect to such interest for
periods after the transfer and (ii) the highest marginal federal income tax rate
applicable to corporations. The tax is imposed on the transferor unless the
transfer is through an agent (including a broker or other middleman) for a
disqualified organization, in which event the tax is imposed on the agent. The
person otherwise liable for the tax shall be relieved of liability for the tax
if the transferee furnished to such person an affidavit that the transferee is
not a disqualified organization and, at the time of the transfer, such person
does not have actual knowledge that the affidavit is false. A "disqualified
organization" means (A) the United States, any State, possession or political
subdivision thereof, any foreign government, any international organization or
any agency or instrumentality of any of the foregoing (provided that such term
does not include an instrumentality if all its activities are subject to tax
and, except for FHLMC, a majority of its board of directors is not selected by
any such governmental agency), (B) any organization (other than certain farmers'
cooperatives) generally exempt from federal income taxes unless such
organization is subject to the tax on "unrelated business taxable income" and
(C) a rural electric or telephone cooperative.
A tax is imposed on a "pass-through entity" (as defined below) holding a
residual interest in a REMIC if at any time during the taxable year of the
pass-through entity a disqualified organization is the record holder of an
interest in such entity. The amount of the tax is equal to the product of (A)
the amount of excess inclusions for the taxable year allocable to the interest
held by the disqualified organization and (B) the highest marginal federal
income tax rate applicable to corporations. The pass-through entity otherwise
liable for the tax, for any period during which the disqualified organization is
the record holder of an interest in such entity, will be relieved of liability
for the tax if such record holder furnishes to such entity an affidavit that
such record holder is not a disqualified organization and, for such period, the
pass-through entity does not have actual knowledge that the affidavit is false.
For this purpose, a "pass-through entity" means (i) a regulated investment
company, real estate investment trust or common trust fund, (ii) a partnership,
trust or estate and (iii) certain cooperatives. Except as may be provided in
Treasury regulations not yet issued, 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. Electing large partnerships
(generally, non-service partnerships with 100 or more members electing to be
subject to simplified IRS reporting provisions under Code sections 771 through
777) will be taxable on excess inclusion income as if all partners were
disqualified organizations.
In order to comply with these rules, the Agreement will provide that no
record or beneficial ownership interest in a REMIC Residual Certificate may be
purchased, transferred or sold, directly or indirectly, without the express
written consent of the Master Servicer. The Master Servicer will grant such
consent to a proposed transfer only if it receives the following: (i) an
affidavit from the proposed transferee to the effect that it is not a
disqualified organization and is not acquiring the REMIC Residual Certificate as
a nominee or agent for a disqualified organization and (ii) a covenant by the
proposed transferee to the effect that the proposed transferee agrees to be
bound by and to abide by the transfer restrictions applicable to the REMIC
Residual Certificate.
Noneconomic REMIC Residual Certificates. The REMIC Regulations disregard,
for federal income tax purposes, any transfer of a Noneconomic REMIC Residual
Certificate to a "U.S. Person," as defined above, unless
97
<PAGE> 268
no significant purpose of the transfer is to enable the transferor to impede the
assessment or collection of tax. A Noneconomic REMIC Residual Certificate is any
REMIC Residual Certificate (including a REMIC Residual Certificate with a
positive value at issuance) unless, at the time of transfer, taking into account
the Prepayment Assumption and any required or permitted clean up calls or
required liquidation provided for in the REMIC's organizational documents, (i)
the present value of the expected future distributions on the REMIC Residual
Certificate 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. 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 transferor is presumed not to have such knowledge if (i) the transferor
conducted a reasonable investigation of the transferee and (ii) the transferee
acknowledges to the transferor that the residual interest may generate tax
liabilities in excess of the cash flow and the transferee represents that it
intends to pay such taxes associated with the residual interest as they become
due. If a transfer of a Noneconomic REMIC Residual Certificate is disregarded,
the transferor would continue to be treated as the owner of the REMIC Residual
Certificate and would continue to be subject to tax on its allocable portion of
the net income of the REMIC.
Foreign Investors. The REMIC Regulations provide that the transfer of a
REMIC Residual Certificate that has a "tax avoidance potential" to a "foreign
person" will be disregarded for federal income tax purposes. This rule appears
to apply to a transferee who is not a U.S. Person unless such transferee's
income in respect of the REMIC Residual Certificate is effectively connected
with the conduct of a United States trade or business. A REMIC Residual
Certificate is deemed to have a tax avoidance potential unless, at the time of
transfer, the transferor reasonably expect that the REMIC will distribute to the
transferee amounts that will equal at least 30 percent of each excess inclusion,
and that such amounts will be distributed at or after the time the excess
inclusion accrues and not later than the end of the calendar year following the
year of accrual. If the non-U.S. Person transfers the REMIC Residual Certificate
to a U.S. Person, the transfer will be disregarded, and the foreign transferor
will continue to be treated as the owner, if the transfer has the effect of
allowing the transferor to avoid tax on accrued excess inclusions. The
provisions in the REMIC Regulations regarding transfers of REMIC Residual
Certificates that have tax avoidance potential to foreign persons are effective
for all transfers after June 30, 1992. The Pooling and Servicing Agreement will
provide that no record or beneficial ownership interest in a REMIC Residual
Certificate may be transferred, directly or indirectly, to a non-U.S. Person
unless such person provides the Trustee with a duly completed IRS Form 4224 and
the Trustee consents to such transfer in writing.
Any attempted transfer or pledge in violation of the transfer restrictions
shall be absolutely null and void and shall vest no rights in any purported
transferee. Investors in REMIC Residual Certificates are advised to consult
their own tax advisors with respect to transfers of the REMIC Residual
Certificates and, in addition, pass-through entities are advised to consult
their own tax advisors with respect to any tax which may be imposed on a
pass-through entity.
STATE TAX CONSIDERATIONS
In addition to the federal income tax consequences described in "Certain
Federal Income Tax Consequences," potential investors should consider the state
income tax consequences of the acquisition, ownership, and disposition of the
Offered Certificates. State income tax law may differ substantially from the
corresponding federal law, and this discussion does not purport to describe any
aspect of the income tax laws of any state. Therefore, potential investors
should consult their own tax advisors with respect to the various tax
consequences of investments in the Offered Certificates.
98
<PAGE> 269
ERISA CONSIDERATIONS
General
Title I of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), imposes certain restrictions on employee benefit plans subject
thereto ("ERISA Plans") and on persons who are parties in interest or
disqualified persons ("parties in interest") with respect to such ERISA Plans.
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 restrictions of ERISA, and assets of such plans may be invested in the
Certificates without regard to the ERISA considerations described below, subject
to other applicable federal, state or local law. However, any such governmental
or church plan which is qualified under Section 401(a) of the Code and exempt
from taxation under Section 501(a) of the Code is subject to the prohibited
transaction rules set forth in Section 503 of the Code.
Investments by ERISA Plans are subject to ERISA's general fiduciary
requirements, including the requirement of investment prudence and
diversification and the requirement that an ERISA Plan's investments be made in
accordance with the documents governing the ERISA Plan.
Prohibited Transactions
General
Section 406 of ERISA prohibits parties in interest with respect to an
ERISA Plan from engaging in certain transactions involving such Plan and its
assets unless a statutory or administrative exemption applies to the
transaction. In some cases, a civil penalty may be assessed on non-exempt
prohibited transactions pursuant to Section 502(i) of ERISA. Section 4975 of the
Code imposes certain excise taxes on similar transactions between employee
benefit plans and certain other retirement plans and arrangements, including
individual retirement accounts or annuities and Keogh plans, subject thereto and
disqualified persons with respect to such plans and arrangements (together with
ERISA Plans, "Plans").
The United States Department of Labor ("Labor") has issued a final
regulation (29 C.F.R. Section 2510.3-101) containing rules for determining what
constitutes the assets of a Plan. This regulation provides that, as a general
rule, the underlying assets and properties of corporations, partnerships, trusts
and certain other entities in which a Plan makes an "equity investment" will be
deemed for purposes of ERISA and Section 4975 of the Code to be assets of the
Plan unless certain exceptions apply.
Under the terms of the regulation, the Trust may be deemed to hold plan
assets by reason of a Plan's investment in a Certificate; such plan assets would
include an undivided interest in the Mortgage Loans and any other assets held by
the Trust. In such an event, the Depositor, the Master Servicer, any
Sub-Servicer, the Trustee, any insurer of the Mortgage Assets and other persons,
in providing services with respect to the assets of the Trust, may be
fiduciaries subject to the fiduciary responsibility provisions of Title I of
ERISA, or may otherwise be parties in interest or disqualified persons, with
respect to such Plan. In addition, transactions involving such assets could
constitute or result in prohibited transactions under Section 406 of ERISA or
Section 4975 of the Code unless such transactions are subject to a statutory or
administrative exemption.
The regulations contain a de minimis safe-harbor rule that exempts any
entity from plan assets status as long as the aggregate equity investment in
such entity by plans is not significant. For this purpose, equity participation
in the entity will be significant if immediately after any acquisition of any
equity interest in the entity, "benefit plan investors" in the aggregate, own at
least 25% of the value of any class of equity interest (excluding equity
interests held by persons who have discretionary authority or control with
respect to the assets of the entity (or by affiliates of such persons)).
"Benefit plan investors" are defined as Plans as well as employee benefit plans
not subject to Title I of ERISA (e.g., governmental plans and foreign plans) and
entities whose underlying assets include plan assets by reason of plan
investment in such entities. The 25% limitation must be met with respect to each
class of equity interests, regardless of the portion of total equity value
represented by such class, on an ongoing basis.
99
<PAGE> 270
Availability of Underwriter's Exemption for Certificates
Labor has granted to Morgan Stanley & Co. Incorporated Prohibited
Transaction Exemption 90-24, Exemption Application No. D-8019, 55 Fed. Reg.
20548 (1990) (the "Exemption") which exempts from the application of the
prohibited transaction rules transactions relating to: (1) the acquisition, sale
and holding by Plans of certain certificates representing an undivided interest
in certain asset-backed pass-through trusts, with respect to which Morgan
Stanley & Co. Incorporated or any of its affiliates is the sole underwriter or
the manager or co-manager of the underwriting syndicate; and (2) the servicing,
operation and management of such asset-backed pass-through trusts, provided that
the general conditions and certain other conditions set forth in the Exemption
are satisfied.
General Conditions of the Exemption. Section II of the Exemption sets forth
the following general conditions which must be satisfied before a transaction
involving the acquisition, sale and holding of the Certificates or a transaction
in connection with the servicing, operation and management of the Trust may be
eligible for exemptive relief thereunder:
(1) The acquisition of the Certificates by a Plan is on terms (including
the price for such Certificates) that are at least as favorable to the
investing Plan as they would be in an arm's-length transaction with an
unrelated party;
(2) The rights and interests evidenced by the Certificates acquired by the
Plan are not subordinated to the rights and interests evidenced by other
certificates of the Trust with respect to the right to receive payment in
the event of default or delinquencies in the underlying assets of the
Trust;
(3) The 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 any of Duff & Phelps Credit Rating Co., Fitch
Investors Service, L.P., Moody's Investors Service, Inc. and Standard &
Poor's Ratings Services;
(4) The Trustee is not an affiliate of the Depositor, any Underwriter, the
Master Servicer, any insurer of the Mortgage Assets, any borrower whose
obligations under one or more Mortgage Loans constitute more than 5% of
the aggregate unamortized principal balance of the assets in the Trust, or
any of their respective affiliates (the "Restricted Group");
(5) The sum of all payments made to and retained by the Underwriter in
connection with the distribution of the Certificates represents not more
than reasonable compensation for underwriting such Certificates; the sum
of all payments made to and retained by the Asset Seller pursuant to the
sale of the Mortgage Loans to the Trust represents not more than the fair
market value of such Mortgage Loans; the sum of all payments made to and
retained by the Master Servicer represent not more than reasonable
compensation for the Master Servicer's services under the Pooling
Agreement and reimbursement of the Master Servicer's reasonable expenses
in connection therewith; and
(6) The Plan investing in the Certificates is an "accredited investor" as
defined in Rule 501(a)(1) of Regulation D of the Securities and Exchange
Commission under the Securities Act of 1933 as amended.
Before purchasing a Certificate in reliance on the Exemption, a fiduciary
of a Plan should itself confirm (a) that the Certificates constitute
"certificates" for purposes of the Exemption and (b) that the general conditions
and other requirements set forth in the Exemption would be satisfied.
Review by Plan Fiduciaries
Any Plan fiduciary considering whether to purchase any Certificates on
behalf of a Plan should consult with its counsel regarding the applicability of
the fiduciary responsibility and prohibited transaction provisions of ERISA and
the Code to such investment. Among other things, before purchasing any
Certificates, a fiduciary of a Plan should make its own determination as to the
availability of the exemptive relief provided in the Exemption, and also
100
<PAGE> 271
consider the availability of any other prohibited transaction exemptions. In
this regard, purchasers that are insurance companies should determine the extent
to which Prohibited Transaction Class Exemption 95-60 (for certain transactions
involving insurance company general accounts) may be available. The Prospectus
Supplement with respect to a series of Certificates may contain additional
information regarding the application of the Exemption, Prohibited Transaction
Class Exemption 83-1 (for certain transactions involving mortgage pool
investment trusts), or any other exemption, with respect to the Certificates
offered thereby.
LEGAL INVESTMENT
The Prospectus Supplement for each series of Offered Certificates will
identify those classes of Offered Certificates, if any, which constitute
"mortgage related securities" for purposes of the Secondary Mortgage Market
Enhancement Act of 1984, as amended ("SMMEA"). Those classes of Offered
Certificates that (i) are rated in one of the two highest rating categories by
one or more Rating Agencies and (ii) are part of a series representing interests
in, or secured by, a Trust Fund consisting of Mortgage Loans or MBS, provided
that such Mortgage Loans (or the Mortgage Loans underlying the MBS) are secured
by first liens on Mortgaged Property and were originated by certain types of
originators as specified in SMMEA, will be "mortgage related securities" for
purposes of SMMEA (the "SMMEA Certificates"). As "mortgage related securities,"
the SMMEA Certificates will constitute legal investments for persons, trusts,
corporations, partnerships, associations, business trusts and business entities
(including, but not limited to, state-chartered savings banks, commercial banks,
savings and loan associations and insurance companies, as well as trustees and
state government employee retirement systems) created pursuant to or existing
under the laws of the United States or of any state (including the District of
Columbia and Puerto Rico) whose authorized investments are subject to state
regulation to the same extent that, under applicable law, obligations issued by
or guaranteed as to principal and interest by the United States or any agency or
instrumentality thereof constitute legal investments for such entities. Pursuant
to SMMEA, a number of states enacted legislation, before the October 4, 1991
cutoff established by SMMEA for such enactments, limiting to varying extents the
ability of certain entities (in particular, insurance companies) to invest in
mortgage related securities, in most cases by requiring the affected investors
to rely solely upon existing state law, and not SMMEA. Pursuant to Section 347
of the Riegle Community Development and Regulatory Improvement Act of 1994,
which amended the definition of "mortgage related security" (effective December
31, 1996) to include, in relevant part, Offered Certificates satisfying the
rating, first lien and qualified originator requirements for "mortgage related
securities," but representing interests in, or secured by, a Trust Fund
consisting, in whole or in part, of first liens on one or more parcels of real
estate upon which are located one or more commercial structures, states were
authorized to enact legislation, on or before September 23, 2001, specifically
referring to Section 347 and prohibiting or restricting the purchase, holding or
investment by state-regulated entities in such types of Offered Certificates.
Investors affected by such legislation will be authorized to invest in SMMEA
Certificates only to the extent provided in such legislation.
SMMEA also amended the legal investment authority of federally-chartered
depository institutions as follows: federal savings and loan associations and
federal savings banks may invest in, sell or otherwise deal in "mortgage related
securities" without limitation as to the percentage of their assets represented
thereby, federal credit unions may invest in such securities, and national banks
may purchase such securities 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 regulatory authority may prescribe. In this connection, the Office of
the Comptroller of the Currency (the "OCC") has amended 12 C.F.R. Part 1 to
authorize national banks to purchase and sell for their own account, without
limitation as to a percentage of the bank's capital and surplus (but subject to
compliance with certain general standards concerning "safety and soundness" and
retention of credit information in 12 C.F.R. Section 1.5), certain "Type IV
securities," defined in 12 C.F.R. Section 1.2(1) to include certain "commercial
mortgage-related securities" and "residential mortgage-related securities." As
so defined, "commercial mortgage-related security" and "residential
mortgage-related security" mean, in relevant part, "mortgage-related security"
within the meaning of SMMEA, provided that, in the case of a "commercial
mortgage-related security," it "represents ownership of a promissory note or
certificate of interest or participation that is directly secured by a first
lien on one or more parcels of real estate upon which one or more commercial
structures are located and that is fully secured by interests in a pool of loans
to numerous obligors." In the absence of any rule or administrative
interpretation by the OCC defining the
101
<PAGE> 272
term "numerous obligors," no representation is made as to whether any class of
Offered Certificates will qualify as "commercial mortgage-related securities,"
and thus as "Type IV securities," for investment by national banks. 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. The NCUA has adopted rules, codified
as 12 C.F.R. Section 703.5(f)-(k), which prohibit federal credit unions from
investing in certain mortgage related securities (including securities such as
certain series or classes of Offered Certificates), except under limited
circumstances. Effective January 1, 1998, the NCUA has amended its rules
governing investments by federal credit unions at 12 C.F.R. Part 703; the
revised rules will permit investments in "mortgage related securities" under
certain limited circumstances, but will prohibit investments in stripped
mortgage related securities, residual interests in mortgage related securities,
and commercial mortgage related securities, unless the credit union has obtained
written approval from the NCUA to participate in the "investment pilot program"
described in 12 C.F.R. Section 703.140.
All depository institutions considering an investment in the Offered
Certificates should review the "Supervisory Policy Statement on Securities
Activities" dated January 28, 1992, as revised April 15, 1994 (the "Policy
Statement") of the Federal Financial Institutions Examination Council. The
Policy Statement, which has been adopted by the Board of Governors of the
Federal Reserve System, the Federal Deposit Insurance Corporation, the OCC and
the Office of Thrift Supervision, and by the NCUA (with certain modifications),
prohibits depository institutions from investing in certain "high-risk mortgage
securities" (including securities such as certain series or classes of the
Offered Certificates), except under limited circumstances, and sets forth
certain investment practices deemed to be unsuitable for regulated institutions.
Institutions whose investment activities are subject to regulation by
federal or state authorities should review rules, policies and guidelines
adopted from time to time by such authorities before purchasing any Offered
Certificates, as certain series or classes may be deemed unsuitable investments,
or may otherwise be restricted, under such rules, policies or guidelines (in
certain instances irrespective of SMMEA).
The foregoing does not take into consideration the applicability of
statutes, rules, regulations, orders, guidelines or agreements generally
governing investments made by a particular investor, including, but not limited
to, "prudent investor" provisions, percentage-of-assets limits, provisions which
may restrict or prohibit investment in securities which are not "interest
bearing" or "income paying," and, with regard to any Offered Certificates issued
in book-entry form, provisions which may restrict or prohibit investments in
securities which are issued in book-entry form.
If specified in the related Prospectus Supplement, other classes of
Offered Certificates offered pursuant to this Prospectus will not constitute
"mortgage related securities" under SMMEA. The appropriate characterization of
such Offered Certificates under various legal investment restrictions, and thus
the ability of investors subject to these restrictions to purchase such Offered
Certificates, may be subject to significant interpretive uncertainties.
Except as to the status of SMMEA Certificates identified in the Prospectus
Supplement for a series as "mortgage related securities" under SMMEA, no
representations are made as to the proper characterization of the Offered
Certificates for legal investment or financial institution regulatory purposes,
or as to the ability of particular investors to purchase any Offered
Certificates under applicable legal investment restrictions. The uncertainties
described above (and any unfavorable future determinations concerning legal
investment or financial institution regulatory characteristics of the Offered
Certificates) may adversely affect the liquidity of the Offered Certificates.
Investors should consult with their own legal advisors in determining
whether and to what extent the Offered Certificates of any class constitute
legal investments or are subject to investment, capital or other restrictions,
and, if applicable, whether SMMEA has been overridden in any jurisdiction
relevant to such investor.
102
<PAGE> 273
PLAN OF DISTRIBUTION
The Offered Certificates offered hereby and by the Supplements to this
Prospectus will be offered in series. The distribution of the Certificates may
be effected from time to time in one or more transactions, including negotiated
transactions, at a fixed public offering price or at varying prices to be
determined at the time of sale or at the time of commitment therefor. If so
specified in the related Prospectus Supplement, the Offered Certificates will be
distributed in a firm commitment underwriting, subject to the terms and
conditions of the underwriting agreement, by Morgan Stanley & Co. Incorporated
("Morgan Stanley") acting as underwriter with other underwriters, if any, named
therein. In such event, the Prospectus Supplement may also specify that the
underwriters will not be obligated to pay for any Offered Certificates agreed to
be purchased by purchasers pursuant to purchase agreements acceptable to the
Depositor. In connection with the sale of Offered Certificates, underwriters may
receive compensation from the Depositor or from purchasers of Offered
Certificates in the form of discounts, concessions or commissions. The
Prospectus Supplement will describe any such compensation paid by the Depositor.
Alternatively, the Prospectus Supplement may specify that Offered
Certificates will be distributed by Morgan Stanley acting as agent or in some
cases as principal with respect to Offered Certificates that it has previously
purchased or agreed to purchase. If Morgan Stanley acts as agent in the sale of
Offered Certificates, Morgan Stanley will receive a selling commission with
respect to such Offered Certificates, depending on market conditions, expressed
as a percentage of the aggregate Certificate Balance or notional amount of such
Offered Certificates as of the Cut-off Date. The exact percentage for each
series of Certificates will be disclosed in the related Prospectus Supplement.
To the extent that Morgan Stanley elects to purchase Offered Certificates as
principal, Morgan Stanley may realize losses or profits based upon the
difference between its purchase price and the sales price. The Prospectus
Supplement with respect to any series offered other than through underwriters
will contain information regarding the nature of such offering and any
agreements to be entered into between the Depositor and purchasers of Offered
Certificates of such series.
The Depositor will indemnify Morgan Stanley and any underwriters against
certain civil liabilities, including liabilities under the Securities Act of
1933, or will contribute to payments Morgan Stanley and any underwriters may be
required to make in respect thereof.
In the ordinary course of business, Morgan Stanley and the Depositor may
engage in various securities and financing transactions, including repurchase
agreements to provide interim financing of the Depositor's mortgage loans
pending the sale of such mortgage loans or interests therein, including the
Certificates.
Offered Certificates will be sold primarily to institutional investors.
Purchasers of Offered Certificates, including dealers, may, depending on the
facts and circumstances of such purchases, be deemed to be "underwriters" within
the meaning of the Securities Act of 1933 in connection with reoffers and sales
by them of Offered Certificates. Certificateholders should consult with their
legal advisors in this regard prior to any such reoffer or sale.
As to each series of Certificates, only those classes rated in an
investment grade rating category by any Rating Agency will be offered hereby.
Any non-investment-grade class may be initially retained by the Depositor, and
may be sold by the Depositor at any time in private transactions.
LEGAL MATTERS
Certain legal matters in connection with the Certificates, including
certain federal income tax consequences, will be passed upon for the Depositor
by Sidley & Austin, New York, New York or Latham & Watkins, New York, New York
or Cadwalader, Wickersham & Taft, New York, New York or Brown & Wood LLP, New
York, New York or such other counsel as may be specified in the related
Prospectus Supplement.
103
<PAGE> 274
FINANCIAL INFORMATION
A new Trust Fund will be formed with respect to each series of
Certificates and no Trust Fund will engage in any business activities or have
any assets or obligations prior to the issuance of the related series of
Certificates. Accordingly, no financial statements with respect to any Trust
Fund will be included in this Prospectus or in the related Prospectus
Supplement.
RATING
It is a condition to the issuance of any class of Offered Certificates
that they shall have been rated not lower than investment grade, that is, in one
of the four highest rating categories, by a Rating Agency.
Ratings on mortgage pass-through certificates address the likelihood of
receipt by certificateholders of all distributions on the underlying mortgage
loans. These ratings address the structural, legal and issuer-related aspects
associated with such certificates, the nature of the underlying mortgage loans
and the credit quality of the guarantor, if any. Ratings on mortgage
pass-through certificates do not represent any assessment of the likelihood of
principal prepayments by mortgagors or of the degree by which such prepayments
might differ from those originally anticipated. As a result, certificateholders
might suffer a lower than anticipated yield, and, in addition, holders of
stripped interest certificates in extreme cases might fail to recoup their
initial investments.
A security rating is not a recommendation to buy, sell or hold securities
and may be subject to revision or withdrawal at any time by the assigning rating
organization. Each security rating should be evaluated independently of any
other security rating.
104
<PAGE> 275
INDEX OF PRINCIPAL DEFINITIONS
Page(s) on which
term is defined
Term in the Prospectus
- ---- -----------------
Accrual Certificates....................................................... 31
ADA........................................................................ 71
Applicable Amount.......................................................... 93
ARM Loans.............................................................. 23, 78
Asset Conservation Act..................................................... 67
Asset Seller............................................................... 20
Assets.................................................................. 1, 20
Balloon Mortgage Loans..................................................... 16
Bankruptcy Code............................................................ 63
Book-Entry Certificates.................................................... 30
Cash Flow Agreement........................................................ 26
Cash Flow Agreements........................................................ 1
Cede.................................................................... 3, 36
CERCLA................................................................. 18, 68
Certificate Account........................................................ 41
Certificate Owners......................................................... 37
Certificateholders.......................................................... 3
Closing Date............................................................... 83
Commercial Loans........................................................... 20
Commercial Properties...................................................... 20
Commission................................................................. 3
Contributions Tax.......................................................... 95
Cooperatives............................................................... 20
Covered Trust.......................................................... 17, 54
CPR........................................................................ 28
Credit Support.......................................................... 1, 25
Crime Control Act.......................................................... 72
Deferred Interest.......................................................... 80
Definitive Certificates................................................ 30, 37
Depositor.................................................................. 20
Determination Date......................................................... 30
DTC..................................................................... 3, 37
Due Period................................................................. 31
Environmental Hazard Condition............................................. 68
Equity Participations...................................................... 24
ERISA...................................................................... 99
ERISA Plans................................................................ 99
Exchange Act................................................................ 3
Exemption................................................................. 100
FDIC....................................................................... 41
FHLMC...................................................................... 50
FNMA....................................................................... 68
Government Securities................................................... 1, 20
Indirect Participants...................................................... 37
Insurance Proceeds......................................................... 42
IRS........................................................................ 75
Labor...................................................................... 99
105
<PAGE> 276
Page(s) on which
term is defined
Term in the Prospectus
- ---- -----------------
L/C Bank................................................................... 55
Lease....................................................................... 3
Lease Assignment............................................................ 1
Legislative History........................................................ 83
Lessee...................................................................... 3
Liquidation Proceeds....................................................... 42
Lock-out Date.............................................................. 24
Lock-out Period............................................................ 24
Mark-to-Market Regulations................................................. 93
Master REMIC............................................................... 82
MBS..................................................................... 1, 20
MBS Agreement.............................................................. 24
MBS Issuer................................................................. 24
MBS Servicer............................................................... 24
MBS Trustee................................................................ 24
Morgan Stanley............................................................ 103
Mortgage Loans.......................................................... 1, 20
Mortgage Notes............................................................. 20
Mortgage Rate.............................................................. 24
Mortgages.................................................................. 21
Multifamily Loans.......................................................... 20
Multifamily Properties..................................................... 20
NCUA...................................................................... 102
Nonrecoverable Advance..................................................... 34
Offered Certificates........................................................ 1
OID........................................................................ 75
OID Regulations............................................................ 75
Originator................................................................. 20
Participants............................................................... 37
Pass-Through Rate.......................................................... 32
Payment Lag Certificates................................................... 89
Permitted Investments...................................................... 41
Plans...................................................................... 99
Prepayment Assumption...................................................... 79
Prepayment Premium......................................................... 24
Prohibited Transactions Tax................................................ 95
RCRA....................................................................... 68
Record Date................................................................ 30
Related Proceeds........................................................... 34
Relief Act................................................................. 71
REMIC Certificates......................................................... 82
REMIC Regular Certificateholders........................................... 83
REMIC Regular Certificates................................................. 82
REMIC Regulations.......................................................... 73
REMIC Residual Certificateholder........................................... 90
REMIC Residual Certificates................................................ 82
REO Extension.............................................................. 61
REO Tax.................................................................... 61
Restricted Group.......................................................... 100
RICO....................................................................... 72
106
<PAGE> 277
Page(s) on which
term is defined
Term in the Prospectus
- ---- -----------------
Senior Certificates........................................................ 30
Servicing Standard......................................................... 44
SMMEA..................................................................... 101
SMMEA Certificates........................................................ 101
Special Servicer........................................................... 45
Stripped ARM Obligations................................................... 79
Stripped Bond Certificates................................................. 77
Stripped Coupon Certificates............................................... 77
Stripped Interest Certificates............................................. 30
Stripped Principal Certificates............................................ 30
Subordinate Certificates................................................... 30
Sub-Servicer............................................................... 45
Sub-Servicing Agreement.................................................... 45
Subsidiary REMIC........................................................... 82
Super-Premium Certificates................................................. 84
Title V.................................................................... 70
Trust Assets................................................................ 2
Trust Fund.................................................................. 1
UCC........................................................................ 37
Voting Rights.............................................................. 19
Warrantying Party.......................................................... 40
107
