Information contained herein is subject to completion. These securities may not
be sold nor may offers to buy be accepted prior to the time a final prospectus
is delivered. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities of any such State.
SUBJECT TO COMPLETION, DATED FEBRUARY 10, 1999
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED OCTOBER 9, 1998)
$764,782,000 (APPROXIMATE)
MORGAN STANLEY CAPITAL I INC.
AS DEPOSITOR
RESIDENTIAL FUNDING CORPORATION
MORGAN STANLEY MORTGAGE CAPITAL INC. AND
WACHOVIA BANK, NATIONAL ASSOCIATION
AS MORTGAGE LOAN SELLERS
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 1999-RM1
-------------------------------------
Morgan Stanley Capital I Inc. is offering certain classes of its Series
1999-RM1 Commercial Mortgage Pass-Through Certificates, which represent
beneficial ownership interests in a trust. The trust's assets will primarily be
221 mortgage loans secured by first liens on 235 commercial properties. The
Series 1999-RM1 Certificates are not obligations of Morgan Stanley Capital I
Inc. or any of its affiliates, and neither the certificates nor the underlying
mortgage loans are insured or guaranteed by any governmental agency.
-------------------------------------
Morgan Stanley Capital I Inc. will not list the offered certificates on
any national securities exchange or on any automated quotation system of any
registered securities association such as NASDAQ
-------------------------------------
INVESTING IN THE OFFERED CERTIFICATES INVOLVES RISKS. SEE "RISK FACTORS"
BEGINNING ON PAGE S-25 OF THIS PROSPECTUS SUPPLEMENT AND PAGE 15 OF THE
PROSPECTUS.
-------------------------------------
Certain characteristics of the offered certificates include:
<TABLE>
<CAPTION>
RATED FINAL
APPROXIMATE INITIAL INITIAL RATE EXPECTED RATINGS DISTRIBUTION
CERTIFICATE PRINCIPAL(1) PASS-THROUGH RATE(2) DESCRIPTION(3) (DCR/MOODY'S)(4) DATE(4)
<S> <C> <C> <C> <C> <C>
Class A-1....... $183,000,000 6.00% Fixed AAA/Aaa Dec 15, 2031
Class A-2....... $429,255,000 6.31% Fixed AAA/Aaa Dec 15, 2031
Class B......... $ 42,966,000 6.45% Fixed AA/Aa2 Dec 15, 2031
Class C......... $ 45,133,000 6.70% Fixed A/A2 Dec 15, 2031
Class D......... $ 12,890,000 NWAC - 0.28% Variable A-/A3 Dec 15, 2031
Class E......... $ 34,372,000 NWAC - 0.03% Variable BBB/Baa2 Dec 15, 2031
Class F......... $ 17,186,000 NWAC - 0.03% Variable BBB-/NR Dec 15, 2031
</TABLE>
(Footnotes to table on page S-3)
-------------------------------------
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved these securities or determined that this
prospectus supplement or the accompanying prospectus are truthful or complete.
Any representation to the contrary is a criminal offense.
Morgan Stanley & Co. Incorporated and Residential Funding Securities Corporation
will purchase the offered certificates from Morgan Stanley Capital I Inc. and
will offer them to the public at negotiated prices determined at the time of
sale. Morgan Stanley & Co. Incorporated and Residential Funding Securities
Corporation expect to deliver the offered certificates to purchasers on March ,
1999. Morgan Stanley Capital I Inc. expects to receive from this offering
approximately % of the initial principal amount of the offered certificates,
plus accrued interest from March 1, 1999 before deducting expenses payable by
Morgan Stanley Capital I Inc.
-------------------------------------
MORGAN STANLEY DEAN WITTER
RESIDENTIAL FUNDING SECURITIES CORPORATION
THE DATE OF THIS PROSPECTUS SUPPLEMENT IS FEBRUARY , 1999
<PAGE>
MORGAN STANLEY CAPITAL I INC.
- --------------------------------------------------------------------------------
Commercial Mortgage Pass-Through Certificates, Series 1999-RM1
Geographic Overview of Mortgage Pool
[MAP SHOWING GEOGRAPHIC OVERVIEW OF MORTGAGE POOL]
<PAGE>
- ------------------
(1) Approximate; subject to a variance of plus or minus 5%.
(2) The pass-through rates for the Class A-1, A-2, Class B, Class C, Class G,
Class H, Class J, Class K, Class L, Class M, Class N and Class O
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 WAC Rate (as defined herein) for
such distribution date. The initial pass-through rates for the Class X,
Class D, Class E and Class F Certificates set forth in the table are the
approximate initial pass-through rates. The pass-through rates for the
Class X, Class D, Class E and Class F Certificates are variable and,
subsequent to the initial distribution date, will be determined as
described in "Description of the Certificates--Pass-Through Rates" herein.
(3) "Fixed" and "WAC" are descriptions of the types of pass-through rates
borne by the related classes.
(4) See "Ratings" herein. The Rated Final Distribution Date for each class of
rated certificates is the distribution date in December 2031.
IMPORTANT NOTICE ABOUT INFORMATION PRESENTED IN THIS
PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS
Information about the offered certificates is contained in two separate
documents that progressively provide more detail: (a) the accompanying
prospectus, which provides general information, some of which may not apply to
the offered certificates; and (b) this prospectus supplement, which describes
the specific terms of the offered certificates. IF THE TERMS OF THE OFFERED
CERTIFICATES VARY BETWEEN THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING
PROSPECTUS, YOU SHOULD RELY ON THE INFORMATION IN THIS PROSPECTUS SUPPLEMENT.
You should rely only on the information contained in this prospectus
supplement and the accompanying prospectus. We have not authorized anyone to
provide you with information that is different from that contained in this
prospectus supplement and the prospectus. The information in this prospectus
supplement is accurate only as of the date of this prospectus supplement.
This prospectus supplement and the accompanying prospectus include cross
references to sections in these materials where you can find further related
discussions. The Tables of Contents in this prospectus supplement and the
prospectus identify the pages where these sections are located.
Certain capitalized terms are defined and used in this prospectus
supplement and the prospectus to assist you in understanding the terms of the
offered certificates and this offering. The capitalized terms used in this
prospectus supplement are defined on the pages indicated under the caption
"Index of Terms for Prospectus Supplement" beginning on page S-105 in this
prospectus supplement. The capitalized terms used in the prospectus are defined
on the pages indicated under the caption "Index of Principal Definitions"
beginning on page 102 in the prospectus.
-----------------------------
In this prospectus supplement, the terms "Depositor," "we," "us" and "our"
refer to Morgan Stanley Capital I Inc.
-----------------------------
Until the date that is ninety days from the date of this prospectus
supplement, all dealers that effect transactions in these securities, whether or
not participating in this offering, may be required to deliver a prospectus
supplement and the accompanying prospectus. This is in addition to the dealers'
obligation to deliver a prospectus supplement and the accompanying prospectus
when acting as underwriters and with respect to their unsold allotments or
subscriptions.
S-3
<PAGE>
TABLE OF CONTENTS
Page
----
SUMMARY OF TERMS.............................................................S-8
RISK FACTORS................................................................S-25
DESCRIPTION OF THE CERTIFICATES.............................................S-49
General..................................................................S-49
Registration; Denominations..............................................S-49
Book-Entry Registration..................................................S-49
Certificate Balances and Notional Amounts................................S-50
Pass-Through Rates.......................................................S-51
Distributions............................................................S-52
Appraisal Reductions.....................................................S-57
Subordination; Allocation of Losses and Certain Expenses.................S-57
Prepayment Interest Shortfalls...........................................S-59
Optional Termination.....................................................S-59
Advances.................................................................S-59
Reports to Certificateholders; Available Information.....................S-61
Book-Entry Certificates..................................................S-64
Example of Distributions.................................................S-64
Voting Rights............................................................S-65
The Trustee and the Fiscal Agent.........................................S-65
MATURITY CONSIDERATIONS.....................................................S-66
YIELD CONSIDERATIONS........................................................S-72
General..................................................................S-72
Rate and Timing of Principal Payments....................................S-72
Losses and Shortfalls....................................................S-73
Certain Relevant Factors.................................................S-73
Delay in Payment of Distributions........................................S-73
DESCRIPTION OF THE MORTGAGE POOL............................................S-73
General..................................................................S-73
Certain Terms and Characteristics of the Mortgage Loans..................S-75
Assessments of Property Value and Condition..............................S-79
Additional Mortgage Loan Information.....................................S-80
Standard Hazard Insurance................................................S-82
The Sellers..............................................................S-83
Assignment of the Mortgage Loans.........................................S-83
Representations and Warranties...........................................S-84
Repurchases and Other Remedies...........................................S-86
Changes in Mortgage Pool Characteristics.................................S-87
SERVICING OF THE MORTGAGE LOANS.............................................S-87
General..................................................................S-87
The Master Servicer and the Special Servicer.............................S-90
Sub-Servicers............................................................S-90
Servicing and Other Compensation and Payment of Expenses.................S-90
The Operating Adviser....................................................S-92
Mortgage Loan Modifications..............................................S-92
Sale of Defaulted Mortgage Loans and REO Properties......................S-94
REO Properties...........................................................S-94
S-4
<PAGE>
Inspections; Collection of Operating Information.........................S-95
Maintenance of Master Servicer/Special Servicer Acceptability............S-95
CERTAIN FEDERAL INCOME TAX CONSEQUENCES.....................................S-95
General..................................................................S-95
Original Issue Discount and Premium......................................S-96
Additional Considerations................................................S-98
ERISA CONSIDERATIONS........................................................S-99
Plan Asset Regulation....................................................S-99
Individual Exemption.....................................................S-99
Other Exemptions........................................................S-101
Insurance Company Purchasers............................................S-101
LEGAL INVESTMENT...........................................................S-102
USE OF PROCEEDS............................................................S-102
PLAN OF DISTRIBUTION.......................................................S-102
LEGAL MATTERS..............................................................S-104
RATINGS....................................................................S-104
INDEX OF TERMS FOR PROSPECTUS SUPPLEMENT...................................S-105
APPENDIX I - MORTGAGE POOL
INFORMATION.....................................I-1
APPENDIX II - CERTAIN
CHARACTERISTICS OF THE MORTGAGE
LOANS AND ADDITIONAL
INFORMATION REGARDING THE
MULTIFAMILY LOANS..............................II-1
APPENDIX III - LARGEST LOAN
SUMMARIES.....................................III-1
APPENDIX IV - FORM OF TRUSTEE
REPORTS........................................IV-1
TERM SHEET........................................T-1
S-5
<PAGE>
EXECUTIVE SUMMARY
This Executive Summary highlights selected information regarding the offered
certificates. It does not contain all of the information you need to consider in
making your investment decision. TO UNDERSTAND ALL OF THE TERMS OF THE OFFERING
OF THE OFFERED CERTIFICATES AND THE UNDERLYING MORTGAGE LOANS, READ THIS ENTIRE
PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS CAREFULLY.
CERTIFICATE STRUCTURE
<TABLE>
<CAPTION>
Approximate Approximate
Credit Support Percent of
Total
Certificates
---------------------------------------
INITIAL
CERTIFICATE EXPECTED
PRINCIPAL RATINGS
CLASS AMOUNT (DCR/MOODY'S)
--------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
CLASS X(2) CLASS A-1 $183,000,000 AAA/Aaa 21.30%
$859,306,538
(Approximate Notional
Amount)
---------------------------------------
28.75(1)% CLASS A-2 $429,255,000 AAA/Aaa 49.95%
---------------------------------------
23.75% CLASS B $ 42,966,000 AA/Aa2 5.00%
---------------------------------------
18.50% CLASS C $ 45,113,000 A/A2 5.25%
---------------------------------------
17.00% CLASS D $ 12,890,000 A-/A3 1.50%
---------------------------------------
13.00% CLASS E $ 34,372,000 BBB/Baa2 4.00%
---------------------------------------
11.00% CLASS F $ 17,186,000 BBB-/NR 2.00%
---------------------------------------
9.75% CLASS G(2) $ 10,741,000 BB+/Ba1 1.25%
---------------------------------------
7.00% CLASS H(2) $ 23,631,000 BB/Ba2 2.75%
---------------------------------------
6.00% CLASS J(2) $ 8,593,000 BB-/NR 1.00%
---------------------------------------
4.50% CLASS K(2) $ 12,890,000 B+/NR 1.50%
---------------------------------------
3.75% CLASS L(2) $ 6,445,000 B/Ba2 0.75%
---------------------------------------
2.75% CLASS M(2) $ 8,593,000 B-/Ba3 1.00%
---------------------------------------
1.75% CLASS N(2) $ 8,593,000 CCC/Caa2 1.00%
---------------------------------------
0.00% CLASS O(2) $ 15,038,538 NR/NR 1.75%
--------------------------------------------------------------
</TABLE>
(1) Represents the approximate credit support for the Class A-1 and Class A-2
Certificates in the aggregate.
(2) Not offered hereby.
The Class R-I, R-II and R-III Certificates are not represented in this
table.
S-6
<PAGE>
- --------------------------------------------------------------------------------
CERTIFICATE SUMMARY
<TABLE>
<CAPTION>
==============================================================================================================
APPROXIMATE
INITIAL CERTIFICATE INITIAL WEIGHTED
APPROXIMATE PRINCIPAL OR PASS-THROUGH EXPECTED AVERAGE
CREDIT NOTIONAL APPROXIMATE RATE AND RATE RATINGS LIFE PRINCIPAL
SUPPORT CLASS AMOUNT(1) % OF TOTAL DESCRIPTION(2)(3) DCR/MOODY'S(4) (YRS.)(5) WINDOW(5)
==============================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
Offered Certificates
==============================================================================================================
A-1 $183,000,000 21.30% 6.00% (fixed) AAA/Aaa 5.50 1-106
-----------------------------------------------------------------------------------------------
28.75%(6) A-2 $429,255,000 49.95% 6.31% (fixed) AAA/Aaa 9.44 106-115
- --------------------------------------------------------------------------------------------------------------
23.75% B $ 42,966,000 5.00% 6.45% (fixed) AA/Aa2 9.67 115-116
- --------------------------------------------------------------------------------------------------------------
18.50% C $ 45,113,000 5.25% 6.70% (fixed) A/A2 9.70 116-116
- --------------------------------------------------------------------------------------------------------------
17.00% D $ 12,890,000 1.50% 7.13% (NWAC) A-/A3 9.77 116-117
- --------------------------------------------------------------------------------------------------------------
13.00% E $ 34,372,000 4.00% 7.38% (NWAC) BBB/Baa2 9.78 117-117
- --------------------------------------------------------------------------------------------------------------
11.00% F $ 17,186,000 2.00% 7.38% (NWAC) BBB-/NR 9.95 117-122
==============================================================================================================
Non-Offered Certificates
==============================================================================================================
$859,306,538 % 1.09 (Variable
N/A X(7) (Notional) N/A Rate IO) AAA/Aaa 9.14 --
- --------------------------------------------------------------------------------------------------------------
9.75% G $ 10,741,000 1.25% 6.00% (fixed) BB+/Ba1 10.39 122-130
- --------------------------------------------------------------------------------------------------------------
7.00% H $ 23,631,000 2.75% 6.00% (fixed) BB/Ba2 12.03 130-157
- --------------------------------------------------------------------------------------------------------------
6.00% J $ 8,593,000 1.00% 6.00% (fixed) BB-/NR 13.48 157-168
- --------------------------------------------------------------------------------------------------------------
4.50% K $ 12,890,000 1.50% 6.00% (fixed) B+/NR 14.10 168-171
- --------------------------------------------------------------------------------------------------------------
3.75% L $ 6,445,000 0.75% 6.00% (fixed) B/Ba2 14.52 171-175
- --------------------------------------------------------------------------------------------------------------
2.75% M $ 8,593,000 1.00% 6.00% (fixed) B-/Ba3 14.61 175-175
- --------------------------------------------------------------------------------------------------------------
1.75% N $ 8,593,000 1.00% 6.00% (fixed) CCC/Caa2 14.68 175-177
- --------------------------------------------------------------------------------------------------------------
0.00% O(8) $ 15,038,538 1.75% 6.00% (fixed) NR/NR 17.75 177-234
==============================================================================================================
</TABLE>
(1) Approximate; subject to a variance of plus or minus 5%.
(2) "Fixed" and "NWAC" are descriptions of the types of pass-through rates
borne by the related classes. "IO" designates that Class X is entitled
only to distributions of interest; it will not receive distributions of
principal.
(3) The pass-through rates for the Class A-1, Class A-2, Class B, Class C,
Class G, Class H, Class J, Class K, Class L, Class M, Class N and Class O
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 NWAC Rate (as defined herein) for
such distribution date. The initial pass-through rates for the Class X and
the Class D, Class E, and Class F Certificates set forth in the table are
the approximate initial pass-through rates. The pass-through rates for the
Interest Only Certificates and the Class D, Class E, and Class F
Certificates are variable and, subsequent to the initial distribution
date, will be determined as described in "Description of the
Certificates--Pass-Through Rates" herein.
(4) See "Ratings" herein. "NR" means not rated.
(5) The principal window is expressed in months following the closing date and
reflects the period during which distributions of principal would be
received. The Weighted Average Life and principal window figures set forth
above are based on the following assumptions, among others: (i) no losses
on the underlying mortgage loans; (ii) no extensions of maturity dates of
mortgage loans that do not have anticipated repayment dates; and (iii)
prepayment in full on the "anticipated repayment date" of each mortgage
loan having such a date. See the assumptions set forth under "Maturity
Considerations" in this prospectus supplement.
(6) Represents the approximate credit support for the Class A-1 and Class A-2
Certificates in the aggregate.
(7) The Class X Certificates will not have a Principal Amount. Interest will
accrue on the notional amount thereof, at a rate equal to the NWAC Rate
minus the weighted average of the Pass-Through Rates of the classes of
certificates that have Principal Amounts.
(8) The Class O Certificates are an investment unit consisting of a REMIC
regular interest and beneficial ownership of Excess Interest in respect of
mortgage loans having a hyper-amortization feature.
The Class R Certificates are not represented in this table and are not offered
hereby.
- --------------------------------------------------------------------------------
S-7
<PAGE>
- --------------------------------------------------------------------------------
SUMMARY OF TERMS
This summary highlights selected information from this prospectus supplement. It
does not contain all of the information you need to consider in making your
investment decision. TO UNDERSTAND ALL OF THE TERMS OF THE OFFERING OF THE
OFFERED CERTIFICATES, READ THIS ENTIRE DOCUMENT AND THE ACCOMPANYING PROSPECTUS
CAREFULLY.
RELEVANT PARTIES AND DATES
DEPOSITOR........................... Morgan Stanley Capital I Inc.
MASTER SERVICER..................... AMRESCO Services, L.P. See "Servicing of
the Mortgage Loans" and "Description of
the Certificates--Advances" in this
prospectus supplement.
SPECIAL SERVICER.................... Banc One Mortgage Capital Markets LLP.
See "Servicing of the Mortgage Loans--The
Operating Adviser" and "--General" in
this prospectus supplement.
TRUSTEE............................. LaSalle National Bank. See "Description
of the Certificates--The Trustee and the
Fiscal Agent" and "--Advances" in this
prospectus supplement.
FISCAL AGENT........................ ABN AMRO Bank N.V., a Netherlands banking
corporation and indirect corporate parent
of the Trustee. See "Description of the
Certificates--The Trustee and the Fiscal
Agent" and "--Advances" in this
prospectus supplement.
OPERATING ADVISER................... The holders of certificates representing
more than 50% of the aggregate
certificate balance of the most
subordinate class of certificates (with
Principal Amounts) outstanding at any
time of determination (or, if the
aggregate balance of such class of
certificates is less than 25% of the
initial aggregate certificate balance of
such class, of the next most subordinate
class of certificates (with Principal
Amounts)) may appoint a representative
for the purposes described in this
prospectus supplement. See "Servicing of
the Mortgage Loans--The Operating
Adviser" and "--General" in this
prospectus supplement.
MORTGAGE LOAN SELLERS............... Residential Funding Corporation, as to
103 mortgage loans, representing 46.5% of
the aggregate principal balance of the
mortgage pool; Wachovia Bank, National
Association, as to 39 mortgage loans,
representing 13.8% of the aggregate
principal balance of the mortgage pool;
and Morgan Stanley Mortgage Capital Inc.,
as to 87 mortgage loans, representing
39.7% of the aggregate principal balance
of the mortgage pool. Although there are
221 mortgage loans secured by 235
properties in the mortgage pool, for the
purposes of this prospectus supplement,
certain of the multiproperty loans are
deemed to be multiple loans each secured
by an individual property; hence, in
certain instances herein, the total
number of loans described will total 229.
See "Description of the Mortgage
Pool--The Sellers" in this prospectus
supplement.
UNDERWRITERS........................ Morgan Stanley & Co. Incorporated and
Residential Funding Securities
Corporation. See "Plan of Distribution"
in this prospectus supplement.
- --------------------------------------------------------------------------------
S-8
<PAGE>
- --------------------------------------------------------------------------------
CUT-OFF DATE........................ March 1, 1999.
CLOSING DATE........................ On or about March _, 1999.
DISTRIBUTION DATE................... The 15th day of each month, or, if such
15th day is not a business day, the
business day immediately following such
15th day, commencing in April 1999.
RECORD DATE......................... With respect to each distribution date,
the close of business on the last
business day of the preceding month.
OFFERED SECURITIES
GENERAL............................. The following 7 classes of Commercial
Mortgage Pass-Through Certificates are
being offered by this prospectus
supplement (collectively, the "Offered
Certificates") as part of Series
1999-RM1:
o Class A-1
o Class A-2
o Class B
o Class C
o Class D
o Class E
o Class F
Series 1999-RM1 will consist of a total
of 19 classes, the following twelve of
which are not being offered through this
prospectus supplement and the
accompanying prospectus: Class X, Class
G, Class H, Class J, Class K, Class L,
Class M, Class N, Class O and Class R-I,
Class R-II and Class R-III (collectively,
the "Private Certificates").
The Offered Certificates and the Private
Certificates will represent beneficial
ownership interests in a trust created by
Morgan Stanley Capital I Inc. The trust's
assets will primarily be 221 mortgage
loans secured by first liens on 235
commercial and multifamily properties.
- --------------------------------------------------------------------------------
S-9
<PAGE>
- --------------------------------------------------------------------------------
CERTIFICATE PRINCIPAL AMOUNT........ Your certificates will have the
approximate aggregate initial principal
amount set forth below, subject to a
variance of plus or minus 5%:
-----------------------------------------
Class A-1 $183,000,000 Principal Amount
-----------------------------------------
Class A-2 $429,255,000 Principal Amount
-----------------------------------------
Class B $ 42,966,000 Principal Amount
-----------------------------------------
Class C $ 45,113,000 Principal Amount
-----------------------------------------
Class D $ 12,890,000 Principal Amount
-----------------------------------------
Class E $ 34,372,000 Principal Amount
-----------------------------------------
Class F $ 17,186,000 Principal Amount
-----------------------------------------
PASS-THROUGH RATES
A. OFFERED CERTIFICATES....... Your certificates will accrue interest at
an annual rate called a "Pass-Through
Rate" which is set forth below:
-----------------------------------
Class A-1 6.00%, but not in
excess of NWAC Rate
-----------------------------------
Class A-2 6.31%, but not in
excess of NWAC Rate
-----------------------------------
Class B 6.45%, but not in
excess of NWAC Rate
-----------------------------------
Class C 6.70%, but not in
excess of NWAC Rate
-----------------------------------
Class D NWAC Rate minus 0.28%
-----------------------------------
Class E NWAC Rate minus 0.03%
-----------------------------------
Class F NWAC Rate minus 0.03%
-----------------------------------
Interest on the Offered Certificates will
be calculated based on a 360-day year
consisting of twelve 30-day months, or a
30/360 basis.
- --------------------------------------------------------------------------------
S-10
<PAGE>
- --------------------------------------------------------------------------------
The "NWAC Rate" for a particular
distribution date is a weighted average
of the mortgage loan interest rates in
effect as of the first day of the
preceding month, minus the weighted
average annual administrative cost of
0.1093% (which includes the servicing fee
rates, and the Trustee fee rate), and
adjusted as set forth herein. The
weighting of this average is based upon
the respective principal balances of
those mortgage loans.
B. CLASS X CERTIFICATES....... The Pass-Through Rate on the Class X
Certificates will be equal to the NWAC
Rate minus the weighted average of the
Pass-Through Rates of the classes of
certificates that have principal amounts.
The weighting will be based upon the
respective principal amount of those
classes.
The notional amount of the Class X
Certificates will generally be equal to
100% of the aggregate principal balance
of the mortgage loans outstanding from
time to time. The Class X Certificates
will receive interest only; they will not
be entitled to distributions of
principal.
For purposes of calculating the Class X
Pass-Through Rates, the mortgage loan
interest rates will not reflect any
default interest rate or any rate
increase occurring after an anticipated
repayment date. The mortgage loan
interest rates will also be determined
without regard to any loan term
modifications agreed to by the Special
Servicer or resulting from the borrower's
bankruptcy or insolvency. In addition, if
a mortgage loan does not accrue interest
on a 30/360 basis, its interest rate for
any month that is not a 30-day month will
be recalculated so that the amount of
interest that would accrue at that rate
in such month, calculated on a 30/360
basis, will equal the amount of interest
that actually accrues on that loan in
that month.
DISTRIBUTIONS
A. AMOUNT AND ORDER
OF DISTRIBUTIONS......... On each distribution date, funds
available for distribution from the
mortgage loans, net of specified trust
expenses, will be distributed in the
following amounts and order of priority:
Step 1/Class A and Class X: To interest
on Classes A-1 and A-2 and Class X, pro
rata, in accordance with their interest
entitlements.
Step 2/Class A: To the extent of funds
available for principal, to principal on
Classes A-1 and A-2, in that order, until
reduced to zero. If each class of
certificates other than Class A has been
reduced to zero, funds available for
principal will be distributed to Classes
A-1 and A-2, pro rata, rather than
sequentially.
Step 3/Class A: To reimburse Classes A-1
and A-2, pro rata, for any previously
unreimbursed losses on the mortgage loans
allocable to principal that were
previously borne by those classes.
- --------------------------------------------------------------------------------
S-11
<PAGE>
- --------------------------------------------------------------------------------
Step 4/Class B: To Class B as follows:
(a) to interest on Class B in the amount
of its interest entitlement; (b) to the
extent of funds available for principal,
to principal on Class B until reduced to
zero; and (c) to reimburse Class B for
any previously unreimbursed losses on the
mortgage loans allocable to principal
that were previously borne by that class,
together with interest.
Step 5/Class C: To Class C in a manner
analogous to the Class B allocations of
Step 4.
Step 6/Class D: To Class D in a manner
analogous to the Class B allocations of
Step 4.
Step 7/Class E: To Class E in a manner
analogous to the Class B allocations of
Step 4.
Step 8/Class F: To Class F in a manner
analogous to the Class B allocations of
Step 4.
Step 9/Subordinate Private Certificates:
In the amounts and order of priority
described in "Description of the
Certificates--Distributions" in this
prospectus supplement.
B. INTEREST AND PRINCIPAL
ENTITLEMENTS............. A description of each class's interest
entitlement can be found in "Description
of the Certificates--Distributions" in
this prospectus supplement. As described
in such section, there are circumstances
relating to the timing of prepayments in
which your interest entitlement for a
distribution date could be less than one
full month's interest at the Pass-Through
Rate on your certificate's principal
amount or notional amount.
The amount of principal required to be
distributed to the classes entitled to
principal on a particular distribution
date also can be found in "Description of
the Certificates--Distributions" in this
prospectus supplement.
C. PREPAYMENT
PREMIUMS................. The manner in which any prepayment
premiums and yield maintenance premiums
received during a particular collection
period will be allocated to the Class X
Certificates, on the one hand, and the
classes of certificates entitled to
principal, on the other hand, is
described in "Description of the
Certificates--Distributions" in this
prospectus supplement.
SUBORDINATION
A. GENERAL.................... The chart below describes the manner in
which the rights of various classes will
be senior to the rights of other classes.
Entitlement to receive principal and
interest on any distribution date is
depicted in descending order. The manner
in which mortgage loan losses are
allocated is depicted in ascending order.
(However, no principal payments or loan
losses will be allocated to the Class X
Certificates).
- --------------------------------------------------------------------------------
S-12
<PAGE>
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----------------------------
Class A-1, Class A-2,
Class X
----------------------------
|
----------------------------
Class B
----------------------------
|
----------------------------
Class C
----------------------------
|
----------------------------
Class D
----------------------------
|
----------------------------
Class E
----------------------------
|
----------------------------
Class F
----------------------------
|
----------------------------
Class G
----------------------------
|
----------------------------
Class H
----------------------------
|
----------------------------
Class J
----------------------------
|
----------------------------
Class K
----------------------------
|
----------------------------
Class L
----------------------------
|
----------------------------
Class M
----------------------------
|
----------------------------
Class N
----------------------------
|
----------------------------
Class O
----------------------------
NO OTHER FORM OF CREDIT ENHANCEMENT WILL
BE AVAILABLE FOR THE BENEFIT OF THE
HOLDERS OF THE OFFERED CERTIFICATES.
See "Description of the Certificates" in
this prospectus supplement.
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S-13
<PAGE>
- --------------------------------------------------------------------------------
B. SHORTFALLS IN AVAILABLE
FUNDS.................... The following types of shortfalls in
available funds will be allocated in the
same manner as mortgage loan losses: (i)
shortfalls resulting from additional
compensation (other than the servicing
fee) which the Master Servicer or Special
Servicer is entitled to receive; (ii)
shortfalls resulting from interest on
Advances made by the Master Servicer, the
Trustee or the Fiscal Agent (to the
extent not covered by default interest
and late payment charges paid by the
borrower); (iii) shortfalls resulting
from extraordinary expenses of the trust;
and (iv) shortfalls resulting from a
reduction of a mortgage loan's interest
rate by a bankruptcy court or from other
unanticipated or default-related expenses
of the trust.
Shortfalls in mortgage loan interest as a
result of the timing of prepayments (net
of the Master Servicer's servicing fee
payable on the related distribution date)
will be allocated to each class of
certificates, pro rata, based upon their
respective interest entitlements.
See "Description of the
Certificates-Distributions" in this
prospectus supplement.
THE MORTGAGE POOL
CHARACTERISTICS OF THE
MORTGAGE POOL
A. GENERAL.................... For a more complete description of the
mortgage loans, see the following
sections in this prospectus supplement:
o Description of the mortgage pool;
o Appendix I (characteristics of the
mortgage loans);
o Appendix II (characteristics of each
mortgage loan on a
property-by-property basis and certain
information regarding the multifamily
loans; and
o Appendix III (descriptions of the
largest mortgage loans).
All numerical information provided in
this prospectus supplement with respect
to the mortgage loans is approximate. All
weighted average information regarding
the mortgage loans reflects weighting of
the mortgage loans by the unpaid
principal balance of the mortgage loans
as of the Cut-off Date.
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S-14
<PAGE>
- --------------------------------------------------------------------------------
B. PRINCIPAL BALANCES......... The trust's primary assets will be 221
mortgage loans with an initial principal
balance of $859,306,538, subject to a
permitted variance of plus or minus 5%.
As of March 1, 1999, the outstanding
principal balances of the mortgage loans
in the mortgage pool ranged from $516,977
to $36,790,447 and the mortgage loans had
an average balance of $3,752,430. See
"Description of the Mortgage
Pool--Certain Terms and Characteristics
of the Mortgage Loans" in this prospectus
supplement.
C. NON-RECOURSE............... Substantially all of the mortgage loans
are non-recourse obligations. No mortgage
loan will be insured or guaranteed by any
governmental entity or private insurer,
or by any other person.
D. FEE SIMPLE/LEASEHOLD....... Each mortgage loan is secured by a first
mortgage lien on the borrower's fee
simple (or, in 3 cases, which represent
2.3% of the initial outstanding pool
balance, leasehold and in 1 case, which
represents 0.6% of the initial
outstanding pool balance, a leasehold
interest in a portion of the property and
a fee interest in the remainder of the
property) estate in an income-producing
real property.
E. PROPERTY PURPOSE........... 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:
Percentage of Number of
Initial Pool Mortgage
Property Type Balance Loans
----------------------------------------------
Retail 31.9% 62
----------------------------------------------
Multifamily 22.9% 64
----------------------------------------------
Office 18.4% 43
----------------------------------------------
Hospitality 10.4% 15
----------------------------------------------
Industrial 9.3% 27
----------------------------------------------
Mixed Use 4.6% 10
----------------------------------------------
Self-Storage 1.3% 5
----------------------------------------------
Manufactured Housing 0.9% 2
----------------------------------------------
Other 0.3% 1
----------------------------------------------
F. PROPERTY LOCATION.......... The number of mortgage loans, and the
approximate percentage of the initial
pool balance represented by such
- --------------------------------------------------------------------------------
S-15
<PAGE>
- --------------------------------------------------------------------------------
mortgage loans, that are secured by
mortgaged properties located in the five
states with the highest concentrations of
mortgaged properties are:
Percentage of Number of
Initial Pool Mortgage
State Balance Loans
----------------------------------------------
California 25.7% 48
----------------------------------------------
Southern 14.7% 30
California
----------------------------------------------
Northern 11.0% 18
California
----------------------------------------------
Georgia 11.9% 34
----------------------------------------------
Florida 8.4% 10
----------------------------------------------
Virginia 7.1% 18
----------------------------------------------
North Carolina 6.3% 13
----------------------------------------------
The remaining mortgaged properties are
located throughout 29 other states and
the District of Columbia. No other state
has a concentration of mortgaged
properties that represents security for
more than 4.9% of the initial outstanding
pool balance. See Appendix I hereto.
G. OTHER MORTGAGE LOAN
FEATURES................. As of March 1, 1999, the mortgage loans
had the following approximate
characteristics:
o No scheduled payment of
principal and interest on any
mortgage loan was thirty days or
more past due, and no mortgage
loan has been thirty days or
more delinquent in the past
year.
o One (1) group of mortgage loans,
which represents 0.2% of the
initial outstanding pool balance
is, within such group,
cross-collateralized with each
other.
o Seven (7) additional mortgage
loans are, in each case, secured
by one or more mortgages
encumbering multiple real
properties, all such mortgage
loans collectively representing
3.8% of the initial outstanding
pool balance of mortgage loans
and the total number of
properties securing such
multiproperty loans is 21.
o Twenty (20) groups of mortgage
loans (not including
cross-collateralized or single
note, multiple mortgage property
loans) are made to the same
borrower or have related
borrowers that are
- --------------------------------------------------------------------------------
S-16
<PAGE>
- --------------------------------------------------------------------------------
affiliated with one another
through partial or complete
direct or indirect common
ownership, the three largest of
these groups representing 5.4%,
3.0% and 2.9%, respectively, of
the initial outstanding pool
balance of mortgage loans.
o Twenty-three (23) mortgage
loans, representing 9.2% of the
initial outstanding pool balance
of mortgage loans, are secured
by a mortgaged properties which
are 100% leased to a single
tenant.
o All mortgage loans bear interest
at fixed rates although three
(3) of the mortgage loans
include hyper-amortization
provisions as described below.
o No mortgage loan permits
negative amortization or the
deferral of accrued interest.
H. BALLOON LOANS.............. Two hundred and twelve (212) of the
mortgage loans, representing 94.6% of the
initial outstanding pool balance, provide
for one of the following:
o Monthly payments based on
amortization schedules
significantly longer than their
respective terms to maturity
(209 of such mortgage loans,
representing 87.1% of the
initial outstanding pool
balance); or
o Increases in the mortgage rate
and/or principal amortization at
a date prior to stated maturity
that create an incentive for the
related borrower to prepay the
loan (3 of such mortgage loans,
representing 7.5% of the initial
outstanding pool balance) (the
"Hyper-Amortization Loans"); but
balloon payments on such
mortgage loans are anticipated
to be made on the date prior to
stated maturity that these
increases occur (the
"Anticipated Repayment Date")
unless such loans are prepaid.
The remaining 17 mortgage loans,
representing 5.4% of the initial
outstanding pool balance, have an
expected balloon balance equal to less
than 10% of the original principal
balance of each loan.
I. PREPAYMENT PROVISIONS;
DEFEASANCE LOANS.......... As of March 1, 1999, all of the mortgage
loans restricted voluntary principal
prepayments as follows:
o Eighty-eight (88) mortgage
loans, representing 44.0% of the
initial outstanding pool
balance,
- --------------------------------------------------------------------------------
S-17
<PAGE>
- --------------------------------------------------------------------------------
contain a defeasance provision,
whereby the related borrower is
permitted (after an initial
lockout period ending on a date
determined by the related
mortgage note during which
voluntary prepayments are
prohibited and until generally
three to six months prior to its
scheduled maturity date or
anticipated repayment date, as
applicable) to substitute
direct, non-callable United
States Treasury obligations for
the mortgaged property securing
the mortgage loan, thereby
releasing the property from the
lien of the mortgage without
prepaying the mortgage loan.
o One hundred nineteen (119)
mortgage loans, representing
48.0% of the initial outstanding
pool balance, prohibit voluntary
prepayments during an initial
lockout period and thereafter
impose, until generally 3 to 6
months prior to maturity (or
anticipated repayment date, as
applicable), prepayment premiums
calculated (i) in the case of
one hundred-sixteen (116)
mortgage loans representing
46.4% of the initial outstanding
pool balance, on the basis of
the greater of a yield
maintenance formula and 1% of
the amount of principal prepaid,
(ii) in the case of two (2)
mortgage loans, representing
1.4% of the initial outstanding
pool balance, on the basis of a
yield maintenance formula, and
(iii) in the case of one
mortgage loan representing 0.2%
of the initial outstanding pool
balance, on the basis of a
prepayment premium equal to 3%
of the amount of principal
prepaid.
o Five (5) mortgage loans
representing 1.9% of the initial
outstanding pool balance, at the
borrower's option, either (i)
prohibit voluntary prepayments
during an initial lockout period
as determined in the related
note and, thereafter until 3
months prior to maturity, allow
the related borrower to impose a
prepayment premium calculated on
the basis of the greater of a
yield maintenance formula and 1%
of the amount prepaid, or (ii)
prohibit voluntary payments
during an initial lockout period
as determined in the related
note and then allow the borrower
to defease the loan by
substituting direct,
non-callable United States
Treasury obligations for the
mortgaged property, thereby
releasing the property from the
lien of the mortgage without
prepaying the mortgage loan.
o Seventeen (17) mortgage loans,
representing 6.1% of the initial
outstanding pool balance, do not
provide for a lockout period,
but impose, until
- --------------------------------------------------------------------------------
S-18
<PAGE>
- --------------------------------------------------------------------------------
0 to 6 months prior to maturity,
a prepayment premium calculated
(i) on the basis of the greater
of a yield maintenance formula
and 1% of the amount prepaid in
the case of eight (8) mortgage
loans representing 4.2% of the
initial outstanding pool
balance, (ii) on the basis of a
declining percentage of the
amount prepaid in the case of
four (4) mortgage loans
representing 1.0% of the initial
outstanding pool balance, and
(iii) on the basis of the
greater of a yield maintenance
formula and 3% of the amount
prepaid for a period of 30 to 60
months, and thereafter on the
basis of a declining percentage
of the amount prepaid, in the
case of five (5) mortgage loans,
representing 1.0% of the initial
outstanding pool balance.
o Notwithstanding the foregoing,
three mortgage loans,
representing 0.7% of the initial
outstanding pool balance, permit
voluntary principal prepayments
of up to 10% of the original
principal balance of the
mortgage loan in any calendar
year without the imposition of a
prepayment premium (the "10%
Free Prepayment Loans").
J. MORTGAGE LOAN RANGES AND
WEIGHTED AVERAGES......... As of March 1, 1999, the mortgage loans
will have the following additional
characteristics:
I. MORTGAGE RATES Mortgage rates ranging from 6.160%
per annum to 9.125% per annum, and
a weighted average mortgage rate of
7.198% per annum;
II. REMAINING TERMS Remaining terms to scheduled
maturity ranging from 22 months to
234 months, and a weighted average
remaining term to scheduled
maturity of 122 months;
III. REMAINING Remaining amortization terms
AMORTIZATION TERMS ranging from 148 months to 357
months, and a weighted average
remaining amortization term of 320
months;
IV. LOAN-TO-VALUE RATIOS Loan-to-value ratios ranging from
26.1% to 81.1% and a weighted
average loan-to-value ratio
(calculated as described in this
prospectus supplement under
"Description of the Mortgage
Pool--Additional Mortgage Loan
Information") of 70.8%; and
V. DEBT SERVICE COVERAGE Debt service coverage ratios
RATIOS ranging from 1.03x to 2.23x and a
weighted average debt service
coverage ratio (calculated as
described in this prospectus
supplement under "Description of
the Mortgage Pool --Additional
Mortgage Loan Information") of
1.42x.
- --------------------------------------------------------------------------------
S-19
<PAGE>
- --------------------------------------------------------------------------------
See "Description of the Mortgage
Pool--Representations and Warranties" and
"--Repurchases and Other Remedies" in
this prospectus supplement.
The mortgage loans are more particularly
described herein under "Description of
the Mortgage Pool," in the tables in
Appendix I and in "Certain
Characteristics of the Mortgage Loans" in
Appendix II. In addition, certain
information with respect to mortgage
loans secured by mortgages on multifamily
properties is also set forth in Appendix
II and a brief summary of the material
terms of the largest mortgage loans in
the mortgage pool is set forth in
Appendix III.
ADVANCES OF PRINCIPAL AND INTEREST
A. GENERAL.................... The Master Servicer is required to
advance (each, a "P&I Advance")
delinquent monthly mortgage loan
payments, if it determines that the
advance will be recoverable. P&I Advances
will generally equal the delinquent
portion of the monthly mortgage loan
payment. The Master Servicer will not be
required to advance interest in excess of
a loan's regular interest rate (not
including any default rate or any rate
increase after an anticipated repayment
date). The Master Servicer also is not
required to advance prepayment or yield
maintenance premiums, or balloon
payments. If an advance is made, the
Master Servicer will defer rather than
advance its servicing fee, but will
advance the Trustee's fee.
If a borrower fails to pay amounts due on
the maturity date of the related mortgage
loan, the Servicer will be required on
and after such date and until final
liquidation thereof, to advance only an
amount equal to the interest and
principal portion of the constant
mortgage loan payment due immediately
prior to the maturity date, with interest
adjusted to the mortgage pass-through
rate (less the master servicing fee) to
the extent not received.
If the Master Servicer fails to make a
required P&I Advance, the Trustee will be
required to make the P&I Advance. If the
Trustee fails to make a required P & I
Advance, the Fiscal Agent -- ABN AMRO
Bank N.V., the indirect corporate parent
of the Trustee -- will be required to
make such P&I Advance. In both cases, the
obligation to make an Advance will also
be subject to a determination of
recoverability.
P&I Advances are intended to maintain a
regular flow of scheduled interest and
principal payments to the
certificateholders and are not intended
to guarantee or insure against losses.
Advances which cannot be
- --------------------------------------------------------------------------------
S-20
<PAGE>
- --------------------------------------------------------------------------------
reimbursed out of collections on, or in
respect of, the related mortgage loans
will be reimbursed directly from any
other collections on the mortgage loans
as provided in this prospectus supplement
and this will cause losses to be borne by
certificateholders in the priority
specified in this prospectus supplement.
The Servicer, the Trustee and the Fiscal
Agent, as the case may be, will be
entitled to interest on any advances
made, such interest accruing at the rate
and payable under the circumstances
described herein. Interest accrued on
outstanding advances may result in
reductions in amounts otherwise payable
on the certificates.
See "The Pooling and Servicing Agreement
-- Advances" in this prospectus
supplement.
B. APPRAISAL REDUCTION
EVENT ADVANCES............ Certain adverse events affecting a
mortgage loan, called "Appraisal
Reduction Events," will require the
Special Servicer to obtain a new
appraisal on the related mortgaged
property. Based on the appraised value in
such appraisal, it may be necessary to
calculate an "Appraisal Reduction
Amount." The amount required to be
advanced in respect of a mortgage loan
that has been subject to an Appraisal
Reduction Event will be reduced so that
the Master Servicer will not be required
to advance interest on the Appraisal
Reduction Amount (as described in this
prospectus supplement). Due to the
payment priorities described above, this
will reduce the funds available to pay
interest on the most subordinate class or
classes of certificates then outstanding.
See "Description of the Certificates --
Appraisal Reductions" in this prospectus
supplement.
ADDITIONAL ASPECTS OF CERTIFICATES
RATINGS............................. The Offered Certificates will not be
issued unless each of the offered classes
receives the following ratings from Duff
& Phelps Credit Rating Co. and Moody's
Investors Service, Inc.:
- --------------------------------------------------------------------------------
S-21
<PAGE>
- --------------------------------------------------------------------------------
---------------------------------
Ratings
Class DCR/Moody's
---------------------------------
Class A-1 and A-2 AAA/Aaa
---------------------------------
Class B AA/Aa2
---------------------------------
Class C A/A2
---------------------------------
Class D A-/A3
---------------------------------
Class E BBB/Baa2
---------------------------------
Class F BBB-/NR
---------------------------------
A rating agency may lower or withdraw a
security rating at any time.
See "Ratings" in this prospectus
supplement and the prospectus for a
discussion of the basis upon which
ratings are given, the limitations of and
restrictions on the ratings, and the
conclusions that should not be drawn from
a rating.
OPTIONAL TERMINATION................ On any distribution date on which the
aggregate principal balance of the
mortgage loans remaining in the trust is
less than 1% of the aggregate unpaid
balance of the mortgage loans as of the
Cut-off Date, the Depositor, the Master
Servicer, the Special Servicer, the
majority holders of the Controlling Class
and any holder of a majority interest in
the Class R-I Certificates will have the
option to purchase all of the remaining
mortgage loans (and all property acquired
through exercise of remedies in respect
of any mortgage loan), at the price
specified in this prospectus supplement.
Exercise of this option will terminate
the trust and retire the then-outstanding
certificates.
See "Description of the
Certificates--Optional Termination" in
this prospectus supplement.
DENOMINATIONS....................... The Class A-1 and Class A-2 Certificates
will be offered in minimum denominations
of $25,000. The Class B Certificates will
be offered in minimum denominations of
$50,000. The remaining Offered
Certificates will be offered in minimum
denominations of $100,000. Investments in
excess of the minimum denominations may
be made in multiples of $1.
REGISTRATION, CLEARANCE AND
SETTLEMENT.......................... Your certificates will be registered in
the name of CEDE & Co., as nominee of The
Depository Trust Company, and will not be
registered in your name. You will not
receive a definitive certificate
representing your interest, except in
very limited circumstances described in
this
- --------------------------------------------------------------------------------
S-22
<PAGE>
- --------------------------------------------------------------------------------
prospectus supplement. As a result, you
will not be a certificateholder of
record, and you will receive
distributions on your certificates and
reports relating to distributions only
through DTC, Cedelbank ("Cedel") or
Euroclear or through participants in DTC,
Cedel or Euroclear.
You may hold your Offered Certificates
through: (i) The Depository Trust Company
("DTC") in the United States; or (ii)
Cedel or The Euroclear System
("Euroclear") in Europe. Transfers within
DTC, Cedel or Euroclear will be made in
accordance with the usual rules and
operating procedures of those systems.
Cross-market transfers between persons
holding directly through DTC, Cedel or
Euroclear will be effected in DTC through
the relevant depositories of Cedel or
Euroclear.
The Depositor may elect to terminate the
book-entry system through DTC with
respect to all or any portion of any
class of the Offered Certificates.
See "Description of the
Certificates--Book-Entry Registration"
and "-Definitive Certificates" in this
prospectus supplement and "Description of
the Certificates-General" in the
prospectus.
We expect that the Offered Certificates
will be delivered in book-entry form
through the facilities of DTC, Cedel or
Euroclear on or about March __, 1999.
TAX STATUS.......................... An election will be made to treat the
Trust as three separate REMICs - - a
Lower-Tier REMIC, a Middle-Tier REMIC,
and an Upper-Tier REMIC - - for federal
income tax purposes. In the opinion of
counsel, the Trust will qualify for this
treatment.
Pertinent federal income tax consequences
of an investment in the Offered
Certificates include:
o Each class of Offered
Certificates will constitute
"regular interests" in the
Upper-Tier REMIC.
o The regular interests will be
treated as newly originated debt
instruments for federal income
tax purposes.
o Beneficial owners will be
required to report income
thereon in accordance with the
accrual method of accounting.
o One or more classes of Offered
Certificates may be issued with
original issue discount.
- --------------------------------------------------------------------------------
S-23
<PAGE>
- --------------------------------------------------------------------------------
See "Certain Federal Income Tax
Consequences" in this prospectus
supplement and "Certain Federal Income
Tax Consequences-REMICs-Taxation of
Owners of REMIC Regular Certificates" in
the prospectus.
ERISA CONSIDERATIONS................ Subject to the satisfaction of important
conditions described under "ERISA
Considerations" in this prospectus
supplement and in the accompanying
prospectus, the Class A and Class X
Certificates may be purchased by persons
investing assets of employee benefit
plans or individual retirement accounts.
THE CLASS B, CLASS C, CLASS D, CLASS E
AND CLASS F CERTIFICATES MAY NOT BE
PURCHASED BY, OR TRANSFERRED TO AN
EMPLOYEE BENEFIT PLAN OR INDIVIDUAL
RETIREMENT ACCOUNT OR ANY PERSON
INVESTING THE ASSETS OF AN EMPLOYEE
BENEFIT PLAN OR INDIVIDUAL RETIREMENT
ACCOUNT, UNLESS SUCH TRANSACTION IS
COVERED BY A PROHIBITED TRANSACTION CLASS
EXEMPTION ISSUED BY THE U.S. DEPARTMENT
OF LABOR.
LEGAL INVESTMENTS................... The Offered Certificates will not
constitute "mortgage related securities"
for purposes of the Secondary Mortgage
Market Enhancement Act of 1984, as
amended ("SMMEA").
No representation is made regarding the
proper characterization of the Offered
Certificates for purposes of any
applicable legal investment restrictions,
regulatory capital requirements or other
similar purposes. Regulated entities
should consult with their own advisors
regarding these matters.
See "Legal Investment" in this prospectus
supplement and in the accompanying
prospectus.
- --------------------------------------------------------------------------------
S-24
<PAGE>
RISK FACTORS
You should carefully consider the risks before making an investment
decision. In particular, the timing and amount of distributions on your
certificates will depend on payments received on and other recoveries with
respect to the mortgage loans. Therefore, you should carefully consider the risk
factors relating to the mortgage loans and the mortgaged properties.
The risks and uncertainties described below are not the only ones relating
to your certificates. Additional risks and uncertainties not presently known to
us or that we currently deem immaterial or unlikely to occur may also impair
your investment.
If any of the following risks actually occur, your investment could be
materially and adversely affected.
This prospectus supplement also contains forward-looking statements that
involve risks and uncertainties. Actual results could differ materially from
those anticipated in these forward-looking statements as a result of certain
factors, including the risks described below and elsewhere in this prospectus
supplement.
MORTGAGE LOANS ARE Payments under the mortgage loans are not
NONRECOURSE AND ARE NOT insured or guaranteed by any person or
INSURED OR GUARANTEED entity.
Substantially all of the mortgage loans
are nonrecourse loans. If a default
occurs, the lender's remedies generally
are limited to foreclosing against the
specific properties and other assets that
have been pledged to secure the loan.
Payment of amounts due under the mortgage
loan prior to maturity is consequently
dependent primarily on the sufficiency of
the net operating income of the mortgaged
property. Payment of the mortgage loan at
maturity is primarily dependent upon the
borrower's ability to sell or refinance
the property for an amount sufficient to
repay the loan.
Two hundred and nineteen (219) of the
mortgage loans, representing 96.1% of the
initial outstanding pool balance, were
originated within 24 months prior to the
Cut-off Date and all mortgage loans were
originated within 60 months prior to the
Cut-off Date. Consequently, the mortgage
loans do not have a long standing payment
history.
COMMERCIAL LENDING IS The mortgage loans are secured by various
DEPENDENT UPON NET types of income-producing commercial
OPERATING INCOME properties. Commercial lending is
generally thought to expose a lender to
greater risk than one-to-four family
residential lending because it typically
involves larger loans to a single
borrower.
The repayment of a commercial loan is
typically dependent upon the ability of
the applicable property to produce cash
flow. Even the liquidation value of a
commercial property is determined, in
substantial part, by the amount of the
property's cash flow (or its potential to
generate cash flow). However, net
operating income and cash flow can be
volatile and may be insufficient to cover
debt service on the loan at any given
time.
The net operating income, cash flow and
property value of the mortgaged
properties may be adversely affected by a
large number of factors. Some of these
factors relate to the property itself,
such as:
o the age, design and construction
quality of the property;
S-25
<PAGE>
o perceptions regarding the
safety, convenience and
attractiveness of the property;
o the proximity and attractiveness
of competing properties;
o the adequacy of the property's
management and maintenance;
o increases in operating expenses
at the property and in relation
to competing properties;
o an increase in the capital
expenditures needed to maintain
the property or make
improvements;
o the dependence upon a single
tenant, or a concentration of
tenants in a particular business
or industry;
o a decline in the financial
condition of a major tenant;
o an increase in vacancy rates;
and
o a decline in rental rates as
leases are renewed or entered
into with new tenants.
Others factors are more general in
nature, such as:
o national, regional or local
economic conditions (including
plant closings, industry
slowdowns and unemployment
rates);
o local real estate conditions
(such as an oversupply of
competing properties, space or
multifamily housing);
o demographic factors;
o decreases in consumer
confidence;
o changes in consumer tastes and
preferences; and
o retroactive changes in building
codes.
The volatility of net operating income
will be influenced by many of the
foregoing factors, as well as by:
o the length of tenant leases;
o the creditworthiness of tenants;
o tenant defaults;
o in the case of rental
properties, the rate at which
new rentals occur; and
o the property's "operating
leverage" (i.e., the percentage
of total property expenses in
relation to revenue, the ratio
of fixed operating
S-26
<PAGE>
expenses to those that vary with
revenues, and the level of
capital expenditures required to
maintain the property and to
retain or replace tenants).
A decline in the real estate market or in
the financial condition of a major tenant
will tend to have a more immediate effect
on the net operating income of properties
with short-term revenue sources and may
lead to higher rates of delinquency or
defaults under mortgage loans.
SOME MORTGAGED Some of the mortgaged properties may not
PROPERTIES MAY NOT BE be readily convertible to alternative
READILY CONVERTIBLE TO uses if those properties were to become
ALTERNATIVE USES unprofitable for any reason. Converting
commercial properties to alternate uses
generally requires substantial capital
expenditures. In addition, zoning or
other restrictions also may prevent
alternative uses. The liquidation value
of any such mortgaged property
consequently may be substantially less
than would be the case if the property
were readily adaptable to other uses.
PROPERTY VALUE MAY BE Various factors may adversely affect the
ADVERSELY AFFECTED EVEN value of the mortgaged properties without
WHEN CURRENT OPERATING affecting the properties' current net
INCOME IS NOT operating income. These factors include,
among others:
o changes in governmental
regulations, fiscal policy,
zoning or tax laws;
o potential environmental
legislation or liabilities or
other legal liabilities;
o the availability of refinancing;
and
o changes in interest rate levels.
TENANT CONCENTRATION ENTAILS A deterioration in the financial
RISK condition of a tenant can be particularly
significant if a mortgaged property is
leased to a single tenant, or a small
number of tenants. Mortgaged properties
leased to a single tenant, or a small
number of tenants, also are more
susceptible to interruptions of cash flow
if a tenant fails to renew its lease.
This is so because: (i) the financial
effect of the absence of rental income
may be severe; (ii) more time may be
required to re-lease the space; and (iii)
substantial capital costs may be incurred
to make the space appropriate for
replacement tenants.
Twenty-three (23) mortgage loans
(representing 9.2% of the initial
outstanding pool balance) are secured by
mortgaged properties leased to single
tenants, some of which are borrower
related.
Retail, office and industrial properties
also may be adversely affected if there
is a concentration of particular tenants
among the mortgaged properties or of
tenants in a particular business or
industry.
MORTGAGED PROPERTIES If a mortgaged property has multiple
LEASED TO MULTIPLE tenants, re-leasing expenditures may be
TENANTS ALSO HAVE RISKS more frequent than in the case of
mortgaged properties with fewer tenants,
thereby reducing the cash flow available
for debt service payments. Multi-tenanted
mortgaged properties also may experience
higher continuing vacancy rates and
greater volatility in rental income and
expenses.
S-27
<PAGE>
RISKS RELATING TO LOAN The effect of mortgage pool loan losses
CONCENTRATION will be more severe: (i) if the pool is
comprised of a small number of loans,
each with a relatively large principal
amount; or (ii) if the losses relate to
loans that account for a
disproportionately large percentage of
the pool's aggregate principal balance.
The 10 largest loans equal 20.3% of the
mortgage pool. Losses on any of these
loans may have a particularly adverse
effect on the Offered Certificates.
Each of the other mortgage loans
represents less than 1.1% of the Cut-off
Date aggregate principal balance.
A concentration of mortgaged property
types or of mortgage loans with the same
borrower or related borrowers also can
pose increased risks. As to property
types:
o retail properties represent
31.9% of the aggregate principal
balance of the mortgage pool as
of the Cut-off Date;
o multifamily properties represent
22.9%;
o office properties represent
18.4%;
o hospitality properties represent
10.4%;
o industrial properties represent
9.3%;
o mixed use properties represent
4.6%;
o self storage properties
represent 1.3%;
o manufactured housing properties
represent 0.9%; and
o other use properties represent
0.3%.
With respect to concentration of
borrowers, twenty groups of mortgage
loans (not including cross-collateralized
or single note multiple property loans)
are made to the same borrower or
borrowers related through common
ownership and where, in general, the
related mortgaged properties are commonly
managed. The three largest of these
groups represent 5.4%, 3.0%, and 2.9%
respectively of the mortgage pool.
GEOGRAPHIC
CONCENTRATION ENTAILS Concentrations of mortgaged properties in
RISKS geographic areas may increase the risk
that adverse economic or other
developments or a natural disaster
affecting a particular region of the
country could increase the frequency and
severity of losses on mortgage loans
secured by the properties. In recent
periods, several regions of the United
States have experienced significant real
estate downturns. Regional economic
declines or conditions in regional real
estate markets could adversely affect the
income from, and market value of, the
mortgaged properties. Other regional
factors - - e.g., earthquakes, floods or
hurricanes or changes in governmental
rules or fiscal policies - - also may
adversely affect the mortgaged
properties. For example, mortgaged
properties located in California may be
more susceptible to certain hazards (such
as earthquakes) than properties in other
parts of the country.
S-28
<PAGE>
The mortgaged properties are located in
34 states and the District of Columbia.
Approximately 25.7% of the mortgaged
properties (based on the Cut-off Date
principal amount) are located in
California, and there are 4 other states
in which 5% or more of the mortgaged
properties (based on the initial
outstanding pool balance) are located.
See "Description of the Mortgage Pool" in
this prospectus supplement.
RETAIL PROPERTIES HAVE Retail properties secure 62 of the
SPECIAL RISKS underlying mortgage loans (representing
31.9% of the initial outstanding pool
balance). The quality and success of a
retail property's tenants significantly
affect the property's value. For example,
if the sales of retail tenants were to
decline, rents tied to a percentage of
gross sales may decline and those tenants
may be unable to pay their rent or other
occupancy costs.
The presence or absence of an "anchor
tenant" in a shopping center also can be
important, because anchors play a key
role in generating customer traffic and
making a center desirable for other
tenants. The economic performance of an
anchored retail property will
consequently be adversely affected by:
o an anchor tenant's failure to
renew its lease;
o termination of an anchor
tenant's lease;
o the bankruptcy or economic
decline of an anchor tenant or
self-owned anchor; or
o the cessation of the business of
a self-owned anchor or of an
anchor tenant (notwithstanding
its continued payment of rent).
If anchor stores in a mortgaged property
were to close, the related borrower may
be unable to replace those anchors in a
timely manner or without suffering
adverse economic consequences.
Furthermore, certain of the anchor stores
at the retail properties have co-tenancy
clauses in their leases or operating
agreements which permit those anchors to
cease operating if certain other stores
are not operated at those locations. The
breach of various other covenants in
anchor store leases or operating
agreements also may permit those stores
to cease operating. Certain non-anchor
tenants at retail properties also may be
permitted to terminate their leases if
certain other stores are not operated or
if those tenants fail to meet certain
business objectives.
Retail properties also face competition
from sources outside a given real estate
market. For example, all of the following
compete with more traditional retail
properties for consumer dollars: factory
outlet centers; discount shopping centers
and clubs; catalogue retailers; home
shopping networks; Internet web sites;
and telemarketing. Continued growth of
these alternative retail outlets (which
often have lower operating costs) could
adversely affect the rents collectible at
the retail properties included in the
mortgage pool, as well as the income
from, and market value of, the mortgaged
properties.
Moreover, additional competing retail
properties may be built in the areas
where the retail properties are located.
S-29
<PAGE>
MULTIFAMILY PROPERTIES Multifamily properties secure 64 of the
HAVE underlying mortgage loans (representing
SPECIAL RISKS 22.9% of the initial outstanding pool
balance).
A large number of factors may adversely
affect the value and successful operation
of a multifamily property, including:
o the physical attributes of the
apartment building (e.g., its
age, appearance and construction
quality);
o the location of the property
(e.g., a change in the
neighborhood over time);
o the ability of management to
provide adequate maintenance and
insurance;
o the types of services the
property provides;
o the property's reputation;
o the level of mortgage interest
rates (which may encourage
tenants to purchase rather than
rent housing);
o the presence of competing
properties;
o adverse local or national
economic conditions;
o state and local regulations;
and
o reductions in government
assistance/rent subsidy
programs.
OFFICE PROPERTIES HAVE Office properties secure 43 of the
SPECIAL RISKS underlying mortgage loans (representing
18.4% of the initial outstanding pool
balance).
A large number of factors may adversely
affect the value of office properties,
including:
o the quality of an office
building's tenants;
o the diversity of an office
building's tenants (or reliance
on a single or dominant tenant);
o the physical attributes of the
building in relation to
competing buildings (e.g., age,
condition, design, location,
access to transportation and
ability to offer certain
amenities, such as sophisticated
building systems);
o the desirability of the area as
a business location; and
o the strength and nature of the
local economy (including labor
costs and quality, tax
environment and quality of life
for employees).
Moreover, the cost of refitting office
space for a new tenant is often higher
than the cost of refitting other types of
property.
S-30
<PAGE>
HOSPITALITY PROPERTIES Hospitality properties secure 15 of the
HAVE SPECIAL RISKS underlying mortgage loans (representing
10.4% of the initial outstanding pool
balance). Various factors may adversely
affect the economic performance of a
hotel, including:
o adverse economic and social
conditions, either local,
regional or national (which may
limit the amount that can be
charged for a room and reduce
occupancy levels);
o the construction of competing
hotels or resorts;
o continuing expenditures for
modernizing, refurbishing, and
maintaining existing facilities
prior to the expiration of their
anticipated useful lives;
o a deterioration in the financial
strength or managerial
capabilities of the owner and
operator of a hotel; and
o changes in travel patterns
caused by changes in access,
energy prices, strikes,
relocation of highways, the
construction of additional
highways or other factors.
Because hotel rooms generally are rented
for short periods of time, the financial
performance of hotels tends to be
affected by adverse economic conditions
and competition more quickly than other
types of commercial properties.
Moreover, the hotel and lodging industry
is generally seasonal in nature. This
seasonality can be expected to cause
periodic fluctuations in a hotel
property's revenues, occupancy levels,
room rates and operating expenses.
RISKS RELATING TO Certain of the hospitality properties are
AFFILIATION WITH A franchises of national hotel chains or
FRANCHISE OR HOTEL managed by a hotel management company.
MANAGEMENT COMPANY The performance of a hotel property
affiliated with a franchise or hotel
management company depends in part on:
(i) the continued existence and
financial strength of the
franchisor or hotel
management company;
(ii) the public perception of
the franchise or hotel
chain service mark; and
(iii) the duration and terms of
the franchise licensing or
agreements.
Any provision in a franchise agreement or
management agreement providing for
termination because of a bankruptcy of a
franchisor or manager generally will not
be enforceable.
The transferability of franchise license
agreements may be restricted. In the
event of a foreclosure, the lender or its
agent may not have the right to use the
franchise license without the
franchisor's consent. Conversely, in the
case of certain mortgage loans, the
lender may be unable to remove a
franchisor or a hotel management company
that it desires to replace following a
foreclosure.
S-31
<PAGE>
Further, in the event of a foreclosure,
the Trustee or a purchaser of such
mortgaged property probably would not be
entitled to the rights under any liquor
license for the mortgaged property. Such
party would be required to apply in its
own right for such a license, and we
cannot assure you that a new license
could be obtained.
The largest concentration of hospitality
properties which are managed by the same
hotel management company or affiliated
companies consists of two mortgage loans
(representing 5.4% of the initial
outstanding pool balance) secured by two
mortgaged properties which are managed by
Ocean Properties, Ltd., or affiliates
thereof.
HOTEL AFFILIATION The economic decline of a particular
CONCENTRATION ENTAILS hotel chain generally may have an adverse
RISKS effect on all hotels operated by that
chain. In this regard, the largest
concentration of any hotel chain in the
mortgage loan pool consists of one
mortgage loan (representing 4.3% of the
initial outstanding pool balance) secured
by a mortgaged property that is operated
as a Hilton hotel.
INDUSTRIAL PROPERTIES Industrial properties secure 27 of the
HAVE SPECIAL RISKS underlying mortgage loans (representing
9.3% of the initial outstanding pool
balance). Various factors may adversely
affect the economic performance of an
industrial property including:
o reduced demand for industrial
space because of a decline in a
particular industry segment;
o a property becoming functionally
obsolete;
o the unavailability of labor
sources;
o changes in access, energy
prices, strikes, relocation of
highways, the construction of
additional highways or other
factors;
o a change in the proximity of
supply sources; and
o environmental hazards.
SELF-STORAGE FACILITIES Self-storage facilities secure 5 of the
HAVE SPECIAL RISKS underlying mortgage loans (representing
1.3% of the initial outstanding pool
balance). Various factors may adversely
affect the value and successful operation
of a self-storage facility:
o competition because both
acquisition and development
costs and break-even occupancy
are relatively low;
o conversion of a self-storage
facility to an alternative use
generally requires substantial
capital expenditures;
o security concerns; and
o user privacy and ease of access
to individual storage space may
increase environmental risks
(although lease agreements
generally prohibit users from
storing hazardous substances in
the units).
S-32
<PAGE>
The environmental assessments discussed
herein did not include an inspection of
the contents of the self-storage units of
the self-storage properties. Accordingly,
there is no assurance that all of the
units included in the self-storage
properties are free from hazardous
substances or will remain so in the
future.
MANUFACTURED HOUSING Manufactured Housing Communities secure 2
COMMUNITIES HAVE of the underlying mortgage loans
SPECIAL RISKS (representing 0.9% of the initial
outstanding pool balance). Loans secured
by liens on properties of these types
pose risks not associated with loans
secured by liens on other types of
income-producing real estate, including:
o the number of competing
manufactured housing communities
and other residential
developments (such as apartment
buildings and single family
homes) in the local market;
o the age, appearance and
reputation of the community;
o the ability of management to
provide adequate maintenance and
insurance; and
o the types of services and
amenities it provides.
The Manufactured Housing Communities are
"special purpose" properties that could
not be readily converted to general
residential, retail or office use.
Some properties within the Manufactured
Housing Communities may lease sites to
non-permanent recreational vehicles,
which occupancy is often very seasonal in
nature.
CERTAIN ADDITIONAL RISKS The income from, and market value of, the
RELATING TO TENANTS mortgaged properties leased to various
tenants would be adversely affected if:
o space in the mortgaged
properties could not be leased
or re-leased;
o tenants were unable to meet
their lease obligations;
o a significant tenant were to
become a debtor in a bankruptcy
case; or
o rental payments could not be
collected for any other reason.
Repayment of the mortgage loans secured
by retail and office properties will be
affected by the expiration of leases and
the ability of the respective borrowers
to renew the leases or relet the space on
comparable terms.
Even if vacated space is successfully
relet, the costs associated with
reletting, including tenant improvements
and leasing commissions, could be
substantial and could reduce cash flow
from the mortgaged properties. Moreover,
if a tenant defaults in its obligations
to a borrower, the borrower may incur
substantial costs and experience
significant delays associated with
enforcing its rights and protecting its
investment, including costs incurred in
renovating and reletting the property.
S-33
<PAGE>
TENANT BANKRUPTCY The bankruptcy or insolvency of a major
ENTAILS RISKS tenant, or a number of smaller tenants,
in retail, industrial and office
properties may adversely affect the
income produced by a mortgaged property.
Under the Bankruptcy Code, a tenant has
the option of assuming or rejecting any
unexpired lease. If the tenant rejects
the lease, the landlord's claim for
breach of the lease would be a general
unsecured claim against the tenant
(absent collateral securing the claim).
The claim would be limited to the unpaid
rent under the lease for the periods
prior to the bankruptcy petition (or
earlier surrender of the leased
premises), plus the rent under the lease
for the greater of one year, or 15% (not
to exceed three years), of the remaining
term of such lease.
With respect to a loan which represents
1.2% of the initial outstanding pool
balance, the parent of the tenant which
leases 100% of the property is currently
operating under Chapter 11. The tenant is
not in bankruptcy but if it were it would
have the right to reject the lease and
the related borrower would have an
unsecured claim in an amount that is
prescribed by law. See "Appendix
II--Significant Loan Summaries--Four
Alleghany Office Center Loan and
Property" in this prospectus supplement.
RISKS RELATING TO Three (3) of the mortgage loans
GOVERNMENT ASSISTED (representing 1.3% of the initial
PROPERTIES outstanding pool balance) are known to
have tenants eligible for rental subsidy
payments under certain federal housing
assistance payment programs, including
Section 8 of United States Housing Act of
1937, as amended ("Section 8") or are
secured by multifamily properties subject
to rental restrictions. Under the Section
8 program, a mortgaged property must
satisfy certain requirements to qualify
for inclusion in the program. These
requirements relate to, among other
things, income limitations on tenants in
the mortgaged property. The borrower
under these mortgage loans may be
adversely affected if it or the mortgaged
property fails to qualify for inclusion
in the program, if subsidies thereunder
are reduced, or if the programs are
otherwise terminated.
ENVIRONMENTAL LAWS Various environmental laws may make a
ENTAIL RISKS current or previous owner or operator of
real property liable for the costs of
removal or remediation of hazardous or
toxic substances on, under, adjacent to,
or in such property. Those laws often
impose liability whether or not the owner
or operator knew of, or was responsible
for, the presence of the hazardous or
toxic substances. For example, certain
laws impose liability for release of
asbestos-containing materials ("ACMs")
into the air or require the removal or
containment of ACMs. In some states,
contamination of a property may give rise
to a lien on the property to assure
payment of the costs of cleanup. In some
states, this lien has priority over the
lien of a pre-existing mortgage.
Additionally, third parties may seek
recovery from owners or operators of real
properties for personal injury associated
with ACMs or other exposure to hazardous
substances related to the properties.
The owner's liability for any required
remediation generally is not limited by
law and could accordingly exceed the
value of the property and/or the
aggregate assets of the owner. The
presence of hazardous or toxic substances
also may adversely affect the owner's
ability to refinance the property or to
sell the property to a third party. The
presence of, or strong potential for
contamination by, hazardous substances
consequently can have a materially
adverse effect on the value of the
property and a borrower's ability to
repay its mortgage loan.
S-34
<PAGE>
In addition, under certain circumstances,
a lender (such as the trust) could be
liable for the costs of responding to an
environmental hazard. See "Legal Matters"
in the prospectus.
ENVIRONMENTAL RISKS All of the mortgaged properties securing
RELATING TO SPECIFIC the mortgage loans have been subject to
MORTGAGED PROPERTIES environmental site assessments in
connection with the origination or
acquisition of the loans. In certain
cases, the assessment disclosed the
existence of or potential for adverse
environmental conditions, such as the
existence of, among other things, ACMs,
underground storage tanks and soil
contamination. We cannot assure you,
however, that the environmental
assessments revealed all existing or
potential environmental risks or that all
adverse environmental conditions have
been completely remediated. Furthermore,
environmental assessments on properties
securing 43 of the underlying mortgage
loans (representing 21.0% of the initial
outstanding pool balance) are, as of the
Cut-off Date, more than a year old, but
in no event more than 25 months old. In
certain cases, Phase II site assessments
also have been performed.
ACMs have been detected through sampling
by environmental consultants at several
mortgaged properties and suspected at
others. ACMs found or suspected at these
mortgaged properties are not expected to
present a significant risk as long as the
property continues to be properly
managed. Nonetheless, the value of a
mortgaged property as collateral for the
mortgage loan could be adversely
affected.
The environmental assessments have not
revealed any environmental liability that
the Depositor believes would have a
material adverse effect on the borrowers'
businesses, assets or results of
operations taken as a whole.
Nevertheless, there may be material
environmental liabilities of which the
Depositor is unaware. Moreover, there is
no assurance that: (i) future laws,
ordinances or regulations will not impose
any material environmental liability; or
(ii) the current environmental condition
of the mortgaged properties will not be
adversely affected by tenants or by the
condition of land or operations in the
vicinity of the mortgaged properties
(such as underground storage tanks).
Before the Special Servicer acquires
title to a property on behalf of the
trust or assumes operation of the
property, it must obtain an environmental
assessment of the property. This
requirement will decrease the likelihood
that the trust will become liable under
any environmental law. However, this
requirement may effectively preclude
foreclosure until a satisfactory
environmental assessment is obtained (or
until any required remedial action is
thereafter taken). There is accordingly
some risk that the mortgaged property
will decline in value while this
assessment is being obtained. Moreover,
there is no assurance this requirement
will effectively insulate the trust from
potential liability under environmental
laws.
BORROWER MAY BE UNABLE Two-hundred and twelve (212) of the
TO REPAY REMAINING mortgage loans, representing 94.6% of the
PRINCIPAL BALANCE ON initial outstanding pool balance, are
MATURITY DATE expected to have substantial remaining
principal balances (equal to greater than
10% of the original principal balance of
each respective mortgage loan) as of
their respective anticipated repayment
dates or stated maturity dates. We cannot
assure you that each borrower will have
the ability to repay the remaining
principal
S-35
<PAGE>
balances on the pertinent date. Mortgage
loans with substantial remaining
principal balances at their stated
maturity (i.e., "balloon loans") involve
greater risk than fully amortizing loans.
A borrower's ability to repay a loan on
its anticipated repayment date or stated
maturity date typically will depend upon
its ability either to refinance the loan
or to sell the mortgaged property at a
price sufficient to permit repayment. A
borrower's ability to achieve either of
these goals will be affected by a number
of factors, including:
o the availability of, and
competition for, credit for
commercial real estate projects;
o the prevailing interest rates;
o the fair market value of the
related properties;
o the borrower's equity in the
related properties;
o the borrower's financial
condition;
o the operating history and
occupancy level of the property;
o the tax laws; and
o prevailing general and regional
economic conditions.
The availability of funds in the credit
markets fluctuates over time.
We cannot assure you that each borrower
will have the ability to repay the
remaining principal balances on the
pertinent date. See "Mortgage Pool
Characteristics--Certain Characteristics
of the Mortgage Loans" in this prospectus
supplement.
RISKS RELATING TO The mortgage loan documents typically
BORROWERS THAT ARE NOT contain a borrower covenant that for so
SPECIAL-PURPOSE ENTITIES long as the related mortgage loan is
outstanding, the borrower will, among
other things, (i) not own any asset other
than the real property and incidental
personal property covered by the
mortgage, (ii) not incur any indebtedness
other than the mortgage loan and trade
payables related to the operation of the
mortgaged property and (iii) perform such
further acts as may be necessary to
distinguish its business activities from
those of its affiliates.
Most of the borrowers (and any
special-purpose entity having an interest
in any such borrowers) do not have an
independent director whose consent would
be required to file a voluntary
bankruptcy petition on behalf of such
borrower. One of the purposes of an
independent director (or of a
special-purpose entity having an interest
in the borrower) is to avoid a bankruptcy
petition filing which is intended solely
to benefit an affiliate and is not
justified by the borrower's own economic
circumstances.
AUTHORITY TO EFFECT OTHER Eleven (11) of the mortgage loans
BORROWINGS ENTAILS RISKS (representing 4.4% of the initial
outstanding pool balance) permit the
borrower to utilize the mortgaged
property as collateral for subordinated
loans. See "Description of the Mortgage
Pool--Certain Terms and Characteristics
of the Mortgage Loans--
S-36
<PAGE>
Subordinate Financing" in this prospectus
supplement. Generally, prior to any
subordinate loan being allowed, certain
conditions must be satisfied.
Substantially all of the mortgage loans
also permit the related borrower to incur
indebtedness in the ordinary course of
business, subject to certain conditions.
When a mortgage loan borrower (or its
constituent members) also has one or more
other outstanding loans (even if
subordinated or mezzanine loans), the
trust is subjected to additional risk.
The borrower may have difficulty
servicing and repaying multiple loans.
The existence of another loan generally
also will make it more difficult for the
borrower to obtain refinancing of the
mortgage loan and may thereby jeopardize
repayment of the mortgage loan. Moreover,
the need to service additional debt may
reduce the cash flow available to the
borrower to operate and maintain the
mortgaged property. See "Description of
the Mortgage Pool--Certain Terms and
Characteristics to the Mortgage
Loans--Subordinate Financing" in this
prospectus supplement.
Additionally, if the borrower (or its
constituent members) defaults on the
mortgage loan and/or any other loan,
actions taken by other lenders could
impair the security available to the
trust. If a junior lender files an
involuntary petition for bankruptcy
against the borrower (or the borrower
files a voluntary petition to stay
enforcement by a junior lender), the
trust's ability to foreclose on the
property would be automatically stayed,
and principal and interest payments might
not be made during the course of the
bankruptcy case. The bankruptcy of
another lender also may operate to stay
foreclosure by the trust.
Further, if another loan secured by the
mortgaged property is in default, the
other lender may foreclose on the
mortgaged property, absent an agreement
to the contrary, thereby causing a delay
in payments and/or an involuntary
repayment of the mortgage loan prior to
maturity. The trust may also be subject
to the costs and administrative burdens
of involvement in foreclosure proceedings
or related litigation.
BANKRUPTCY PROCEEDINGS Under the Bankruptcy Code, the filing of
ENTAILS CERTAIN RISKS a petition in bankruptcy by or against a
borrower will stay the sale of the real
property owned by that borrower, as well
as the commencement or continuation of a
foreclosure action. In addition, if a
court determines that the value of the
mortgaged property is less than the
principal balance of the mortgage loan it
secures, the court may prevent a lender
from foreclosing on the mortgaged
property (subject to certain protections
available to the lender). As part of a
restructuring plan, a court also may
reduce the amount of secured indebtedness
to the then-value of the mortgaged
property. Such an action would make the
lender a general unsecured creditor for
the difference between the then-value and
the amount of its outstanding mortgage
indebtedness. A bankruptcy court also
may: (i) grant a debtor a reasonable time
to cure a payment default on a mortgage
loan; (ii) reduce monthly payments due
under a mortgage loan; (iii) change the
rate of interest due on a mortgage loan;
or (iv) otherwise alter the mortgage
loan's repayment schedule.
S-37
<PAGE>
Moreover, the filing of a petition in
bankruptcy by, or on behalf of, a junior
lienholder may stay the senior lienholder
from taking action to foreclose on the
junior lien. Additionally, the borrower's
trustee or the borrower, as
debtor-in-possession, has certain special
powers to avoid, subordinate or disallow
debts. In certain circumstances, the
claims of the trustee may be subordinated
to financing obtained by a
debtor-in-possession subsequent to its
bankruptcy.
Under the Bankruptcy Code, the lender
will be stayed from enforcing a
borrower's assignment of rents and
leases. The Bankruptcy Code also may
interfere with the Trustee's ability to
enforce any lockbox requirements. The
legal proceedings necessary to resolve
these issues can be time consuming and
may significantly delay the lender's
receipt of rents. Rents also may escape
an assignment to the extent they are used
by the borrower to maintain the mortgaged
property or for other court authorized
expenses.
As a result of the foregoing, the
Trustee's recovery with respect to
borrowers in bankruptcy proceedings may
be significantly delayed, and the
aggregate amount ultimately collected may
be substantially less than the amount
owed.
LACK OF SKILLFUL PROPERTY The successful operation of a real estate
MANAGEMENT ENTAILS RISKS project depends upon the property
manager's performance and viability. The
property manager is generally responsible
for:
o responding to changes in the
local market;
o planning and implementing the
rental structure;
o operating the property and
providing building services;
o managing operating expenses; and
o assuring that maintenance and
capital improvements are carried
out in a timely fashion.
Properties deriving revenues primarily
from short-term sources are generally
more management intensive than properties
leased to creditworthy tenants under
long-term leases.
A good property manager, by controlling
costs, providing appropriate service to
tenants and seeing to the maintenance of
improvements, can, in some cases, improve
cash flow, reduce vacancy, leasing and
repair costs and preserve building value.
On the other hand, management errors can,
in some cases, impair short-term cash
flow and the long term viability of an
income producing property.
We make no representation or warranty as
to the skills of any present or future
managers. Additionally, we cannot assure
you that the property managers will be in
a financial condition to fulfill their
management responsibilities throughout
the terms of their respective management
agreements.
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RISKS OF INSPECTIONS Licensed engineers or consultants
RELATING TO PROPERTY inspected the mortgaged properties in
connection with the origination of the
mortgage loans to assess items such as
structure, exterior walls, roofing,
interior construction, mechanical and
electrical systems and general condition
of the site, buildings and other
improvements. However, there is no
assurance that all conditions requiring
repair or replacement were identified.
ABSENCE OR INADEQUACY OF The mortgaged properties may suffer
INSURANCE COVERAGE casualty losses due to risks which were
ENTAILS RISKS not covered by insurance or for which
insurance coverage is inadequate. In
addition, certain of the mortgaged
properties are located in California and
Texas and in coastal areas of Florida,
states that have historically been at
greater risk regarding acts of nature
(such as hurricanes, floods and
earthquakes) than other states. There is
no assurance borrowers will be able to
maintain adequate insurance. Moreover, if
reconstruction or any major repairs are
required, changes in laws may materially
affect the borrower's ability to effect
such reconstruction or major repairs or
may materially increase the cost thereof.
As a result of any of the foregoing, the
amount available to make distributions on
the Offered Certificates could be
reduced.
APPRAISALS AND MARKET An appraisal or other market analysis was
STUDIES HAVE CERTAIN conducted in respect of the mortgaged
LIMITATIONS properties in connection with the
origination or acquisition of the related
mortgage loan. The resulting estimates of
value are the basis of the Cut-off Date
LTV Ratios referred to herein. Those
estimates represent the analysis and
opinion of the person performing the
appraisal or market analysis and are not
guarantees of present or future values.
Moreover, the values of the mortgaged
properties may have fluctuated
significantly since the appraisal or
market study was performed. In addition,
appraisals 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. Information regarding
the values of mortgaged properties
available to the Depositor as of the
Cut-off Date is presented in Appendix I
and Appendix II hereto for illustrative
purposes only. See "Description of the
Mortgage Pool--Assessments of Property
Value and Condition--Appraisals" in this
prospectus supplement.
DIFFERENT TIMING OF As principal payments or prepayments are
MORTGAGE LOAN made on a mortgage loan that is part of a
AMORTIZATION POSES pool of loans, the pool may be subject to
CERTAIN RISKS more risk with respect to the decreased
diversity of mortgaged properties, types
of mortgaged properties, geographic
location and number of borrowers and
affiliated borrowers, as described above.
Classes that have a later sequential
designation or a lower payment priority
are more likely to be exposed to this
concentration risk than are classes with
an earlier sequential designation or
higher priority. This is so because
principal on the Offered Certificates is
generally payable in sequential order,
and no class entitled to distribution of
principal generally receives principal
until the principal amount of the
preceding class or classes entitled to
receive principal have been reduced to
zero.
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SUBORDINATION OF As described in this prospectus
SUBORDINATE OFFERED supplement, unless your certificates are
CERTIFICATES Class A-1, Class A-2 or Class X
Certificates, your rights to receive
distributions of amounts collected or
advanced on or in respect of the mortgage
loans will be subordinated to those of
the holders of the offered certificates
with an earlier alphabetical designation.
See "Description of the
Certificates--Distributions" and
"--Subordination; Allocation of Losses
and Certain Expenses" in this prospectus
supplement and "Risk
Factors--Subordination of the Subordinate
Certificates; Effect of Losses on the
Assets" in the prospectus.
TAX CONSIDERATIONS If the trust acquires a mortgaged
RELATING TO FORECLOSURE property pursuant to a foreclosure or
deed in lieu of foreclosure, the Special
Servicer will generally retain an
independent contractor to operate the
property. Any net income from such
operation (other than qualifying "rents
from real property" as defined in Section
856(d) of the Code), or any rental income
based on the net profits of a tenant or
sub-tenant or allocable to a
non-customary service which is not
provided through an independent
contractor, will subject the Lower-Tier
REMIC to federal tax on such income at
the highest marginal corporate tax rate
(currently 35%) and possibly state or
local tax. In such event, the net
proceeds available for distribution to
certificateholders will be reduced. The
Special Servicer may permit the
Lower-Tier REMIC to earn "net income from
foreclosure property" that is subject to
tax if it determines that the net
after-tax benefit to certificateholders
is greater than under another method of
operating or leasing the mortgaged
property.
RISKS RELATING TO All of the mortgages permit the lender to
ENFORCEABILITY accelerate the debt upon default by the
borrower. The courts of all states will
enforce acceleration clauses in the event
of a material payment default. State
equity courts, however, may refuse to
permit foreclosure or acceleration if a
default is deemed immaterial or the
exercise of those remedies would be
unjust or unconscionable.
If a mortgaged property has tenants, the
borrower typically assigns its income as
landlord to the lender as further
security, while retaining a license to
collect rents as long as there is no
default. If the borrower defaults, the
license terminates and the lender is
entitled to collect rents. In certain
jurisdictions, such assignments may not
be perfected as security interests until
the lender takes actual possession of the
property's cash flow. In some
jurisdictions, the lender may not be
entitled to collect rents until the
lender takes possession of the property
and secures the appointment of a
receiver. In addition, as previously
discussed, if bankruptcy or similar
proceedings are commenced by or for the
borrower, the lender's ability to collect
the rents may be adversely affected.
STATE LAW LIMITATIONS Some states (including California) have
ENTAIL CERTAIN RISKS laws prohibiting more than one "judicial
action" to enforce a mortgage obligation.
Some courts have construed the term
"judicial action" broadly. In the case of
a pool loan secured by mortgaged
properties located in multiple states,
the Special Servicer may be required to
foreclose first on mortgaged properties
located in states where such "one action"
rules apply (and where non-judicial
foreclosure is permitted) before
foreclosing on properties located in
states where judicial foreclosure is the
only permitted method of foreclosure. As
a result, the ability to realize upon the
mortgage loans may be limited by the
application of state laws. Foreclosure
actions may also, in certain
circumstances, subject the trust to
liability as a "lender-in-possession" or
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result in the equitable subordination of
the claims of the trustee to the claims
of other creditors of the borrower. The
Special Servicer may take these state
laws into consideration in deciding which
remedy to choose following a default by a
borrower.
LEASEHOLD INTERESTS ENTAIL Three (3) of the mortgage loans
CERTAIN RISKS (representing 2.3% of the initial
outstanding pool balance) are secured
solely by mortgages on borrowers'
leasehold interests under ground leases.
In addition, one mortgage loan
(representing 0.6% of the initial
outstanding pool balance), is secured by
a mortgage on both the borrower's
leasehold interest in a portion of the
related mortgaged property and the
borrower's fee simple interest in the
remainder of the related mortgaged
property. See "Description of the
Mortgage Pool--Certain Terms and
Characteristics of the Mortgage
Loans--Ground Leases".
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. Generally, 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 the leasehold mortgagee or
the purchaser at a foreclosure sale, and
contains certain other protective
provisions typically included in a
"mortgageable" ground lease.
Upon the bankruptcy of a lessor or a
lessee under a ground lease, the debtor
entity has the right to assume or reject
the lease. If a debtor lessor rejects the
lease, the lessee has the right to remain
in possession of its leased premises
under the rent under the lease for the
term of the lease (including renewals).
If a debtor lessee/borrower rejects any
or all of its leases, the leasehold
lender could succeed to the
lessee/borrower's position under the
lease only if the lessor specifically
grants the lender such right. If both the
lessor and the lessee/borrowers are
involved in bankruptcy proceedings, the
trustee may be unable to enforce the
bankrupt lessee/borrower's obligation to
refuse to treat a ground lease rejected
by a bankrupt lessor as terminated. In
such circumstances, a lease could be
terminated notwithstanding lender
protection provisions contained therein
or in the mortgage.
Most of the ground leases securing the
mortgaged properties provide that the
ground rent payable thereunder increases
during the term of the lease. These
increases may adversely affect the cash
flow and net income of the borrower from
the mortgaged property.
RISKS RELATING TO The Mortgage Pool includes one set of
ENFORCEABILITY OF cross-collateralized mortgage loans,
CROSS-COLLATERALIZATION representing 0.2% of the initial
outstanding pool balance. See Appendix II
hereto. Cross-collateralization
arrangements involving more than one
borrower could be challenged as
fraudulent conveyances by creditors of
the related borrower in an action brought
outside a bankruptcy case or, if such
borrower were to become a debtor in a
bankruptcy case, by the borrower's
representative. A lien granted by a
borrower entity could be avoided if a
court were to determine that: (i) such
borrower was insolvent when it granted
the lien, was rendered insolvent by the
granting of the lien or was left with
inadequate capital, or was not able to
pay its debts as they matured; and (ii)
such borrower did not receive fair
consideration or reasonably equivalent
value when it allowed its mortgaged
property or properties to be encumbered
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by a lien securing the entire
indebtedness. Among other things, a legal
challenge to the granting of the liens
may focus on the benefits realized by
such borrower from the respective
mortgage loan proceeds, as well as the
overall cross-collateralization. If a
court were to conclude that the granting
of the liens was an avoidable fraudulent
conveyance, that court could subordinate
all or part of the pertinent mortgage
loan to existing or future indebtedness
of that borrower. The court also could
recover payments made under that mortgage
loan or take other actions detrimental to
the holders of the certificates,
including, under certain circumstances,
invalidating the loan or the mortgages
securing such cross-collateralization.
POTENTIAL ABSENCE OF In some jurisdictions, if tenant leases
ATTORNMENT PROVISIONS are subordinate to the liens created by
ENTAILS RISKS the mortgage and do not contain
attornment provisions (i.e. provisions
requiring the tenant to recognize a
successor owner following foreclosure as
landlord under the lease), the leases may
terminate upon the transfer of the
property to a foreclosing lender or
purchaser at foreclosure. Not all leases
were reviewed to ascertain the existence
of attornment or subordination
provisions. Accordingly, if a mortgaged
property is located in such a
jurisdiction and is leased to one or more
desirable tenants under leases that are
subordinate to the mortgage and do not
contain attornment provisions, such
mortgaged property could experience a
further decline in value if such tenants'
leases were terminated. This is
particularly likely if such tenants were
paying above-market rents or could not be
replaced.
If a lease is not subordinate to a
mortgage, the trust will not possess the
right to dispossess the tenant upon
foreclosure of the mortgaged property
(unless it has otherwise agreed with the
tenant). If the lease contains provisions
inconsistent with the mortgage (e.g.
provisions relating to application of
insurance proceeds or condemnation
awards) or which could affect the
enforcement of the lender's rights (e.g.
a right of first refusal to purchase the
property), the provisions of the lease
will take precedence over the provisions
of the mortgage. Certain of the leases at
the retail properties included in the
trust may not be subordinate to the
related Mortgage.
RISKS RELATING TO There may be pending or threatened legal
LITIGATION proceedings against the borrowers and
managers of the mortgaged properties and
their respective affiliates arising out
of the ordinary business of the
borrowers, managers and affiliates. We
cannot assure you that any such
litigation would not have a material
adverse effect on distributions to your
investment.
RISKS RELATING TO Under the Americans with Disabilities Act
COMPLIANCE WITH of 1990 ("ADA"), all public
AMERICANS WITH accommodations are required to meet
DISABILITIES ACT certain federal requirements related to
access and use by disabled persons.
Borrowers may incur costs complying with
the ADA. In addition, noncompliance could
result in the imposition of fines by the
federal government or an award of damages
to private litigants.
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<PAGE>
RISKS RELATING TO Conflicts Between Various Classes of
CONFLICTS OF INTEREST Certificateholders. The Special Servicer
is given considerable latitude in
determining whether and in what manner to
liquidate or modify defaulted mortgage
loans. The Operating Adviser will be
empowered to replace the Special
Servicer. At any given time, the
Operating Adviser will be controlled
generally by the holders of the most
subordinated (or, under certain
circumstances, the next most
subordinated) class of certificates (that
is, the Controlling Class) outstanding
from time to time, and such holders may
have interests in conflict with those of
the holders of the other 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 may be better
served by prompt action, since delay
followed by a market downturn could
result in less proceeds to the trust than
would have been realized if earlier
action had been taken.
The Special Servicer or an affiliate may
acquire certain of the most subordinated
certificates (including those of the
initial Controlling Class). Under such
circumstances, the Special Servicer
itself may have interests that conflict
with the interests of the other holders
of the certificates.
Conflicts Between Trustee and Affiliates
of each of Residential Funding
Corporation, Wachovia Bank and Morgan
Stanley Mortgage Capital Inc. Conflicts
of interest may arise between the trust
and affiliates of each of Residential
Funding Corporation, Wachovia Bank, and
Morgan Stanley Mortgage Capital Inc. that
engage in the acquisition, development,
operation, financing and disposition of
real estate.
Those conflicts may arise because
affiliates of each of Residential Funding
Corporation, Wachovia Bank, and Morgan
Stanley Mortgage Capital Inc. intend to
continue to actively acquire, develop,
operate, finance and dispose of real
estate-related assets in the ordinary
course of their business. During the
course of their business activities,
those affiliates may acquire or sell
properties, or finance mortgage loans
secured by properties which may include
the mortgaged properties or properties
which are in the same markets as the
mortgaged properties. In such case, the
interests of those affiliates may differ
from, and compete with, the interests of
the trust, and decisions made with
respect to those assets may adversely
affect the amount and timing of
distributions with respect to the
certificates.
Conflicts Between Managers and the
Mortgage Loan Borrowers. Substantially
all of the property managers for the
mortgaged properties (or their
affiliates) manage additional properties,
including properties that may compete
with the mortgaged properties. Affiliates
of the managers, and certain of the
managers themselves, also may own other
properties, including competing
properties. The managers of the mortgaged
properties may accordingly experience
conflicts of interest in the management
of such mortgaged properties.
Conflicts Between Sellers of Mortgage
Loans and Classes of Certificateholders.
Affiliates of Residential Funding
Corporation, Wachovia Bank, and Morgan
Stanley Mortgage Capital Inc. may acquire
certain of the Offered Certificates.
Under such circumstances, they may become
the
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<PAGE>
Controlling Class, and as such have
interests that may conflict with their
interests as Sellers of the Mortgage
Loans.
RISKS RELATING TO The yield to maturity on your
PREPAYMENTS AND certificates will depend, in significant
REPURCHASES part, upon the rate and timing of
principal payments on the mortgage loans.
For this purpose, principal payments
include both voluntary prepayments, if
permitted, and involuntary prepayments,
such as prepayments resulting from
casualty or condemnation of mortgaged
properties, defaults and liquidations by
borrowers, or repurchases upon a Seller's
breaches of representations and
warranties. Because the Notional Amount
of the Class X Certificates is based upon
the Principal Amounts of the certificates
with principal amounts, the yield to
maturity on the Class X Certificates will
be extremely sensitive to the rate and
timing of prepayments of principal.
The investment performance of your
certificates may vary materially and
adversely from your expectations if the
actual rate of prepayment is higher or
lower than you anticipate.
Voluntary prepayments under certain of
the mortgage loans require payment of a
yield maintenance premium unless the loan
is within a specified number of days of
the anticipated repayment date or stated
maturity date, as the case may be. See
"Description of the Mortgage
Pool--Certain Terms and Characteristics
of the Mortgage Loans--Prepayment
Restrictions." Nevertheless, we cannot
assure you that the related borrowers
will refrain from prepaying their
mortgage loans due to the existence of a
prepayment premium. We also cannot assure
you that involuntary prepayments will not
occur. The rate at which voluntary
prepayments occur on the mortgage loans
will be affected by a variety of factors,
including:
o the terms of the mortgage loans;
o the length of any prepayment
lockout period;
o the level of prevailing interest
rates;
o the availability of mortgage
credit;
o the applicable yield maintenance
charges or prepayment premiums;
o the Master Servicer's or Special
Servicer's ability to enforce
those charges or premiums;
o the occurrence of casualties or
natural disasters; and
o economic, demographic, tax,
legal or other factors.
Generally, no yield maintenance charge or
prepayment premium will be required for
prepayments in connection with a casualty
or condemnation unless, in the case of
most of the mortgage loans, an event of
default has occurred and is continuing.
In addition, if a Seller repurchases any
mortgage from the trust due to breaches
of representations or warranties, the
repurchase price paid will be passed
through to the holders of the
certificates with the same effect as if
the mortgage loan had been prepaid in
part or in full, except that no
prepayment premium or yield maintenance
charge would be payable.
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<PAGE>
Such a repurchase may therefore adversely
affect the yield to maturity on your
certificates.
RISKS RELATING TO Provisions requiring yield maintenance
ENFORCEABILITY OF charges, prepayment premiums and lockout
PREPAYMENT PREMIUMS periods may not be enforceable in some
states and under federal bankruptcy law.
Those provisions for charges and premiums
also may constitute interest for usury
purposes. Accordingly, we cannot assure
you that the obligation to pay a yield
maintenance charge or prepayment premium
or to prohibit prepayments will be
enforceable. We also cannot assure you
that the foreclosure proceeds will be
sufficient to pay an enforceable yield
maintenance charge or prepayment premium.
Additionally, although the collateral
substitution provisions related to
defeasance do not have the same effect on
the certificateholders as prepayment, we
cannot assure you that a court would not
interpret those provisions as requiring a
yield maintenance charge or prepayment
premium. In certain jurisdictions those
collateral substitution provisions might
therefore be deemed unenforceable under
applicable law, or usurious.
YIELD CONSIDERATIONS The yield on any certificate will depend
on (i) the price at which such
certificate is purchased by an investor
and (ii) the rate, timing and amount of
distributions on such certificate. The
rate, timing and amount of distributions
on any certificate will, in turn, depend
on, among other things:
o the interest rate for such
certificate;
o 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
balance or Notional Amount of
such certificate;
o the rate, timing and severity of
losses on or in respect of the
mortgage loans or unanticipated
expenses of the trust;
o the timing and severity of any
interest shortfalls resulting
from prepayments;
o the timing and severity of any
Appraisal Reductions; and
o the extent to which prepayment
premiums are collected and, in
turn, distributed on such
certificate.
RISKS RELATING TO BORROWER DEFAULT The rate and timing of delinquencies or
defaults on the mortgage loans will
affect:
o the aggregate amount of
distributions on the Offered
Certificates;
o their yield to maturity;
o the rate of principal payments;
and
o their weighted average life.
The rights of holders of each class of
subordinate certificates to receive
certain payments of principal and
interest otherwise payable on their
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certificates will be subordinated to such
rights of the holders of the more senior
certificates having an earlier
alphabetical class designation. See
"Description of the
Certificates--Distributions" in this
prospectus supplement. Losses on the
mortgage loans will be allocated to the
Class O, Class N, Class M, 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 otherwise payable to each class.
Any remaining losses would then be
allocated to the Class A Certificates.
If losses on the mortgage loans exceed
the aggregate principal amount of the
classes of certificates subordinated to a
particular class, such class will suffer
a loss equal to the full amount of such
excess (up to the outstanding principal
amount of such class).
If you calculate your anticipated yield
based on assumed rates of default and
losses that are lower than the default
rate and losses actually experienced and
such losses are allocable to your
certificates, your actual yield to
maturity will be lower than the assumed
yield. Under certain extreme scenarios,
such yield could be negative. In general,
the earlier a loss borne by your
certificates occurs, the greater the
effect on your yield to maturity.
Even if losses on the mortgage loans are
not borne by your certificates, those
losses may affect the weighted average
life and yield to maturity of your
certificates. This may be so because
those losses cause your certificates to
have a higher percentage ownership
interest in the trust (and therefore
related distributions of principal
payments on the mortgage loans) than
would otherwise have been the case. The
effect on the weighted average life and
yield to maturity of your certificates
will depend upon the characteristics of
the remaining mortgage loans.
Additionally, delinquencies and defaults
on the mortgage loans may significantly
delay the receipt of distributions by you
on your certificates, unless P&I Advances
are made to cover delinquent payments or
the subordination of another class of
certificates fully offsets the effects of
any such delinquency or default.
Also, if the related borrower does not
repay a mortgage loan with a
hyper-amortization feature by its
anticipated repayment date, the effect
will be to increase the weighted average
life of your certificates and may reduce
your yield to maturity.
RISKS RELATING TO CERTAIN To the extent described in this
PAYMENTS prospectus supplement, the Master
Servicer, the Special Servicer, the
Trustee or the Fiscal Agent, as
applicable, will be entitled to receive
interest on unreimbursed Advances. This
interest will generally accrue from the
date on which the related Advance is made
or the related expense is incurred
through the date of reimbursement. In
addition, under certain circumstances,
including delinquencies in the payment of
principal and interest, a mortgage loan
will be specially serviced, and the
Special Servicer is entitled to
compensation for special servicing
activities. The right to receive interest
on Advances or special servicing
compensation is senior to the rights of
certificateholders to receive
distributions.
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RISKS OF LIMITED Your certificates will not be listed on
LIQUIDITY AND MARKET any securities exchange, and there is
VALUE currently no secondary market for the
Offered Certificates. While Morgan
Stanley & Co. Incorporated and
Residential Funding Securities
Corporation each currently intends to
make a secondary market in the Offered
Certificates, it is not obligated to do
so. Accordingly, you may not have an
active or liquid secondary market for
your certificates. Lack of liquidity
could result in a substantial decrease in
the market value of your certificates.
The market value of your certificates
also may be affected by many other
factors, including the then-prevailing
interest rates. Furthermore, you should
be aware that the market for securities
of the same type as the certificates has
recently been volatile and offered very
limited liquidity. Finally, affiliates of
Residential Funding Corporation, Wachovia
Bank and Morgan Stanley Mortgage Capital
Inc. may acquire certain classes of
Offered Certificates in which case the
market for those classes of Offered
Certificates may not be as liquid as if
third parties had acquired such
certificates.
RISK OF PASS-THROUGH The interest rate of the Class X
RATE VARIABILITY Certificates is based on the WAC Rate of
CONSIDERATIONS the mortgage loans. In general, mortgage
loans with relatively high mortgage
interest rates are more likely to prepay
than mortgage loans with relatively low
mortgage interest rates. Varying rates of
principal payments on mortgage loans
having mortgage interest rates above the
weighted average of such rates of the
mortgage loans will have the effect of
reducing the interest rate of such
certificates.
RISK OF LIMITED ASSETS The Offered Certificates will represent
interests solely in the assets of the
trust and will not represent an interest
in or an obligation of any other entity
or person. Distributions on any of the
certificates will depend solely on the
amount and timing of payments on the
mortgage loans.
RISKS ASSOCIATED WITH We are aware of the issues associated
YEAR 2000 COMPLIANCE with the programming code in existing
computer systems as the millennium (year
2000) approaches. The "year 2000 problem"
is pervasive and complex; virtually every
computer operation will be affected in
some way by the rollover of the two digit
year value to 00. The issue is whether
computer systems will properly recognize
date-sensitive information when the year
changes to 2000. Systems that do not
properly recognize such information could
generate erroneous data or otherwise
fail.
We have been advised by each of the
Master Servicer and the Special Servicer
that they are committed either to (i)
implement modifications to their
respective existing systems to the extent
required to cause them to be year 2000
compliant or (ii) acquire computer
systems that are year 2000 compliant in
each case prior to August 31, 1999.
Furthermore, we have been advised by the
Trustee that it will use reasonable
commercial efforts to cure (by August
1999) any deficiencies with regard to the
manipulation or calculation of dates
beyond December 31, 1999 in the
internally maintained computer software
systems used by the Trustee in the
conduct of its trust business which would
materially and adversely affect its
ability to perform its obligations under
the Pooling and Servicing Agreement.
However, we have not made any independent
investigation of the computer systems of
the Master Servicer, the Special Servicer
or the Trustee. In the event that
computer problems arise out of a failure
of such efforts to be completed on time,
or in the event that the computer systems
of the Master Servicer, the Special
Servicer or the Trustee are not fully
year 2000 compliant, the resulting
disruptions in the collection or
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distribution of receipts on the mortgage
loans could materially adversely affect
your investment.
OTHER RISKS See "Risk Factors" in the prospectus for
a description of certain other risks and
special considerations that may be
applicable to your certificates.
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DESCRIPTION OF THE CERTIFICATES
GENERAL
The Series 1999-RM1 Commercial Mortgage Pass-Through Certificates (the
"Certificates") will be issued on or about March __, 1999 (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 19 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 Certificates (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, the Class L
Certificates, the Class M Certificates, the Class N Certificates and the Class O
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 "REMIC Residual Certificates").
Only the Class A, Class B, Class C, Class D, Class E and Class F
Certificates (the "Offered Certificates") are offered hereby. The Class X, Class
G, Class H, Class J, Class K, Class L, Class M, Class N and Class O Certificates
and the REMIC Residual Certificates (collectively, the "Private Certificates")
have not been registered under the Securities Act of 1933, as amended, and are
not offered hereby. The Private Certificates other than the Class X Certificates
are referred to collectively as the "Subordinate Private Certificates."
REGISTRATION; DENOMINATIONS
The Offered Certificates will initially be issued in book-entry format
(the "Book-Entry Certificates"). The Class A-1 and Class A-2 Certificates will
be offered in minimum denominations of $25,000. The Class B Certificates will be
offered in minimum denominations of $50,000. The remaining Certificates will be
issued in denominations of $100,000 and in any whole dollar denomination in
excess thereof.
BOOK-ENTRY REGISTRATION
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 such 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 such
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 such Offered Certificates will refer to
payments, notices, reports and statements to DTC
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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 elect to hold their Offered Certificates through
any of DTC (in the United States) or Cedelbank or 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.
("Citibank") or The Chase Manhattan Bank ("Chase"), the relevant depositories 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.
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, Class L, Class M, Class
N and Class O 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%):
APPROXIMATE APPROXIMATE
INITIAL AGGREGATE PERCENT OF INITIAL PERCENT OF
CLASS CERTIFICATE BALANCE POOL BALANCE CREDIT SUPPORT
--------------------------------------------------------------------------
Class A-1 $183,000,000 21.30% 28.75%
Class A-2 $429,255,000 49.95% 28.75%
Class B $ 42,966,000 5.00% 23.75%
Class C $ 45,113,000 5.25% 18.50%
Class D $ 12,890,000 1.50% 17.00%
Class E $ 34,372,000 4.00% 13.00%
Class F $ 17,186,000 2.00% 11.00%
Class G $ 10,741,000 1.25% 9.75%
Class H $ 23,631,000 2.75% 7.00%
Class J $ 8,593,000 1.00% 6.00%
Class K $ 12,890,000 1.50% 4.50%
Class L $ 6,445,000 0.75% 3.75%
Class M $ 8,593,000 1.00% 2.75%
Class N $ 8,593,000 1.00% 1.75%
Class O $ 15,038,538 1.75% 0.00%
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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 any 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 "--Subordination;
Allocation of Losses and Certain Expenses" below.
The Interest Only Certificates will not have Certificate Balances. Each
such Certificate will represent the right to receive distributions of interest
accrued as described herein on a notional principal amount (a "Notional
Amount"). The aggregate Notional Amount of the Interest Only Certificates will
equal 100% of the aggregate Stated Principal Balance of the REMIC II Regular
Interests, which will be the same as the aggregate Stated Principal Balance of
the Mortgage Loans. The Interest Only Certificates will have an initial
aggregate Notional Amount of $859,306,538 (subject to a variance of plus or
minus 5%).
The REMIC Residual Certificates will not have Certificate Balances or
Notional Amounts.
The "Stated Principal Balance" of each Mortgage Loan will generally equal
the unpaid principal balance thereof as of the Cut-off Date (or, in the case of
a Qualifying Substitute Mortgage Loan (as defined herein), as of the date of
substitution), after application of all payments due on or before such date
(whether or not received), reduced (to not less than zero) on each subsequent
Distribution Date by (i) any payments or other collections (or advances in lieu
thereof) of principal of such Mortgage Loan that have been or, if they had not
been applied to cover Additional Trust Fund Expenses, would have been
distributed on the Certificates on such date, and (ii) the principal portion of
any Realized Loss incurred in respect of or allocable to such Mortgage Loan
during the related Collection Period. Notwithstanding the foregoing, but subject
to the discussion under "--Distribution--Treatment of REO Properties" below, if
any Mortgage Loan is paid in full, liquidated or otherwise removed from the
Trust Fund, then, commencing as of the first Distribution Date following the
Collection Period during which such event occurred, the Stated Principal Balance
of such Mortgage Loan will be zero.
PASS-THROUGH RATES
The rate per annum at which any Class of Certificates accrues interest
from time to time is herein referred to as its "Pass-Through Rate."
The Pass-Through Rates applicable to the Class A-1, Class A-2, Class B,
Class C, Class G, Class H, Class J, Class K, Class L, Class M, Class N and Class
O Certificates will, at all times, be equal to 6.00%, 6.31%, 6.45%, 6.70%,
6.00%, 6.00%, 6.00%, 6.00%, 6.00%, 6.00%, 6.00% and 6.00% per annum,
respectively; provided, however, that each such Pass-Through Rate will not
exceed the WAC Rate for such Distribution Date.
The Pass-Through Rates applicable to Class D, Class E and Class F
Certificates will, at all times, be equal to the NWAC Rate minus 0.28%, 0.03%
and 0.03%, respectively.
The Pass-Through Rate applicable to the Interest Only Certificates for the
initial Distribution Date will equal approximately 1.09% per annum. The
Pass-Through Rate applicable to the Interest Only Certificates for each
subsequent Distribution Date will, in general, equal the excess, if any, of (i)
the NWAC Rate, over (ii) the weighted average of the Pass-Though Rates
applicable to the respective Classes of Principal Balance Certificates for such
Distribution Date, the relevant weighting to be on the basis of the respective
aggregate Certificate Balances of such Classes of Certificates immediately prior
to such Distribution Date.
The "WAC Rate" for any Distribution Date is the weighted average of the
Net Mortgage Rates in effect for the Mortgage Loans as of their Due Dates in the
month preceding the month in which such Distribution Date occurs weighted on the
basis of their respective Stated Principal Balances on such Due Date.
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The "NWAC Rate" with respect to any Mortgage Loan will, in general, be a
per annum rate equal to the related Mortgage Rate in effect from time to time,
minus the applicable Administrative Cost Rate. However, for purposes of
calculating the Class X Pass-Through Rates, the Net Mortgage Rate for any
Mortgage Loan will be determined without regard to any post-Closing Date
modification, waiver or amendment of the terms of such Mortgage Loan. 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 the Mortgage Loan that accrues interest other than on the basis of a 360-day
year consisting of twelve 30-day months (a "Non-30/360 Loan") will be
appropriately adjusted to reflect such difference. See "SERVICING OF THE
MORTGAGE LOANS--Servicing and Other Compensation and Payment of Expenses"
herein.
The "Collection Period" related to each Distribution Date 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 day after
the Cut-off Date) and will end on the Determination Date in the month in which
the Distribution Date occurs.
The "Determination Date" related to each Distribution Date is the fifth
day of the month in which such Distribution Date occurs (or if such date is not
a business day, then the next preceding business day).
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, 1999. 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 Offered 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 any
Distribution Date will, in general, equal (a) all amounts on deposit in the
Certificate Account (as described in
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the Prospectus) 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) Monthly 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 amounts payable to the Master
Servicer, the Special Servicer or the Trustee as compensation or in
reimbursement of outstanding Advances and amounts payable in respect of
Additional Trust Fund Expenses); 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 and Compensating Interest Payments made with respect to such
Distribution Date.
As used herein, "Certificate Account" includes, on a collective basis,
each collection account established and maintained by the Master Servicer for
the retention of payments and other collections of principal and interest in
respect of the Mortgage Loans (other than Excess Interest in respect of
Hyper-Amortization Loans, which will be deposited to the Excess Interest
Distribution Account and paid to the Class O Certificates) and each distribution
account established and maintained by the Trustee for the retention of funds
pending distribution on the Certificates. See "Description of the
Agreements--Certificate Account and Other Collection Accounts" in the
Prospectus.
Application of the Available Distribution Amount.
On each Distribution Date, the Trustee will apply the Available
Distribution Amount for such date for the following purposes and in the
following order of priority:
(1) to pay interest to the holders of the respective Classes of
Senior Certificates, up to an amount equal to, and pro rata as among such
Classes in accordance with, all Distributable Certificate Interest in
respect of each such Class of Certificates for such Distribution Date;
(2) to pay principal from the Principal Distribution Amount for such
Distribution Date, first to the holders of the Class A-1 Certificates and
second to the holders of the Class A-2 Certificates, in each case, up to
an amount equal to the lesser of (i) the then-outstanding aggregate
Certificate Balance of such Class of Certificates and (ii) the remaining
portion of such Principal Distribution Amount;
(3) to reimburse the holders of the respective Classes of Class A
Certificates, up to an amount equal to, and pro rata as among such Classes
in accordance with, (a) the respective amounts of Realized Losses and
Expense Losses, if any, previously allocated to such Classes of
Certificates and for which no reimbursement has previously been paid, plus
(b) all unpaid interest on such amounts (compounded monthly) at the
respective Pass-Through Rates of such Classes; and
(4) to make payments on the Subordinate Certificates and the REMIC
Residual Certificates as contemplated below;
provided that, on each Distribution Date after the aggregate Certificate Balance
of the Subordinate Certificates has been reduced to zero, and in any event on
the final Distribution Date in connection with a termination of the Trust Fund
(see "--Optional Termination" below), the payments of principal to be made as
contemplated by clause (2) above with respect to the Class A Certificates, will
be so made to the holders of the respective Classes of such
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Certificates, up to an amount equal to, and pro rata as among such Classes in
accordance with the respective then-outstanding aggregate Certificate Balances
of such Classes of Certificates.
On each Distribution Date, following the above-described distributions on
the Senior Certificates, the Trustee will apply the remaining portion, if any,
of the Available Distribution Amount for such date to make payments on the
respective Classes of Subordinate Certificates in alphabetical order of Class
designation. On each Distribution Date, the holders of each Class of Subordinate
Certificates will be entitled, to the extent of the Available Distribution
Amount remaining after all required distributions to be made therefrom on the
Senior Certificates (as described under this "--Distribution--Application of the
Available Distribution Amount" section) and each other Class of Subordinate
Certificates, if any, with an earlier alphabetical Class designation: first, to
distributions of interest, up to an amount equal to all Distributable
Certificate Interest in respect of such Class of Certificates for such
Distribution Date; second, if the aggregate Certificate Balance of the Class A
Certificates and each other Class of Subordinate Certificates, if any, with an
earlier alphabetical Class designation has been reduced to zero, to
distributions of principal, 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 Amounts for such
Distribution Date (or, on the final Distribution Date in connection with the
termination of the Trust Fund, up to an amount equal to the then-outstanding
aggregate Certificate Balance of such Class of Certificates); and, third, to
distributions for purposes of reimbursement, 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 the Pass-Through
Rate for such Class of Certificates.
On each Distribution Date, following the above-described distributions on
the REMIC Regular Certificates, the Trustee will pay the remaining portion, if
any, of the Available Distribution Amounts for such date to the holders of the
Class R-I Certificates, and shall pay any amount of Excess Interest on deposit
in the Excess Interest Distribution Account for the related Collection Period to
the holders of the Class O Certificates.
The "Excess Interest" in respect of each Hyper-Amortization Loan that does
not repay on its Anticipated Repayment Date is the excess, if any, of interest
accrued at the rate of interest applicable to such loan after the Anticipated
Repayment Date ("the "Revised Rate") over interest accrued at the rate of
interest applicable to such loan before the Anticipated Repayment Date, together
with interest thereon at the Revised Rate from the date accrued to the date such
interest is payable (generally, after payment in full of the outstanding
principal balance of such loan).
Distributable Certificate Interest.
The "Distributable Certificate Interest" in respect of each Class of REMIC
Regular Certificates for each Distribution Date will be equal to the Accrued
Certificate Interest in respect of such Class of Certificates for such
Distribution Date, reduced (to not less than zero) by such Class of
Certificates' allocable share (calculated as described below) of any Net
Aggregate Prepayment Interest Shortfall for such Distribution Date, and
increased by any Class Interest Shortfall in respect of such Class of
Certificates for such Distribution Date. See "--Prepayment Interest Shortfalls"
below.
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 "Class Interest Shortfall" with respect to any Class of REMIC Regular
Certificates for any Distribution Date, will equal: (a) in the case of the
initial Distribution Date, zero; and (b) in the case of any subsequent
Distribution Date, the sum of (i) the excess, if any, of (A) all Distributable
Certificate Interest in respect of such Class of Certificates for the
immediately preceding Distribution Date, over (B) all distributions of interest
made with respect to such Class of Certificates on the immediately preceding
Distribution Date, plus (ii) to the extent permitted
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by applicable law, other than in the case of the Interest Only Certificates, one
month's interest on any such excess at the Pass-Through Rate applicable to such
Class of Certificates.
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 Monthly Payments (other than
Balloon Payments) and any Assumed Monthly 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 voluntary principal prepayments and
Balloon Payments) and other collections received on the Mortgage Loans
during the related Collection Period that were identified and applied by
the Master Servicer as recoveries of principal thereof, in each case net
of any portion of such amounts that represents a payment or other recovery
of the principal portion of any Monthly Payment (other than a Balloon
Payment) due, or the principal portion of any Assumed Monthly 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 paid or
recovered.
If on any Distribution Date the aggregate amount of distributions of
principal made on the Principal Balance Certificates is less than such Principal
Distribution Amount, then the amount of such shortfall will be included in the
Principal Distribution Amount (if available) for the next succeeding
Distribution Date.
The "Monthly Payment" for any Mortgage Loan will, in general, be the
scheduled payment of principal and/or interest due thereon from time to time
(taking into account any waiver, modification or amendment of the terms of such
Mortgage Loan, whether agreed to by the Master Servicer or Special Servicer or
in connection with a bankruptcy or similar proceeding involving the related
borrower).
An "Assumed Monthly Payment" is an amount deemed due in respect of: (i)
any Balloon Loan that is delinquent in respect of its Balloon Payment beyond the
end of the Collection Period in which its stated maturity date occurs; or (ii)
any Mortgage Loan as to which the related Mortgaged Property has become an REO
Property. The Assumed Monthly Payment for any such Balloon Loan deemed due on
its stated maturity date and on each successive Due Date that it remains or is
deemed to remain outstanding shall equal the Monthly 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 such
loan's amortization schedule, if any, in effect immediately prior to maturity
and had continued to accrue interest in accordance with its terms in effect
immediately prior to maturity. The Assumed Monthly Payment for any such Mortgage
Loan as to which the related Mortgaged Property has become an REO Property,
deemed due on each Due Date for so long as such REO Property remains part of the
Trust Fund, will equal the Monthly Payment (or, in the case of a Balloon Loan
described in the prior sentence, the Assumed Monthly 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 G, Class H, Class J, Class K, Class
L, Class M, Class N and Class O Certificates) then entitled to distributions of
principal from the Principal Distribution Amount for 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
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senior of such Classes of 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 for the prepaid
Mortgage Loan, over the relevant Discount Rate. If there is more than one Class
of Principal Balance Certificates entitled to distributions of principal from
the Principal Distribution Amount for such Distribution Date, the aggregate
amount described in the preceding sentence shall be allocated among such Classes
on a pro rata basis in accordance with the relative amounts of such
distributions of principal. Any portion of such Prepayment Premium that is not
so distributed to the holders of such Principal Balance Certificates will be
distributed to the holders of the Interest Only 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 (or Anticipated Repayment Date, if applicable) of the Mortgage
Loan prepaid. If Release H.15 is no longer published, the Trustee 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.
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 be treated, for purposes of, among other things,
determining distributions on the Certificates, allocations of Realized Losses
and Expense Losses to the Certificates, and the amount of Master Servicing Fees,
Special Servicing Fees and Trustee Fees payable under the Pooling and Servicing
Agreement, as having remained outstanding until such REO Property is liquidated.
Among other things, such Mortgage Loan will be taken into account when
determining Pass-Through Rates and the Principal Distribution Amount. In
connection therewith, operating revenues and other proceeds derived from such
REO Property (after application thereof to pay certain costs and taxes,
including certain reimbursements payable to the Master Servicer, the Special
Servicer and/or the Trustee, incurred in connection with the operation and
disposition of such REO Property) will be "applied" by the Master Servicer as
principal, interest and other amounts "due" on such Mortgage Loan, and, subject
to the applicable limitations described under "--Advances" below, the Master
Servicer, the Trustee and the Fiscal Agent will each be required, to the extent
such proceeds are less than the monthly payments due under such Mortgage Loan,
to make P&I Advances in respect of such Mortgage Loan, in all cases as if such
Mortgage Loan had remained outstanding.
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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 60 days after receipt of notice that
the related borrower has filed 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 from the initial maturity date, 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" and the affected Mortgage Loan, a "Required
Appraisal Loan"), the Special Servicer is required to have obtained an MAI
appraisal of the related Mortgaged Property or REO Property, as the case may be
(or, at its discretion, if the Stated Principal Balance of the particular
Required Appraisal Loan is less than or equal to $1,000,000, to perform an
internal valuation of such property) unless such an appraisal or valuation had
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 Required Appraisal Loan will be an amount,
calculated as of the first Determination Date that is at least fifteen days
after the date on which an appraisal report or internal valuation is completed,
equal to the excess, if any, of (a) the sum of (i) the Stated Principal Balance
of such Required Appraisal Loan, (ii) to the extent not previously advanced by
the Master Servicer, the Trustee or the Fiscal Agent, all unpaid interest on the
Required Appraisal Loan, (iii) all related unreimbursed Advances and interest on
such 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 value (net of any prior mortgage liens) of the
related Mortgaged Property or REO Property as determined by such appraisal or
internal valuation. Notwithstanding the foregoing, if an internal valuation of
the Mortgaged Property is performed, the Appraisal Reduction will equal the
greater of (A) the amount calculated above and (B) 25% of the Stated Principal
Balance of the Mortgage Loan. Furthermore, if an appraisal is not obtained from
an MAI appraiser following the earliest of the dates described in clauses
(i)-(iv) in the preceding paragraph, then until such an appraisal is obtained
the Appraisal Reduction will equal 25% of the Stated 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 or is paid in full,
liquidated, repurchased, replaced or otherwise disposed of. An appraisal for any
Required Appraisal Loan that has not been brought current for at least three
consecutive months (or paid in full, liquidated, repurchased or otherwise
disposed of) will be updated annually, with corresponding adjustments to the
amount of the related Appraisal Reduction.
The existence of an Appraisal Reduction reduces the Master Servicer's, the
Trustee's or the Fiscal Agent's, as the case may be, advancing obligation in
respect of delinquent principal and interest on the related Mortgage Loan, which
may result in a reduction in distributions in respect of the then-most
subordinate Class of Certificates. See "--Advances--P&I Advances" below.
SUBORDINATION; ALLOCATION OF LOSSES AND CERTAIN EXPENSES
As and to the extent described herein, the rights of holders of
Subordinate Certificates to receive distributions of amounts collected or
advanced on the Mortgage Loans will, in the case of each Class thereof, be
subordinated to the rights of holders of the Senior Certificates and, further,
to the rights of holders of each other Class of Subordinate Certificates, if
any, with an earlier alphabetical Class designation. This subordination is
intended to enhance the likelihood of timely receipt by holders of the
respective Classes of Senior Certificates of the full amount of Distributable
Certificate Interest payable in respect of their Certificates on each
Distribution Date, and the ultimate receipt by holders of the respective Classes
of Class A Certificates of principal equal to, in each such case, the entire
aggregate Certificate Balance of such Class of Certificates. Similarly, but to
decreasing degrees, this subordination is also intended to enhance the
likelihood of timely receipt by holders of the other Classes of Offered
Certificates of the full amount of Distributable Certificate Interest payable in
respect of their
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Certificates on each Distribution Date, and the ultimate receipt by holders of
such other Classes of Offered Certificates of principal equal to, in each such
case, the entire aggregate Certificate Balance of such Class of Certificates.
The subordination of each Class of Subordinate Certificates will be accomplished
by, among other things, the application of the Available Distribution Amount on
each Distribution Date in the order of priority described under
"--Distributions--Application of the Available Distribution Amount" above. No
other form of credit support will be available for the benefit of holders of
Certificates.
If, following the distributions to be made in respect of the Certificates
on any Distribution Date, the aggregate Stated Principal Balance of the Mortgage
Pool that will be outstanding immediately following such Distribution Date is
less than the then-aggregate Certificate Balance of the Principal Balance
Certificates, the respective aggregate Certificate Balances of the Class O,
Class N, Class M, Class L, Class K, Class J, Class H, Class G, Class F, Class E,
Class D, Class C and Class B Certificates will be reduced, sequentially in that
order, in the case of each such Class until such deficit (or the related
aggregate Certificate Balance) is reduced to zero (whichever occurs first). If
any portion of such deficit remains at such time as the aggregate Certificate
Balance of all such Classes of Certificates is reduced to zero, then the
respective aggregate Certificate Balances of the Class A-1 and Class A-2
Certificates will be reduced, pro rata in accordance with the relative sizes of
the remaining aggregate Certificate Balances of such Classes of Certificates,
until such deficit (or the aggregate Certificate Balance of each such Class of
Certificates) is reduced to zero. In general, any such deficit will be the
result of Realized Losses incurred in respect of the Mortgage Loans and/or
Expense Losses. Accordingly, the foregoing reductions in the aggregate
Certificate Balances of the respective Classes of Principal Balance Certificates
will constitute an allocation of any such Realized Losses and Expense Losses.
Any such allocation of Realized Losses and/or Expense Losses to a particular
Class of Principal Balance Certificates will be allocated among the Certificates
of such Class in proportion to their respective Percentage Interests in such
Class.
"Realized Losses" are losses on or in respect of the Mortgage Loans
arising from the inability of the Master Servicer or Special Servicer, as
applicable, to collect all amounts due and owing under any such Mortgage Loan,
including by reason of the fraud or bankruptcy of a borrower or a casualty of
any nature at a Mortgaged Property, to the extent not covered by insurance. The
Realized Loss in respect of a liquidated Mortgage Loan (or related REO Property)
is an amount generally equal to the excess, if any, of (a) the outstanding
principal balance of such Mortgage Loan as of the date of liquidation, together
with (i) all accrued and unpaid interest thereon at the related Mortgage Rate to
but not including the Due Date in the Collection Period in which the liquidation
occurred and (ii) all related unreimbursed Servicing Advances (including
interest on any outstanding Advances at the Advance Rate) and outstanding
liquidation expenses, over (b) the aggregate amount of Liquidation Proceeds (as
defined in the Prospectus), if any, recovered in connection with such
liquidation. If any portion of the debt due under a 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 the bankruptcy or similar
proceeding involving the related borrower, the amount so forgiven also will be
treated as a Realized Loss.
"Expense Losses" are losses incurred by the Trust Fund by reason of
Additional Trust Fund Expenses being paid out of the Trust Fund that were not of
the type typically subject to a Servicing Advance or were of such type but were
the subject of a determination that such Servicing Advance, if made, would be
nonrecoverable. "Additional Trust Fund Expenses" include, among other things,
(i) Special Servicing Fees, Workout Fees and Liquidation Fees, (ii) interest in
respect of Advances not paid out of default interest and late payment charges,
(iii) the cost of various opinions of counsel required or permitted to be
obtained in connection with the servicing of the Mortgage Loans and the
administration of the Trust Fund, (iv) certain unanticipated, non-Mortgage Loan
specific expenses of the Trust Fund, including certain indemnities and
reimbursements to the Trustee (and certain indemnities and reimbursements to the
Fiscal Agent comparable to those for the Trustee) as described under
"Description of the Agreements--The Trustee" in the Prospectus, certain
indemnities and reimbursements to the Master Servicer and the Depositor (and
certain indemnities and reimbursements to the Special Servicer comparable to
those for the Master Servicer) as described under "Description of the
Agreements--Certain Matters Regarding a Master Servicer and the Depositor" in
the Prospectus and certain federal, state and local taxes, and certain
tax-related expenses, payable out of the Trust Fund as described under
"Servicing of the Mortgage Loans--REO Properties" herein and "Certain Federal
Income Tax Consequences--Prohibited Transactions and Other Taxes" in the
Prospectus, (v) any amounts expended on behalf of the Trust Fund to remediate an
adverse environmental
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condition at any Mortgaged Property securing a defaulted Mortgage Loan (see
"Description of the Agreements--Realization Upon Defaulted Whole Loans" in the
Prospectus), and (vi) any other expense of the Trust Fund not specifically
included in the calculation of Realized Loss for which there is no corresponding
collection from a borrower.
PREPAYMENT INTEREST SHORTFALLS
If a borrower prepays a Mortgage Loan, in whole or in part, prior to the
Determination Date in any calendar month, the amount of interest (net of related
Master Servicing Fees and Trustee Fees) accrued on such prepayment, in general,
from the beginning of such calendar month to, but not including, the date of
prepayment (or any later date through which interest accrues) will, to the
extent actually collected, constitute a "Prepayment Interest Excess".
Conversely, if a borrower prepays a Mortgage Loan, in whole or in part, after
the Determination Date in any calendar month and does not pay interest on such
prepayment through, in general, the end of such calendar month, then the
shortfall in a full month's interest (net of related Master Servicing Fees and
Trustee Fees) on such prepayment will constitute a "Prepayment Interest
Shortfall". Prepayment Interest Excesses collected on the Mortgage Loans during
any Collection Period will first be applied to offset Prepayment Interest
Shortfalls incurred in respect of the Mortgage Loans during such Collection
Period and, to the extent not needed for such purposes, will be retained by the
Master Servicer as additional servicing compensation. The Master Servicer will
be obligated to cover, out of its own funds, without right of reimbursement, to
the extent of that portion of its Master Servicing Fees for the related
Collection Period calculated in respect of all the Mortgage Loans at a rate of
0.02% per annum, any Prepayment Interest Shortfalls in respect of the Mortgage
Loans that are not so offset by Prepayment Interest Excesses. 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, 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 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 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.
OPTIONAL TERMINATION
The Depositor, the Master Servicer, the Special Servicer, majority holders
of the Controlling Class and any holder of a majority interest in the Class R-I
Certificate, will each 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 as of 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. Such purchase will be at a price (the "Termination
Price") generally equal to 100% of the aggregate unpaid principal balance of the
Mortgage Loans (other than any Mortgage Loans as to which the Special Servicer
has determined that all payments or recoveries with respect thereto have been
made and other than any Mortgage Loans as to which the related Mortgaged
Property has become an REO Property), plus accrued and unpaid interest on each
such Mortgage Loan at the related Mortgage Rate to the Due Date for such
Mortgage Loan in the Collection Period with respect to which such purchase
occurs, plus related unreimbursed Servicing Advances, plus interest on any
related Advances at the Advance Rate, plus the fair market value of any other
property (including REO Property) remaining in the Trust Fund. The Termination
Price, net of any portion thereof payable to persons other than the
Certificateholders, will constitute part of the Available Distribution Amount
for the final Distribution Date.
ADVANCES
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P&I Advances.
With respect to each Distribution Date, the Master Servicer will be
obligated to make advances (each, a "P&I Advance") out of its own funds or,
subject to the replacement thereof as provided in the Pooling and Servicing
Agreement, funds held in the Certificate Account that are not required to be
part of the Available Distribution Amount for such Distribution Date, in an
amount generally equal to the aggregate of all Monthly Payments (other than
Balloon Payments) and any Assumed Monthly Payments, in each case net of any
related Master Servicing Fee and Workout Fee, that were due or deemed due, as
the case may be, in respect of the Mortgage Loans during the related Collection
Period and that were not paid by or on behalf of the related borrowers or
otherwise collected as of the close of business on the last day of the related
Collection Period or other specified date prior to such Distribution Date. The
Master Servicer will not be required to make a P&I Advance if it, in its
reasonable discretion, determines that the funds therefor plus interest thereon
at the Advance Rate would not be recoverable from subsequent payments or other
collections (including Insurance Proceeds (as defined in the Prospectus),
condemnation proceeds and Liquidation Proceeds) in respect of the related
Mortgage Loan (such payments and other collections, "Related Proceeds") as
described in the Prospectus. The Master Servicer will also not be required to
advance prepayment or yield maintenance premiums. The Master Servicer's
obligations to make P&I Advances (unless the Master Servicer shall determine
that any such Advance would be nonrecoverable) in respect of any Mortgage Loan
will continue through liquidation of such Mortgage Loan or disposition of any
REO Property acquired in respect thereof. Notwithstanding the foregoing, if an
Appraisal Reduction exists with respect to any Mortgage Loan, then, with respect
to the Distribution Date immediately following the date of such determination
and with respect to each subsequent Distribution Date for so long as such
Appraisal Reduction exists, in the event of subsequent delinquencies on such
Mortgage Loan, the amount of the P&I Advance in respect of such Mortgage Loan
will be reduced to equal to the product of (i) the amount of such P&I Advance
that would otherwise be required to be made for such Distribution Date without
regard to this sentence, multiplied by (ii) a fraction (expressed as a
percentage), the numerator of which is equal to the Stated Principal Balance of
such Mortgage Loan, net of the amount of such Appraisal Reduction, and the
denominator of which is equal to the Stated Principal Balance of such Mortgage
Loan. See "Appraisal Reductions" above. The Master Servicer will make only one
P&I Advance in respect of each Mortgage Loan for the benefit of the most
subordinate Class of Certificates then outstanding unless the related defaulted
Monthly Payment is cured prior to the following Due Date on any Mortgage Loan.
If the Master Servicer fails to make a required P&I Advance, the Trustee will be
obligated to make such P&I Advance; and, if the Trustee fails to make a required
P&I Advance, the Fiscal Agent will be obligated to make such P&I Advance. See
"--The Trustee and the Fiscal Agent" below.
The Master Servicer, the Trustee and the Fiscal Agent will each be
entitled to recover any P&I Advance made by it from Related Proceeds collected
in respect of the Mortgage Loan as to which such P&I Advance was made.
Notwithstanding the foregoing, none of the Master Servicer, the Trustee or the
Fiscal Agent will be obligated to make a P&I Advance that would, if made,
constitute a Nonrecoverable Advance (as defined below). The Master Servicer, the
Trustee and the Fiscal Agent will each be entitled to recover any P&I Advance
previously made by it that is, at any time, determined to be a Nonrecoverable
Advance, out of general funds on deposit in the Certificate Account. See
"Description of the Certificates--Advances in Respect of Delinquencies" and
"Description of the Agreements--Certificate Account and Other Collection
Accounts" in the Prospectus.
Servicing Advances.
In general, customary, reasonable and necessary "out-of-pocket" costs and
expenses required to be incurred by the Master Servicer or the Special Servicer,
as applicable, in connection with the servicing of a Mortgage Loan, a 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 and to the extent described in the Pooling and
Servicing Agreement. Notwithstanding the foregoing, the Master Servicer and the
Special Servicer will each be permitted to pay, or to direct the payment of,
certain servicing expenses directly out of the Certificate Account and at times
without regard to the relationship between the expense and the funds from which
it is being paid. Furthermore, if the Special Servicer is required under the
Pooling and Servicing Agreement to make any Servicing Advance but does not
desire to do so, and if the Special Servicer and the Master Servicer are not the
same person, then the
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Special Servicer may, in its sole discretion, with limited exception, request
that the Master Servicer make such Advance, such request to be made in writing
and in a timely manner that does not adversely affect the interests of any
Certificateholder. The Master Servicer will be obligated to make any such
Servicing Advance that it is requested by the Special Servicer to so make
(unless the Master Servicer shall determine that any such Advance would be
nonrecoverable) within ten (10) days of the Master Servicer's receipt of such
request.
If the Master Servicer or the Special Servicer is required under the
Pooling and Servicing Agreement to make a Servicing Advance, but does not do so
within 15 days after such Servicing Advance is required to be made, then the
Trustee will, if it has actual knowledge of such failure, be required to give
the defaulting party notice of such failure and, if such failure continues for
three more business days, the Trustee will be obligated to make such Servicing
Advance (and, if the Trustee fails to make any Servicing Advance required under
the Pooling and Servicing Agreement, the Fiscal Agent will be obligated to make
such Servicing Advance on behalf of the Trustee).
The Master Servicer, the Special Servicer, the Trustee and the Fiscal
Agent will each be obligated to make Servicing Advances only to the extent that
such Servicing Advances are, in the reasonable and good faith judgment of such
party, ultimately recoverable from Related Proceeds.
Nonrecoverable Advances.
The determination by the Master Servicer, the Special Servicer (or, if
applicable, the Trustee or Fiscal Agent) that any P&I Advance or Servicing
Advance previously made or proposed to be made would not be recoverable from
Related Proceeds, is to be made in the reasonable and good faith discretion of
such party and is to be accompanied by an officer's certificate delivered to the
Trustee and setting forth the reasons for such determination, together with
copies of appraisals, if any, or other information relevant thereto which
supports such determination. The Master Servicer's or Special Servicer's
determination of nonrecoverability will be conclusive and binding upon the
Certificateholders, the Trustee and the Fiscal Agent with respect to the
obligation of the Trustee or the Fiscal Agent to make any Advance. The Trustee
and the Fiscal Agent shall be entitled to rely conclusively on any determination
by the Master Servicer or Special Servicer of nonrecoverability with respect to
such Advance and shall have no obligation to make a separate determination of
recoverability. The Master Servicer shall be entitled to rely conclusively on
any determination by the Special Servicer of non-recoverability with respect to
such Advance, and shall have no obligation to make a separate determination of
recoverability.
Interest on Advances.
The Master Servicer, the Special 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 be
payable to the Master Servicer, the Special Servicer, the Trustee or the Fiscal
Agent, as the case may be, first out of default interest and late payment
charges actually collected by the Master Servicer or the Special Servicer (and
not retainable by any Sub-Servicer) in respect of the related Mortgage Loan or,
if such amounts are insufficient, out of any amounts then on deposit in the
Certificate Account. To the extent not offset by default interest and late
payment charges actually collected in respect of any defaulted Mortgage Loan,
interest accrued on outstanding Advances made in respect thereof will result in
a reduction in amounts payable on the Certificates.
REPORTS TO CERTIFICATEHOLDERS; AVAILABLE INFORMATION
Trustee Reports.
1. Based on information provided in monthly reports prepared by the Master
Servicer and the Special Servicer and delivered by the Master Servicer to the
Trustee, the Trustee will prepare and forward on each Distribution Date to each
Certificateholder:
(a) A statement generally setting forth, to the extent applicable:
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(i) the amount, if any, of the distributions to the
holders of each Class of Principal Balance Certificates on
such Distribution Date applied to reduce the aggregate
Certificate Balance thereof;
(ii) the amount of the distributions to holders of each
Class of REMIC Regular Certificates on such Distribution Date
allocable to (A) interest and (B) Prepayment Premiums;
(iii) the number and aggregate Stated Principal Balance
of outstanding Mortgage Loans in the Mortgage Pool;
(iv) the number and aggregate Stated Principal Balance
of Mortgage Loans in the Mortgage Pool (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
related Collection Period, the Stated Principal Balance of the
related Mortgage Loan as of the date of acquisition of the REO
Property;
(vi) (A) the most recent appraised value of any REO
Property as of the related Determination Date, (B) as to any
REO Property sold during the related Collection Period, the
date of the related determination by the Special Servicer that
it has recovered all Related Proceeds that 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 distributions, and any allocations
of Realized Losses and Expense Losses, 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 the Interest
Only Certificates for such Distribution Date;
(x) the aggregate amount of servicing fees retained by
or paid to the Master Servicer and the Special Servicer;
(xi) the amount of Realized Losses or Expense Losses, if
any, incurred with respect to the Mortgage Loans during the
related Collection Period;
(xii) the aggregate amount of Servicing Advances and P&I
Advances outstanding as of the end of the prior calendar month
that have been made by the Master Servicer, the Special
Servicer, the Trustee and 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 as of such Distribution
Date; and
(xiv) such other information and in such form as shall
be specified in the Pooling and Servicing Agreement.
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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 IV and will be presented in a tabular format
substantially similar to the respective format utilized in Appendix IV,
which shall be in standard CSSA format.
2. For those who have obtained an account number on the Trustee's ASAP
(Automatic Statements Accessed by Phone) System, the foregoing report or a
summary report of bond factors may be obtained from the Trustee via automated
facsimile by placing a telephone call to (714) 282-5518 and following the voice
prompts to request "Statement Number 387." 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. Separately, bond factor information
may be obtained from the Trustee by calling (800) 246-5761. 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 certain
information related to the Mortgage Loans (as presented in the standard CSSA
format) as provided for in the Pooling and Servicing Agreement. The bulletin
board is located at (714) 282-3990. A directory has been set up on the bulletin
board in which an electronic file is stored containing monthly servicer data.
All files are password protected. Passwords to each file will be released by the
Trustee in accordance with the terms of the Pooling and Servicing Agreement.
Those who have an account on the bulletin board may retrieve the loan level data
file for each transaction in the directory. An account number may be obtained by
typing "NEW" upon logging into the bulletin board. The Trustee also intends to
make certain information relating to the Certificates and the Mortgage Loans
available on the Internet at www.lnbabs.com. Such Internet access may require
the use of a password which can be obtained from the Trustee. The Master
Servicer will also make certain information available on the Internet at its
Website at www.amresco.com.
3. Unless otherwise reported pursuant to 1(b) above, on an annual basis,
the Master Servicer is required to deliver to the Trustee, who will deliver,
upon written request (which may be in the form of a standing request), such
report to the Underwriters, the Certificateholders, the Depositor and anyone
else the Depositor or the Underwriters reasonably designate, a report setting
forth the debt service coverage ratio (and the calculation thereof) with respect
to each Mortgage Loan for which the Master Servicer obtains operating
statements, and such other information, including occupancy, to the extent
available, and substantially in the form set forth in the Pooling and Servicing
Agreement. In addition, upon request from the Underwriters, the
Certificateholders or the Depositor, the Master Servicer will make available, in
accordance with the terms of the Pooling and Servicing Agreement, the most
recent annual operating statements and rent rolls for each Mortgaged Property
(to the extent available to the Master Servicer).
Special Servicer Reports.
No later than one business day following each Determination Date, the
Special Servicer will prepare and provide the Master Servicer with reports with
respect to Specially Serviced Mortgage Loans substantially in the form set forth
in the Pooling and Servicing Agreement. Such reports generally will include,
among other things, 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 by the
Trustee, no later than the Distribution Date, to the Underwriters, the Rating
Agencies and the Depositor. Provided however that such information may be
provided as part of another CSSA report in lieu of these separate reports.
Other Information.
The Pooling and Servicing Agreement requires that the Trustee make
available, at its offices primarily responsible for administering the Trust Fund
or at such other office as it may reasonably designate, during normal
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business hours, upon reasonable advance notice for review by any holder or
prospective purchaser of a Certificate, 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 by the Trustee to holders
of the relevant Class of Certificates since the Closing Date,
(iii) all accountants' reports delivered to the Trustee since the
Closing Date,
(iv) 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 and delivered to the Trustee,
(v) 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 and delivered to the Trustee,
(vi) 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 delivered to the Trustee, and
(vii) any and all officers' certificates and other evidence
delivered to the Trustee to support the Master Servicer's determination
that any Advance was not or, if made, would not be, recoverable from
Related Proceeds.
Copies of any and all of the foregoing items and any Special
Servicer Reports delivered to the Trustee will be available from the
Trustee upon request; provided that the Trustee will be permitted to
require payment of a sum sufficient to cover the reasonable costs and
expenses of providing such copies; and provided further that certain
limitations will be imposed on the recipients with respect to the use and
further dissemination of the information to the extent described in the
Pooling and Servicing Agreement.
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 form and substance satisfactory to the
Trustee, regarding such Certificate Owner's beneficial ownership of Offered
Certificates will be recognized as a Certificateholder for purposes of obtaining
the foregoing information and access.
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 during March 1999:
The close of business on
March 1.................... (A) Cut-off Date.
March 31................... (B) Record Date for all Classes of
Certificates.
March 2 - April 5......... (C) The Collection Period. The Master
Servicer receives Monthly Payments
due after the Cut-off Date and on
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or prior to April 5, the last day
of the Collection Period for
scheduled payments due and
received, and any principal
prepayments made, after the
Cut-off Date and on or prior to
April 5, the last day of the
Collection Period for unscheduled
payments.
April 5.................... (D) Determination Date.
April 12................... (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 principal balance of the Mortgage Loans at the close of business on
March 1, 1999 (after deducting principal payments due on or before such date).
Those 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 Monthly Payments due and collected and Principal Prepayments
collected, after the Cut-off Date and on or prior to the dates set forth above
will be deposited in the Certificate Account. Each subsequent Collection Period
will begin on the day after the Determination Date in the month preceding the
month of the related Distribution Date and will end on the Determination Date in
the month in which the related Distribution Date occurs.
(D) As of the close of business on the Determination Date, the Master
Servicer will have determined the amounts of principal and interest due and
payable on the Mortgage Loans with respect to the related Collection Period. The
Determination Date related to each Distribution Date is the fifth day of the
month in which such Distribution Date occurs (or if such date is not a business
day, then the next preceding business day).
(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
that are payable to Certificateholders on such Distribution Date.
(F) The Trustee will make distributions to Certificateholders on the 15th
day of each month or, if any such 15th day is not a business day, the next
succeeding business day.
VOTING RIGHTS
At all times during the term of the Pooling and Servicing Agreement, 97%
of the voting rights for the Certificates (the "Voting Rights") are to be
allocated among the holders of the respective Classes of Principal Balance
Certificates in proportion to the aggregate Certificate Balances of such
Classes, 2% of the Voting Rights are to be allocated among the holders of the
Class of Interest Only Certificates, and the remaining Voting Rights are to be
allocated among the holders of the respective Classes of REMIC Residual
Certificates in three equal shares. Voting Rights allocated to a Class of
Certificateholders will be allocated among Certificateholders of such Class in
proportion to the Percentage Interests in such Class evidenced by their
respective Certificates.
THE TRUSTEE AND THE FISCAL AGENT
The Trustee
LaSalle National Bank ("LaSalle") will act as Trustee (the "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
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be required 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 "A" by DCR and "Aa" by Moody's (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, Attention: Asset-Backed Securities Trust Services Group - Morgan
Stanley Capital I Inc., Commercial Mortgage Pass-Through Certificates, Series
1999-RM1. As of June 30, 1998, the Trustee had assets of approximately $19
billion. See "Servicing of the Mortgage Loans--Duties of the Trustee",
"Servicing of the Mortgage Loans--Certain Matters Regarding the Trustee" and
"Servicing of the Mortgage Loans--Resignation and Removal of the Trustee" in the
Prospectus.
The principal compensation to be paid to the Trustee in respect of its
activities as the trustee under the Pooling and Servicing Agreement will be the
Trustee Fee. The "Trustee Fee" will be payable monthly on a loan-by-loan basis
from amounts received in respect of interest on each Mortgage Loan (including
Specially Serviced Mortgage Loans and Mortgage Loans as to which the related
Mortgaged Property has become an REO Property) and will be computed on the basis
of the same principal amount and for the same period respecting which any
related interest payment on the related Mortgage Loan is computed.
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 (the "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 deems to be a Nonrecoverable Advance. The Fiscal Agent
will be entitled (but not obligated) 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, 1998, the Fiscal Agent had
consolidated assets of approximately $491 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.
MATURITY CONSIDERATIONS
The weighted average life of a Principal Balance Certificate refers to the
average amount of time that will elapse from the date of its issuance until each
dollar allocable to principal of such Certificate is distributed to the
investor. For purposes of this Prospectus Supplement, the weighted average life
of a Principal Balance Certificate is determined by (i) multiplying the amount
of each principal distribution thereon by the number of years from the Closing
Date to the related Distribution Date, (ii) summing the results and (iii)
dividing the sum by the aggregate amount of the reductions in the Certificate
Balance of such Certificate. Accordingly, the weighted average life of any such
Certificate will be influenced by, among other things, the rate at which
principal of the Mortgage Loans is paid or otherwise collected or advanced and
the extent to which such payments, collections and/or advances of principal are
in turn applied in reduction of the Certificate Balance of such Certificate.
Prepayments on mortgage loans may be measured by a prepayment standard or
model ("Prepayment Assumptions"). The model used in this Prospectus Supplement
is the CPR prepayment model (as described under "Yield
Considerations--Prepayments--Maturity and Weighted Average Life" in the
Prospectus).
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As used in each of the following tables, the column headed "0%" assumes
that none of the Mortgage Loans is prepaid before maturity, or in the case of an
Anticipated Repayment Date Loan, the Anticipated Repayment Date. The columns
headed "3%", "5%", "7%", "10%" and "15%" assume that no prepayments are made on
any Mortgage Loan during such Mortgage Loan's Lockout Period, if any, or during
such Mortgage Loan's yield maintenance period (unless the prepayment penalty for
such Mortgage Loan is calculated as the lesser of yield maintenance or a fixed
percentage), if any, and are otherwise made on each of the Mortgage Loans at the
indicated CPRs. Such tables and assumptions are intended to illustrate the
sensitivity of weighted average life of the Certificates to various prepayment
rates and are not intended to predict or to provide information that will enable
investors to predict the actual weighted average life of the Certificates. There
is no assurance, however, that prepayments of the Mortgage Loans (whether or not
in a Lockout Period or a yield maintenance period) will conform to any
particular CPR, and no representation is made that the Mortgage Loans will
prepay in accordance with the assumptions at any of the CPRs shown or at any
other particular prepayment rate, that all the Mortgage Loans will prepay in
accordance with the assumptions at the same rate or that Mortgage Loans that are
in a Lockout Period or a yield maintenance period will not prepay as a result of
involuntary liquidations upon default or otherwise. A "yield maintenance period"
is any period during which a Mortgage Loan provides that voluntary prepayments
be accompanied by a Yield Maintenance Premium.
The following tables indicate the percentage of the initial aggregate
Certificate Balance of each Class of Offered Certificates that would be
outstanding after each of the dates shown at various CPRs and the corresponding
weighted average life of each such Class of Certificates. The tables have been
prepared on the basis of the following assumptions (collectively, the "Maturity
Assumptions"):
(i) the Initial Pool Balance is approximately $859,306,538,
(ii) the initial aggregate Certificate Balance or Notional Amount,
as the case may be, for each Class of Offered Certificates is as set forth
on the cover page hereof, and the Pass-Through Rate for each Class of
Offered Certificates is as set forth or otherwise described herein,
(iii) the scheduled Monthly Payments for each Mortgage Loan are as
set forth in Appendix II,
(iv) all Monthly Payments are due and timely received on the first
day of each month,
(v) there are no delinquencies or losses in respect of the Mortgage
Loans, there are no extensions of maturity in respect of the Mortgage
Loans, there are no Appraisal Reductions with respect to the Mortgage
Loans and there are no casualties or condemnations affecting the Mortgaged
Properties,
(vi) (A) prepayments are made on each of the Mortgage Loans at the
indicated CPRs (except that prepayments are assumed not to be received as
to any Mortgage Loan during such Mortgage Loan's Lockout Period ("LOP"),
if any, or yield maintenance period ("YMP"), if any, unless the prepayment
penalty for such Mortgage Loan is calculated as the lesser of yield
maintenance or a fixed percentage) and (B) Mortgage Loans that provide for
an increase in the respective Mortgage Rate and/or principal amortization
on a specified date prior to stated maturity are prepaid in full on their
respective Anticipated Repayment Dates,
(vii) Mortgage Loans with holdback provisions are assumed to meet
their Release Conditions and the Escrowed Holdback Amounts are assumed
released to the respective borrowers,
(viii) (A) Mortgage Loans that are silent as to the methodology of
interest accrual on such loans are assumed to accrue on the basis of a
360-day year consisting of twelve 30-day months (a "30/360 basis") and (B)
Mortgage Loans that accrue interest on the basis of the actual number of
days elapsed each month in a 360-day year pay principal based on monthly
payments that are calculated on an actual/360 basis,
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(ix) no party entitled thereto exercises its right of optional
termination described herein under "Description of the
Certificates--Optional Termination",
(x) no Mortgage Loan is required to be repurchased or replaced by a
Seller or other party,
(xi) no Prepayment Interest Shortfalls are incurred,
(xii) there are no Additional Trust Fund Expenses,
(xiii) distributions on the Certificates are made on the 15th day of
each month, commencing in April 1999,
(xiv) the Certificates are issued on the Closing Date,
(xv) the prepayment provisions for each Mortgage Loan are assumed to
begin on the first payment date of such Mortgage Loan and any resulting
Prepayment Premiums are allocated as described under "Description of the
Certificates--Distributions--Distributions of Prepayment Premiums", and
(xvi) the open prepayment period, if any, is assumed to begin on the
first day of the respective month prior to the maturity date.
To the extent that the Mortgage Loans have characteristics that
differ from those assumed in preparing the tables set forth below, the Offered
Certificates may mature earlier or later than indicated by the tables. The
"Final Scheduled Distribution Date" for each Class of Offered Certificates is
the Distribution Date on which the related aggregate Certificate Balance or
Notional Amount, as the case may be, would be reduced to zero based upon the
Maturity Assumptions and a 0% CPR. It is highly unlikely that the Mortgage Loans
will prepay in accordance with the Maturity Assumptions at any constant rate
until maturity or that all the Mortgage Loans will prepay in accordance with the
Maturity Assumptions at the same rate. 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 aggregate Certificate Balances
(and weighted average lives) shown in the following tables. Such variations may
occur even if the average prepayment experience of the Mortgage Loans were to
reflect the Maturity Assumptions and any of the specified CPR percentages.
Investors are urged to conduct their own analyses of the rates at which
the Mortgage Loans may be expected to prepay.
Based on the Maturity Assumptions, the following tables indicate the
resulting weighted average lives of the Offered Certificates and set forth the
percentage of the initial Certificate Balance of each Class of such Certificates
that would be outstanding after each of the dates shown under the applicable
assumptions at the indicated CPRs.
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PERCENTAGES OF THE INITIAL AGGREGATE CERTIFICATE BALANCE OF
THE CLASS A-1 CERTIFICATES AT THE SPECIFIED CPRS
PREPAYMENT ASSUMPTION (CPR)
----------------------------------------------------
Date 0% 3% 5% 7% 10% 15%
- -------------------------- -- -- -- -- --- ---
Closing Date.............. 100% 100% 100% 100% 100% 100%
March 2000................ 94 94 94 93 93 93
March 2001................ 86 86 85 85 85 84
March 2002................ 78 77 77 77 76 75
March 2003................ 68 67 67 66 66 65
March 2004................ 60 59 59 58 58 57
March 2005................ 51 50 50 49 49 48
March 2006................ 41 41 40 40 39 39
March 2007................ 18 17 16 16 15 15
March 2008................ 0 0 0 0 0 0
Weighted Average
Life (years).............. 5.50 5.45 5.43 5.40 5.37 5.32
PERCENTAGES OF THE INITIAL AGGREGATE CERTIFICATE BALANCE
OF THE CLASS A-2 CERTIFICATES AT THE SPECIFIED CPRS
PREPAYMENT ASSUMPTION (CPR)
----------------------------------------------------
Date 0% 3% 5% 7% 10% 15%
- -------------------------- -- -- -- -- --- ---
Closing Date.............. 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................ 95 95 95 95 95 94
March 2009................ 0 0 0 0 0 0
Weighted Average
Life (years).............. 9.44 9.44 9.44 9.43 9.43 9.43
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PERCENTAGES OF THE INITIAL AGGREGATE CERTIFICATE BALANCE OF
THE CLASS B CERTIFICATES AT THE SPECIFIED CPRS
PREPAYMENT ASSUMPTION (CPR)
----------------------------------------------------
Date 0% 3% 5% 7% 10% 15%
- -------------------------- -- -- -- -- --- ---
Closing Date.............. 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................ 100 100 100 100 100 100
March 2009................ 0 0 0 0 0 0
Weighted Average
Life (years).............. 9.67 9.66 9.66 9.66 9.66 9.66
PERCENTAGES OF THE INITIAL AGGREGATE CERTIFICATE BALANCE OF
THE CLASS C CERTIFICATES AT THE SPECIFIED CPRS
PREPAYMENT ASSUMPTION (CPR)
----------------------------------------------------
Date 0% 3% 5% 7% 10% 15%
- -------------------------- -- -- -- -- --- ---
Closing Date.............. 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................ 100 100 100 100 100 100
March 2009................ 0 0 0 0 0 0
Weighted Average
Life (years).............. 9.70 9.70 9.70 9.70 9.70 9.70
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PERCENTAGES OF THE INITIAL AGGREGATE CERTIFICATE BALANCE OF
THE CLASS D CERTIFICATES AT THE SPECIFIED CPRS
PREPAYMENT ASSUMPTION (CPR)
----------------------------------------------------
Date 0% 3% 5% 7% 10% 15%
- -------------------------- -- -- -- -- --- ---
Closing Date.............. 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................ 100 100 100 100 100 100
March 2009................ 0 0 0 0 0 0
Weighted Average
Life (years).............. 9.77 9.77 9.76 9.76 9.76 9.75
PERCENTAGES OF THE INITIAL AGGREGATE CERTIFICATE BALANCE OF
THE CLASS E CERTIFICATES AT THE SPECIFIED CPRS
PREPAYMENT ASSUMPTION (CPR)
----------------------------------------------------
Date 0% 3% 5% 7% 10% 15%
- -------------------------- -- -- -- -- --- ---
Closing Date.............. 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................ 100 100 100 100 100 100
March 2009................ 0 0 0 0 0 0
Weighted Average
Life (years).............. 9.78 9.78 9.78 9.78 9.78 9.78
PERCENTAGES OF THE INITIAL AGGREGATE CERTIFICATE BALANCE OF
THE CLASS F CERTIFICATES AT THE SPECIFIED CPRS
PREPAYMENT ASSUMPTION (CPR)
----------------------------------------------------
Date 0% 3% 5% 7% 10% 15%
- -------------------------- -- -- -- -- --- ---
Closing Date.............. 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................ 100 100 100 100 100 100
March 2009................ 35 32 31 29 28 26
March 2010................ 0 0 0 0 0 0
Weighted Average
Life (years).............. 9.95 9.94 9.93 9.93 9.92 9.92
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YIELD CONSIDERATIONS
GENERAL
The yield on any Offered Certificate will depend on: (i) the Pass-Through
Rate in effect from time to time for such Certificate; (ii) the price paid for
such Certificate and, if the price was other than par, the rate and timing of
payments of principal on such Certificate; and (iii) the aggregate amount of
distributions on such Certificate.
RATE AND TIMING OF PRINCIPAL PAYMENTS
The yield to holders of the Interest Only Certificates and any other
Offered Certificates that are purchased at a discount or premium will be
affected by the rate and timing of principal payments on the Mortgage Loans
(including principal prepayments on the Mortgage Loans resulting from both
voluntary prepayments by the mortgagors and involuntary liquidations). The rate
and timing of principal payments on the Mortgage Loans 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, or repurchases of Mortgage Loans out of the
Trust Fund). Prepayments and, assuming the respective stated maturity dates
therefor have not occurred, liquidations and repurchases of the Mortgage Loans,
will result in distributions on the Principal Balance Certificates of amounts
that otherwise would have been distributed (and reductions in the Notional
Amounts of the Interest Only Certificates that would otherwise have occurred)
over the remaining terms of the Mortgage Loans. Defaults on the Mortgage Loans,
particularly at or near their stated maturity dates, may result in significant
delays in payments of principal on the Mortgage Loans (and, accordingly, on the
Principal Balance Certificates) while work-outs are negotiated or foreclosures
are completed. See "Servicing of the Mortgage Loans--Modifications, Waivers,
Amendments and Consents" and "Servicing of the Mortgage Loans--Sale of Defaulted
Mortgage Loans" herein and "Description Of The Agreements--Realization Upon
Defaulted Whole Loans" and "Certain Legal Aspects Of The Mortgage Loans And
Leases--Foreclosure" in the Prospectus. Because the rate of principal payments
on the Mortgage Loans will depend on future events and a variety of factors (as
described 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.
The extent to which the yield to maturity of an 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 are in turn distributed on or
otherwise result in the reduction of the Certificate Balance or Notional Amount,
as the case may be, of such Certificate. An investor should consider, in the
case of any Principal Balance Certificate purchased at a discount, the risk that
a slower than anticipated rate of principal payments on such Certificate could
result in an actual yield to such investor that is lower than the anticipated
yield and, in the case of any Principal Balance Certificate purchased at a
premium, the risk that a faster than anticipated rate of principal payments on
such Certificate could result in an actual yield to such investor that is lower
than the anticipated yield. In general, the earlier a payment of principal is
made on a Principal Balance Certificate purchased at a discount or premium, the
greater will be the effect on an investor's yield to maturity. As a result, the
effect on an investor's yield of principal payments on such investor's Principal
Balance Certificates occurring at a rate higher (or lower) than the rate
anticipated by the investor during any particular period would not be fully
offset by a subsequent like reduction (or increase) in the rate of principal
payments. The yield to maturity of each Class of Interest Only Certificates will
be highly sensitive to the rate and timing of principal payments (including by
reason of prepayments, repurchases, extensions, defaults and liquidations) on or
in respect of the Mortgage Loans. Investors in the Interest Only Certificates
should fully consider the associated risks, including the risk that an extremely
rapid rate of amortization and prepayment of the Notional Amounts of their
Certificates could result in the failure of such investors to recoup their
initial investments.
An investor should consider the risk that rapid rates of prepayments on
the Mortgage Loans, and therefore of amounts distributable in reduction of the
principal balance of the Offered Certificates entitled to distributions of
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principal may coincide with periods of low prevailing interest rates. During
such periods, the effective interest rates on securities in which an investor
may choose to reinvest amounts distributed in reduction of the principal balance
of such investor's Offered Certificate may be lower than the Pass-Through Rate
applicable thereto. Conversely, slower rates of prepayments on the Mortgage
Loans, and therefore of amounts distributable in reduction of principal balance
of the Offered Certificates entitled to distributions of principal, may coincide
with periods of high prevailing interest rates. During such periods, the amount
of principal distributions resulting from prepayments available to an investor
in such Certificates for reinvestment at such high prevailing interest rates may
be relatively small.
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. Losses and other shortfalls on the Mortgage
Loans (other than Net Aggregate Prepayment Interest Shortfalls) will generally
be borne: first, by the holders of the respective Classes of Subordinate
Certificates, in reverse alphabetical order of Class designation, to the extent
of amounts otherwise distributable in respect of their Certificates; and then,
by the holders of the Senior Certificates. 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.
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, Prepayment Premiums, Lockout Periods 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 comparable residential and/or commercial space 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" and "Description of the Mortgage
Pool" herein and "Risk Factors" and "Yield Considerations" 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
coupon, a borrower may have an increased incentive to refinance its mortgage
loan. If a Mortgage Loan is not in a Lockout Period, the Prepayment Premium, if
any, in respect of such Mortgage Loan may not be sufficient economic
disincentive to prevent the related borrower from voluntarily prepaying the loan
as part of a refinancing thereof. See "Description of the Mortgage Pool--Certain
Terms and Characteristics of the Mortgage Loans" herein.
DELAY IN PAYMENT OF DISTRIBUTIONS
Because monthly distributions will not be made to Certificateholders until
a date that is scheduled to be at least 15 days following the end of the related
Interest Accrual Period, the effective yield to the holders of the Offered
Certificates will be lower than the yield that would otherwise be produced by
the applicable Pass-Through Rates and purchase prices.
DESCRIPTION OF THE MORTGAGE POOL
GENERAL
The mortgage pool (the "Mortgage Pool") will consist of 229 mortgage loans
(each, a "Mortgage Loan") with an Initial Pool Balance of $859,306,538 equal to
the aggregate Cut-off Date Balance (the "Initial Pool Balance") of the Mortgage
Loans, subject to a permitted variance of plus or minus 5%. The "Cut-off Date
Balance" with respect to any Mortgage Loan is the unpaid principal balance
thereof as of the Cut-off Date.
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All numerical information provided herein with respect to the Mortgage
Loans is provided on an approximate basis.
A brief summary of the material terms of the ten significant Mortgage
Loans in the Mortgage Pool is set forth on Appendix III attached hereto.
Principal Balances
The Mortgage Loans have an Initial Pool Balance of $859,306,538 (subject
to a variance of plus or minus 5%). The Cut-off Date Balances of the Mortgage
Loans range from $516,977 to $36,790,447, and the Mortgage Loans have an average
Cut-off Date Balance of $3,752,430.
Balloon Loans
Two hundred and twelve (212) of the Mortgage Loans, representing 94.6% of
the Initial Pool Balance, are Balloon Loans or provide for increases in the
mortgage rate and/or principal amortization at a date prior to the stated
maturity date.
Fee/Leasehold
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 (or, in 3 cases, or 2.3%
of the Initial Pool Balance, a leasehold estate and in one case, or 0.6% of the
Initial Pool Balance, a leasehold interest in a portion of the property and a
fee interest in the remainder of the property) in income-producing real property
(a "Mortgaged Property").
Property Type
o Sixty-two (62) of the Mortgaged Properties, which represent security for
31.9% of the Initial Pool Balance, are retail properties;
o Sixty-four (64) of the Mortgaged Properties, which represent security
for 22.9% of the Initial Pool Balance, are multifamily apartment properties;
o Forty-three (43) of the Mortgaged Properties, which represent security
for 18.4% of the Initial Pool Balance, are office properties;
o Fifteen (15) of the Mortgaged Properties, which represent security for
10.4% of the Initial Pool Balance, are hospitality properties;
o Twenty-seven (27) of the Mortgaged Properties, which represent security
for 9.3% of the Initial Pool Balance, are industrial/warehouse properties,
including multi-tenant industrial properties;
o Ten (10) of the Mortgaged Properties, which represent security for 4.6%
of the Initial Pool Balance, are mixed use properties;
o Five (5) of the Mortgaged Properties, which represent security for 1.3%
of the Initial Pool Balance, are self-storage facilities;
o Two (2) of the Mortgaged Properties, which represent security for 0.9%
of the Initial Pool Balance, are manufactured housing communities; and
o One (1) of the Mortgaged Properties, which represents security for 0.3%
of the Initial Pool Balance, is an "other" type of property, a cinema property.
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Geographic Location
The Mortgaged Properties are located throughout 34 states and the District
of Columbia with the largest concentration in the California (48) Mortgaged
Properties, which represent security for 25.7% of the Initial Pool Balance). Of
the Mortgaged Properties located in the State of California, 30 Mortgaged
Properties, which represent 14.7% of the Initial Pool Balance are located in
Southern California, and 18 Mortgaged Properties, representing 11.0% of the
Initial Pool Balance are located in Northern California. No other state has a
concentration of Mortgaged Properties that represents security for more than
11.9% of the Initial Pool Balance. See Appendix II for a more detailed
description of the Mortgage Loans and additional information with respect to
those Mortgage Loans secured by Mortgages on multifamily apartment properties.
Delinquency
As of the Cut-off Date, none of the Mortgage Loans was 30 days or more
delinquent, or had been 30 days or more delinquent during the 12 calendar months
preceding the Cut-off Date.
Sellers
One hundred three (103) of the Mortgage Loans (the "Residential Funding
Loans"), which represent 46.5% of the Initial Pool Balance will, immediately
prior to the issuance of the Certificates, be held by RFC. The Residential
Funding Loans were all originated by Residential Funding Corporation.
Thirty-nine (39) of the Mortgage Loans (the "Wachovia Loans"), which represent
13.8% of the Initial Pool Balance, are currently held by Wachovia. The Wachovia
Loans were all originated by Wachovia, or an affiliate. Eighty-seven (87) of the
Mortgage Loans (the "Morgan Stanley Loans"), which represent 39.7% of the
Initial Pool Balance, are currently held by MSMC. RFC, Wachovia and MSMC will
each be referred to herein as a "Seller" and will collectively be referred to
herein as the "Sellers."
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; Repurchases" below.
Origination Dates
Mortgage Loans were originated between March 1, 1994 and January 7, 1999.
CERTAIN TERMS AND CHARACTERISTICS OF THE MORTGAGE LOANS
Mortgage Rates; Calculations of Interest
All of the Mortgage Loans bear interest at annualized rates ("Mortgage
Rates") that will remain fixed for the remaining terms of the Mortgage Loans. No
Mortgage Loan permits negative amortization or the deferral of accrued interest.
Twenty-five (25) of the Mortgage Loans representing 11.1% of the Initial
Pool Balance, accrue interest on the basis of a 360-day year consisting of
twelve 30-day months, and two hundred and four (204) Mortgage Loans,
representing 88.9% of the Initial Pool Balance are Actual/360 Mortgage Loans
(the "Interest Accrual Method").
As of the Cut-off Date, the Mortgage Rates of the Mortgage Loans range
from 6.160% to 9.125% per annum, and the weighted average Mortgage Rate of the
Mortgage Loans is 7.198% per annum.
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Due Dates
All of the Mortgage Loans have "Due Dates" (that is, the dates upon which
the related Monthly Payments are due) that occur on the first day of each month.
Amortization
Two hundred-nine (209) of the Mortgage Loans, representing 87.1% the
Initial Pool Balance, provide for Monthly Payments of principal and interest
based on amortization schedules significantly longer than their terms to
maturity. Three (3) additional Mortgage Loans, representing 7.5% of the Initial
Pool Balance, are Hyper-Amortization Loans. As a result, such Mortgage Loans
(the "Balloon Loans") will have substantial payments (each such payment, a
"Balloon Payment") payable on their respective maturity dates or anticipated to
be paid on their Anticipated Repayment Dates, as the case may be, unless prepaid
prior thereto. See "Risk Factors and Other Special Considerations--The Mortgage
Loans--Balloon Payments" herein. The remaining 17 Mortgage Loans, representing
5.4% of the Initial Pool Balance, have an expected balloon balance equal to less
than 10% of the original principal balance of each loan.
Defeasance; Prepayment Restrictions
Eighty-eight (88) of the Mortgage Loans (the "Defeasance Loans"),
representing 44.0% of the Initial Pool Balance, prohibit voluntary prepayment
from the origination of the Mortgage Loan until a date that is generally up to
three to six months prior to its scheduled maturity date or Anticipated
Repayment Date, as applicable, but, in lieu of prepayment, the borrower may,
after a period of no fewer than two years from the Closing Date, obtain a
release of the related Mortgaged Property from the lien of such Mortgage Loan by
pledging "Defeasance Collateral" to the holder of the Mortgage Note. In general,
"Defeasance Collateral" is required to consist of direct, non-callable United
States Treasury obligations that provide for payments prior, but as close as
possible, to all successive dates on which a Monthly Payment is due (including
the scheduled maturity date), with each such payment being equal to or greater
than (with any excess to be returned to the borrower) the Monthly Payment
(including, in the case of the scheduled maturity date, any Balloon Payment),
due on such date (or with respect to Cross-Collateralized Mortgage Loans which
permit defeasance, an amount equal to not less than the monthly payment and any
Balloon Payment relating to the principal portion of the Mortgage Loan allocable
to the released Mortgaged Property. A borrower's ability to defease is in each
case subject to certain conditions, including reasonable assurance that
acceptance of a pledge of the Defeasance Collateral in lieu of a full prepayment
will not result in a qualification, downgrade or withdrawal of the rating then
assigned by each Rating Agency to any Class of Certificates.
One hundred-nineteen (119) Mortgage Loans, representing 48.0% of the
Initial Pool Balance, prohibit voluntary prepayments for a period (a "Lockout
Period") ending on a date determined by the related Mortgage Note and,
thereafter impose, until generally 3 to 6 months prior to maturity (or
Anticipated Repayment Date, as applicable), prepayment premiums calculated (i)
in the case of one hundred-sixteen (116) Mortgage Loans, representing 46.4% of
the Initial Pool Balance, on the basis of the greater of a yield maintenance
formula and 1% of the amount of principal prepaid; (ii) in the case of two (2)
Mortgage Loans, representing 1.4% of the Initial Pool Balance, on the basis of a
yield maintenance formula and (iii) in the case of one (1) Mortgage Loan,
representing 0.2% of the Initial Pool Balance, on the basis of a prepayment
premium equal to 3% of the amount of principal prepaid.
Five (5) Mortgage Loans, representing 1.9% of the Initial Pool Balance,
provide, at the borrower's option, until 3 months before maturity, either (i) a
Lockout Period as determined in the related Mortgage Note, followed by a period
during which borrower may pay a prepayment premium calculated on the basis of
the greater of a yield maintenance formula and 1% of the amount prepaid or (ii)
a Lockout Period as determined in the related Mortgage Note, followed by a
period during which borrower may defease the loan by substituting direct,
non-callable United States Treasury obligations for the Mortgaged Property,
thereby releasing the property from the lien of the mortgage without prepaying
the mortgage loans.
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Seventeen (17) Mortgage Loans, representing 6.1% of the Initial Pool
Balance, do not provide for a lockout period, but impose, until 0 to 6 months
prior to maturity, a prepayment premium calculated (i) on the basis of the
greater of a yield maintenance formula and 1% of the amount prepaid in the case
of eight (8) Mortgage Loans representing 4.2% of the Initial Pool Balance, (ii)
on the basis of a declining percentage of the amount prepaid in the case of four
(4) Mortgage Loans Representing 1.0% of the Initial Pool Balance, and (iii) on
the basis of the greater of a yield maintenance formula and 3% of the amount
prepaid for a period of 30 to 60 months, and thereafter on the basis of a
declining percentage of the amount prepaid, in the case of five (5) Mortgage
Loans, representing 1.0% of the Initial Pool Balance.
Notwithstanding the foregoing, three Mortgage Loans, representing 0.7% 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 a Prepayment Premium (the "10%
Free Prepayment Loans").
Yield Maintenance Premiums and Percentage Premiums, if and to the extent
collected, will be distributed to the holders of the Certificates as described
herein under "Description of the Certificates--Distributions--Distributions of
Prepayment Premiums" herein. 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. Neither the Depositor nor any Seller can
provide any assurance as to the enforceability of any Mortgage Loan provisions
barring prepayment or requiring the payment of a Prepayment Premium or of the
collectibility of any Prepayment Premium.
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. Generally, the Mortgage Loans
permit a transfer of the related Mortgaged Property, subject to the satisfaction
of certain conditions, including, in some cases, approval of the proposed
transferee by the Special Servicer. 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 or Special Servicer, as
applicable.
Borrower Concentrations
Twenty groups of Mortgage Loans (not including cross-collateralized or
single note, multiple mortgage property loan) are made to the same borrower or
have related borrowers ("Related Borrower Loan Groups") that are affiliated with
one another through partial or complete direct or indirect common ownership. The
three largest of these groups represent 5.4%, 3.0%, and 2.9%, respectively, of
the Initial Pool Balance.
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Cross-Collateralized Mortgage Loans
The Mortgage Pool includes one set of Cross-Collateralized Mortgage Loans,
representing 0.2% of the Initial Pool Balance. See Appendix II hereto.
Multiple Mortgaged Properties
In seven cases, or 3.8% of the Initial Pool Balance (not including the one
cross-collateralized and cross-defaulted Mortgage Loan group referred to above
in "--Cross-Collateralized Mortgage Loans"), a single Mortgage Note is secured
by a Mortgage or Mortgages on two or more Mortgaged Properties. Accordingly, the
total number of Mortgaged Properties secured by such multi-property loans is 21.
In Appendix II the Mortgaged Properties are collectively considered to
constitute one Mortgaged Property for purposes of presenting numerical
information herein. In all cases the Debt Service Coverage Ratios were
determined on the basis of the aggregate Underwritable Cash Flow of all the
related Mortgaged Properties, the Cut-off Date Balance per unit or square foot
were determined based on the aggregate number of square feet or units, and the
Cut-off Date LTVs and the Balloon LTVs were determined on the basis of the
aggregate of the appraised values of the related Mortgaged Properties.
Single-Tenant Mortgage Loans
In the case of twenty-three (23) Mortgage Loans, representing 9.2% of the
Initial Pool Balance, the related Mortgaged Property is 100% leased to a single
tenant (each such Mortgage Loan, a "Single-Tenant Mortgage Loan"). The Mortgaged
Property securing each such Mortgage Loan is generally subject to a single space
lease, which generally have a primary lease term that expires on or after the
scheduled maturity date or Anticipated Repayment Date of the related Mortgage
Loan and the remainder of which have shorter primary lease terms. The amount of
the monthly rental payments payable by the tenant under the lease is equal to or
greater than the scheduled payment of all principal, interest and other amounts
(other than any Balloon Payment) due each month on the related Mortgage Loan.
The underwriting of the Single-Tenant Mortgage Loans is based primarily
upon the monthly rental payments due from the tenant under the lease of the
related Mortgaged Property, and where the primary lease term expires before the
scheduled maturity date of the related Mortgage Loan, the underwriting
considered the incentives for the primary tenant to re-lease the premises and
the anticipated rental value of the premises at the end of the primary lease
term. In addition, the loan underwriting for certain of the Single-Tenant
Mortgage Loans takes into account the creditworthiness of the tenants under the
applicable leases. Accordingly, such Single-Tenant Mortgage Loans may have
higher loan-to-value ratios and lower debt-service-coverage ratios than other
types of Mortgage Loans.
Each lease generally provides that the related tenant must pay all real
property taxes and assessments levied or assessed against the related Mortgaged
Property and all charges for utility services, insurance and other operating
expenses incurred in connection with the operation of the related Mortgaged
Property. Generally, the tenants under such leases are required, at their
expense, to maintain the related Mortgaged Properties in good order and repair.
Release Provisions
Several Mortgage Loans secured by multiple properties described under
"--Borrower Concentrations" and "--Multiple Mortgaged Properties", respectively,
above, permit the release of individual real properties from the lien of the
related Mortgage(s), subject to the satisfaction of certain specified
conditions.
Ground Leases
Three (3) of the Mortgage Loans, representing 2.3% of the Initial Pool
Balance, are secured solely by a Mortgage on the borrower's leasehold interest
in the related Mortgaged Property. One (1) of the Mortgage Loans, representing
0.6% of the Initial Pool Balance, is secured by a leasehold interest in a
portion of the Mortgaged Property and a fee interest in the remainder of the
related Mortgaged Property. Each of the ground leases (including
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renewed options) expires at least ten years after the stated maturity of the
related Mortgage Loan. In each such case, the related ground lessor has agreed
to give the holder of the Mortgage Loan notice of, and has granted such holder
the right to cure, any default by the borrower/lessee. See "Risk Factors and
Other Special Considerations--The Mortgage Loans--Leasehold Considerations"
herein.
Subordinate Financing
With respect to 11 Mortgage Loans, representing approximately 4.4% of the
Initial Pool Balance, in general, the related Mortgage Loan documents allow the
borrower to grant a subordinate mortgage in the future, subject in each case to
certain loan to value and debt service coverage ratios. Generally, prior to any
such subordinate mortgage being allowed, certain conditions specified in the
related Mortgage Loan documents must be satisfied. 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. See "Risk Factors and Other Special Considerations--The
Mortgage Loans--Risks of Subordinate Financing" herein and "Certain Legal
Aspects of Mortgage Loans and The Leases--Subordinate Financing" in the
Prospectus.
ASSESSMENTS OF PROPERTY VALUE AND CONDITION
Appraisals
In connection with the origination or acquisition of most of the Mortgage
Loans, the related Mortgaged Property was appraised by an independent appraiser
who belonged to the Appraisal Institute. In certain cases, however, the values
of the related Mortgaged Properties were estimated internally on the basis of an
analysis of net operating income generated by the applicable property as well as
on the basis of sales and rental information with respect to comparable
properties. The purpose of each appraisal or other estimate of value was to
provide an opinion as to the fair market value of the related Mortgaged Property
as of the date thereof. There can be no assurance that such opinion represents a
reasonable approximation of the amount that could actually be realized from a
sale of the Mortgaged Property. None of the Depositor, any Seller, the
Underwriters, the Trustee, the Master Servicer or the Special Servicer or any of
their respective affiliates has prepared or conducted its own separate appraisal
or reappraisal of any Mortgaged Property. See "Risk Factors and Other Special
Considerations--The Mortgage Loans--Limitations of Appraisal" herein. Not all of
the above-described appraisals, and none of the market value estimates,
conformed to the appraisal guidelines set forth in Title XI of the Federal
Financial Institutions Reform, Recovery and Enforcement Act of 1989.
Environmental Assessments
An environmental site assessment (or an update to a previously performed
environmental site assessment) was performed with respect to Mortgaged
Properties securing 186 Mortgage Loans, representing 79.0% of the Initial Pool
Balance, within one-year of the Cut-off Date in connection with the origination
of the related Mortgage Loan. With respect to Mortgaged Properties securing 228
Mortgage Loans, representing 99.8% of the Initial Pool Balance, such assessments
were prepared within two years of the Cut-off Date, and all of the Mortgaged
Properties were assessed within 25 months of the Cut-off Date. In all cases, the
environmental site assessment was a "Phase I" environmental assessment. In
certain cases, the assessment disclosed the existence of or potential for
adverse environmental conditions, such as the existence of, among other things,
asbestos-containing materials, underground storage tanks and soil contamination.
In certain cases, the related borrowers were required to establish operations
and maintenance plans, monitor the Mortgaged Property or nearby properties,
abate or remediate the condition and/or provide additional security. See "Risk
Factors and Other Special Considerations--The Mortgage Loans--Environmental
Considerations" herein.
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Property Condition Assessments
Most of the Mortgaged Properties were inspected, in connection with the
origination or acquisition of the related Mortgage Loan, by an employee of the
related Seller or by a third party professional engaged by the Seller.
Furthermore, in each case, a licensed engineer or consultant inspected the
related Mortgaged Property, in connection with the origination or acquisition of
the related Mortgage Loan, to assess the structure, exterior walls, roofing,
interior structure and mechanical and electrical systems. In general, where
material deficiencies were observed, the related borrower was required to
establish reserves for replacement or repair or remediate the deficiency.
With respect to the Spanish Trace East Loan, representing 1.3% of the
Initial Pool Balance, two fires occurred at the property, one during the last
week of December, 1998 (the "First Fire") and the other during the first week of
January, 1999 (the "Second Fire"). The First Fire resulted in damage to six (6)
units, which damage is estimated to be between $100,000 and $150,000. The
tenants residing in the six units were relocated to other vacant units at the
property. The cost to repair the First Fire damage will be covered by the party
responsible (a roofing company) and its insurer. Repair work has commenced and
should take approximately two months to complete. The Second Fire resulted in
damage to the leasing office and four (4) units, which damage is estimated to be
between $250,000 and $300,000. The tenants residing in the four units were
relocated to other vacant units at the property and the leasing office been
relocated to a room within the clubhouse. Repair work has commenced and should
take approximately four months to complete. No one was injured in either fire.
As the property was 95% occupied at the time of both fires neither casualty
caused an interruption of cashflow.
Seismic Review Process
In general, the underwriting guidelines applicable to the origination of
the Mortgage Loans required that prospective borrowers seeking loans secured by
properties located in California 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 either be
subject to a lower loan-to-value limit at origination, be conditioned on seismic
upgrading of the Mortgaged Property, be conditioned on receipt of satisfactory
earthquake insurance or be declined.
Zoning and Building Code Compliance.
Each Seller took steps to establish that the use and operation of the
Mortgaged Properties that represent security for its Mortgage Loans were, at
their respective dates of origination, in compliance in all material respects
with applicable zoning, land-use and similar laws and ordinances, but no
assurance can be made that such steps revealed all possible violations. Evidence
of such compliance may have been in the form of legal opinions, certifications
from government officials and/or representations by the related borrower
contained in the related Mortgage Loan documents. Certain violations may exist
at any particular Mortgaged Property, but the related Seller does not consider
any such violations known to it to be material.
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. 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 Mortgage Pool" section and
under "Certain Legal Aspects Of Mortgage Loans And The Leases" in the
Prospectus.
For purposes of this Prospectus Supplement, including for the tables in
Appendix I and the information set forth in Appendix II:
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(1) 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 those Mortgage Loans).
"Underwritable Cash Flow" in each case is an estimate of annual cash
flow available for debt service based generally on the most recently
available property statements. In general, it is the estimated
revenue derived from the use and operation of a Mortgaged Property
(consisting primarily of rental income) less the sum of (a)
estimated operating expenses (such as utilities, administrative
expenses, repairs and maintenance, management and franchise fees and
advertising), (b) fixed expenses (such as insurance, real estate
taxes and, if applicable, ground lease payments) and (c) reserves
for capital expenditures, including tenant improvement costs and
leasing commissions, where appropriate. Underwritable Cash Flow
generally does not reflect interest expenses and non-cash items such
as depreciation and amortization. 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.
In determining Underwritable Cash Flow for a Mortgaged Property, the
Sellers generally relied on rent rolls and other generally unaudited
financial information provided by the respective borrowers. From
that information, the Sellers generally calculated stabilized
estimates of cash flow that took into consideration historical
financial statements, material changes in the operating position of
a Mortgaged Property of which the applicable Seller was aware (e.g.,
newly signed leases, expirations of "free rent" periods and market
rent and market vacancy data), and estimated capital expenditures,
including leasing commission and tenant improvement reserves, where
appropriate. In certain cases, the applicable Seller's estimate of
Underwritable Cash Flows reflected differences from the information
contained in the operating statements 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 own analysis of such operating statements and the
assumptions applied by the respective borrowers in preparing such
statements and information. In certain instances, for example,
property management fees and other expenses may have been included
in the calculation of Underwritable Cash Flow even though such
expense may not have been reflected in actual historic operating
statements. In certain cases, only partial year operating income
information was available. In most of those cases, the information
was annualized, with certain adjustments for items deemed not
appropriate to be annualized, before using it as a basis for the
determination of Underwritable Cash Flow. 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 Sellers 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 to "Loan-to-Value Ratio" or "Cut-off Date LTV" or
"Cut-off Date LTV Ratio" are references to the ratio, expressed as a
percentage, of the Cut-off Date Balance of a Mortgage Loan (or the
aggregate Cut-off Date Balance of a group of Cross-Collateralized
Mortgage Loans) to the value of the related Mortgaged Property or
Properties as determined by the appraisal or market valuation of
such Mortgaged Property or Properties conducted in connection with
the origination of the Mortgage Loan. References to "Balloon LTV" or
"Balloon LTV Ratio" are references to
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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 Balloon Loans) anticipated to be outstanding at
the date on which the related Balloon Payment(s) are scheduled to be
due (the "Scheduled Balloon Balance") (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 "Year Built" and "Year Renovated" are references to
the year or years in which a Mortgaged Property was constructed and
the year or years in which such Mortgaged Property was substantially
renovated, respectively.
(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
The Pooling and Servicing Agreement will provide that the Master Servicer
or the Special Servicer, as applicable, shall use reasonable efforts to cause
each mortgagor to maintain in respect of the related Mortgaged Property all
insurance coverage (other than earthquake insurance) as is required under the
related Mortgage; provided that if any Mortgage permits the holder thereof to
dictate to the mortgagor the insurance coverage to be maintained on such
Mortgaged Property, the Master Servicer or the Special Servicer, as applicable,
shall impose such insurance requirements as are consistent with the Servicing
Standard. If at any time a Mortgaged Property is located in an area identified
in the Federal Register by the Federal Emergency Management Agency as having
special flood hazards or it becomes located in such area by virtue of remapping
conducted by such agency (and flood insurance has been made available), then
upon the Master Servicer or the Special Servicer becoming aware of such fact
(using efforts in accordance with the Servicing Standard), the Master Servicer
or the Special Servicer, as applicable, shall if and to the extent that the
Mortgage Loan requires the related mortgagor or permits the related mortgagee to
require such mortgagor to do so, use efforts consistent with the Servicing
Standard to cause such mortgagor to maintain a flood insurance policy meeting
the requirements of the current guidelines of the Federal Insurance
Administration in an amount representing coverage of not less than the least of
(i) the unpaid principal balance of the related Mortgage Loan, (ii) the full
insurable value of such Mortgaged Property, (iii) the maximum amount of
insurance coverage available under the National Flood Insurance Act of 1968, the
Flood Disaster Protection Act of 1973 or the National Flood Insurance Reform Act
of 1994, as amended, and (iv) 100% of the replacement cost of the improvements
on such Mortgaged Property. 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. If a borrower fails to maintain the foregoing insurance, the
Master Servicer (or, with respect to REO Properties, the Special Servicer) will
be required to obtain such insurance (to the extent available at commercially
reasonable rates) and the cost thereof will be a Servicing Advance.
If the Master Servicer or the Special Servicer, as applicable, causes any
Mortgaged Property or REO Property to be covered by a master force placed
insurance policy, which provides protection equivalent to the individual
policies otherwise required, the Master Servicer or Special Servicer will
conclusively be deemed to have satisfied its respective obligations to cause
hazard insurance to be maintained on such Mortgaged Properties or REO
Properties. Such policy may contain a deductible clause, in which case the
Master Servicer or the Special Servicer, as applicable, will in the event that
(i) there shall not have been maintained on the related Mortgaged Property or
REO Property a policy otherwise complying with the provisions set forth above,
and (ii) a loss occurs that would have been covered by such a policy had it been
maintained, be required to pay the amount not otherwise payable
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under such policy because such deductible exceeds the deductible of an
individual policy otherwise complying with the provisions set forth above.
Each Mortgage generally also requires the related borrower to maintain
comprehensive general liability insurance against claims for personal and bodily
injury, death or property damage occurring on, in or about the related Mortgaged
Property in an amount customarily required by commercial mortgage lenders.
Each Mortgage other than those relating to Manufactured Housing
Communities generally further requires the related borrower to maintain business
interruption or rent loss insurance in an amount not less than 100% of the
projected rental income from the related Mortgaged Property for not less than
six months.
In general, the Mortgaged Properties are not insured for earthquake risk.
THE SELLERS
Residential Funding Corporation.
Residential Funding Corporation ("RFC") is an indirect wholly-owned
subsidiary of GMAC Mortgage Group, Inc. and was formed as a Delaware
corporation. RFC Commercial is a division of RFC which originates and acquires
loans secured by mortgages on commercial and multifamily real estate. Prior to
origination or acquisition, RFC Commercial's staff underwrites all the loans.
RFC maintains its principal office at 8400 Normandale Lake Boulevard, Suite 600,
Minneapolis, Minnesota 55437. Its telephone number is (612) 832-7000. RFC
Commercial's offices are located at 4800 Montgomery Lane, Suite 300, Bethesda,
Maryland 20814 and its telephone number is (301) 215-6200. RFSC is an affiliate
of RFC.
Wachovia Bank
Wachovia Bank, National Association ("Wachovia") is a national banking
association headquartered in Winston-Salem, North Carolina, and is a wholly
owned subsidiary of Wachovia Corporation. Wachovia currently offers credit and
deposit services and investment and trust services to consumers primarily
located in Georgia, North Carolina, South Carolina, Virginia and Florida and to
corporations located both inside and outside of the United States. Consumer
products and services are provided through a network of retail branches and
ATMs, 1-800-WACHOVIA On-Call 24 hour telephone banking, automated Phone Access,
and internet-based investing and banking at www.wachovia.com. Wachovia
originated and performed the underwriting of the Wachovia loans covered in this
prospectus supplement. Wacovia's executive office is located at 100 North Main
Street, Winston-Salem, North Carolina 27101. Its telephone number is (336)
770-5000.
Morgan Stanley Mortgage Capital Inc.
Morgan Stanley Mortgage Capital Inc. ("MSMC") is a subsidiary of Morgan
Stanley & Co. Incorporated formed as a New York corporation to originate and
acquire loans secured by mortgages on commercial and multifamily real estate.
Each of MSMC's Mortgage 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.
Acquisition of Certificates
Affiliates of RFC, Wachovia and MSMC may acquire a significant portion of
certain Classes of the Certificates.
ASSIGNMENT OF THE MORTGAGE LOANS
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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 the foregoing, 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) to the
order of Trustee;
(b) the original or a certified copy of the related recorded
Mortgage(s), together with originals or certified copies of intervening
assignments of such document(s) conveying the Mortgage to the last
assignee of record prior to the Trustee, 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 recorded assignment(s) of
rents and leases (if any such item is a document separate from the
Mortgage), together with originals or copies of intervening assignments of
such document(s) conveying the assignment(s) of rents and leases to the
last assignee of record prior to the Trustee, 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 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 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);
(g) when applicable, the related ground lease or a certified copy
thereof; and
(h) when relevant, the loan agreement and the lockbox agreement.
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 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, as of the
Closing Date, or as of such other date specifically provided in the
representation and warranty, among other things, generally (subject to certain
exceptions) to the effect that:
(1) the information set forth in the schedule of the mortgage loans
attached to the related Mortgage Loan Purchase Agreement (which contains
certain of the information set forth in Appendix II) 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;
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(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 creditors' rights exceptions, enforceable first
priority lien (subject to certain permitted encumbrances) in the related
borrower's interest in all leases of the Mortgaged Property;
(7) the Mortgage has not been satisfied, canceled, 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 (normal wear and tear excepted);
(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 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) 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;
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(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 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 (provided any required notice
of the lien is given to lessor), 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 or
cross-defaulted 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 defeaseance (in the
case of the Defeasance Loans), 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.
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 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 (a "Material Document Defect" and a "Material Breach",
respectively), then the Seller will be obligated to cure such Material Document
Defect or Material Breach within the applicable Permitted Cure Period. If any
such Material Document Defect or Material Breach cannot be corrected or cured
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, any related
unreimbursed Servicing Advances, together with interest on all Advances, and
generally, all expenses reasonably incurred in respect of the Material Document
Defect or the
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Material Breach giving rise to such repurchase, 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 860G(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 terms comparable to
the Mortgage Loan to be replaced and that is acceptable to each Rating Agency (a
"Qualifying Substitute Mortgage Loan") (and in the case of a "defective
obligation", satisfying the requirements of a "qualified replacement mortgage"
within the meaning of Section 860G(a)(4)(B) of the Code) and (B) pay an amount
(a "Substitution Shortfall Amount") generally equal to the excess of the
applicable Purchase Price for the Mortgage Loan to be replaced (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 within such 90-day period, but it is susceptible of cure
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, either 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 each be required to service and administer the Mortgage
Loans on behalf of the Trustee and in the best interests of and for the benefit
of the Certificateholders (as determined by the Master Servicer or Special
Servicer, as applicable, in its good faith and reasonable judgment), in
accordance with applicable law, the terms of the Pooling and Servicing Agreement
and the terms of the respective Mortgage Loans and, to the extent consistent
with the foregoing, as follows: (i) with the same skill, care and diligence as
is normal and usual in its general mortgage servicing and REO property
management activities on behalf of third parties or on behalf of itself,
whichever is higher, with respect to mortgage loans that are comparable to the
Mortgage Loans; (ii) with a view to the timely collection of all scheduled
payments of principal and interest under the Mortgage Loans or, if a Mortgage
Loan comes into and continues in default and
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if, in the good faith and reasonable judgment of the Special Servicer, no
satisfactory arrangements can be made for the collection of the delinquent
payments, the maximization of the recovery on such Mortgage Loan to the
Certificateholders (as a collective whole) on a present value basis (the
relevant discounting of anticipated collections that will be distributable to
Certificateholders to be performed at the related Net Mortgage Rate); and (iii)
without regard to (A) any relationship that the Master Servicer or the Special
Servicer, as the case may be, or any affiliate thereof may have with the related
borrower; (B) the ownership of any Certificate by the Master Servicer or the
Special Servicer, as the case may be, or any affiliate thereof; (C) the Master
Servicer's obligation to make Advances; (D) the Special Servicer's obligation to
make (or to direct the Master Servicer to make) Servicing Advances; and (E) the
right of the Master Servicer or the Special Servicer, as the case may be, to
receive reimbursement of costs, or the sufficiency of any compensation payable
to it under the Pooling and Servicing Agreement or with respect to any
particular transaction.
In general, the Master Servicer will be responsible for the servicing and
administration of all the Mortgage Loans as to which no Servicing Transfer Event
has occurred and all Corrected Mortgage Loans, and the Special Servicer will be
obligated to service and administer each Mortgage Loan (other than a Corrected
Mortgage Loan) as to which a Servicing Transfer Event has occurred (each, a
"Specially Serviced Mortgage Loan") and each Mortgaged Property acquired in
respect of a defaulted Mortgage Loan on behalf of the Certificateholders through
foreclosure, deed-in-lieu of foreclosure or otherwise. A "Servicing Transfer
Event" with respect to any Mortgage Loan consists of any of the following
events:
(i) the related borrower has failed to make when due a Balloon
Payment, which failure has continued unremedied for 30 days;
(ii) the related borrower has failed to make when due any Monthly
Payment (other than a Balloon Payment) or any other payment required under
the related Mortgage Note or the related Mortgage(s), which failure has
continued unremedied for 60 days;
(iii) the Master Servicer has determined, in accordance with the
Servicing Standard, that a default in the making of a Monthly Payment or
any other payment required under the related Mortgage Note or the related
Mortgage(s) is likely to occur within 30 days and is likely to remain
unremedied for at least 60 days or, in the case of a Balloon Payment, for
at least 30 days;
(iv) there shall have occurred a default under the related loan
documents, other than as described in clause (i) or (ii) above, that (in
the Master Servicer's judgment in accordance with the Servicing Standard)
materially impairs the value of the related Mortgaged Property as security
for the Mortgage Loan or otherwise materially and adversely affects the
interests of Certificateholders, which default has continued unremedied
for the applicable grace period under the terms of the Mortgage Loan (or,
if no grace period is specified, 60 days);
(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
or the appointment of a conservator or receiver or liquidator in any
insolvency, readjustment of debt, marshaling of assets and liabilities or
similar proceedings, or for the winding-up or liquidation of its affairs,
shall have been entered against the related borrower and such decree or
order shall have remained in force undischarged or unstayed for a period
of 60 days;
(vi) the related borrower shall have consented to the appointment of
a conservator or receiver or liquidator in any insolvency, readjustment of
debt, marshaling of assets and liabilities or similar proceedings of or
relating to such borrower or of or relating to all or substantially all of
its property;
(vii) the related borrower shall have admitted in writing its
inability to pay its debts generally as they become due, filed a petition
to take advantage of any applicable insolvency or reorganization statute,
made an assignment for the benefit of its creditors, or voluntarily
suspended payment of its obligations; and
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(viii) the Master Servicer shall have received notice of the
commencement of foreclosure or similar proceedings with respect to the
related Mortgaged Property.
The Master Servicer will continue to collect certain information and
prepare and remit all reports to the Trustee as provided in the Pooling and
Servicing Agreement with respect to any Specially Serviced Mortgage Loans and
REO Properties, and to render incidental services with respect to any Specially
Serviced Mortgage Loans and REO Properties as are specifically provided for in
the Pooling and Servicing Agreement. Neither the Master Servicer nor the Special
Servicer shall have any responsibility for the performance by the other of its
duties under the Pooling and Servicing Agreement.
A Mortgage Loan will cease to be a Specially Serviced Mortgage Loan (and
will become a "Corrected Mortgage Loan" as to which the Master Servicer will
re-assume servicing responsibilities) at such time as such of the following as
are applicable occur with respect to the circumstances identified above that
caused the Mortgage Loan to be characterized as a Specially Serviced Mortgage
Loan (and provided that no other Servicing Transfer Event then exists):
(w) with respect to the circumstances described in clauses (i) and
(ii) of the preceding paragraph, the related borrower has made
three consecutive full and timely Monthly Payments under the
terms of such Mortgage Loan (as such terms may be changed or
modified in connection with a bankruptcy or similar proceeding
involving the related borrower or by reason of a modification,
waiver or amendment granted or agreed to by the Special
Servicer);
(x) with respect to the circumstances described in clauses (iii),
(v), (vi) and (vii) of the preceding paragraph, such
circumstances cease to exist in the good faith and reasonable
judgment of the Special Servicer;
(y) with respect to the circumstances described in clause (iv) of
the preceding paragraph, such default is cured; and
(z) with respect to the circumstances described in clause (viii)
of the preceding paragraph, such proceedings are terminated.
The Special Servicer will prepare a report (an "Asset Status Report") for
each Mortgage Loan which becomes a Specially Serviced Mortgage Loan not later
than 30 days after the Servicing Transfer Event for such Mortgage Loan. Each
Asset Status Report will be delivered in accordance with the Pooling and
Servicing Agreement.
The Master Servicer and Special Servicer will each be required to service
and administer the respective groups of Cross-Collateralized Mortgage Loans as a
single Mortgage Loan as and when it deems necessary and appropriate, consistent
with the Servicing Standard. If any Cross-Collateralized Mortgage Loan becomes a
Specially Serviced Mortgage Loan, then each other Mortgage Loan with which it is
cross-collateralized shall also become a Specially Serviced Mortgage Loan.
Similarly, no Cross-Collateralized Mortgage Loan may subsequently become a
Corrected Mortgage Loan, unless and until all Servicing Transfer Events in
respect of each other Mortgage Loan in the group are remediated or otherwise
addressed as contemplated above.
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THE MASTER SERVICER AND THE SPECIAL SERVICER
AMRESCO Services, L.P., a Delaware limited partnership, will serve as
master servicer (the "Master Servicer") and in such capacity will be responsible
for servicing the Mortgage Loans (other than Specially Serviced Mortgage Loans
and REO Properties). The Master Servicer is a wholly-owned subsidiary of
AMRESCO, INC. ("AMRESCO"), a diversified financial services company which is
publicly traded on NASDAQ. The Master Servicer's principal offices are located
at 235 Peachtree Street, NE, Suite 900, Atlanta, Georgia 30303.
As of December 31, 1998, AMRESCO serviced approximately 18,830 commercial
and multifamily loans, totaling approximately $41.8 billion in aggregate
outstanding principal amount. Within this servicing portfolio are loans that
have been securitized in a total of 88 transactions with an aggregate principal
balance of approximately $34.2 billion. The portfolio is significantly
diversified both geographically and by product type.
Banc One Mortgage Capital Markets, LLC ("Banc One"), a Delaware limited
liability company, will be the Special Servicer (the "Special Servicer") and in
such capacity will be responsible for servicing any Specially Serviced Mortgage
Loans and REO Properties. The Special Servicer's offices are located at 1717
Main Street, Dallas, Texas 75201.
As of December 31, 1998, Banc One and its affiliates were responsible for
servicing approximately 7,058 commercial and multifamily loans with an aggregate
principal balance of approximately $22,287,101,048, the collateral for which is
located in 49 states, Mexico, Puerto Rico, Virgin Islands and the District of
Columbia. With respect to such loans, approximately 6,180 loans with an
aggregate principal balance of approximately $17,946,030,189 pertain to
commercial and multifamily mortgage-backed securities.
The information set forth herein concerning the Master Servicer and the
Special Servicer has been provided by it, and neither the Depositor nor the
Underwriters make any representation or warranty as to the accuracy or
completeness of such information.
SUB-SERVICERS
The Master Servicer and Special Servicer may each delegate its servicing
obligations in respect of the Mortgage Loans serviced thereby to one or more
third-party servicers (each, a "Sub-Servicer"); provided that the Master
Servicer or Special Servicer, as the case may be, will remain obligated under
the Pooling and Servicing Agreement for such delegated duties. Fifty-three (53)
Mortgage Loans, representing 23.40% of the Initial Pool Balance, are currently
directly serviced by third-party servicers that are entitled to and will become
Sub-Servicers of such loans on behalf of the Master Servicer. Each sub-servicing
agreement between the Master Servicer or Special Servicer, as the case may be,
and a Sub-Servicer (each, a "Sub-Servicing Agreement") must provide that, if for
any reason the Master Servicer or Special Servicer, as the case may be, is no
longer acting in such capacity, the Trustee or any successor to such Master
Servicer or Special Servicer may assume such party's rights and obligations
under such Sub-Servicing Agreement or, in some circumstances, may terminate such
Sub-Servicer. The Master Servicer and Special Servicer will each be required to
monitor the performance of Sub-Servicers retained by it.
The Master Servicer and Special Servicer will each be solely liable for
all fees owed by it to any Sub-Servicer retained thereby, irrespective of
whether its compensation pursuant to the Pooling and Servicing Agreement is
sufficient to pay such fees. Each Sub-Servicer retained thereby will be
reimbursed by the Master Servicer or Special Servicer, as the case may be, for
certain expenditures which it makes, only to the extent the Master Servicer or
Special Servicer would be reimbursed under the Pooling and Servicing Agreement.
See "--Servicing and Other Compensation and Payment of Expenses" herein.
SERVICING AND OTHER COMPENSATION AND PAYMENT OF EXPENSES
The principal compensation to be paid to the Master Servicer in respect of
its master servicing activities will be the Master Servicing Fee. The "Master
Servicing Fee" will be payable monthly on a loan-by-loan basis from amounts
received in respect of interest on each Mortgage Loan (including Specially
Serviced Mortgage Loans
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and Mortgage Loans as to which the related Mortgaged Property has become an REO
Property) and will be computed on the basis of the same principal amount and for
the same period respecting which any related interest payment on the related
Mortgage Loan is computed. The administrative costs on each Mortgage Loan will
equal the sum of the related Master Servicing Fee and the Trustee Fee
(collectively, expressed as a per annum rate, the "Administrative Cost Rate").
The Administrative Cost Rate for each Mortgage Loan will range from 0.0537% to
0.1787% per annum, as set forth in Appendix II. As of the Cut-off Date, the
weighted average Administrative Cost Rate for the Mortgage Loans was 0.1093% per
annum. As additional servicing compensation, the Master Servicer will be
entitled to retain 50% of all assumption fees and modification fees and 100% of
any available similar or ancillary fees, in each case to the extent actually
paid by a borrower with respect to a Mortgage Loan that is not a Specially
Serviced Mortgage Loan. The Master Servicer will also be entitled to: (a)
Prepayment Interest Excesses collected on the Mortgage Loans and not otherwise
applied to cover Prepayment Interest Shortfalls; and (b) any default interest
and late payment charges actually collected on the Mortgage Loans (other than
Specially Serviced Mortgage Loans and certain sub-serviced Mortgage Loans), but
only to the extent that such default interest and late payment charges are not
allocable to cover interest payable to the Master Servicer, the Special
Servicer, the Trustee or the Fiscal Agent with respect to any Advances made in
respect of the related Mortgage Loan. In addition, the Master Servicer will be
authorized to invest or direct the investment of funds held in any and all
accounts maintained by it or the Trustee that constitute part of the Certificate
Account, in certain government securities and other investment grade obligations
specified in the Pooling and Servicing Agreement ("Permitted Investments"), and
the Master Servicer will be entitled to retain any interest or other income
earned on such funds, but will be required to cover any investment losses on
such funds from its own funds without any right to reimbursement. Furthermore,
the Master Servicer will also be entitled to any interest earned on escrow
accounts and reserve accounts maintained in respect of the Mortgage Loans (to
the extent not otherwise payable to the borrowers).
The principal compensation to be paid to the Special Servicer in respect
of its special servicing activities will be the Special Servicing Fee, the
Workout Fee and the Liquidation Fee. The "Special Servicing Fee" will accrue
with respect to each Specially Serviced Mortgage Loan and each Mortgage Loan as
to which the related Mortgaged Property has become an REO Property, at a rate
equal to 0.25% per annum (the "Special Servicing Fee Rate"), on the basis of the
same principal amount and for the same period respecting which any related
interest payment due or deemed due on such Mortgage Loan is computed, and will
be payable monthly from general collections on the Mortgage Loans and any REO
Properties held by the Master Servicer from time to time. A "Workout Fee" will
in general be payable with respect to each Corrected Mortgage Loan. As to each
Corrected Mortgage Loan, the Workout Fee will be payable out of, and will be
calculated by application of a "Workout Fee Rate" of 1.00% to, each collection
of interest and principal (including scheduled payments, prepayments, Balloon
Payments and payments at maturity) received on such Mortgage Loan for so long as
it remains a Corrected Mortgage Loan. The Workout Fee with respect to any
Corrected Mortgage Loan will cease to be payable if such loan again becomes a
Specially Serviced Mortgage Loan or if the related Mortgaged Property becomes an
REO Property; provided that a new Workout Fee will become payable if and when
such Mortgage Loan again becomes a Corrected Mortgage Loan. If the Special
Servicer is terminated (other than for cause) or resigns with respect to any or
all of its servicing duties, it shall retain the right to receive any and all
Workout Fees payable with respect to Mortgage Loans that became Corrected
Mortgage Loans during the period that it had responsibility for servicing
Specially Serviced Mortgage Loans and that were still Corrected Mortgage Loans
at the time of such termination or resignation (and the successor Special
Servicer shall not be entitled to any portion of such Workout Fees), in each
case until the Workout Fee for any such loan ceases to be payable in accordance
with the preceding sentence. A "Liquidation Fee" will be payable in an amount
equal to the product of (x) 1.00%, and (y) the related Liquidation Proceeds.
Notwithstanding anything to the contrary described above, no Liquidation Fee
will be payable based on, or out of, Liquidation Proceeds received in connection
with the repurchase or replacement of any Mortgage Loan by a Seller for a breach
of representation or warranty or for defective or deficient Mortgage Loan
documentation or in connection with the purchase of all of the Mortgage Loans
and REO Properties by any person entitled to effect an optional termination of
the Trust Fund. If, however, Liquidation Proceeds are received with respect to
any Corrected Mortgage Loan and the Special Servicer is properly entitled to a
Workout Fee, such Workout Fee will be payable based on and out of the portion of
such Liquidation Proceeds that constitute principal and/or interest. The Special
Servicer will be entitled to additional servicing compensation in the form of
100% of all assumption fees and modification fees received on or with respect to
Specially Serviced Mortgage Loans and 50% of all assumption fees and
modification fees received on or with respect to Mortgage Loans that are not
Specially Serviced Mortgage
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Loans. The Special Servicer will also be entitled to any default interest and
late payment charges actually collected on the Specially Serviced Mortgage
Loans.
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.
THE OPERATING ADVISER
The Pooling and Servicing Agreement will permit the holder (or holders) of
Certificates representing more than 50% of the aggregate Certificate Balance of
the most subordinate Class of Principal Balance Certificates at any time of
determination (or, if the aggregate Certificate Balance of such Class of
Certificates is less than 25% of the original aggregate Certificate Balance
thereof, of the next most subordinate Class of Principal Balance Certificates)
(in any event, the "Controlling Class") to appoint any person or entity to act
as the representative of the Controlling Class to the extent described below
(such person or entity, in such capacity, the "Operating Adviser").
If the Special Servicer is not the Operating Adviser, the Special Servicer
will notify the Operating Adviser prior to the Special Servicer's taking any of
the following actions: (i) any foreclosure or comparable conversion (which may
include acquisition of an REO Property) of any Mortgaged Property; (ii) any
modification of a Money Term of a Mortgage Loan other than a modification
consisting of the extension of the original maturity of the Mortgage Loan for
two years or less; (iii) any proposed sale of a Defaulted Mortgage Loan or REO
Property (other than upon termination of the Trust Fund pursuant to the Pooling
and Servicing Agreement); (iv) any determination to bring an REO Property into
compliance with applicable environmental laws; and (v) any acceptance of
substitute or additional collateral for a Mortgage Loan. See "Servicing of the
Mortgage Loans-- General" herein.
The Operating Adviser may replace the Special Servicer, provided that such
replacement will be subject to, among other things, receipt from the Rating
Agencies of written confirmation that such replacement will not result in a
qualification, downgrade or withdrawal of any of the then-current ratings
assigned to any Class of Certificates.
MORTGAGE LOAN MODIFICATIONS
Subject to any restrictions applicable to REMICs, and to certain
limitations imposed by the Pooling and Servicing Agreement, the Special Servicer
may amend any term, other than a Money Term, of a Mortgage Loan that is not a
Specially Serviced Mortgage Loan. Subject to any restrictions applicable to
REMICs, 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 Monthly 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 Lockout 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.
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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 Rated Final Distribution
Date,
(ii) extend the maturity date of a Specially Serviced Mortgage Loan
at an interest rate 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 that is ten (10) years prior to the expiration of the term
of such ground lease,
(iv) reduce the Mortgage Rate 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 Stated 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.
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 Loan; provided that in no event shall any such extension extend beyond
the date that is two years prior to the Rated Final Distribution Date.
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."
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
Considerations" and "Maturity Considerations."
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SALE OF DEFAULTED MORTGAGE LOANS AND REO PROPERTIES
The Special Servicer 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 (any such Mortgage Loan, a "Defaulted Mortgage Loan"). For
this purpose, "Default" means a default in payment that continues for at least
60 days. The Special Servicer is required (i) 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, (ii) 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 (iii) to accept the
highest cash bid received in such auction or other procedures 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, that such sale at such price is in the
best interest of Certificateholders; provided that the Special Servicer's
ability to accept such bid made by certain interested persons is limited, as
described in the Pooling and Servicing Agreement.
REO PROPERTIES
If title to any Mortgaged Property is acquired by the Special Servicer on
behalf of the Certificateholders, the Special Servicer, on behalf of such
holders, will be required to attempt to sell the Mortgaged Property for cash by
the close of the third taxable year of the REMIC following the taxable year in
which the Mortgaged Property was acquired (such date, the "REO Sale Deadline"),
unless (i) the Internal Revenue Service grants an extension of time to sell such
property (an "REO Extension") or (ii) the Special Servicer obtains an opinion of
independent counsel generally to the effect that the holding of the property
beyond the REO Sale Deadline will not result in the imposition of a tax on the
Trust Fund, or cause any of REMIC I, REMIC II or REMIC III to fail to qualify as
a REMIC under the Code. Subject to the foregoing, the Special Servicer will
generally be required to attempt to sell any Mortgaged Property so acquired in
such a manner as will be reasonably likely to realize a fair price for such
property. 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 Special Servicer of its obligations with respect to such
REO Property.
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 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. 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 "prohibited transactions,"
and the "non-service" portion of such income could be subject to federal tax at
the highest 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
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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.
INSPECTIONS; COLLECTION OF OPERATING INFORMATION
The Master Servicer is required to, or may contract with a third party to,
perform physical inspections of each Mortgaged Property at least once every two
years (or, if the related Mortgage Loan has a then-current balance greater than
$2,000,000, at least once every year), provided that the Master Servicer will
have no obligation to inspect a Mortgaged Property inspected by the Special
Servicer during such period. In addition, the Special Servicer, subject to
limitations set forth in the related loan documents and the Pooling and
Servicing Agreement, is required to perform a physical inspection of each
Mortgaged Property as soon as practicable after servicing of the related
Mortgage Loan is transferred thereto, and annually thereafter for so long as it
remains a Specially Serviced Mortgage Loan or if such Mortgaged Property becomes
REO Property, the cost of which will be a Servicing Advance. The Special
Servicer and the Master Servicer will each be required to prepare or to contract
with a third party to prepare a written report of each such inspection performed
thereby describing the condition of the Mortgaged Property.
With respect to each Mortgage Loan that requires the borrower to deliver
annual operating statements with respect to the related Mortgaged Property, the
Master Servicer or the Special Servicer, depending on which is obligated to
service such Mortgage Loan, is also required to make reasonable efforts to
collect and review such statements. However, there can be no assurance that any
operating statements required to be delivered will in fact be delivered, nor is
the Master Servicer or the Special Servicer likely to have any practical means
of compelling such delivery in the case of an otherwise performing Mortgage
Loan.
MAINTENANCE OF MASTER SERVICER/SPECIAL SERVICER ACCEPTABILITY
It will be an event of default in respect of the Master Servicer or the
Special Servicer, as applicable, if the Trustee receives written notice from
either Rating Agency that the continuation of the then-current Master Servicer
or Special Servicer, as the case may be, 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.
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 "real estate mortgage investment conduit" ("REMIC") elections
will be made with respect to the Trust Fund, other than that portion of the
Trust Fund consisting of the rights to Excess Interest and the Excess Interest
Distribution Account. The assets of "REMIC I" or the "Lower-Tier REMIC" will
consist of the mortgage loans and any properties acquired on behalf of the
Certificateholders. The assets of "REMIC II" or the "Middle-Tier REMIC" will
consist of the separate uncertificated REMIC I regular interests, and the assets
of "REMIC III" or the "Upper-Tier REMIC" will consist of the separate
uncertificated REMIC II regular interests. Upon the issuance of the Offered
Certificates, Latham & Watkins, 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
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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 Internal Revenue
Code of 1986, as amended (the "Code"). For federal income tax purposes, the
Class R-I, R-II and R-III Certificates 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 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. The Class X
Certificates will be an investment unit comprised of 15 separate "regular
interests" issued by REMIC III, each of which represents a right to receive a
"specified portion" of interest payable on the uncertificated REMIC II regular
interests. The portion of the Trust Fund consisting of the right to Excess
Interest and the Excess Interest Distribution Account will be treated as a
grantor trust for federal income tax purposes, and the Class O Certificates will
represent both a REMIC regular interest and beneficial ownership of the assets
of the grantor trust. 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) and 856(c)(5)(B) of the Code in the same proportion that
the assets of the Trust Fund underlying such Certificates would be so treated.
However, if 95% or more of the REMICs' assets (treating REMIC I, REMIC II and
REMIC III as if they were a single REMIC) during a calendar quarter, then the
Offered Certificates will be considered "real estate assets" in their entirety
for that quarter. 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 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 institutions
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 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 (which is subject
to change due to changes in principal balances and prepayments) is initially
approximately 22.9%. 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 Classes of Offered Certificates may be treated for Federal income tax
reporting purposes as having been issued with "original issue discount" ("OID").
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
are expected to be issued with premium, depending on the price at which such
Classes of Certificates are sold. Whether the Offered Certificates are treated
as issued with OID depends, in part, on whether the Offered Certificates are
considered to bear interest at a single fixed rate, an objective rate or a
qualified floating rate. Moreover, Classes of Offered Certificates other than
the Senior Certificates may be treated as issued with OID due to the possibility
that defaults or delinquencies on the Mortgage Loans may result in reduced
distributions on such Certificate, in order to effect their subordination to the
Senior Certificates. Although unclear under present law, the Depositor intends
to treat stated interest on the Offered Certificates, including stated interest
on Offered Certificates that bear interest based on a weighted average of net
interest rates on qualified mortgages, as qualified stated interest. See
"Certain Federal
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Income Tax Consequences--REMICs--Taxation of Owners of REMIC Regular
Certificates--Variable Rate REMIC Regular Certificates" in the Prospectus. The
weighted average rate used to compute the initial pass-through rate 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 such Certificates under the rules relating to obligations that
provide for contingent payments. These rules, by their terms, do not apply to
debt instruments, such as the Offered Certificates, which are subject to
prepayment based on prepayments on underlying mortgages. Application of these
rules to the Offered Certificates may affect the timing of income accruals on
REMIC Regular Certificates. 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. In addition, for purposes of calculating OID, the
Hyper-Amortization Loans are assumed to prepay in full on the Anticipated
Repayment Date. For a description of CPR, see "Yield Considerations" 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 Sections 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 anti-abuse rule allowing
the Internal Revenue Service to apply or depart from the OID Regulations where
necessary or appropriate to ensure a reasonable tax result in light of
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 than that
taken by the Depositor. 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.
If the method for computing OID 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 with amortizable
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 on such interests. 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
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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 current administration's budget proposal for the fiscal year 2000,
released February 1, 1999, proposes legislation that would amend the market
discount provisions of the Code described in the Prospectus (see "Certain
Federal Income Tax Consequences--REMICs--Taxation of Owners of Regular
Certificates--Market Discount" in the Prospectus) to require holders of debt
instruments, such as REMIC Regular Certificates, that use an accrual method of
accounting to include market discount in income as it accrues. For purposes of
determining and accruing market discount, the proposed legislation would provide
that a Certificateholder's yield can not exceed 5 percentage points over the
greater of (1) the original yield-to-maturity of the Certificate, or (2) the
applicable Federal rate in effect at the time the Certificateholder acquired the
Certificate. It is unclear how this proposal would apply to instruments, such as
the REMIC Regular Certificates, which have uncertain yields to maturity
attributable to possible prepayments on an underlying pool of prepayable
securities. This proposal is intended to be effective for debt instruments
acquired on or after the date the proposed legislation is enacted.
The OID Regulations in some circumstances permit the holder of a debt
instrument to recognize OID under a method that differs from that of the issuer.
Accordingly, it is possible that holders of Offered Certificates issued with OID
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 OID 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
Gain or loss on the sale, exchange, redemption or retirement of an Offered
Certificate may be a capital gain or loss, subject to certain restrictions and
provided the Offered Certificate is held as a capital asset. See "Certain
Federal Income Tax Consequences ---REMICs---Sale, Exchange or Redemption" in the
Prospectus. Any such capital gain or loss will be a long-term capital gain or
loss if the Offered Certificate was held for more than one year. Long-term
capital gains of individuals are subject to reduced maximum tax rates, while
capital gains recognized by individuals on capital assets held for twelve months
or less are generally taxed at ordinary income rates. The use of capital losses
is limited.
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--REO Properties" 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.
S-98
<PAGE>
For 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.
ERISA CONSIDERATIONS
A fiduciary of any employee benefit plan or other retirement plan or
arrangement, including individual retirement accounts, annuities, Keogh plans,
and collective investment funds, separate accounts and general accounts in which
such plans, accounts or arrangements are invested, that is subject to the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), or
Section 4975 of the Code (each, a "Plan") and any entity whose assets include
assets of such a Plan 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 permitted either under ERISA or Section
4975 of the Code or whether there exists any statutory or administrative
exemption applicable thereto.
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 Offered Certificates without regard to the ERISA considerations described
below, subject to other applicable federal and state 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.
PLAN ASSET REGULATION
The United States Department of Labor (the "DOL") has issued a final
regulation (the "Final Regulation") determining when assets of an entity in
which a Plan makes an equity investment will be treated as assets of the
investing Plan. If the Certificates are treated as debt with no substantial
equity features under applicable local law, the assets of the Trust Fund would
not be treated as assets of the Plans that become Certificateholders. In the
absence of treatment of the Certificates as debt, and unless the Final
Regulation provides an exemption from this "plan asset" treatment, an undivided
portion of the assets of the Trust Fund will be treated, for purposes of
applying the fiduciary standards and prohibited transactions rules of ERISA and
Section 4975 of the Code, as an asset of each Plan that acquires and holds the
Offered Certificates.
The Final Regulation provides an exemption from "plan asset" treatment for
securities issued by an entity if, immediately after the most recent acquisition
of any equity interest in the entity, less than 25% of the value of each Class
of equity interests in the entity, excluding interests held by any person who
has discretionary authority or control with respect to the assets of the entity
(or any affiliate of such a person), are held by "benefit plan investors" (e.g.,
Plans, governmental, foreign and other plans not subject to ERISA and entities
holding assets deemed to be "plan assets"). Because the availability of this
exemption to the Trust Fund depends upon the identity of the holders of the
Offered Certificates at any time, there can be no assurance that any Class of
the Offered Certificates will qualify for this exemption.
INDIVIDUAL EXEMPTION
The U.S. Department of Labor has issued to Morgan Stanley an individual
prohibited transaction exemption, Prohibited Transaction Exemption No. 90-24
(the "Exemption"), which generally exempts from the application of the
prohibited transaction provisions of Section 406 of ERISA, and the excise taxes
imposed on such prohibited transactions pursuant to Sections 4975(a) and (b) of
the Code and Section 502(i) of ERISA, certain transactions, among others,
relating to the servicing and operation of mortgage loans, such as the Mortgage
Loans, and the purchase, sale and holding of mortgage pass-through certificates,
such as the Senior Certificates, underwritten by an "underwriter," provided that
certain conditions set forth in the Exemption are satisfied. For purposes of
this discussion, the term "underwriter" shall include (a) Morgan Stanley & Co.
Incorporated, (b) any person directly or indirectly, through one or more
intermediaries, controlling, controlled by or under common control with Morgan
Stanley & Co. Incorporated, and (c) any member of the underwriting syndicate or
selling
S-99
<PAGE>
group of which a person described in (a) or (b) is a manager or co-manager with
respect to the Senior Certificates, including Residential Funding Securities
Corporation.
The Exemption sets forth six general conditions that must be satisfied for
a transaction involving the purchase, sale and holding of Senior Certificates to
be eligible for exemptive relief thereunder. First, the acquisition of such
Certificates by a Plan must be on terms that are at least as favorable to the
Plan as they would be in an arm's-length transaction with an unrelated party.
Second, the rights and interests evidenced by the Senior Certificates must not
be subordinated to the rights and interests evidenced by the other certificates
of the same trust. Third, the Senior Certificates at the time of acquisition by
the Plan must be rated in one of the three highest generic rating categories by
Standard & Poor's Ratings Services ("S&P"), DCR, Moody's or Fitch IBCA, Inc.
("Fitch"). Fourth, the Trustee cannot be an affiliate of any other member of the
"Restricted Group", which consists of the Underwriters, the Depositor, the
Master Servicer, the Special Servicer, the Trustee, any sub-servicer, and any
mortgagor with respect to a Mortgage Loan constituting more than 5% of the
aggregate unamortized principal balance of the Mortgage Loans as of the date of
initial issuance of the Senior Certificates. Fifth, the sum of all payments made
to and retained by the Underwriters must represent not more than reasonable
compensation for underwriting the Senior 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 obligations; and the sum of all payments made to and retained by the Master
Servicer, the Special Servicer or any sub-servicer must represent not more than
reasonable compensation for such person's services under the Pooling and
Servicing Agreement and reimbursement of such person's reasonable expenses in
connection therewith. Sixth, the investing Plan must be an accredited investor
as defined in Rule 501(a)(1) of Regulation D under the Securities Act.
Because the Senior Certificates are not subordinate to any other Class of
Certificates, the second general condition set forth above is satisfied with
respect to such Certificates. It is a condition of the issuance of the Senior
Certificates that they be rated not lower than "AAA" and "Aaa" by each of DCR
and Moody's, respectively; thus, the third general condition set forth above is
satisfied with respect to the Senior Certificates as of the Closing Date. In
addition, the fourth general condition set forth above is also satisfied as of
the Closing Date. A fiduciary of a Plan contemplating purchasing a Senior
Certificate in the secondary market also must make its own determination that,
at the time of such purchase, the Senior Certificates continue to satisfy the
third and fourth general conditions set forth above. A fiduciary of a Plan
contemplating the purchase of a Senior Certificate also must make its own
determination that the first, fifth and sixth general conditions set forth above
will be satisfied with respect to such Senior Certificate as of the date of such
purchase.
The Exemption also requires that the Trust Fund meet the following
requirements: (i) the Trust Fund must consist solely of assets of the type that
have been included in other investment pools; (ii) certificates in such other
investment pools must have been rated in one of the three highest categories of
Fitch, DCR, Moody's or S&P for at least one year prior to the Plan's acquisition
of Senior Certificates; and (iii) certificates in such other investment pools
must have been purchased by investors other than Plans for at least one year
prior to any Plan's acquisition of Senior Certificates.
Moreover, the Exemption provides relief from certain self-dealing/conflict
of interest prohibited transactions that may occur when any person who has
discretionary authority or renders investment advice with respect to the
investment of plan assets causes a Plan to acquire Senior Certificates, provided
that, among other requirements: (i) such person (or its affiliate) is an obligor
with respect to five percent or less of the fair market value of the obligations
or receivables contained in the trust; (ii) the Plan is not a plan with respect
to which any member of the Restricted Group is the "plan sponsor" (as defined in
Section 3(16)(B) of ERISA); (iii) in the case of an acquisition in connection
with the initial issuance of Senior Certificates, at least fifty percent of such
class is acquired by persons independent of the Restricted Group and at least
fifty percent of the aggregate interest in the trust fund is acquired by persons
independent of the Restricted Group; (iv) the Plan's investment in Senior
Certificates does not exceed twenty-five percent of all of the certificates of
that class outstanding at the time of the acquisition; and (v) immediately after
the acquisition, no more than twenty-five percent of the assets of the Plan with
respect to which such person has discretionary authority or renders investment
advice are invested in certificates representing an interest in one or more
trusts containing assets sold or serviced by the same entity.
S-100
<PAGE>
Finally, if certain specific conditions of the Exemption are satisfied,
the Exemption may provide an exemption from the restrictions imposed by Sections
406(a), 406(b) and 407(a) of ERISA, and the taxes imposed by Sections 4975(a)
and (b) of the Code by reason of Section 4975(c) of the Code for transactions in
connection with the servicing, management and operation of the Mortgage Loan.
The Depositor expects that the specific conditions of the Exemption required for
this purpose will be satisfied with respect to the Senior Certificates.
A purchaser of a Senior Certificate should be aware, however, that even if
the conditions specified in one or more parts of the Exemption are satisfied,
the scope of relief provided by the Exemption may not cover all acts that may be
considered prohibited transactions.
Before purchasing a Senior Certificate, a fiduciary of a Plan should
itself confirm that the specific and general conditions of the Exemption and the
other requirements set forth in the Exemption would be satisfied. In addition to
making its own determination as to the availability of the exemptive relief
provided in the Exemption, the Plan fiduciary should consider the availability
of any other prohibited transaction exemptions.
OTHER EXEMPTIONS
The characteristics of each Class of the Subordinate Certificates do not
meet the requirements of the Exemption. Accordingly, Certificates of those
Classes may not be acquired by, on behalf of or with assets of a Plan, unless
such transaction is covered by a Prohibited Transaction Class Exemption ("PTCE")
issued by the U.S. Department of Labor, such as: PTCE 95-60, regarding
investments by insurance company general accounts; PTCE 90-1, regarding
investments by insurance company pooled separate accounts; PTCE 91-38, regarding
investments by bank collective investment funds; PTCE 84-14, regarding
transactions effected by "qualified professional asset managers;" and PTCE
96-23, regarding transactions effected by "in-house asset managers." There can
be no assurance that any of these exemptions will apply with respect to any
particular Plan's investment in Offered Certificates or, even if an exemption
were deemed to apply, that any exemption would apply to all prohibited
transactions that may occur in connection with such investment. Before
purchasing Subordinate Certificates based on the availability of any such
exemption, a Plan fiduciary should itself confirm that all applicable conditions
and other requirements set forth in such exemption have been satisfied. Any such
Plan or person to whom a transfer of any such Certificate or interest therein is
made shall be deemed to have represented to the Depositor, the Master Servicer,
the Special Servicer, the Trustee and any sub-servicer that the purchase and
holding of such Certificate is so exempt on the basis of the availability of a
PTCE.
INSURANCE COMPANY PURCHASERS
Purchasers that are insurance companies should consult their legal
advisors with respect to the applicability of PTCE 95-60, regarding transactions
by insurance company general accounts. In addition to any exemption that may be
available under PTCE 95-60 for the purchase and holding of Certificates by an
insurance company general account, the Small Business Job Protection Act of 1996
added a new Section 401(c) to ERISA, 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) of ERISA required the DOL to
issue final regulations ("401(c) Regulations") no later than December 31, 1997
to provide guidance for the purpose 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) of ERISA generally
provides that, until the date that 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, unless (i)
as otherwise provided by the Secretary of Labor in the 401(c) Regulations to
prevent avoidance of the regulations or (ii) an action is brought by the
Secretary of Labor 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 that support insurance policies or annuity
contracts issued to a Plan after December 31, 1998 or issued to Plans on or
before December 31, 1998 for which the insurance company does
S-101
<PAGE>
not comply with the 401(c) Regulations may be treated as plan assets. In
addition, because Section 401(c) does not relate to insurance company separate
accounts, separate account assets are still treated as plan assets of any Plan
invested in such separate account. Insurance companies contemplating the
investment of general account assets in the Certificates should consult their
legal counsel with respect to the applicability of Section 401(c) of ERISA,
including the general account's ability to continue to hold the Certificates
after the date which is 18 months after the date the 401(c) Regulations become
final.
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.
PLAN OF DISTRIBUTION
The Depositor has entered into an underwriting agreement (the
"Underwriting Agreement") with Morgan Stanley & Co. Incorporated ("Morgan
Stanley"), an affiliate of the Depositor, and Residential Funding Securities
Corporation ("RFSC", and together with Morgan Stanley the "Underwriters").
Subject to the terms and conditions set forth in the Underwriting
Agreement, the Underwriters have severally agreed to purchase the respective
aggregate principal or notional amount of each Class of the Offered
Certificates, in each case as set forth opposite its name below:
UNDERWRITER CLASS A-1 CLASS A-2 CLASS B
- ----------- --------- --------- -------
Morgan Stanley & Co. $ $ $
Incorporated
Residential Funding _________ _________ _______
Securities Corporation
Total $ $ $
========= ========= =======
S-102
<PAGE>
UNDERWRITER CLASS C CLASS D CLASS E CLASS F
- ----------- ------- ------- ------- -------
Morgan Stanley & Co. $ $ $ $
Incorporated
Residential Funding _________ _________ _______ _______
Securities Corporation
Total $ $ $ $
========= ========= ======= =======
It is not anticipated that Residential Funding Securities Corporation will
be obligated to purchase more than $100,000,000 aggregate principal amount of
the Offered Certificates.
The Underwriting Agreement provides that the obligations of the
Underwriters are subject to certain conditions precedent, and that the
Underwriters will be obligated to purchase all of the Offered Certificates if
any are purchased.
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 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
it 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 __, 1999, which is
the fifth business day following the date of pricing of the Certificates. Under
Rule 15c6-1 recently adopted by the Securities and Exchange Commission under the
Securities Exchange Act of 1934, as amended, trades in the secondary market
generally are required to settle in three business days, unless the parties to
any 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.
Affiliates of RFC, Wachovia and MSMC may acquire certain of the Offered
Certificates.
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 intend to make a secondary market in the Offered
Certificates, but they are not obligated to do so.
S-103
<PAGE>
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 Latham & Watkins, New York, New York. Certain legal matters
with respect to the Offered Certificates will be passed upon for the
Underwriters by Latham & Watkins, New York, New York.
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 Moody's Investors Service, Inc. ("Moody's", and together with DCR,
the "Rating Agencies"):
CLASS DCR MOODY'S
----- --- -------
Class A-1.................................... AAA Aaa
Class A-2.................................... AAA Aaa
Class B...................................... AA Aa2
Class C...................................... A A2
Class D...................................... A- A3
Class E...................................... BBB Baa2
Class F...................................... BBB- NR
The ratings of the Offered Certificates address the likelihood of the
timely receipt by holders thereof of all payments of interest to which they are
entitled and the ultimate receipt by holders thereof of all payments of
principal to which they are entitled, if any, by the Distribution Date in
December 2031 (the "Rated Final 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, voluntary or involuntary, 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 or default interest 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 Interest Only 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 Interest Only Certificates consist only
of interest. If all of the Mortgage Loans were to prepay in the initial month,
with the result that the Certificateholders 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/Aaa" ratings received on the Interest
Only Certificates. The respective aggregate Notional Amounts upon which interest
in respect of the Interest Only Certificates are calculated is 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 aggregate Notional Amounts, but only the
obligation to pay interest timely on such aggregate Notional Amounts as so
reduced from time to time. Accordingly, the rating of the Interest Only
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-104
<PAGE>
INDEX OF TERMS FOR PROSPECTUS SUPPLEMENT
10% Free Prepayment Loans...................................................S-77
30/360 basis................................................................S-67
Accrued Certificate Interest................................................S-54
Additional Trust Fund Expenses..............................................S-58
Administrative Cost Rate....................................................S-91
Advance Rate................................................................S-61
Advances....................................................................S-60
Appraisal Event.............................................................S-57
Appraisal Reduction.........................................................S-57
Asset Status Report.........................................................S-89
Assumed Monthly Payment.....................................................S-55
Available Distribution Amount...............................................S-52
Balloon Loans...............................................................S-76
Balloon LTV.................................................................S-81
Balloon LTV Ratio...........................................................S-81
Balloon Payment.............................................................S-76
Book-Entry Certificates.....................................................S-49
Certificate Account.........................................................S-53
Certificate Balance.........................................................S-51
Certificate Owner...........................................................S-49
Certificateholders..........................................................S-49
Certificates................................................................S-49
Chase.......................................................................S-50
Citibank....................................................................S-50
Class.......................................................................S-49
Class A Certificates........................................................S-49
Class Interest Shortfall....................................................S-54
Class X Certificates........................................................S-49
Closing Date................................................................S-49
Collection Period...........................................................S-52
Compensating Interest Payment...............................................S-59
Controlling Class...........................................................S-92
Corporate Trust Office......................................................S-66
Corrected Mortgage Loan.....................................................S-89
Cross-Collateralized Mortgage Loans.........................................S-76
Cut-off Date.................................................................S-9
Cut-off Date Balance........................................................S-73
Cut-off Date LTV............................................................S-81
Cut-off Date LTV Ratio......................................................S-81
DCR........................................................................S-104
Debt Service Coverage Ratio.................................................S-81
Default.....................................................................S-94
Defaulted Mortgage Loan.....................................................S-94
Defeasance Collateral.......................................................S-76
Defeasance Loans............................................................S-76
Definitive Certificate......................................................S-49
Depositor....................................................................S-3
Determination Date..........................................................S-52
Discount Rate...............................................................S-56
Distributable Certificate Interest..........................................S-54
Distribution Date...........................................................S-52
Document Defect.............................................................S-86
DOL.........................................................................S-99
DSCR........................................................................S-81
DTC.........................................................................S-49
ERISA.......................................................................S-99
S-105
<PAGE>
Exemption...................................................................S-99
Expense Losses..............................................................S-58
FASIT.......................................................................S-96
Final Regulation............................................................S-99
Final Scheduled Distribution Date...........................................S-68
Fiscal Agent................................................................S-66
Fitch......................................................................S-104
Initial Pool Balance........................................................S-73
Interest Accrual Method.....................................................S-75
Interest Accrual Period.....................................................S-55
Interest Only Certificates..................................................S-49
LaSalle.....................................................................S-65
Liquidation Fee.............................................................S-91
Loan-to-Value Ratio.........................................................S-81
LOP.........................................................................S-67
Lower-Tier REMIC............................................................S-95
Master Servicing Fee........................................................S-90
Material Breach.............................................................S-86
Material Document Defect....................................................S-86
Maturity Assumptions........................................................S-67
Middle-Tier REMIC...........................................................S-95
Money Term..................................................................S-57
Monthly Payment.............................................................S-55
Morgan Stanley.............................................................S-102
Morgan Stanley Loans........................................................S-75
Mortgage....................................................................S-74
Mortgage File...............................................................S-84
Mortgage Loan...............................................................S-73
Mortgage Loan Purchase Agreement............................................S-75
Mortgage Note...............................................................S-74
Mortgage Pool...............................................................S-73
Mortgaged Property..........................................................S-74
MSMC........................................................................S-83
Net Aggregate Prepayment Interest Shortfall.................................S-59
Net income from foreclosure property........................................S-94
Non-30/360 Loan.............................................................S-52
Notional Amount.............................................................S-51
NWAC Rate.............................................................S-11, S-52
Offered Certificates........................................................S-49
OID.........................................................................S-96
Operating Adviser...........................................................S-92
P&I Advance.................................................................S-60
Participants................................................................S-49
Pass-Through Rate...........................................................S-51
Percentage Interest.........................................................S-52
Permitted Cure Period.......................................................S-87
Permitted Investments.......................................................S-91
Phase I.....................................................................S-79
Plan........................................................................S-99
Pooling and Servicing Agreement.............................................S-49
Prepayment Assumptions......................................................S-66
Prepayment Interest Excess..................................................S-59
Prepayment Interest Shortfall...............................................S-59
Principal Balance Certificates..............................................S-50
Principal Distribution Amount...............................................S-55
Private Certificates........................................................S-49
PTCE.......................................................................S-101
Purchase Price..............................................................S-86
Qualifying Substitute Mortgage Loan.........................................S-87
Rated Final Distribution Date..............................................S-104
S-106
<PAGE>
Rating Agencies............................................................S-104
Realized Losses.............................................................S-58
Record Date.................................................................S-52
Related Borrower Loan Groups................................................S-77
Related Proceeds............................................................S-60
Remaining Amortization Terms................................................S-19
REMIC.......................................................................S-95
REMIC I.....................................................................S-95
REMIC II....................................................................S-95
REMIC III...................................................................S-95
REMIC Regular Certificates..................................................S-49
REMIC Residual Certificates.................................................S-49
REO Extension...............................................................S-94
REO Property................................................................S-49
REO Sale Deadline...........................................................S-94
REO Tax.....................................................................S-94
Required Appraisal Loan.....................................................S-57
Residential Funding Loans...................................................S-75
Restricted Group...........................................................S-100
RFSC.......................................................................S-102
Scheduled Balloon Balance...................................................S-82
Seller......................................................................S-75
Sellers.....................................................................S-75
Senior Certificates.........................................................S-49
Servicing Advance...........................................................S-60
Servicing Standard..........................................................S-88
Servicing Transfer Event....................................................S-88
Single-Tenant Mortgage Loan.................................................S-78
SMMEA................................................................S-24, S-102
Special Servicing Fee.......................................................S-91
Special Servicing Fee Rate..................................................S-91
Specially Serviced Mortgage Loan............................................S-88
Stated Principal Balance....................................................S-51
Subordinate Certificates....................................................S-49
Subordinate Private Certificates............................................S-49
Sub-Servicer................................................................S-90
Sub-Servicing Agreement.....................................................S-90
Substitution Shortfall Amount...............................................S-87
Termination Price...........................................................S-59
Trust Fund..................................................................S-49
Trustee.....................................................................S-65
Trustee Fee.................................................................S-66
Underwritable Cash Flow.....................................................S-81
Underwriters...............................................................S-102
Underwriting Agreement.....................................................S-102
Upper-Tier REMIC............................................................S-95
Voting Rights...............................................................S-65
WAC Rate....................................................................S-51
Wachovia....................................................................S-83
Workout Fee.................................................................S-91
Workout Fee Rate............................................................S-91
Year Built..................................................................S-82
Year Renovated..............................................................S-82
YMP.........................................................................S-67
S-107
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
APPENDIX I
MORTGAGE POOL INFORMATION
CUT-OFF DATE BALANCES
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
WEIGHTED
NUMBER PERCENT BY WEIGHTED AVERAGE WEIGHTED WEIGHTED
OF AGGREGATE AGGREGATE AVERAGE REMAINING WEIGHTED AVERAGE CUT- AVERAGE
MORTGAGE CUT-OFF DATE CUT-OFF DATE MORTGAGE TERM TO AVERAGE OFF DATE BALLOON
CUT-OFF DATE BALANCE ($) LOANS BALANCE ($) BALANCE (%) RATE (%) MATURITY (MOS) DSCR (X) LTV (%) LTV (%)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 to 1,000,000 20 15,634,021 1.82 7.322 122 1.41 68.5 51.9
1,000,001 to 2,000,000 62 96,314,163 11.21 7.268 122 1.48 68.0 50.4
2,000,001 to 3,000,000 51 128,069,100 14.90 7.271 123 1.47 68.8 52.4
3,000,001 to 4,000,000 25 88,174,514 10.26 7.080 118 1.46 69.6 57.3
4,000,001 to 5,000,000 22 97,628,653 11.36 7.207 136 1.44 70.3 52.8
5,000,001 to 6,000,000 17 94,772,803 11.03 7.294 126 1.37 72.9 60.0
6,000,001 to 7,000,000 10 65,846,343 7.66 7.142 123 1.41 70.7 56.7
7,000,001 to 8,000,000 5 37,920,340 4.41 7.121 109 1.33 69.0 59.5
8,000,001 to 9,000,000 6 51,183,059 5.96 7.002 114 1.32 75.7 64.5
9,000,001 to 10,000,000 1 9,426,129 1.10 7.505 111 1.57 69.3 56.9
10,000,001 to 15,000,000 6 72,369,597 8.42 7.169 127 1.45 72.3 55.6
15,000,001 to 20,000,000 1 15,140,544 1.76 7.400 112 1.27 74.2 65.9
20,000,001 to 25,000,000 1 21,152,666 2.46 7.210 116 1.29 74.4 65.3
25,000,001 and above 2 65,674,607 7.64 7.116 112 1.41 72.3 61.1
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL OR WEIGHTED AVERAGE: 229 $859,306,538 100.00% 7.198% 122 1.42X 70.8% 56.5%
====================================================================================================================================
</TABLE>
Min: $516,977
Max: $36,790,447
Average: $3,752,430
I-1
<PAGE>
APPENDIX I
MORTGAGE POOL INFORMATION
STATES
<TABLE>
<CAPTION>
====================================================================================================================================
WEIGHTED
NUMBER PERCENT BY WEIGHTED AVERAGE WEIGHTED WEIGHTED
OF AGGREGATE AGGREGATE AVERAGE REMAINING WEIGHTED AVERAGE CUT- AVERAGE
MORTGAGE CUT-OFF DATE CUT-OFF DATE MORTGAGE TERM TO AVERAGE OFF DATE BALLOON
STATE LOANS BALANCE ($) BALANCE (%) RATE (%) MATURITY (MOS) DSCR (X) LTV (%) LTV (%)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
California 48 220,969,222 25.71 7.273 116 1.42 67.3 55.2
Southern (1) 30 126,529,593 14.72 7.200 115 1.46 68.7 57.5
Northern (1) 18 94,439,629 10.99 7.370 117 1.35 65.3 52.1
Georgia 34 102,020,276 11.87 7.130 121 1.44 74.0 61.0
Florida 10 71,954,176 8.37 7.141 113 1.45 69.7 56.7
Virginia 18 60,766,272 7.07 7.352 135 1.48 69.9 48.1
North Carolina 13 53,752,139 6.26 7.123 126 1.43 72.6 59.0
Ohio 13 41,484,561 4.83 7.003 135 1.35 76.0 59.8
Maryland 8 41,116,659 4.78 7.299 120 1.30 74.6 62.2
Pennsylvania 10 33,294,170 3.87 7.351 126 1.53 66.9 54.2
Colorado 7 28,757,204 3.35 7.136 142 1.33 74.2 49.1
Texas 7 24,398,620 2.84 7.132 129 1.28 73.3 55.7
New Jersey 9 23,286,457 2.71 7.058 120 1.42 71.5 60.4
Washington 6 17,009,548 1.98 7.347 120 1.48 64.6 55.1
Arizona 6 14,901,197 1.73 7.325 106 1.48 72.3 63.8
Tennessee 2 13,700,243 1.59 7.085 83 1.36 78.6 71.7
Indiana 6 11,884,492 1.38 7.116 114 1.46 73.3 62.2
Illinois 5 11,460,913 1.33 7.049 103 1.47 77.5 66.8
Delaware 3 10,071,611 1.17 6.838 123 1.43 73.0 61.2
Missouri 2 10,058,792 1.17 7.184 115 1.30 74.4 59.3
Michigan 3 9,510,572 1.11 6.745 194 1.90 55.6 25.9
</TABLE>
I-2
<PAGE>
APPENDIX I
MORTGAGE POOL INFORMATION
STATES
(continued)
<TABLE>
<CAPTION>
====================================================================================================================================
WEIGHTED
NUMBER PERCENT BY WEIGHTED AVERAGE WEIGHTED WEIGHTED
OF AGGREGATE AGGREGATE AVERAGE REMAINING WEIGHTED AVERAGE CUT- AVERAGE
MORTGAGE CUT-OFF DATE CUT-OFF DATE MORTGAGE TERM TO AVERAGE OFF DATE BALLOON
STATE LOANS BALANCE ($) BALANCE (%) RATE (%) MATURITY (MOS) DSCR (X) LTV (%) LTV (%)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Maine 1 9,426,129 1.10 7.505 111 1.57 69.3 56.9
Wisconsin 1 5,472,161 0.64 7.320 113 1.32 73.5 64.9
Massachusetts 3 5,404,129 0.63 6.930 116 1.66 63.8 55.2
Vermont 1 5,352,191 0.62 7.430 115 1.27 74.7 66.1
South Carolina 1 4,596,794 0.53 7.250 177 1.25 68.1 0.0
Minnesota 1 4,274,865 0.50 7.750 111 1.32 78.4 70.2
Louisiana 1 4,251,651 0.49 7.170 234 1.20 73.9 3.1
District of Columbia 1 3,982,835 0.46 6.600 115 1.60 66.4 57.6
Utah 1 3,488,993 0.41 7.250 116 1.22 70.5 62.1
New York 2 3,230,776 0.38 7.071 114 1.32 70.3 60.2
Alabama 1 2,626,656 0.31 6.740 114 1.51 79.6 69.4
New Mexico 1 2,042,934 0.24 7.220 107 1.35 58.1 47.5
Connecticut 1 1,261,355 0.15 7.090 111 1.43 78.8 69.5
Kentucky 1 1,219,019 0.14 7.450 105 1.54 78.6 64.9
Iowa 1 1,193,947 0.14 6.750 114 1.60 79.6 69.4
Montana 1 1,084,978 0.13 7.750 112 2.10 58.6 41.6
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL OR WEIGHTED
AVERAGE: 229 $859,306,538 100.00% 7.198% 122 1.42X 70.8% 56.5%
====================================================================================================================================
</TABLE>
(1) Southern California consists of loans in California zip codes less than or
equal to 93600. Northern California consists of loans in California zip
codes greater than 93600.
I-3
<PAGE>
APPENDIX I
MORTGAGE POOL INFORMATION
PROPERTY TYPES
<TABLE>
<CAPTION>
====================================================================================================================================
WEIGHTED
NUMBER PERCENT BY WEIGHTED AVERAGE WEIGHTED WEIGHTED
OF AGGREGATE AGGREGATE AVERAGE REMAINING WEIGHTED AVERAGE CUT- AVERAGE
MORTGAGE CUT-OFF DATE CUT-OFF DATE MORTGAGE TERM TO AVERAGE OFF DATE BALLOON
PROPERTY TYPE LOANS BALANCE ($) BALANCE (%) RATE (%) MATURITY (MOS) DSCR (X) LTV (%) LTV (%)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Retail 62 274,151,700 31.90 7.248 118 1.34 73.4 61.7
Anchored 32 164,504,712 19.14 7.215 118 1.35 73.1 62.1
Unanchored 23 70,722,986 8.23 7.442 119 1.35 72.7 59.5
Shadow Anchored 5 34,652,409 4.03 7.018 118 1.28 77.6 65.1
Big Box 2 4,271,592 0.50 7.191 114 1.42 66.6 56.5
- ------------------------------------------------------------------------------------------------------------------------------------
SUBTOTAL: 62 $ 74,151,700 31.90% 7.248% 118 1.34X 73.4% 61.7%
Multifamily 64 196,774,257 22.90 6.938 117 1.45 73.8 61.3
Garden 61 185,990,583 21.64 6.924 116 1.45 74.1 61.7
High-Rise 2 8,377,279 0.97 6.934 158 1.49 73.3 57.0
Mid-Rise 1 2,406,395 0.28 8.050 22 1.26 51.8 50.3
- ------------------------------------------------------------------------------------------------------------------------------------
SUBTOTAL: 64 $196,774,257 22.90% 6.938% 117 1.45X 73.8% 61.3%
Office 43 157,810,158 18.36 7.193 126 1.40 70.9 55.8
Suburban 26 87,413,197 10.17 7.127 125 1.35 72.8 56.9
Urban 11 43,290,382 5.04 7.316 135 1.54 65.0 48.5
Medical 6 27,106,579 3.15 7.211 114 1.35 74.3 63.6
- ------------------------------------------------------------------------------------------------------------------------------------
SUBTOTAL: 43 $157,810,158 18.36% 7.193% 126 1.40X 70.9% 55.8%
Hospitality 15 89,184,584 10.38 7.499 118 1.57 66.9 51.4
Resort 1 36,790,447 4.28 7.255 109 1.52 67.5 55.1
Full Service 2 22,136,292 2.58 7.841 114 1.51 67.9 56.1
Limited Service 6 19,862,289 2.31 7.299 141 1.58 67.9 39.7
Extended Stay 6 10,395,557 1.21 8.020 114 1.82 60.6 50.3
- ------------------------------------------------------------------------------------------------------------------------------------
SUBTOTAL: 15 $ 89,184,584 10.38% 7.499% 118 1.57X 66.9% 51.4%
</TABLE>
I-4
<PAGE>
APPENDIX I
MORTGAGE POOL INFORMATION
<TABLE>
<CAPTION>
====================================================================================================================================
WEIGHTED
NUMBER PERCENT BY WEIGHTED AVERAGE WEIGHTED WEIGHTED
OF AGGREGATE AGGREGATE AVERAGE REMAINING WEIGHTED AVERAGE CUT- AVERAGE
MORTGAGE CUT-OFF DATE CUT-OFF DATE MORTGAGE TERM TO AVERAGE OFF DATE BALLOON
PROPERTY TYPE LOANS BALANCE ($) BALANCE (%) RATE (%) MATURITY (MOS) DSCR (X) LTV (%) LTV (%)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Industrial 27 80,089,833 9.32 7.285 130 1.43 62.8 42.8
Light 14 37,753,500 4.39 7.155 123 1.38 68.8 51.9
Flex 6 20,754,838 2.42 7.732 128 1.45 49.4 28.5
Warehouse 6 17,301,906 2.01 7.029 136 1.58 62.8 38.6
Manufacturing 1 4,279,589 0.50 7.300 176 1.25 74.4 48.0
- ------------------------------------------------------------------------------------------------------------------------------------
SUBTOTAL: 27 $ 80,089,833 9.32% 7.285% 130 1.43X 62.8% 42.8%
Mixed Use 10 39,561,336 4.60 7.355 133 1.41 67.4 47.8
Retail/Office 7 29,816,891 3.47 7.466 131 1.42 68.3 49.0
Office/Industrial 1 5,975,312 0.70 6.800 115 1.27 66.4 57.8
Self Storage/
Unanchored
Retail 1 1,981,554 0.23 7.360 177 1.80 50.8 0.0
Retail/Whse 1 1,787,579 0.21 7.350 174 1.30 74.5 48.3
- ------------------------------------------------------------------------------------------------------------------------------------
SUBTOTAL: 10 $ 39,561,336 4.60% 7.355% 133 1.41X 67.4% 47.8%
Self Storage 5 11,125,915 1.29 7.141 124 1.77 62.7 50.4
- ------------------------------------------------------------------------------------------------------------------------------------
SUBTOTAL: 5 $ 11,125,915 1.29% 7.141% 124 1.77X 62.7% 50.4%
Mobile Home Park 2 7,625,562 0.89 6.961 192 1.99 52.2 22.2
- ------------------------------------------------------------------------------------------------------------------------------------
SUBTOTAL: 2 $ 7,625,562 0.89% 6.961% 192 1.99X 52.2% 22.2%
Other 1 2,983,195 0.35 7.270 177 1.27 72.8 30.8
- ------------------------------------------------------------------------------------------------------------------------------------
SUBTOTAL: 1 $ 2,983,195 0.35% 7.270% 177 1.27X 72.8% 30.8%
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL OR WEIGHTED
AVERAGE: 229 $859,306,538 100.00% 7.198% 122 1.42X 70.8% 56.5%
====================================================================================================================================
</TABLE>
I-5
<PAGE>
APPENDIX I
MORTGAGE POOL INFORMATION
MORTGAGE RATES
<TABLE>
<CAPTION>
====================================================================================================================================
WEIGHTED
NUMBER PERCENT BY WEIGHTED AVERAGE WEIGHTED WEIGHTED
OF AGGREGATE AGGREGATE AVERAGE REMAINING WEIGHTED AVERAGE CUT- AVERAGE
MORTGAGE CUT-OFF DATE CUT-OFF DATE MORTGAGE TERM TO AVERAGE OFF DATE BALLOON
MORTGAGE RATE (%) LOANS BALANCE ($) BALANCE (%) RATE (%) MATURITY (MOS) DSCR (X) LTV (%) LTV (%)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
6.001 to 6.500 8 28,452,839 3.31 6.356 119 1.48 76.3 64.9
6.501 to 7.000 72 288,989,531 33.63 6.821 119 1.48 72.3 61.0
7.001 to 7.500 101 394,284,218 45.88 7.225 125 1.37 71.8 55.7
7.501 to 8.000 24 76,283,899 8.88 7.658 128 1.45 68.2 52.6
8.001 to 8.500 16 45,716,974 5.32 8.159 108 1.52 60.7 47.2
8.501 to 9.000 6 18,211,574 2.12 8.788 115 1.23 59.9 32.9
9.000 to 9.500 2 7,367,503 0.86 9.121 81 1.35 52.6 40.1
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL OR WEIGHTED
AVERAGE: 229 $859,306,538 100.00% 7.198% 122 1.42X 70.8% 56.5%
====================================================================================================================================
</TABLE>
Min: 6.160%
Max: 9.125%
Weighted Average: 7.198%
I-6
<PAGE>
APPENDIX I
MORTGAGE POOL INFORMATION
ORIGINAL TERMS TO STATED MATURITY
<TABLE>
<CAPTION>
====================================================================================================================================
WEIGHTED
NUMBER PERCENT BY WEIGHTED AVERAGE WEIGHTED WEIGHTED
ORIGINAL TERM OF AGGREGATE AGGREGATE AVERAGE REMAINING WEIGHTED AVERAGE CUT- AVERAGE
TO STATED MATURITY MORTGAGE CUT-OFF DATE CUT-OFF DATE MORTGAGE TERM TO AVERAGE OFF DATE BALLOON
(MOS) LOANS BALANCE ($) BALANCE (%) RATE (%) MATURITY (MOS) DSCR (X) LTV (%) LTV (%)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 to 60 2 3,894,265 0.45 7.848 32 1.32 58.6 56.6
61 to 120 184 682,356,043 79.41 7.162 112 1.42 71.8 61.2
121 to 180 32 142,524,864 16.59 7.309 151 1.44 67.3 42.8
181 to 240 11 30,531,366 3.55 7.380 227 1.43 66.8 13.5
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL OR WEIGHTED
AVERAGE: 229 $859,306,538 100.00% 7.198% 122 1.42X 70.8% 56.5%
====================================================================================================================================
</TABLE>
Min: 60
Max: 240
Weighted Average: 130
I-7
<PAGE>
APPENDIX I
MORTGAGE POOL INFORMATION
REMAINING TERMS TO STATED MATURITY
<TABLE>
<CAPTION>
====================================================================================================================================
WEIGHTED
NUMBER PERCENT BY WEIGHTED AVERAGE WEIGHTED WEIGHTED
REMAINING TERM OF AGGREGATE AGGREGATE AVERAGE REMAINING WEIGHTED AVERAGE CUT- AVERAGE
TO STATED MATURITY MORTGAGE CUT-OFF DATE CUT-OFF DATE MORTGAGE TERM TO AVERAGE OFF DATE BALLOON
(MOS) LOANS BALANCE ($) BALANCE (%) RATE (%) MATURITY (MOS) DSCR (X) LTV (%) LTV (%)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 to 60 6 9,711,303 1.13 8.305 34 1.33 61.3 58.7
61 to 120 184 708,470,456 82.45 7.160 112 1.42 71.9 61.4
121 to 180 29 112,881,126 13.14 7.317 162 1.47 65.6 36.0
181 to 240 10 28,243,653 3.29 7.284 231 1.45 67.0 14.6
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL OR WEIGHTED
AVERAGE: 229 $859,306,538 100.00% 7.198% 122 1.42X 70.8% 56.5%
====================================================================================================================================
</TABLE>
Min: 22
Max: 234
Weighted Average: 122
I-8
<PAGE>
APPENDIX I
MORTGAGE POOL INFORMATION
ORIGINAL AMORTIZATION TERMS
<TABLE>
<CAPTION>
====================================================================================================================================
WEIGHTED
NUMBER PERCENT BY WEIGHTED AVERAGE WEIGHTED WEIGHTED
ORIGINAL OF AGGREGATE AGGREGATE AVERAGE REMAINING WEIGHTED AVERAGE CUT- AVERAGE
AMORTIZATION MORTGAGE CUT-OFF DATE CUT-OFF DATE MORTGAGE TERM TO AVERAGE OFF DATE BALLOON
TERM (MOS) LOANS BALANCE ($) BALANCE (%) RATE (%) MATURITY (MOS) DSCR (X) LTV (%) LTV (%)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALLOON LOAN 212 $ 13,271,573 94.64% 7.175% 118 1.42X 71.5% 59.6%
240 19 55,482,256 6.46 7.607 129 1.34 67.6 40.8
264 1 2,007,045 0.23 8.890 88 1.34 59.0 47.1
300 67 218,093,585 25.38 7.357 117 1.51 67.3 53.7
312 1 4,764,177 0.55 7.160 113 1.43 67.5 56.0
324 1 2,406,395 0.28 8.050 22 1.26 51.8 50.3
336 1 7,461,619 0.87 6.520 115 1.25 70.1 59.0
343 1 3,477,262 0.40 6.710 113 1.26 79.0 67.6
346 1 4,609,876 0.54 8.900 103 1.22 73.2 66.3
354 1 3,566,062 0.41 7.600 118 1.60 65.7 57.7
360 119 511,403,296 59.51 7.034 117 1.40 73.8 64.2
FULLY-AMORTIZING
LOAN 17 $ 6,034,966 5.36% 7.597% 196 1.42X 58.6% 0.9%
180 8 23,191,192 2.70 7.846 166 1.36 54.7 0.1
192 1 2,287,713 0.27 8.570 174 1.19 64.4 0.0
240 8 20,556,060 2.39 7.208 233 1.50 62.4 1.9
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL OR WEIGHTED
AVERAGE: 229 $859,306,538 100.00% 7.198% 122 1.42X 70.8% 56.5%
====================================================================================================================================
</TABLE>
Min: 180
Max: 360
Weighted Average: 328
I-9
<PAGE>
APPENDIX I
MORTGAGE POOL INFORMATION
DEBT SERVICE COVERAGE RATIOS
<TABLE>
<CAPTION>
====================================================================================================================================
WEIGHTED
NUMBER PERCENT BY WEIGHTED AVERAGE WEIGHTED WEIGHTED
OF AGGREGATE AGGREGATE AVERAGE REMAINING WEIGHTED AVERAGE CUT- AVERAGE
DEBT SERVICE MORTGAGE CUT-OFF DATE CUT-OFF DATE MORTGAGE TERM TO AVERAGE OFF DATE BALLOON
COVERAGE RATIO (X) LOANS BALANCE ($) BALANCE (%) RATE (%) MATURITY (MOS) DSCR (X) LTV (%) LTV (%)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1.01 to 1.15 2 10,010,854 1.16 7.240 99 1.05 76.5 68.4
1.16 to 1.25 22 79,624,501 9.27 7.556 145 1.23 69.3 38.5
1.26 to 1.35 65 284,217,638 33.08 7.288 119 1.30 73.6 60.8
1.36 to 1.50 78 271,174,736 31.56 7.051 118 1.43 72.9 61.3
1.51 to 1.75 39 146,997,446 17.11 7.087 118 1.57 69.2 55.4
1.76 to 2.00 17 52,005,452 6.05 7.339 131 1.81 56.4 44.1
2.01 and above 6 15,275,912 1.78 6.807 153 2.17 47.4 29.2
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL OR WEIGHTED
AVERAGE: 229 $859,306,538 100.00% 7.198% 122 1.42X 70.8% 56.5%
====================================================================================================================================
</TABLE>
Min: 1.03x
Max: 2.23x
Weighted Average: 1.42x
I-10
<PAGE>
APPENDIX I
MORTGAGE POOL INFORMATION
CUT-OFF DATE LOAN-TO-VALUE RATIOS
<TABLE>
<CAPTION>
====================================================================================================================================
WEIGHTED
NUMBER PERCENT BY WEIGHTED AVERAGE WEIGHTED WEIGHTED
CUT-OFF DATE OF AGGREGATE AGGREGATE AVERAGE REMAINING WEIGHTED AVERAGE CUT- AVERAGE
LOAN-TO-VALUE MORTGAGE CUT-OFF DATE CUT-OFF DATE MORTGAGE TERM TO AVERAGE OFF DATE BALLOON
RATIO (%) LOANS BALANCE ($) BALANCE (%) RATE (%) MATURITY (MOS) DSCR (X) LTV (%) LTV (%)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
20.1 to 30.0 1 1,381,921 0.16 9.125 39 1.68 26.1 23.4
30.1 to 40.0 1 1,193,582 0.14 6.540 116 2.23 39.8 31.6
40.1 to 50.0 8 31,632,770 3.68 7.484 157 1.81 45.6 22.2
50.1 to 60.0 25 68,196,632 7.94 7.566 112 1.54 55.9 40.9
60.1 to 70.0 51 193,661,678 22.54 7.335 122 1.50 66.5 50.2
70.1 to 80.0 142 561,942,557 65.39 7.082 121 1.36 75.6 62.5
80.1 to 90.0 1 1,297,399 0.15 8.750 25 1.15 81.1 79.0
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL OR WEIGHTED
AVERAGE: 229 $859,306,538 100.00% 7.198% 122 1.42X 70.8% 56.5%
====================================================================================================================================
</TABLE>
Min: 26.1%
Max: 81.1%
Weighted Average: 70.8%
I-11
<PAGE>
APPENDIX I
MORTGAGE POOL INFORMATION
BALLOON LOAN-TO-VALUE RATIOS
<TABLE>
<CAPTION>
====================================================================================================================================
WEIGHTED
NUMBER PERCENT BY WEIGHTED AVERAGE WEIGHTED WEIGHTED
BALLOON OF AGGREGATE AGGREGATE AVERAGE REMAINING WEIGHTED AVERAGE CUT- AVERAGE
LOAN-TO-VALUE MORTGAGE CUT-OFF DATE CUT-OFF DATE MORTGAGE TERM TO AVERAGE OFF DATE BALLOON
RATIO (%) LOANS BALANCE ($) BALANCE (%) RATE (%) MATURITY (MOS) DSCR (X) LTV (%) LTV (%)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
0.0 11 28,905,312 3.36 7.885 179 1.32 58.2 0.0
0.1 to 10.0 6 17,129,654 1.99 7.110 226 1.57 59.2 2.4
20.1 to 30.0 2 2,873,870 0.33 8.344 111 1.50 47.0 26.2
30.1 to 40.0 8 36,066,041 4.20 7.174 156 1.61 60.6 33.6
40.1 to 50.0 33 96,688,886 11.25 7.500 132 1.49 63.2 46.2
50.1 to 60.0 57 218,657,635 25.45 7.195 115 1.50 67.7 56.1
60.1 to 70.0 103 426,982,619 49.69 7.070 114 1.36 75.8 66.0
70.1 to 80.0 9 32,002,523 3.72 7.360 97 1.34 79.2 71.5
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL OR WEIGHTED
AVERAGE: 229 $859,306,538 100.00% 7.198% 122 1.42X 70.8% 56.5%
====================================================================================================================================
</TABLE>
Min: 0.0%
Max: 79.0%
Weighted Average: 56.5%
I-12
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
APPENDIX II
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
LOAN INFORMATION - I
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Original
Principal Cut-Off Date Cut-Off Date Bal./
Loan No. Seller(1) Property Name(2) Balance Balance(3) Unit or NSF(4) Note Date
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <C> <S> <C> <C> <C> <C>
1 MS Key West Hilton Resort $37,260,000 $36,790,447 $206,687.90 10-Mar-98
- -----------------------------------------------------------------------------------------------------------------------------------
2 RFC Lancaster Commerce Center $29,000,000 $28,884,160 $96.28 14-Sep-98
- -----------------------------------------------------------------------------------------------------------------------------------
3 MS Cupertino Village Shopping Center $21,250,000 $21,152,666 $193.68 4-Aug-98
- -----------------------------------------------------------------------------------------------------------------------------------
4 RFC Metro Pike Center $15,225,000 $15,140,544 $236.25 12-Jun-98
- -----------------------------------------------------------------------------------------------------------------------------------
5 RFC Hawthorne Woods $13,000,000 $12,927,771 $37,471.80 20-Jul-98
- -----------------------------------------------------------------------------------------------------------------------------------
6 RFC Sybase Building $13,000,000 $12,878,713 $133.65 24-Sep-98
- -----------------------------------------------------------------------------------------------------------------------------------
7 MS Alexandria Courtyard Marriott Hotel $12,750,000 $12,710,162 $72,216.83 2-Nov-98
- -----------------------------------------------------------------------------------------------------------------------------------
8 RFC Heritage House $12,000,000 $11,934,054 $34,293.26 9-Jul-98
- -----------------------------------------------------------------------------------------------------------------------------------
9 RFC Spanish Trace East Apartments $11,500,000 $11,448,025 $22,100.43 2-Sep-98
- -----------------------------------------------------------------------------------------------------------------------------------
10 MS Four Allegheny Office Center $10,556,023 $10,470,872 $45.25 1-Aug-98
- -----------------------------------------------------------------------------------------------------------------------------------
11 MS Town Center Lodge Motel (I) $2,210,000 $2,196,384 $15,632.42 17-Aug-98
12 MS Decatur Lodge Motel (I) $2,200,000 $2,186,446 $15,632.42 17-Aug-98
13 MS Fulton Lodge Motel (I) $2,080,000 $2,067,185 $15,632.42 17-Aug-98
14 MS Douglasville Lodge Motel (I) $1,950,000 $1,937,986 $15,632.42 17-Aug-98
15 MS West Georgia Lodge Motel (I) $1,440,000 $1,431,128 $15,632.42 17-Aug-98
16 MS East Point Lodge Motel (I) $580,000 $576,427 $15,632.42 17-Aug-98
- -----------------------------------------------------------------------------------------------------------------------------------
17 MS Holiday Inn Hotel- Bar Harbor $9,520,000 $9,426,129 $42,269.64 14-May-98
- -----------------------------------------------------------------------------------------------------------------------------------
18 MS Kirkwood Crossings Office and Retail Building $9,000,000 $8,945,963 $115.25 22-Sep-98
- -----------------------------------------------------------------------------------------------------------------------------------
19 RFC North Salado Village Shopping Center $8,780,000 $8,713,455 $50.46 15-Apr-98
- -----------------------------------------------------------------------------------------------------------------------------------
20 RFC Golden Miles Market Place $8,600,000 $8,579,786 $88.20 4-Nov-98
- -----------------------------------------------------------------------------------------------------------------------------------
21 WACH New Market Madison $8,480,000 $8,445,547 $50.02 1-Oct-98
- -----------------------------------------------------------------------------------------------------------------------------------
22 RFC Valencia Apartments $8,500,000 $8,425,975 $17,554.12 22-Jul-98
- -----------------------------------------------------------------------------------------------------------------------------------
23 RFC Rollingwood Shopping Center $8,100,000 $8,072,332 $109.38 29-Oct-98
- -----------------------------------------------------------------------------------------------------------------------------------
24 MS 525 Almanor Industrial Building $8,000,000 $7,961,041 $92.92 4-Aug-98
- -----------------------------------------------------------------------------------------------------------------------------------
25 WACH Town Country S C $7,900,000 $7,875,515 $25.91 7-Oct-98
- -----------------------------------------------------------------------------------------------------------------------------------
26 MS Lucky/Long's Plaza Shopping Center $7,900,000 $7,556,516 $89.23 1-Mar-96
- -----------------------------------------------------------------------------------------------------------------------------------
27 RFC Koret Distribution Center $7,500,000 $7,461,619 $18.76 9-Sep-98
- -----------------------------------------------------------------------------------------------------------------------------------
28 RFC Colony By The Mall Apartments $7,100,000 $7,065,649 $28,839.38 27-Aug-98
- -----------------------------------------------------------------------------------------------------------------------------------
29 MS Manekin Industrial Portfolio $7,050,000 $6,977,644 $29.08 30-Jan-98
- -----------------------------------------------------------------------------------------------------------------------------------
30 RFC St. Andrews Professional Center $6,825,000 $6,775,172 $115.39 10-Aug-98
- -----------------------------------------------------------------------------------------------------------------------------------
31 RFC Green Ridge Heights Apartments $6,800,000 $6,740,657 $21,814.42 30-Mar-98
- -----------------------------------------------------------------------------------------------------------------------------------
32 RFC Cove Center $6,750,000 $6,711,669 $44.53 24-Jul-98
- -----------------------------------------------------------------------------------------------------------------------------------
33 RFC Golden Isle Plaza $6,710,000 $6,692,595 $68.57 12-Nov-98
- -----------------------------------------------------------------------------------------------------------------------------------
34 MS 2040-2060 Corporate Court Industrial $7,350,000 $6,638,012 $50.61 12-Jun-96
- -----------------------------------------------------------------------------------------------------------------------------------
35 RFC Miami Lakes Corporate Center $6,500,000 $6,469,269 $87.71 4-Aug-98
- -----------------------------------------------------------------------------------------------------------------------------------
36 MS Bon Air Professional Center $6,450,000 $6,425,893 $233.16 11-Sep-98
- -----------------------------------------------------------------------------------------------------------------------------------
37 MS Woodside Apartments $6,400,000 $6,345,884 $35,254.91 10-Mar-98
- -----------------------------------------------------------------------------------------------------------------------------------
38 RFC Cambridge Commons Apartments $6,100,000 $6,069,549 $31,612.24 27-Aug-98
- -----------------------------------------------------------------------------------------------------------------------------------
39 MS Alicia Valencia Plaza Shopping Center $6,285,000 $5,985,583 $97.00 9-Sep-96
- -----------------------------------------------------------------------------------------------------------------------------------
40 RFC Willow Tree $6,000,000 $5,978,315 $88.18 1-Oct-98
- -----------------------------------------------------------------------------------------------------------------------------------
41 MS Bayport Marina Plaza Industrial $6,000,000 $5,975,312 $71.81 2-Sep-98
- -----------------------------------------------------------------------------------------------------------------------------------
42 RFC New Market Square $6,000,000 $5,969,295 $47.93 14-Aug-98
- -----------------------------------------------------------------------------------------------------------------------------------
43 WACH Shoppes at Cresthaven $5,850,000 $5,828,877 $32.84 17-Nov-98
- -----------------------------------------------------------------------------------------------------------------------------------
44 WACH Southport Centre $5,840,000 $5,818,314 $94.46 21-Sep-98
- -----------------------------------------------------------------------------------------------------------------------------------
45 RFC Half-A-Car $5,700,000 $5,668,331 $104.97 7-Jul-98
- -----------------------------------------------------------------------------------------------------------------------------------
46 MS Merchants Centre $5,600,000 $5,578,009 $87.66 29-Sep-98
- -----------------------------------------------------------------------------------------------------------------------------------
47 RFC Plaza K Shopping Center $5,600,000 $5,576,860 $196.15 25-Sep-98
- -----------------------------------------------------------------------------------------------------------------------------------
48 RFC Parkway Shopping Center $5,600,000 $5,547,313 $41.09 11-Dec-97
- -----------------------------------------------------------------------------------------------------------------------------------
49 MS 788 North Jefferson Office Building $5,500,000 $5,472,161 $54.18 1-Jul-98
- -----------------------------------------------------------------------------------------------------------------------------------
50 WACH Comfort Suites $5,400,000 $5,369,395 $44,744.96 14-Sep-98
- -----------------------------------------------------------------------------------------------------------------------------------
51 MS Taft Corners Shopping Center $5,371,500 $5,352,191 $81.59 14-Sep-98
<CAPTION>
- -----------------------------------------------------------------------------------------
Maturity Date Original Original Remaining
or Anticipated Term to Amort. Remaining Term to
Repayment Date Maturity or Term Amort. Maturity or
Loan No. (ARD)(5) ARD (mos) (mos)(6) Term ARD (mos) Security Type
- -----------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C>
1 1-Apr-08 120 300 289 109 Fee
- -----------------------------------------------------------------------------------------
2 1-Oct-08 120 360 355 115 Fee
- -----------------------------------------------------------------------------------------
3 1-Nov-08 122 360 354 116 Fee
- -----------------------------------------------------------------------------------------
4 1-Jul-08 120 360 352 112 Fee
- -----------------------------------------------------------------------------------------
5 1-Aug-08 120 360 353 113 Fee
- -----------------------------------------------------------------------------------------
6 1-Oct-13 180 240 235 175 Leasehold
- -----------------------------------------------------------------------------------------
7 1-Dec-08 120 300 297 117 Fee
- -----------------------------------------------------------------------------------------
8 1-Aug-06 96 360 353 89 Fee
- -----------------------------------------------------------------------------------------
9 1-Oct-08 120 360 355 115 Fee
- -----------------------------------------------------------------------------------------
10 1-Apr-12 164 300 293 157 Fee
- -----------------------------------------------------------------------------------------
11 1-Sep-08 120 300 294 114 Fee
12 1-Sep-08 120 300 294 114 Fee
13 1-Sep-08 120 300 294 114 Fee
14 1-Sep-08 120 300 294 114 Fee
15 1-Sep-08 120 300 294 114 Fee
16 1-Sep-08 120 300 294 114 Fee
- -----------------------------------------------------------------------------------------
17 1-Jun-08 120 300 291 111 Fee
- -----------------------------------------------------------------------------------------
18 1-Oct-08 120 300 295 115 Fee
- -----------------------------------------------------------------------------------------
19 1-May-08 120 360 350 110 Fee
- -----------------------------------------------------------------------------------------
20 1-Dec-08 120 360 357 117 Fee
- -----------------------------------------------------------------------------------------
21 1-Oct-08 120 360 355 115 Fee
- -----------------------------------------------------------------------------------------
22 1-Aug-08 120 300 293 113 Fee
- -----------------------------------------------------------------------------------------
23 1-Nov-08 120 360 356 116 Fee
- -----------------------------------------------------------------------------------------
24 1-Sep-08 120 360 354 114 Fee
- -----------------------------------------------------------------------------------------
25 1-Nov-08 120 360 356 116 Fee
- -----------------------------------------------------------------------------------------
26 1-Apr-06 120 300 265 85 Fee
- -----------------------------------------------------------------------------------------
27 1-Oct-08 120 336 331 115 Fee
- -----------------------------------------------------------------------------------------
28 1-Sep-08 120 360 354 114 Fee
- -----------------------------------------------------------------------------------------
29 1-Feb-08 120 360 347 107 Fee
- -----------------------------------------------------------------------------------------
30 1-Sep-08 120 300 294 114 Fee
- -----------------------------------------------------------------------------------------
31 1-Apr-13 180 360 349 169 Fee
- -----------------------------------------------------------------------------------------
32 1-Aug-08 120 360 353 113 Fee
- -----------------------------------------------------------------------------------------
33 1-Dec-08 120 360 357 117 Fee
- -----------------------------------------------------------------------------------------
34 1-Jul-11 180 180 148 148 Fee
- -----------------------------------------------------------------------------------------
35 1-Sep-08 120 360 354 114 Fee
- -----------------------------------------------------------------------------------------
36 1-Oct-08 120 360 355 115 Fee
- -----------------------------------------------------------------------------------------
37 1-Apr-09 132 360 349 121 Fee
- -----------------------------------------------------------------------------------------
38 1-Sep-08 120 360 354 114 Fee
- -----------------------------------------------------------------------------------------
39 1-Oct-06 120 240 211 91 Fee
- -----------------------------------------------------------------------------------------
40 1-Nov-08 120 360 356 116 Fee
- -----------------------------------------------------------------------------------------
41 1-Oct-08 120 360 355 115 Fee
- -----------------------------------------------------------------------------------------
42 1-Sep-08 120 360 354 114 Fee
- -----------------------------------------------------------------------------------------
43 1-Dec-08 120 300 297 117 Fee
- -----------------------------------------------------------------------------------------
44 1-Oct-08 120 360 355 115 Fee
- -----------------------------------------------------------------------------------------
45 1-Aug-08 120 360 353 113 Fee
- -----------------------------------------------------------------------------------------
46 1-Oct-08 120 360 355 115 Fee
- -----------------------------------------------------------------------------------------
47 1-Oct-13 180 360 355 175 Fee
- -----------------------------------------------------------------------------------------
48 1-Jan-08 120 360 346 106 Fee
- -----------------------------------------------------------------------------------------
49 1-Aug-08 120 360 353 113 Fee
- -----------------------------------------------------------------------------------------
50 1-Oct-13 180 300 295 175 Fee
- -----------------------------------------------------------------------------------------
51 1-Oct-08 120 360 355 115 Fee / Leasehold
</TABLE>
II-1
<PAGE>
APPENDIX II
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
LOAN INFORMATION - I
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Original
Principal Cut-Off Date Cut-Off Date Bal./
Loan No. Seller(1) Property Name(2) Balance Balance(3) Unit or NSF(4) Note Date
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <C> <S> <C> <C> <C> <C>
52 MS Mickelberry Shopping Center $5,358,306 $5,332,111 $80.88 1-Aug-98
- -----------------------------------------------------------------------------------------------------------------------------------
53 RFC Cottonwood Corners Shopping Center $5,200,000 $5,183,452 $64.59 14-Oct-98
- -----------------------------------------------------------------------------------------------------------------------------------
54 WACH Comfort Inn & Comfort Suites $5,140,000 $5,110,784 $45,228.18 20-Nov-98
- -----------------------------------------------------------------------------------------------------------------------------------
55 RFC Dalton Place Shopping Center $5,080,000 $5,026,502 $68.89 17-Dec-97
- -----------------------------------------------------------------------------------------------------------------------------------
56 RFC Showcase Plaza Shopping Center $5,000,000 $4,981,312 $67.47 1-Oct-98
- -----------------------------------------------------------------------------------------------------------------------------------
57 RFC Springrove Mobile Home Park $5,000,000 $4,941,284 $11,653.97 17-Aug-98
- -----------------------------------------------------------------------------------------------------------------------------------
58 RFC Gateway/Lombardi (II) $4,800,000 $4,764,177 $68.61 16-Jul-98
- -----------------------------------------------------------------------------------------------------------------------------------
59 RFC Arbors of Wooster Apartments $4,800,000 $4,757,522 $40,317.98 20-Feb-98
- -----------------------------------------------------------------------------------------------------------------------------------
60 MS Sunset Plaza Shopping Center $4,655,405 $4,609,876 $44.09 15-Sep-97
- -----------------------------------------------------------------------------------------------------------------------------------
61 WACH Blackstock Warehouse $4,640,000 $4,596,794 $10.63 30-Nov-98
- -----------------------------------------------------------------------------------------------------------------------------------
62 RFC Augusta at Gruene $4,600,000 $4,571,095 $49,685.82 23-Jun-98
- -----------------------------------------------------------------------------------------------------------------------------------
63 MS Commerce Office Building (III) $2,962,050 $2,947,599 $34.32 25-Aug-98
64 MS Medical & Professional Office Building (III) $1,587,950 $1,580,202 $34.32 25-Aug-98
- -----------------------------------------------------------------------------------------------------------------------------------
65 RFC Southside Square Shopping Center $4,500,000 $4,477,443 $28.31 14-Aug-98
- -----------------------------------------------------------------------------------------------------------------------------------
66 RFC Saratoga Square Apartments $4,500,000 $4,473,773 $44,737.73 13-Jul-98
- -----------------------------------------------------------------------------------------------------------------------------------
67 MS Minaret Village Retail and Office Center $4,500,000 $4,463,560 $63.90 20-Mar-98
- -----------------------------------------------------------------------------------------------------------------------------------
68 WACH Redland Crest Apartments $4,450,000 $4,434,859 $28,428.58 27-Oct-98
- -----------------------------------------------------------------------------------------------------------------------------------
69 RFC Village of Westover Apartments $4,350,000 $4,324,538 $40,042.02 15-Jul-98
- -----------------------------------------------------------------------------------------------------------------------------------
70 MS 499 University Avenue $4,400,000 $4,314,934 $222.37 4-Aug-97
- -----------------------------------------------------------------------------------------------------------------------------------
71 RFC Manufacturers Bank Building $4,300,000 $4,286,504 $112.10 20-Oct-98
- -----------------------------------------------------------------------------------------------------------------------------------
72 WACH Print Pack Buildings $4,300,000 $4,279,589 $28.66 15-Oct-98
- -----------------------------------------------------------------------------------------------------------------------------------
73 MS Hennepin Square Office Building $4,300,000 $4,274,865 $44.13 26-May-98
- -----------------------------------------------------------------------------------------------------------------------------------
74 MS Brandywine III Apartments $4,275,000 $4,255,336 $27,277.79 31-Aug-98
- -----------------------------------------------------------------------------------------------------------------------------------
75 RFC V United Plaza $4,300,000 $4,251,651 $72.85 27-Aug-98
- -----------------------------------------------------------------------------------------------------------------------------------
76 WACH South Park Shopping Center $4,250,000 $4,233,203 $37.65 25-Sep-98
- -----------------------------------------------------------------------------------------------------------------------------------
77 RFC Pineville Towne Market $4,200,000 $4,178,507 $60.38 14-Aug-98
- -----------------------------------------------------------------------------------------------------------------------------------
78 WACH 555 & 565 Old Norcross Rd $4,150,000 $4,130,297 $113.43 21-Aug-98
- -----------------------------------------------------------------------------------------------------------------------------------
79 MS Lake Union Office Building $4,050,000 $4,027,534 $145.66 29-Jun-98
- -----------------------------------------------------------------------------------------------------------------------------------
80 MS Via Alamos Apartments $4,000,000 $3,986,523 $24,915.77 2-Oct-98
- -----------------------------------------------------------------------------------------------------------------------------------
81 RFC Gallery Row $4,000,000 $3,982,835 $104.70 24-Sep-98
- -----------------------------------------------------------------------------------------------------------------------------------
82 RFC Arbour Walk Village Apartments $3,900,000 $3,881,673 $57,083.43 24-Sep-98
- -----------------------------------------------------------------------------------------------------------------------------------
83 MS San Fernando Industrial Building $3,900,000 $3,871,428 $21.39 4-May-98
- -----------------------------------------------------------------------------------------------------------------------------------
84 WACH Village at Cedar Shoals $3,840,000 $3,810,745 $66.89 28-Aug-98
- -----------------------------------------------------------------------------------------------------------------------------------
85 MS Kirby Plaza Office Building $3,775,000 $3,756,066 $102.27 18-Jun-98
- -----------------------------------------------------------------------------------------------------------------------------------
86 MS 800 South Broadway Office Building $3,700,000 $3,680,285 $114.74 2-Jul-98
- -----------------------------------------------------------------------------------------------------------------------------------
87 RFC Polifly Plaza $3,675,000 $3,656,398 $79.70 10-Jul-98
- -----------------------------------------------------------------------------------------------------------------------------------
88 MS Summit Apartments $3,600,000 $3,581,539 $39,794.88 6-Aug-98
- -----------------------------------------------------------------------------------------------------------------------------------
89 RFC Villa Fontana $3,600,000 $3,576,550 $99,348.62 12-Jun-98
- -----------------------------------------------------------------------------------------------------------------------------------
90 MS Laguna Self Storage $3,585,824 $3,566,062 $37.59 9-Jul-98
- -----------------------------------------------------------------------------------------------------------------------------------
91 MS Hughes Towers Apartments $3,577,500 $3,563,391 $56,561.76 28-Sep-98
- -----------------------------------------------------------------------------------------------------------------------------------
92 WACH Roswell Oaks $3,500,000 $3,490,394 $81.01 3-Nov-98
- -----------------------------------------------------------------------------------------------------------------------------------
93 MS Temple Medical Office Building $3,500,000 $3,488,993 $69.73 2-Oct-98
- -----------------------------------------------------------------------------------------------------------------------------------
94 RFC Victoria Square Apartments $3,500,000 $3,477,262 $33,435.21 14-Jul-98
- -----------------------------------------------------------------------------------------------------------------------------------
95 RFC Kmart $3,500,000 $3,454,547 $49.27 22-Jul-98
- -----------------------------------------------------------------------------------------------------------------------------------
96 MS Strathmore Towers Apartments $3,450,000 $3,434,884 $54,521.97 8-Sep-98
- -----------------------------------------------------------------------------------------------------------------------------------
97 MS 69 Hickory Drive Office Building $3,400,000 $3,389,094 $151.03 14-Oct-98
- -----------------------------------------------------------------------------------------------------------------------------------
98 MS Rancho Broadway Shopping Center $3,500,000 $3,310,157 $72.35 30-Jul-96
- -----------------------------------------------------------------------------------------------------------------------------------
99 MS Union Bank Office Building $3,350,000 $3,287,109 $93.99 18-Aug-97
- -----------------------------------------------------------------------------------------------------------------------------------
100 RFC Northampton Apartments $3,325,000 $3,269,819 $21,945.10 29-May-98
- -----------------------------------------------------------------------------------------------------------------------------------
101 MS 2424 Babcock Office and Medical Building $3,225,000 $3,213,833 $64.18 22-Sep-98
- -----------------------------------------------------------------------------------------------------------------------------------
102 MS Casa Grande Retail Center $3,200,000 $3,188,673 $81.42 1-Sep-98
<CAPTION>
- -----------------------------------------------------------------------------------------
Maturity Date Original Original Remaining
or Anticipated Term to Amort. Remaining Term to
Repayment Date Maturity or Term Amort. Maturity or
Loan No. (ARD)(5) ARD (mos) (mos)(6) Term ARD (mos) Security Type
- -----------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C>
52 1-Sep-08 121 360 353 114 Fee
- -----------------------------------------------------------------------------------------
53 1-Nov-08 120 360 356 116 Fee
- -----------------------------------------------------------------------------------------
54 1-Dec-08 120 240 237 117 Fee
- -----------------------------------------------------------------------------------------
55 1-Jan-18 240 360 346 226 Fee
- -----------------------------------------------------------------------------------------
56 1-Oct-08 120 360 355 115 Fee
- -----------------------------------------------------------------------------------------
57 1-Sep-18 240 240 234 234 Fee
- -----------------------------------------------------------------------------------------
58 1-Aug-08 120 312 305 113 Fee
- -----------------------------------------------------------------------------------------
59 1-Mar-13 180 360 348 168 Fee
- -----------------------------------------------------------------------------------------
60 1-Oct-07 120 346 329 103 Fee
- -----------------------------------------------------------------------------------------
61 1-Dec-13 180 180 177 177 Fee
- -----------------------------------------------------------------------------------------
62 1-Jul-08 120 360 352 112 Fee
- -----------------------------------------------------------------------------------------
63 1-Sep-08 120 360 354 114 Fee
64 1-Sep-08 120 360 354 114 Fee
- -----------------------------------------------------------------------------------------
65 1-Sep-08 120 360 354 114 Fee
- -----------------------------------------------------------------------------------------
66 1-Aug-08 120 360 353 113 Fee
- -----------------------------------------------------------------------------------------
67 1-Apr-13 180 360 349 169 Fee
- -----------------------------------------------------------------------------------------
68 1-Nov-08 120 360 356 116 Fee
- -----------------------------------------------------------------------------------------
69 1-Aug-08 120 360 353 113 Fee
- -----------------------------------------------------------------------------------------
70 1-Sep-07 120 300 282 102 Fee
- -----------------------------------------------------------------------------------------
71 1-Nov-08 120 360 356 116 Fee
- -----------------------------------------------------------------------------------------
72 1-Nov-13 180 300 296 176 Fee
- -----------------------------------------------------------------------------------------
73 1-Jun-08 120 360 351 111 Fee
- -----------------------------------------------------------------------------------------
74 1-Sep-08 120 360 354 114 Fee
- -----------------------------------------------------------------------------------------
75 1-Sep-18 240 240 234 234 Fee
- -----------------------------------------------------------------------------------------
76 1-Oct-08 120 360 355 115 Fee
- -----------------------------------------------------------------------------------------
77 1-Sep-08 120 360 354 114 Fee
- -----------------------------------------------------------------------------------------
78 1-Sep-08 120 360 354 114 Fee
- -----------------------------------------------------------------------------------------
79 1-Jul-10 144 360 352 136 Fee
- -----------------------------------------------------------------------------------------
80 1-Nov-08 120 360 356 116 Fee
- -----------------------------------------------------------------------------------------
81 1-Oct-08 120 360 355 115 Leasehold
- -----------------------------------------------------------------------------------------
82 1-Oct-08 120 360 355 115 Fee
- -----------------------------------------------------------------------------------------
83 1-Jun-09 132 360 351 123 Fee
- -----------------------------------------------------------------------------------------
84 1-Sep-08 120 300 294 114 Fee
- -----------------------------------------------------------------------------------------
85 1-Jul-08 120 360 352 112 Fee
- -----------------------------------------------------------------------------------------
86 1-Aug-08 120 360 353 113 Fee
- -----------------------------------------------------------------------------------------
87 1-Aug-08 120 360 353 113 Fee
- -----------------------------------------------------------------------------------------
88 1-Sep-08 120 360 354 114 Fee
- -----------------------------------------------------------------------------------------
89 1-Jul-08 120 360 352 112 Fee
- -----------------------------------------------------------------------------------------
90 1-Jan-09 125 354 347 118 Fee
- -----------------------------------------------------------------------------------------
91 1-Oct-08 120 360 355 115 Fee
- -----------------------------------------------------------------------------------------
92 1-Dec-08 120 360 357 117 Fee
- -----------------------------------------------------------------------------------------
93 1-Nov-08 120 360 356 116 Fee
- -----------------------------------------------------------------------------------------
94 1-Aug-08 120 343 336 113 Fee
- -----------------------------------------------------------------------------------------
95 1-Aug-08 120 240 233 113 Fee
- -----------------------------------------------------------------------------------------
96 1-Oct-08 120 360 355 115 Fee
- -----------------------------------------------------------------------------------------
97 1-Nov-08 120 360 356 116 Fee
- -----------------------------------------------------------------------------------------
98 1-Sep-06 120 240 210 90 Fee
- -----------------------------------------------------------------------------------------
99 1-Oct-07 120 300 283 103 Fee
- -----------------------------------------------------------------------------------------
100 1-Jun-18 240 240 231 231 Fee
- -----------------------------------------------------------------------------------------
101 1-Oct-08 120 360 355 115 Fee
- -----------------------------------------------------------------------------------------
102 1-Oct-08 120 360 355 115 Fee
</TABLE>
II-2
<PAGE>
APPENDIX II
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
LOAN INFORMATION - I
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Original
Principal Cut-Off Date Cut-Off Date Bal./
Loan No. Seller(1) Property Name(2) Balance Balance(3) Unit or NSF(4) Note Date
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <C> <S> <C> <C> <C> <C>
103 RFC The Vineyards Apartments $3,200,000 $3,183,859 $33,165.20 25-Aug-98
- -----------------------------------------------------------------------------------------------------------------------------------
104 RFC Dunwoody Shallowford Office Park $3,100,000 $3,072,391 $70.45 18-Jun-98
- -----------------------------------------------------------------------------------------------------------------------------------
105 WACH Best Western $3,020,000 $2,997,150 $30,274.24 14-Oct-98
- -----------------------------------------------------------------------------------------------------------------------------------
106 MS Kenyon Place Apartments $3,000,000 $2,992,807 $26,721.49 18-Nov-98
- -----------------------------------------------------------------------------------------------------------------------------------
107 MS College Square Shopping Center $3,000,000 $2,988,567 $201.86 2-Sep-98
- -----------------------------------------------------------------------------------------------------------------------------------
108 WACH Americana Self Storage $3,000,000 $2,987,287 $41.24 22-Sep-98
- -----------------------------------------------------------------------------------------------------------------------------------
109 WACH Regal Cinemas $3,000,000 $2,983,195 $143.80 2-Nov-98
- -----------------------------------------------------------------------------------------------------------------------------------
110 MS Mission Plaza Shopping Center $3,000,000 $2,982,964 $119.79 13-Jul-98
- -----------------------------------------------------------------------------------------------------------------------------------
111 WACH Collier & Piedmont Rd. Apts. (IV) $3,000,000 $2,972,464 $35,812.82 3-Jun-98
- -----------------------------------------------------------------------------------------------------------------------------------
112 WACH Canteberi Place Apartments $3,000,000 $2,966,629 $22,820.23 1-Jun-98
- -----------------------------------------------------------------------------------------------------------------------------------
113 WACH Holiday Inn Express $3,000,000 $2,963,339 $35,277.85 22-Oct-98
- -----------------------------------------------------------------------------------------------------------------------------------
114 RFC Pacifica Hampden Industrial Park $2,900,000 $2,873,240 $23.63 3-Jun-98
- -----------------------------------------------------------------------------------------------------------------------------------
115 RFC Atlantic Plaza II $2,820,000 $2,800,082 $63.68 7-Aug-98
- -----------------------------------------------------------------------------------------------------------------------------------
116 RFC Bath Street Partners $2,800,000 $2,793,353 $165.44 17-Nov-98
- -----------------------------------------------------------------------------------------------------------------------------------
117 RFC JM Industrial $2,800,000 $2,776,102 $26.22 1-Jul-98
- -----------------------------------------------------------------------------------------------------------------------------------
118 RFC Sargent Road Shopping Center. $2,800,000 $2,771,478 $49.86 20-May-98
- -----------------------------------------------------------------------------------------------------------------------------------
119 RFC Little Brook Apartments $2,760,000 $2,744,932 $29,201.41 29-Jul-98
- -----------------------------------------------------------------------------------------------------------------------------------
120 MS Courtside Office Building (V) $1,932,432 $1,923,004 $40.20 25-Aug-98
- -----------------------------------------------------------------------------------------------------------------------------------
121 MS Murphy Office Building (V) $817,568 $813,579 $40.20 25-Aug-98
- -----------------------------------------------------------------------------------------------------------------------------------
122 RFC North Oaks Plaza $2,750,000 $2,727,551 $57.07 20-Jul-98
- -----------------------------------------------------------------------------------------------------------------------------------
123 MS Ohlone Village Shopping and Office Center $2,750,000 $2,703,285 $68.76 9-Dec-97
- -----------------------------------------------------------------------------------------------------------------------------------
124 RFC Palms Plaza $2,700,000 $2,688,890 $82.13 30-Sep-98
- -----------------------------------------------------------------------------------------------------------------------------------
125 RFC St. Clair Mobile Home Parks $2,700,000 $2,684,278 $8,414.66 29-Sep-98
- -----------------------------------------------------------------------------------------------------------------------------------
126 WACH Claremont Commons $2,675,000 $2,661,091 $71.88 14-Jul-98
- -----------------------------------------------------------------------------------------------------------------------------------
127 RFC Guilford Street Center $2,650,000 $2,633,648 $49.11 30-Jun-98
- -----------------------------------------------------------------------------------------------------------------------------------
128 RFC Ski Lodge Apartments $2,640,000 $2,626,656 $27,649.01 10-Aug-98
- -----------------------------------------------------------------------------------------------------------------------------------
129 MS Maxwell Labs Industrial Building $2,750,000 $2,604,622 $38.33 25-Aug-97
- -----------------------------------------------------------------------------------------------------------------------------------
130 RFC Lakeshore Apartments $2,550,000 $2,537,208 $21,143.40 14-Oct-98
- -----------------------------------------------------------------------------------------------------------------------------------
131 WACH Vidalia Food Lion $2,500,000 $2,493,524 $63.94 30-Dec-98
- -----------------------------------------------------------------------------------------------------------------------------------
132 MS Rosecrans Avenue Warehouse $2,500,000 $2,477,891 $22.53 19-Mar-98
- -----------------------------------------------------------------------------------------------------------------------------------
133 MS 4800 Santa Fe Industrial Building $2,450,000 $2,435,626 $25.17 15-Jun-98
- -----------------------------------------------------------------------------------------------------------------------------------
134 MS Century Warehouse $2,450,000 $2,429,096 $35.35 9-Mar-98
- -----------------------------------------------------------------------------------------------------------------------------------
135 MS Pingry Arms and Cornell Arms Apartments $2,500,000 $2,406,395 $21,108.73 28-Dec-95
- -----------------------------------------------------------------------------------------------------------------------------------
136 MS 20195 Stevens Creek Boulevard Office Building $2,400,000 $2,363,264 $133.68 25-Jun-98
- -----------------------------------------------------------------------------------------------------------------------------------
137 RFC Maple Run Apartments $2,350,000 $2,338,415 $27,838.27 25-Aug-98
- -----------------------------------------------------------------------------------------------------------------------------------
138 WACH Comfort Inn Laurinburg $2,350,000 $2,336,643 $29,208.03 20-Nov-98
- -----------------------------------------------------------------------------------------------------------------------------------
139 MS Blockbuster - Westwood Shopping Center $2,300,000 $2,291,441 $297.74 11-Sep-98
- -----------------------------------------------------------------------------------------------------------------------------------
140 MS Clock Tower Office and Retail Building $2,400,000 $2,287,713 $99.31 25-Jul-97
- -----------------------------------------------------------------------------------------------------------------------------------
141 RFC One Bank Street $2,200,000 $2,190,446 $67.33 5-Aug-98
- -----------------------------------------------------------------------------------------------------------------------------------
142 MS Shoppes of Deerfield $2,200,000 $2,189,794 $166.64 13-Aug-98
- -----------------------------------------------------------------------------------------------------------------------------------
143 RFC Dartmoor Apartments $2,200,000 $2,185,656 $30,356.33 14-May-98
- -----------------------------------------------------------------------------------------------------------------------------------
144 WACH Lavender Lakes $2,175,000 $2,163,916 $37,308.90 15-Jul-98
- -----------------------------------------------------------------------------------------------------------------------------------
145 RFC Sunshine Office Building $2,150,000 $2,139,771 $91.25 12-Aug-98
- -----------------------------------------------------------------------------------------------------------------------------------
146 MS Underwood Gartland Industrial Building $2,144,000 $2,137,258 $47.18 30-Oct-98
- -----------------------------------------------------------------------------------------------------------------------------------
147 WACH Washington Square $2,100,000 $2,087,771 $77.04 6-Nov-98
- -----------------------------------------------------------------------------------------------------------------------------------
148 RFC Eastlake Business Park $2,100,000 $2,084,209 $34.99 4-Aug-98
- -----------------------------------------------------------------------------------------------------------------------------------
149 MS Lindsay Marketplace Shopping Center $2,100,000 $2,061,084 $23.91 25-Jul-97
- -----------------------------------------------------------------------------------------------------------------------------------
150 MS Sierra Meadows Apartments $2,075,000 $2,042,934 $17,024.45 28-Jan-98
- -----------------------------------------------------------------------------------------------------------------------------------
151 MS 4700 Santa Fe Industrial Building $2,050,000 $2,039,221 $24.23 7-Jul-98
- -----------------------------------------------------------------------------------------------------------------------------------
152 RFC Georgetown Plaza $2,050,000 $2,021,554 $54.36 11-Jun-98
- -----------------------------------------------------------------------------------------------------------------------------------
153 MS Itasca Business Park $2,100,000 $2,007,045 $29.39 24-May-96
<CAPTION>
- -----------------------------------------------------------------------------------------
Maturity Date Original Original Remaining
or Anticipated Term to Amort. Remaining Term to
Repayment Date Maturity or Term Amort. Maturity or
Loan No. (ARD)(5) ARD (mos) (mos)(6) Term ARD (mos) Security Type
- -----------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C>
103 1-Sep-08 120 360 354 114 Fee
- -----------------------------------------------------------------------------------------
104 1-Jul-08 120 300 292 112 Fee
- -----------------------------------------------------------------------------------------
105 1-Nov-08 120 240 236 116 Fee
- -----------------------------------------------------------------------------------------
106 1-Dec-08 120 360 357 117 Fee
- -----------------------------------------------------------------------------------------
107 1-Oct-08 120 360 355 115 Fee
- -----------------------------------------------------------------------------------------
108 1-Oct-08 120 360 355 115 Fee
- -----------------------------------------------------------------------------------------
109 1-Dec-13 180 240 237 177 Fee
- -----------------------------------------------------------------------------------------
110 1-Aug-08 120 360 353 113 Fee
- -----------------------------------------------------------------------------------------
111 1-Jul-08 120 300 292 112 Fee
- -----------------------------------------------------------------------------------------
112 1-Jun-08 120 300 291 111 Fee
- -----------------------------------------------------------------------------------------
113 1-Nov-13 180 180 176 176 Fee
- -----------------------------------------------------------------------------------------
114 1-Jul-08 120 300 292 112 Fee
- -----------------------------------------------------------------------------------------
115 1-Sep-08 120 300 294 114 Fee
- -----------------------------------------------------------------------------------------
116 1-Dec-08 120 360 357 117 Fee
- -----------------------------------------------------------------------------------------
117 1-Aug-13 180 300 293 173 Fee
- -----------------------------------------------------------------------------------------
118 1-Jun-08 120 300 291 111 Fee
- -----------------------------------------------------------------------------------------
119 1-Aug-08 120 360 353 113 Fee
- -----------------------------------------------------------------------------------------
120 1-Sep-08 120 360 354 114 Fee
- -----------------------------------------------------------------------------------------
121 1-Sep-08 120 360 354 114 Fee
- -----------------------------------------------------------------------------------------
122 1-Aug-08 120 300 293 113 Fee
- -----------------------------------------------------------------------------------------
123 1-Jan-08 120 300 286 106 Fee
- -----------------------------------------------------------------------------------------
124 1-Oct-08 120 360 355 115 Leasehold
- -----------------------------------------------------------------------------------------
125 1-Oct-08 120 300 295 115 Fee
- -----------------------------------------------------------------------------------------
126 1-Aug-18 240 360 353 233 Fee
- -----------------------------------------------------------------------------------------
127 1-Jul-08 120 360 352 112 Fee
- -----------------------------------------------------------------------------------------
128 1-Sep-08 120 360 354 114 Fee
- -----------------------------------------------------------------------------------------
129 1-Sep-12 180 180 162 162 Fee
- -----------------------------------------------------------------------------------------
130 1-Nov-08 120 300 296 116 Fee
- -----------------------------------------------------------------------------------------
131 1-Jan-09 120 300 298 118 Fee
- -----------------------------------------------------------------------------------------
132 1-Apr-10 144 360 349 133 Fee
- -----------------------------------------------------------------------------------------
133 1-Jul-09 132 360 352 124 Fee
- -----------------------------------------------------------------------------------------
134 1-Apr-08 120 360 349 109 Fee
- -----------------------------------------------------------------------------------------
135 1-Jan-01 60 324 286 22 Fee
- -----------------------------------------------------------------------------------------
136 1-Jul-08 120 240 232 112 Fee
- -----------------------------------------------------------------------------------------
137 1-Sep-08 120 360 354 114 Fee
- -----------------------------------------------------------------------------------------
138 1-Dec-08 120 240 237 117 Fee
- -----------------------------------------------------------------------------------------
139 1-Oct-08 120 360 355 115 Fee
- -----------------------------------------------------------------------------------------
140 1-Sep-13 192 192 174 174 Fee
- -----------------------------------------------------------------------------------------
141 1-Sep-08 120 360 354 114 Fee
- -----------------------------------------------------------------------------------------
142 1-Sep-08 120 360 354 114 Fee
- -----------------------------------------------------------------------------------------
143 1-Jun-08 120 360 351 111 Fee
- -----------------------------------------------------------------------------------------
144 1-Aug-08 120 360 353 113 Fee
- -----------------------------------------------------------------------------------------
145 1-Sep-08 120 360 354 114 Fee
- -----------------------------------------------------------------------------------------
146 1-Nov-08 120 360 356 116 Fee
- -----------------------------------------------------------------------------------------
147 1-Dec-08 120 240 237 117 Fee
- -----------------------------------------------------------------------------------------
148 1-Sep-08 120 300 294 114 Fee
- -----------------------------------------------------------------------------------------
149 1-Sep-07 120 300 282 102 Fee
- -----------------------------------------------------------------------------------------
150 1-Feb-08 120 300 287 107 Fee
- -----------------------------------------------------------------------------------------
151 1-Aug-08 120 360 353 113 Fee
- -----------------------------------------------------------------------------------------
152 1-Jul-18 240 240 232 232 Fee
- -----------------------------------------------------------------------------------------
153 1-Jul-06 120 264 232 88 Fee
</TABLE>
II-3
<PAGE>
APPENDIX II
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
LOAN INFORMATION - I
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Original
Principal Cut-Off Date Cut-Off Date Bal./
Loan No. Seller(1) Property Name(2) Balance Balance(3) Unit or NSF(4) Note Date
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <C> <S> <C> <C> <C> <C>
154 WACH Shoal Creek Apartments $2,025,000 $1,998,601 $41,637.52 22-Jul-98
- -----------------------------------------------------------------------------------------------------------------------------------
155 RFC Pinnacle Peak Office Building $2,000,000 $1,991,391 $171.41 4-Sep-98
- -----------------------------------------------------------------------------------------------------------------------------------
156 MS Fishers Crossing Shoppes $2,000,000 $1,986,461 $85.62 30-Oct-98
- -----------------------------------------------------------------------------------------------------------------------------------
157 WACH Great Neck Shops & Potter Self Storage $2,000,000 $1,981,554 $26.76 6-Nov-98
- -----------------------------------------------------------------------------------------------------------------------------------
158 MS Computer City Store $2,000,000 $1,980,152 $79.56 4-Jun-98
- -----------------------------------------------------------------------------------------------------------------------------------
159 RFC Seaboard Industrial $2,000,000 $1,955,071 $12.41 17-Jul-98
- -----------------------------------------------------------------------------------------------------------------------------------
160 MS Tire Discounters - Dayton (VI) $1,050,000 $1,042,170 $132.75 10-Jul-98
161 MS Tire Discounters - Cincinnati (VI) $900,000 $893,288 $132.75 10-Jul-98
- -----------------------------------------------------------------------------------------------------------------------------------
162 RFC Interstate West Office Park $1,930,000 $1,919,369 $35.36 3-Jun-98
- -----------------------------------------------------------------------------------------------------------------------------------
163 RFC North Center Office Building $1,900,000 $1,880,612 $39.98 1-Jun-98
- -----------------------------------------------------------------------------------------------------------------------------------
164 MS Westchase Apartments $1,900,000 $1,859,449 $11,621.56 20-Feb-98
- -----------------------------------------------------------------------------------------------------------------------------------
165 MS Ashewood Apartments $1,850,000 $1,845,538 $18,093.51 18-Nov-98
- -----------------------------------------------------------------------------------------------------------------------------------
166 RFC Oakland Drive Apartments $1,800,000 $1,793,186 $17,931.86 23-Oct-98
- -----------------------------------------------------------------------------------------------------------------------------------
167 RFC Victoria Street Offices $1,800,000 $1,790,152 $151.64 24-Jul-98
- -----------------------------------------------------------------------------------------------------------------------------------
168 MS Montague Industrial Building $1,800,000 $1,789,439 $31.92 5-Jun-98
- -----------------------------------------------------------------------------------------------------------------------------------
169 RFC Sunrise Square Shopping Center $1,800,000 $1,789,177 $58.14 12-May-98
- -----------------------------------------------------------------------------------------------------------------------------------
170 WACH Berkmar Park $1,800,000 $1,787,579 $40.09 1-Sep-98
- -----------------------------------------------------------------------------------------------------------------------------------
171 MS Crest Ridge Apartments $1,850,000 $1,766,189 $15,095.63 28-Dec-95
- -----------------------------------------------------------------------------------------------------------------------------------
172 RFC British Petroleum - Westlake $1,750,000 $1,740,901 $45.84 31-Jul-98
- -----------------------------------------------------------------------------------------------------------------------------------
173 RFC Kirkland Way Building $1,750,000 $1,739,339 $20.87 22-Sep-98
- -----------------------------------------------------------------------------------------------------------------------------------
174 WACH Willow Tree and Coastal Court Apartments (VII) $1,740,000 $1,731,216 $26,230.55 20-Oct-98
- -----------------------------------------------------------------------------------------------------------------------------------
175 RFC Eagle Watch Apartments $1,700,000 $1,691,461 $17,619.38 25-Aug-98
- -----------------------------------------------------------------------------------------------------------------------------------
176 RFC Post Alley Market Building $1,700,000 $1,689,098 $91.52 4-Sep-98
- -----------------------------------------------------------------------------------------------------------------------------------
177 WACH Cramer Marketplace Shopping Center $1,657,000 $1,652,826 $39.45 24-Nov-98
- -----------------------------------------------------------------------------------------------------------------------------------
178 WACH Penn Forest Executive Building $1,670,000 $1,644,831 $48.38 24-Sep-98
- -----------------------------------------------------------------------------------------------------------------------------------
179 MS 460 Valley Drive Industrial Building $1,700,000 $1,641,964 $32.81 10-Jul-97
- -----------------------------------------------------------------------------------------------------------------------------------
180 RFC Bradley Smith Apartments (VIII) $1,650,000 $1,636,623 $24,427.20 30-Jul-98
- -----------------------------------------------------------------------------------------------------------------------------------
181 MS A Storage Place $1,600,000 $1,593,374 $22.15 15-Sep-98
- -----------------------------------------------------------------------------------------------------------------------------------
182 RFC Tallmadge Towne Apartments $1,575,000 $1,568,099 $26,577.95 25-Sep-98
- -----------------------------------------------------------------------------------------------------------------------------------
183 MS Garden Ridge I & II Shopping and Office Center $1,540,000 $1,523,427 $74.31 1-Sep-98
- -----------------------------------------------------------------------------------------------------------------------------------
184 WACH Greenbriar Village Shopping Center $1,500,000 $1,494,333 $108.28 17-Sep-98
- -----------------------------------------------------------------------------------------------------------------------------------
185 RFC Chapel Centre $1,500,000 $1,492,543 $19.38 21-Aug-98
- -----------------------------------------------------------------------------------------------------------------------------------
186 RFC Laurel Manor Apartments $1,500,000 $1,492,201 $30,453.07 24-Jul-98
- -----------------------------------------------------------------------------------------------------------------------------------
187 WACH Potter Self Storage $1,500,000 $1,491,949 $26.45 9-Nov-98
- -----------------------------------------------------------------------------------------------------------------------------------
188 RFC Dorjul Apartments $1,500,000 $1,491,738 $20,718.58 2-Oct-98
- -----------------------------------------------------------------------------------------------------------------------------------
189 RFC Orange Industrial Park $1,500,000 $1,488,211 $34.96 10-Jul-98
- -----------------------------------------------------------------------------------------------------------------------------------
190 RFC Fiesta Palms II Retail Center $1,500,000 $1,487,870 $52.42 27-Feb-98
- -----------------------------------------------------------------------------------------------------------------------------------
191 RFC Newport Mesa Self Storage $1,500,000 $1,487,243 $39.61 14-Jul-98
- -----------------------------------------------------------------------------------------------------------------------------------
192 MS Brunswick Apartments $1,432,000 $1,407,768 $17,597.11 6-Nov-97
- -----------------------------------------------------------------------------------------------------------------------------------
193 RFC Canyon Professional Center $1,400,000 $1,390,079 $75.04 28-Aug-98
- -----------------------------------------------------------------------------------------------------------------------------------
194 WACH Madison Heights Square $1,400,000 $1,386,690 $69.68 28-Sep-98
- -----------------------------------------------------------------------------------------------------------------------------------
195 MS Lexington Apartments $1,500,000 $1,381,921 $6,549.39 15-May-95
- -----------------------------------------------------------------------------------------------------------------------------------
196 MS Heritage Green Apartments $1,432,000 $1,371,530 $10,632.01 1-Mar-94
- -----------------------------------------------------------------------------------------------------------------------------------
197 RFC Aaron Center $1,365,000 $1,356,332 $31.81 21-Sep-98
- -----------------------------------------------------------------------------------------------------------------------------------
198 RFC Carlton Way Apartments $1,350,000 $1,344,840 $26,369.42 9-Oct-98
- -----------------------------------------------------------------------------------------------------------------------------------
199 WACH Creekview Townhouse Apartments $1,340,000 $1,333,001 $31,738.13 17-Jul-98
- -----------------------------------------------------------------------------------------------------------------------------------
200 MS Country Village Apartments $1,354,600 $1,297,399 $17,298.65 15-Mar-94
- -----------------------------------------------------------------------------------------------------------------------------------
201 WACH Blackstone Square $1,300,000 $1,295,259 $62.03 30-Dec-98
- -----------------------------------------------------------------------------------------------------------------------------------
202 RFC Pizza Hut / 7-Eleven (A) $671,000 $667,080 $154.13 21-Sep-98
- -----------------------------------------------------------------------------------------------------------------------------------
203 RFC Quick Chek (A) $629,000 $625,325 $154.13 21-Sep-98
- -----------------------------------------------------------------------------------------------------------------------------------
204 WACH Holcomb Place III $1,297,500 $1,288,426 $90.99 4-Aug-98
- -----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
- ------------------------------------------------------------------------------------------
Maturity Date Original Original Remaining
or Anticipated Term to Amort. Remaining Term to
Repayment Date Maturity or Term Amort. Maturity or
Loan No. (ARD)(5) ARD (mos) (mos)(6) Term ARD (mos) Security Type
- ------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C>
154 1-Aug-18 240 240 233 233 Fee
- ------------------------------------------------------------------------------------------
155 1-Oct-08 120 360 355 115 Fee
- ------------------------------------------------------------------------------------------
156 1-Nov-08 120 240 236 116 Fee
- ------------------------------------------------------------------------------------------
157 1-Dec-13 180 180 177 177 Fee
- ------------------------------------------------------------------------------------------
158 1-Jul-08 120 300 292 112 Fee
- ------------------------------------------------------------------------------------------
159 1-Aug-13 180 180 173 173 Fee
- ------------------------------------------------------------------------------------------
160 1-Aug-08 120 300 293 113 Fee
161 1-Aug-08 120 300 293 113 Fee
- ------------------------------------------------------------------------------------------
162 1-Jul-08 120 360 352 112 Fee
- ------------------------------------------------------------------------------------------
163 1-Jul-08 121 300 291 112 Fee
- ------------------------------------------------------------------------------------------
164 1-Mar-18 240 240 228 228 Fee
- ------------------------------------------------------------------------------------------
165 1-Dec-08 120 360 357 117 Fee
- ------------------------------------------------------------------------------------------
166 1-Nov-08 120 360 356 116 Fee
- ------------------------------------------------------------------------------------------
167 1-Aug-08 120 360 353 113 Fee
- ------------------------------------------------------------------------------------------
168 1-Jul-09 132 360 352 124 Fee
- ------------------------------------------------------------------------------------------
169 1-Jun-08 120 360 351 111 Fee
- ------------------------------------------------------------------------------------------
170 1-Sep-13 180 300 294 174 Fee
- ------------------------------------------------------------------------------------------
171 1-Jan-03 84 300 262 46 Fee
- ------------------------------------------------------------------------------------------
172 1-Aug-08 120 360 353 113 Fee
- ------------------------------------------------------------------------------------------
173 1-Oct-08 120 300 295 115 Fee
- ------------------------------------------------------------------------------------------
174 1-Nov-08 120 300 296 116 Fee
- ------------------------------------------------------------------------------------------
175 1-Sep-08 120 360 354 114 Fee
- ------------------------------------------------------------------------------------------
176 1-Oct-08 120 300 295 115 Fee
- ------------------------------------------------------------------------------------------
177 1-Dec-08 120 360 357 117 Fee
- ------------------------------------------------------------------------------------------
178 1-Oct-13 180 180 175 175 Fee
- ------------------------------------------------------------------------------------------
179 1-Jul-07 120 240 220 100 Fee
- ------------------------------------------------------------------------------------------
180 1-Aug-08 120 300 293 113 Fee
- ------------------------------------------------------------------------------------------
181 1-Oct-08 120 360 355 115 Fee
- ------------------------------------------------------------------------------------------
182 1-Oct-08 120 360 355 115 Fee
- ------------------------------------------------------------------------------------------
183 1-Sep-18 240 240 234 234 Fee
- ------------------------------------------------------------------------------------------
184 1-Oct-08 120 360 355 115 Fee
- ------------------------------------------------------------------------------------------
185 1-Sep-08 120 360 354 114 Fee
- ------------------------------------------------------------------------------------------
186 1-Aug-08 120 360 353 113 Fee
- ------------------------------------------------------------------------------------------
187 1-Dec-13 180 240 237 177 Fee
- ------------------------------------------------------------------------------------------
188 1-Nov-13 180 300 296 176 Fee
- ------------------------------------------------------------------------------------------
189 1-Aug-08 120 300 293 113 Fee
- ------------------------------------------------------------------------------------------
190 1-Mar-03 60 360 348 48 Fee
- ------------------------------------------------------------------------------------------
191 1-Aug-08 120 300 293 113 Fee
- ------------------------------------------------------------------------------------------
192 1-Dec-07 120 300 285 105 Fee
- ------------------------------------------------------------------------------------------
193 1-Sep-08 120 300 294 114 Fee
- ------------------------------------------------------------------------------------------
194 1-Oct-13 180 240 235 175 Fee
- ------------------------------------------------------------------------------------------
195 1-Jun-02 84 240 195 39 Fee
- ------------------------------------------------------------------------------------------
196 1-Apr-01 84 360 301 25 Fee
- ------------------------------------------------------------------------------------------
197 1-Oct-08 120 300 295 115 Fee
- ------------------------------------------------------------------------------------------
198 1-Nov-08 120 360 356 116 Fee
- ------------------------------------------------------------------------------------------
199 1-Aug-08 120 360 353 113 Fee
- ------------------------------------------------------------------------------------------
200 1-Apr-01 84 360 301 25 Fee
- ------------------------------------------------------------------------------------------
201 1-Jan-09 120 240 238 118 Fee
- ------------------------------------------------------------------------------------------
202 1-Oct-08 120 300 295 115 Fee
- ------------------------------------------------------------------------------------------
203 1-Oct-08 120 300 295 115 Fee
- ------------------------------------------------------------------------------------------
204 1-Sep-08 120 300 294 114 Fee
- ------------------------------------------------------------------------------------------
</TABLE>
II-4
<PAGE>
APPENDIX II
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
LOAN INFORMATION - I
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Original
Principal Cut-Off Date Cut-Off Date Bal./
Loan No. Seller(1) Property Name(2) Balance Balance(3) Unit or NSF(4) Note Date
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <C> <S> <C> <C> <C> <C>
205 RFC New Hope Commons $1,270,000 $1,261,355 $105,112.91 21-May-98
- -----------------------------------------------------------------------------------------------------------------------------------
206 RFC Union Avenue Plaza $1,250,000 $1,247,260 $75.94 2-Nov-98
- -----------------------------------------------------------------------------------------------------------------------------------
207 MS Cedargate Apartments $1,240,000 $1,219,019 $21,017.55 6-Nov-97
- -----------------------------------------------------------------------------------------------------------------------------------
208 RFC Oakcrest Apartments $1,200,000 $1,193,947 $33,165.20 25-Aug-98
- -----------------------------------------------------------------------------------------------------------------------------------
209 RFC City Sports $1,200,000 $1,193,582 $69.84 30-Oct-98
- -----------------------------------------------------------------------------------------------------------------------------------
210 MS Glenarm Manor Apartments $1,200,000 $1,179,694 $16,852.78 6-Nov-97
- -----------------------------------------------------------------------------------------------------------------------------------
211 RFC Lin-Valle Center $1,120,000 $1,112,829 $26.06 18-Sep-98
- -----------------------------------------------------------------------------------------------------------------------------------
212 RFC Cramer Woods Apartments $1,100,000 $1,091,005 $34,093.90 30-Jul-98
- -----------------------------------------------------------------------------------------------------------------------------------
213 MS Great Falls Days Inn $1,100,000 $1,084,978 $17,499.65 16-Jun-98
- -----------------------------------------------------------------------------------------------------------------------------------
214 MS Hillside Trace Apartments $1,088,000 $1,069,589 $16,712.34 6-Nov-97
- -----------------------------------------------------------------------------------------------------------------------------------
215 WACH Pearisburg Square $1,000,000 $998,529 $55.66 7-Jan-99
- -----------------------------------------------------------------------------------------------------------------------------------
216 RFC 3180 Presidential Drive $1,000,000 $991,408 $39.91 29-Jun-98
- -----------------------------------------------------------------------------------------------------------------------------------
217 MS Villa Seville Apartments $975,000 $971,155 $53,953.05 28-Sep-98
- -----------------------------------------------------------------------------------------------------------------------------------
218 RFC Montreal Station $925,000 $917,868 $46.41 17-Jul-98
- -----------------------------------------------------------------------------------------------------------------------------------
219 WACH Dunwoody Springs Building $925,000 $916,403 $59.36 25-Sep-98
- -----------------------------------------------------------------------------------------------------------------------------------
220 RFC Spring House Office Park $914,000 $907,360 $43.53 1-Sep-98
- -----------------------------------------------------------------------------------------------------------------------------------
221 MS Sutton Place Apartments $880,000 $865,109 $15,729.26 6-Nov-97
- -----------------------------------------------------------------------------------------------------------------------------------
222 RFC Garrison Street Apartments $825,000 $821,452 $102,681.55 14-Sep-98
- -----------------------------------------------------------------------------------------------------------------------------------
223 WACH Airport Drive Shops $825,000 $806,969 $44.83 8-Jul-98
- -----------------------------------------------------------------------------------------------------------------------------------
224 RFC 2755 Philmont Ave. $800,000 $788,826 $17.83 9-Jun-98
- -----------------------------------------------------------------------------------------------------------------------------------
225 RFC 9107 Gaither Rd. $700,000 $690,274 $22.58 8-Jun-98
- -----------------------------------------------------------------------------------------------------------------------------------
226 RFC Tulwane Apartments $675,000 $672,420 $19,777.06 2-Nov-98
- -----------------------------------------------------------------------------------------------------------------------------------
227 RFC 900-902 Pine Street Apartments $624,000 $620,770 $51,730.82 10-Jul-98
- -----------------------------------------------------------------------------------------------------------------------------------
228 RFC Rochelle Arms $575,000 $572,802 $20,457.23 2-Nov-98
- -----------------------------------------------------------------------------------------------------------------------------------
229 RFC Pottery Row Apartments $520,000 $516,977 $57,441.92 25-Jun-98
TOTAL/WEIGHTED AVERAGE $867,112,658 $859,306,538
<CAPTION>
- ------------------------------------------------------------------------------------------
Maturity Date Original Original Remaining
or Anticipated Term to Amort. Remaining Term to
Repayment Date Maturity or Term Amort. Maturity or
Loan No. (ARD)(5) ARD (mos) (mos)(6) Term ARD (mos) Security Type
- ------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C>
205 1-Jun-08 120 360 351 111 Fee
- ------------------------------------------------------------------------------------------
206 1-Dec-08 120 360 357 117 Fee
- ------------------------------------------------------------------------------------------
207 1-Dec-07 120 300 285 105 Fee
- ------------------------------------------------------------------------------------------
208 1-Sep-08 120 360 354 114 Fee
- ------------------------------------------------------------------------------------------
209 1-Nov-08 120 300 296 116 Fee
- ------------------------------------------------------------------------------------------
210 1-Dec-07 120 300 285 105 Fee
- ------------------------------------------------------------------------------------------
211 1-Oct-08 120 300 295 115 Fee
- ------------------------------------------------------------------------------------------
212 1-Aug-08 120 300 293 113 Fee
- ------------------------------------------------------------------------------------------
213 1-Jul-08 120 240 232 112 Fee
- ------------------------------------------------------------------------------------------
214 1-Dec-07 120 300 285 105 Fee
- ------------------------------------------------------------------------------------------
215 1-Feb-09 120 300 299 119 Fee
- ------------------------------------------------------------------------------------------
216 1-Jul-08 120 300 292 112 Fee
- ------------------------------------------------------------------------------------------
217 1-Oct-08 120 360 355 115 Fee
- ------------------------------------------------------------------------------------------
218 1-Aug-08 120 300 293 113 Fee
- ------------------------------------------------------------------------------------------
219 1-Oct-08 120 240 235 115 Fee
- ------------------------------------------------------------------------------------------
220 1-Sep-08 120 300 294 114 Fee
- ------------------------------------------------------------------------------------------
221 1-Dec-07 120 300 285 105 Fee
- ------------------------------------------------------------------------------------------
222 1-Oct-08 120 360 355 115 Fee
- ------------------------------------------------------------------------------------------
223 1-Aug-13 180 180 173 173 Fee
- ------------------------------------------------------------------------------------------
224 1-Jul-08 120 240 232 112 Fee
- ------------------------------------------------------------------------------------------
225 1-Jul-18 240 240 232 232 Fee
- ------------------------------------------------------------------------------------------
226 1-Dec-08 120 300 297 117 Fee
- ------------------------------------------------------------------------------------------
227 1-Aug-08 120 360 353 113 Fee
- ------------------------------------------------------------------------------------------
228 1-Dec-08 120 300 297 117 Fee
- ------------------------------------------------------------------------------------------
229 1-Jul-08 120 360 352 112 Fee
130 328 320 122
</TABLE>
II-5
<PAGE>
APPENDIX II
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
LOAN INFORMATION - II
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Loan Related Borrower Loan Groups
No. Seller Property Name(2) Interest Rate InterestAccrualMethod (by Loan No.)
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <C> <S> <C> <C> <C>
1 MS Key West Hilton Resort 7.255% Actual/360 17
- -----------------------------------------------------------------------------------------------------------------------------------
2 RFC Lancaster Commerce Center 6.940% Actual/360
- -----------------------------------------------------------------------------------------------------------------------------------
3 MS Cupertino Village Shopping Center 7.210% Actual/360
- -----------------------------------------------------------------------------------------------------------------------------------
4 RFC Metro Pike Center 7.400% Actual/360
- -----------------------------------------------------------------------------------------------------------------------------------
5 RFC Hawthorne Woods 6.900% Actual/360 8
- -----------------------------------------------------------------------------------------------------------------------------------
6 RFC Sybase Building 7.150% Actual/360
- -----------------------------------------------------------------------------------------------------------------------------------
7 MS Alexandria Courtyard Marriott Hotel 8.090% Actual/360
- -----------------------------------------------------------------------------------------------------------------------------------
8 RFC Heritage House 6.950% Actual/360 5
- -----------------------------------------------------------------------------------------------------------------------------------
9 RFC Spanish Trace East Apartments 6.350% Actual/360
- -----------------------------------------------------------------------------------------------------------------------------------
10 MS Four Allegheny Office Center 7.550% 30/360
- -----------------------------------------------------------------------------------------------------------------------------------
11 MS Town Center Lodge Motel (I) 8.020% Actual/360
12 MS Decatur Lodge Motel (I) 8.020% Actual/360
13 MS Fulton Lodge Motel (I) 8.020% Actual/360
14 MS Douglasville Lodge Motel (I) 8.020% Actual/360
15 MS West Georgia Lodge Motel (I) 8.020% Actual/360
16 MS East Point Lodge Motel (I) 8.020% Actual/360
- -----------------------------------------------------------------------------------------------------------------------------------
17 MS Holiday Inn Hotel- Bar Harbor 7.505% Actual/360 1
- -----------------------------------------------------------------------------------------------------------------------------------
18 MS Kirkwood Crossings Office and Retail Building 7.250% 30/360
- -----------------------------------------------------------------------------------------------------------------------------------
19 RFC North Salado Village Shopping Center 7.015% Actual/360
- -----------------------------------------------------------------------------------------------------------------------------------
20 RFC Golden Miles Market Place 7.250% Actual/360
- -----------------------------------------------------------------------------------------------------------------------------------
21 WACH New Market Madison 6.860% Actual/360
- -----------------------------------------------------------------------------------------------------------------------------------
22 RFC Valencia Apartments 6.780% Actual/360
- -----------------------------------------------------------------------------------------------------------------------------------
23 RFC Rollingwood Shopping Center 6.830% Actual/360
- -----------------------------------------------------------------------------------------------------------------------------------
24 MS 525 Almanor Industrial Building 7.125% 30/360
- -----------------------------------------------------------------------------------------------------------------------------------
25 WACH Town Country S C 7.330% Actual/360
- -----------------------------------------------------------------------------------------------------------------------------------
26 MS Lucky/Long's Plaza Shopping Center 7.650% 30/360
- -----------------------------------------------------------------------------------------------------------------------------------
27 RFC Koret Distribution Center 6.520% actual/360
- -----------------------------------------------------------------------------------------------------------------------------------
28 RFC Colony By The Mall Apartments 6.950% Actual/360 38,103
- -----------------------------------------------------------------------------------------------------------------------------------
29 MS Manekin Industrial Portfolio 7.080% Actual/360
- -----------------------------------------------------------------------------------------------------------------------------------
30 RFC St. Andrews Professional Center 7.010% Actual/360
- -----------------------------------------------------------------------------------------------------------------------------------
31 RFC Green Ridge Heights Apartments 6.870% Actual/360 59
- -----------------------------------------------------------------------------------------------------------------------------------
32 RFC Cove Center 6.800% Actual/360
- -----------------------------------------------------------------------------------------------------------------------------------
33 RFC Golden Isle Plaza 6.750% Actual/360
- -----------------------------------------------------------------------------------------------------------------------------------
34 MS 2040-2060 Corporate Court Industrial 8.770% 30/360
- -----------------------------------------------------------------------------------------------------------------------------------
35 RFC Miami Lakes Corporate Center 7.060% Actual/360
- -----------------------------------------------------------------------------------------------------------------------------------
36 MS Bon Air Professional Center 7.250% Actual/360
- -----------------------------------------------------------------------------------------------------------------------------------
37 MS Woodside Apartments 7.010% Actual/360 67,83,132,133,134,151,168
- -----------------------------------------------------------------------------------------------------------------------------------
38 RFC Cambridge Commons Apartments 6.800% actual/360 28,103
- -----------------------------------------------------------------------------------------------------------------------------------
39 MS Alicia Valencia Plaza Shopping Center 9.120% 30/360
- -----------------------------------------------------------------------------------------------------------------------------------
40 RFC Willow Tree 6.540% Actual/360 45
- -----------------------------------------------------------------------------------------------------------------------------------
41 MS Bayport Marina Plaza Industrial 6.800% Actual/360
- -----------------------------------------------------------------------------------------------------------------------------------
42 RFC New Market Square 6.680% Actual/360 65,77
- -----------------------------------------------------------------------------------------------------------------------------------
43 WACH Shoppes at Cresthaven 7.190% Actual/360
- -----------------------------------------------------------------------------------------------------------------------------------
44 WACH Southport Centre 7.280% Actual/360
- -----------------------------------------------------------------------------------------------------------------------------------
45 RFC Half-A-Car 6.900% actual/360 40
- -----------------------------------------------------------------------------------------------------------------------------------
46 MS Merchants Centre 7.020% Actual/360
- -----------------------------------------------------------------------------------------------------------------------------------
47 RFC Plaza K Shopping Center 6.780% Actual/360
- -----------------------------------------------------------------------------------------------------------------------------------
48 RFC Parkway Shopping Center 7.750% Actual/360
- -----------------------------------------------------------------------------------------------------------------------------------
49 MS 788 North Jefferson Office Building 7.320% Actual/360
- -----------------------------------------------------------------------------------------------------------------------------------
50 WACH Comfort Suites 7.380% Actual/360
- -----------------------------------------------------------------------------------------------------------------------------------
51 MS Taft Corners Shopping Center 7.430% Actual/360
- -----------------------------------------------------------------------------------------------------------------------------------
52 MS Mickelberry Shopping Center 7.900% 30/360
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
- -----------------------------------
Loan Scheduled Balloon
No. Balloon Balance LTV(4)
- -----------------------------------
1 $30,048,330 55.1%
- -----------------------------------
2 $25,299,927 68.7%
- -----------------------------------
3 $18,573,862 65.3%
- -----------------------------------
4 $13,443,596 65.9%
- -----------------------------------
5 $11,327,518 69.7%
- -----------------------------------
6 $5,495,265 32.5%
- -----------------------------------
7 $10,537,775 55.5%
- -----------------------------------
8 $10,868,743 72.5%
- -----------------------------------
9 $9,872,585 68.6%
- -----------------------------------
10 $7,146,415 33.2%
- -----------------------------------
11 $1,822,661 50.3%
12 $1,814,414 50.3%
13 $1,715,446 50.3%
14 $1,608,231 50.3%
15 $1,187,617 50.3%
16 $478,346 50.3%
- -----------------------------------
17 $7,735,498 56.9%
- -----------------------------------
18 $7,126,220 59.3%
- -----------------------------------
19 $7,676,464 66.8%
- -----------------------------------
20 $7,563,201 68.0%
- -----------------------------------
21 $7,368,935 67.9%
- -----------------------------------
22 $6,772,953 56.4%
- -----------------------------------
23 $7,043,605 69.1%
- -----------------------------------
24 $6,885,043 47.2%
- -----------------------------------
25 $6,949,101 66.4%
- -----------------------------------
26 $6,322,788 57.5%
- -----------------------------------
27 $6,281,691 59.0%
- -----------------------------------
28 $6,193,881 68.1%
- -----------------------------------
29 $6,158,569 65.5%
- -----------------------------------
30 $5,476,450 60.2%
- -----------------------------------
31 $5,186,912 57.0%
- -----------------------------------
32 $5,865,934 65.9%
- -----------------------------------
33 $5,824,092 63.1%
- -----------------------------------
34 $0 0.0%
- -----------------------------------
35 $5,686,814 65.7%
- -----------------------------------
36 $5,662,861 65.5%
- -----------------------------------
37 $5,465,951 55.5%
- -----------------------------------
38 $5,300,349 69.8%
- -----------------------------------
39 $4,479,343 43.9%
- -----------------------------------
40 $5,176,656 63.9%
- -----------------------------------
41 $5,205,427 57.8%
- -----------------------------------
42 $5,196,631 63.4%
- -----------------------------------
43 $4,707,645 52.9%
- -----------------------------------
44 $5,131,273 70.3%
- -----------------------------------
45 $4,966,681 69.5%
- -----------------------------------
46 $4,887,109 68.4%
- -----------------------------------
47 $4,254,158 59.5%
- -----------------------------------
48 $4,983,136 65.6%
- -----------------------------------
49 $4,837,669 64.9%
- -----------------------------------
50 $3,485,173 45.0%
- -----------------------------------
51 $4,737,651 66.1%
- -----------------------------------
52 $4,682,756 63.7%
- -----------------------------------
II-6
<PAGE>
APPENDIX II
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
LOAN INFORMATION - II
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Loan Related Borrower Loan Groups
No. Seller Property Name(2) Interest Rate InterestAccrualMethod (by Loan No.)
- ------------------------------------------------------------------------------------------------------------------------------------
<C> <C> <S> <C> <C> <C>
53 RFC Cottonwood Corners Shopping Center 7.190% Actual/360
- ------------------------------------------------------------------------------------------------------------------------------------
54 WACH Comfort Inn & Comfort Suites 7.150% Actual/360 138
- ------------------------------------------------------------------------------------------------------------------------------------
55 RFC Dalton Place Shopping Center 7.640% 30/360
- ------------------------------------------------------------------------------------------------------------------------------------
56 RFC Showcase Plaza Shopping Center 7.250% Actual/360
- ------------------------------------------------------------------------------------------------------------------------------------
57 RFC Springrove Mobile Home Park 6.820% Actual/360
- ------------------------------------------------------------------------------------------------------------------------------------
58 RFC Gateway/Lombardi (II) 7.160% Actual/360
- ------------------------------------------------------------------------------------------------------------------------------------
59 RFC Arbors of Wooster Apartments 7.140% Actual/360 31
- ------------------------------------------------------------------------------------------------------------------------------------
60 MS Sunset Plaza Shopping Center 8.900% Actual/360
- ------------------------------------------------------------------------------------------------------------------------------------
61 WACH Blackstock Warehouse 7.250% Actual/360
- ------------------------------------------------------------------------------------------------------------------------------------
62 RFC Augusta at Gruene 6.860% Actual/360
- ------------------------------------------------------------------------------------------------------------------------------------
63 MS Commerce Office Building (III) 6.910% Actual/360 120,121
64 MS Medical & Professional Office Building (III) 6.910% Actual/360 120,121
- ------------------------------------------------------------------------------------------------------------------------------------
65 RFC Southside Square Shopping Center 6.780% Actual/360 42,77
- ------------------------------------------------------------------------------------------------------------------------------------
66 RFC Saratoga Square Apartments 6.680% Actual/360
- ------------------------------------------------------------------------------------------------------------------------------------
67 MS Minaret Village Retail and Office Center 7.200% Actual/360 37,83,132,133,134,151,168
- ------------------------------------------------------------------------------------------------------------------------------------
68 WACH Redland Crest Apartments 6.850% Actual/360
- ------------------------------------------------------------------------------------------------------------------------------------
69 RFC Village of Westover Apartments 6.660% Actual/360
- ------------------------------------------------------------------------------------------------------------------------------------
70 MS 499 University Avenue 8.230% 30/360
- ------------------------------------------------------------------------------------------------------------------------------------
71 RFC Manufacturers Bank Building 7.260% Actual/360
- ------------------------------------------------------------------------------------------------------------------------------------
72 WACH Print Pack Buildings 7.300% Actual/360
- ------------------------------------------------------------------------------------------------------------------------------------
73 MS Hennepin Square Office Building 7.750% Actual/360
- ------------------------------------------------------------------------------------------------------------------------------------
74 MS Brandywine III Apartments 7.190% Actual/360
- ------------------------------------------------------------------------------------------------------------------------------------
75 RFC V United Plaza 7.170% Actual/360
- ------------------------------------------------------------------------------------------------------------------------------------
76 WACH South Park Shopping Center 6.990% Actual/360
- ------------------------------------------------------------------------------------------------------------------------------------
77 RFC Pineville Towne Market 6.680% Actual/360 42,65
- ------------------------------------------------------------------------------------------------------------------------------------
78 WACH 555 & 565 Old Norcross Rd 7.040% Actual/360
- ------------------------------------------------------------------------------------------------------------------------------------
79 MS Lake Union Office Building 7.400% Actual/360
- ------------------------------------------------------------------------------------------------------------------------------------
80 MS Via Alamos Apartments 6.900% Actual/360
- ------------------------------------------------------------------------------------------------------------------------------------
81 RFC Gallery Row 6.600% Actual/360
- ------------------------------------------------------------------------------------------------------------------------------------
82 RFC Arbour Walk Village Apartments 6.160% Actual/360
- ------------------------------------------------------------------------------------------------------------------------------------
83 MS San Fernando Industrial Building 6.760% Actual/360 37,67,132,133,134,151,168
- ------------------------------------------------------------------------------------------------------------------------------------
84 WACH Village at Cedar Shoals 6.750% Actual/360
- ------------------------------------------------------------------------------------------------------------------------------------
85 MS Kirby Plaza Office Building 7.820% Actual/360
- ------------------------------------------------------------------------------------------------------------------------------------
86 MS 800 South Broadway Office Building 7.090% Actual/360
- ------------------------------------------------------------------------------------------------------------------------------------
87 RFC Polifly Plaza 7.320% actual/360
- ------------------------------------------------------------------------------------------------------------------------------------
88 MS Summit Apartments 6.670% Actual/360
- ------------------------------------------------------------------------------------------------------------------------------------
89 RFC Villa Fontana 6.700% Actual/360
- ------------------------------------------------------------------------------------------------------------------------------------
90 MS Laguna Self Storage 7.600% Actual/360
- ------------------------------------------------------------------------------------------------------------------------------------
91 MS Hughes Towers Apartments 7.000% Actual/360 217
- ------------------------------------------------------------------------------------------------------------------------------------
92 WACH Roswell Oaks 6.460% Actual/360
- ------------------------------------------------------------------------------------------------------------------------------------
93 MS Temple Medical Office Building 7.250% Actual/360
- ------------------------------------------------------------------------------------------------------------------------------------
94 RFC Victoria Square Apartments 6.710% Actual/360
- ------------------------------------------------------------------------------------------------------------------------------------
95 RFC Kmart 7.170% Actual/360
- ------------------------------------------------------------------------------------------------------------------------------------
96 MS Strathmore Towers Apartments 6.500% Actual/360
- ------------------------------------------------------------------------------------------------------------------------------------
97 MS 69 Hickory Drive Office Building 7.150% Actual/360
- ------------------------------------------------------------------------------------------------------------------------------------
98 MS Rancho Broadway Shopping Center 8.340% 30/360
- ------------------------------------------------------------------------------------------------------------------------------------
99 MS Union Bank Office Building 8.030% 30/360
- ------------------------------------------------------------------------------------------------------------------------------------
100 RFC Northampton Apartments 7.225% Actual/360
- ------------------------------------------------------------------------------------------------------------------------------------
101 MS 2424 Babcock Office and Medical Building 7.600% Actual/360
- ------------------------------------------------------------------------------------------------------------------------------------
102 MS Casa Grande Retail Center 7.500% Actual/360
- ------------------------------------------------------------------------------------------------------------------------------------
103 RFC The Vineyards Apartments 6.750% Actual/360 28,38
- ------------------------------------------------------------------------------------------------------------------------------------
104 RFC Dunwoody Shallowford Office Park 7.350% Actual/360
</TABLE>
- -----------------------------------
Loan Scheduled Balloon
No. Balloon Balance LTV(4)
- -----------------------------------
53 $4,564,621 68.1%
- -----------------------------------
54 $3,518,071 47.9%
- -----------------------------------
55 $3,031,630 47.7%
- -----------------------------------
56 $4,397,356 69.8%
- -----------------------------------
57 $188,880 1.5%
- -----------------------------------
58 $3,951,847 56.0%
- -----------------------------------
59 $3,709,802 61.8%
- -----------------------------------
60 $4,176,835 66.3%
- -----------------------------------
61 $0 0.0%
- -----------------------------------
62 $4,005,246 69.7%
- -----------------------------------
63 $2,577,131 62.8%
64 $1,381,595 62.8%
- -----------------------------------
65 $3,907,998 53.7%
- -----------------------------------
66 $3,897,984 55.7%
- -----------------------------------
67 $3,475,187 48.9%
- -----------------------------------
68 $3,865,377 69.6%
- -----------------------------------
69 $3,766,003 62.8%
- -----------------------------------
70 $3,574,183 46.7%
- -----------------------------------
71 $3,781,354 60.0%
- -----------------------------------
72 $2,762,391 48.0%
- -----------------------------------
73 $3,823,325 70.2%
- -----------------------------------
74 $3,747,013 65.7%
- -----------------------------------
75 $178,066 3.1%
- -----------------------------------
76 $3,706,017 69.3%
- -----------------------------------
77 $3,637,642 59.6%
- -----------------------------------
78 $3,623,198 67.1%
- -----------------------------------
79 $3,422,633 62.2%
- -----------------------------------
80 $3,479,162 68.2%
- -----------------------------------
81 $3,457,861 57.6%
- -----------------------------------
82 $3,330,066 68.0%
- -----------------------------------
83 $3,305,560 45.3%
- -----------------------------------
84 $3,047,656 61.0%
- -----------------------------------
85 $3,362,747 68.1%
- -----------------------------------
86 $3,235,052 59.1%
- -----------------------------------
87 $3,237,281 63.5%
- -----------------------------------
88 $3,111,877 39.9%
- -----------------------------------
89 $3,121,065 50.1%
- -----------------------------------
90 $3,130,566 57.7%
- -----------------------------------
91 $3,120,423 65.4%
- -----------------------------------
92 $3,008,072 64.0%
- -----------------------------------
93 $3,072,396 62.1%
- -----------------------------------
94 $2,975,468 67.6%
- -----------------------------------
95 $2,410,153 49.2%
- -----------------------------------
96 $2,968,506 61.8%
- -----------------------------------
97 $2,976,884 63.3%
- -----------------------------------
98 $2,437,555 45.1%
- -----------------------------------
99 $2,707,633 41.7%
- -----------------------------------
100 $141,579 3.1%
- -----------------------------------
101 $2,856,678 66.4%
- -----------------------------------
102 $2,827,440 70.7%
- -----------------------------------
103 $2,776,782 69.4%
- -----------------------------------
104 $2,514,723 61.3%
II-7
<PAGE>
APPENDIX II
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
LOAN INFORMATION - II
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Loan Related Borrower Loan Groups
No. Seller Property Name(2) Interest Rate InterestAccrualMethod (by Loan No.)
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <C> <S> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------------
105 WACH Best Western 7.190% Actual/360
- -----------------------------------------------------------------------------------------------------------------------------------
106 MS Kenyon Place Apartments 7.150% Actual/360
- -----------------------------------------------------------------------------------------------------------------------------------
107 MS College Square Shopping Center 7.160% Actual/360
- -----------------------------------------------------------------------------------------------------------------------------------
108 WACH Americana Self Storage 6.660% Actual/360
- -----------------------------------------------------------------------------------------------------------------------------------
109 WACH Regal Cinemas 7.270% Actual/360
- -----------------------------------------------------------------------------------------------------------------------------------
110 MS Mission Plaza Shopping Center 6.800% Actual/360
- -----------------------------------------------------------------------------------------------------------------------------------
111 WACH Collier & Piedmont Rd. Apts. (IV) 7.180% Actual/360
- -----------------------------------------------------------------------------------------------------------------------------------
112 WACH Canteberi Place Apartments 6.810% Actual/360
- -----------------------------------------------------------------------------------------------------------------------------------
113 WACH Holiday Inn Express 7.470% Actual/360
- -----------------------------------------------------------------------------------------------------------------------------------
114 RFC Pacifica Hampden Industrial Park 7.150% actual/360
- -----------------------------------------------------------------------------------------------------------------------------------
115 RFC Atlantic Plaza II 7.210% actual/360
- -----------------------------------------------------------------------------------------------------------------------------------
116 RFC Bath Street Partners 7.200% Actual/360
- -----------------------------------------------------------------------------------------------------------------------------------
117 RFC JM Industrial 6.900% Actual/360
- -----------------------------------------------------------------------------------------------------------------------------------
118 RFC Sargent Road Shopping Center. 7.320% Actual/360
- -----------------------------------------------------------------------------------------------------------------------------------
119 RFC Little Brook Apartments 6.980% Actual/360
- -----------------------------------------------------------------------------------------------------------------------------------
120 MS Courtside Office Building (V) 6.910% Actual/360 63,64
121 MS Murphy Office Building (V) 6.910% Actual/360 63,64
- -----------------------------------------------------------------------------------------------------------------------------------
122 RFC North Oaks Plaza 7.160% Actual/360
- -----------------------------------------------------------------------------------------------------------------------------------
123 MS Ohlone Village Shopping and Office Center 7.360% 30/360
- -----------------------------------------------------------------------------------------------------------------------------------
124 RFC Palms Plaza 6.800% Actual/360
- -----------------------------------------------------------------------------------------------------------------------------------
125 RFC St. Clair Mobile Home Parks 7.220% Actual/360
- -----------------------------------------------------------------------------------------------------------------------------------
126 WACH Claremont Commons 7.200% Actual/360
- -----------------------------------------------------------------------------------------------------------------------------------
127 RFC Guilford Street Center 6.940% Actual/360
- -----------------------------------------------------------------------------------------------------------------------------------
128 RFC Ski Lodge Apartments 6.740% actual/360
- -----------------------------------------------------------------------------------------------------------------------------------
129 MS Maxwell Labs Industrial Building 8.500% 30/360
- -----------------------------------------------------------------------------------------------------------------------------------
130 RFC Lakeshore Apartments 6.950% Actual/360
- -----------------------------------------------------------------------------------------------------------------------------------
131 WACH Vidalia Food Lion 7.220% Actual/360
- -----------------------------------------------------------------------------------------------------------------------------------
132 MS Rosecrans Avenue Warehouse 6.810% Actual/360 37,67,83,133,134,151,168
- -----------------------------------------------------------------------------------------------------------------------------------
133 MS 4800 Santa Fe Industrial Building 7.160% Actual/360 37,67,83,132,134,151,168
- -----------------------------------------------------------------------------------------------------------------------------------
134 MS Century Warehouse 6.970% Actual/360 37,67,83,132,133,151,168
- -----------------------------------------------------------------------------------------------------------------------------------
135 MS Pingry Arms and Cornell Arms Apartments 8.050% 30/360
- -----------------------------------------------------------------------------------------------------------------------------------
136 MS 20195 Stevens Creek Boulevard Office Building 7.200% 30/360
- -----------------------------------------------------------------------------------------------------------------------------------
137 RFC Maple Run Apartments 6.860% Actual/360 175
- -----------------------------------------------------------------------------------------------------------------------------------
138 WACH Comfort Inn Laurinburg 7.150% Actual/360 54
- -----------------------------------------------------------------------------------------------------------------------------------
139 MS Blockbuster - Westwood Shopping Center 7.270% Actual/360
- -----------------------------------------------------------------------------------------------------------------------------------
140 MS Clock Tower Office and Retail Building 8.570% 30/360
- -----------------------------------------------------------------------------------------------------------------------------------
141 RFC One Bank Street 7.460% Actual/360
- -----------------------------------------------------------------------------------------------------------------------------------
142 MS Shoppes of Deerfield 7.150% Actual/360
- -----------------------------------------------------------------------------------------------------------------------------------
143 RFC Dartmoor Apartments 7.280% Actual/360 205
- -----------------------------------------------------------------------------------------------------------------------------------
144 WACH Lavender Lakes 7.290% Actual/360 154
- -----------------------------------------------------------------------------------------------------------------------------------
145 RFC Sunshine Office Building 7.030% actual/360
- -----------------------------------------------------------------------------------------------------------------------------------
146 MS Underwood Gartland Industrial Building 7.250% Actual/360
- -----------------------------------------------------------------------------------------------------------------------------------
147 WACH Washington Square 6.950% Actual/360 194,201,215
- -----------------------------------------------------------------------------------------------------------------------------------
148 RFC Eastlake Business Park 6.830% Actual/360 173
- -----------------------------------------------------------------------------------------------------------------------------------
149 MS Lindsay Marketplace Shopping Center 8.500% 30/360
- -----------------------------------------------------------------------------------------------------------------------------------
150 MS Sierra Meadows Apartments 7.220% Actual/360
- -----------------------------------------------------------------------------------------------------------------------------------
151 MS 4700 Santa Fe Industrial Building 7.150% Actual/360 37,67,83,132,133,134,168
- -----------------------------------------------------------------------------------------------------------------------------------
152 RFC Georgetown Plaza 7.630% actual/360
- -----------------------------------------------------------------------------------------------------------------------------------
153 MS Itasca Business Park 8.890% 30/360
- -----------------------------------------------------------------------------------------------------------------------------------
154 WACH Shoal Creek Apartments 7.140% Actual/360 144
- -----------------------------------------------------------------------------------------------------------------------------------
155 RFC Pinnacle Peak Office Building 6.585% Actual/360
- -----------------------------------------------------------------------------------------------------------------------------------
156 MS Fishers Crossing Shoppes 8.100% Actual/360
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
- ------------------------------------
Loan Scheduled Balloon
No. Balloon Balance LTV(4)
- ------------------------------------
105 $2,069,664 49.3%
- ------------------------------------
106 $2,626,971 65.7%
- ------------------------------------
107 $2,627,742 69.3%
- ------------------------------------
108 $2,592,787 51.9%
- ------------------------------------
109 $1,261,616 30.8%
- ------------------------------------
110 $2,602,790 48.5%
- ------------------------------------
111 $2,414,037 61.9%
- ------------------------------------
112 $2,385,972 59.6%
- ------------------------------------
113 $0 0.0%
- ------------------------------------
114 $2,338,253 60.0%
- ------------------------------------
115 $2,276,669 57.3%
- ------------------------------------
116 $2,459,283 61.5%
- ------------------------------------
117 $1,770,639 47.2%
- ------------------------------------
118 $2,268,529 63.0%
- ------------------------------------
119 $2,410,006 69.9%
- ------------------------------------
120 $1,681,312 64.7%
121 $711,325 64.7%
- ------------------------------------
122 $2,217,169 57.6%
- ------------------------------------
123 $2,183,990 47.5%
- ------------------------------------
124 $2,346,746 67.0%
- ------------------------------------
125 $2,181,184 60.3%
- ------------------------------------
126 $1,662,522 49.8%
- ------------------------------------
127 $2,312,283 67.0%
- ------------------------------------
128 $2,290,228 69.4%
- ------------------------------------
129 $0 0.0%
- ------------------------------------
130 $2,042,287 60.1%
- ------------------------------------
131 $2,013,310 60.1%
- ------------------------------------
132 $2,071,448 51.8%
- ------------------------------------
133 $2,101,998 60.1%
- ------------------------------------
134 $2,135,463 50.8%
- ------------------------------------
135 $2,340,284 50.3%
- ------------------------------------
136 $1,613,118 40.5%
- ------------------------------------
137 $2,045,209 68.2%
- ------------------------------------
138 $1,608,457 46.9%
- ------------------------------------
139 $2,020,357 65.2%
- ------------------------------------
140 $0 0.0%
- ------------------------------------
141 $1,944,493 65.6%
- ------------------------------------
142 $1,926,282 66.4%
- ------------------------------------
143 $1,936,055 61.5%
- ------------------------------------
144 $1,911,604 70.2%
- ------------------------------------
145 $1,879,552 62.7%
- ------------------------------------
146 $1,882,062 62.7%
- ------------------------------------
147 $1,426,921 51.0%
- ------------------------------------
148 $1,675,678 35.7%
- ------------------------------------
149 $1,717,182 44.0%
- ------------------------------------
150 $1,670,264 47.5%
- ------------------------------------
151 $1,795,214 59.8%
- ------------------------------------
152 $97,737 3.3%
- ------------------------------------
153 $1,602,899 47.1%
- ------------------------------------
154 $0 0.0%
- ------------------------------------
155 $1,728,219 64.4%
- ------------------------------------
156 $1,415,259 50.9%
- ------------------------------------
II-8
<PAGE>
APPENDIX II
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
LOAN INFORMATION - II
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Loan Related Borrower Loan Groups
No. Seller Property Name(2) Interest Rate InterestAccrualMethod (by Loan No.)
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <C> <S> <C> <C> <C>
157 WACH Great Neck Shops & Potter Self Storage 7.360% Actual/360 187
- -----------------------------------------------------------------------------------------------------------------------------------
158 MS Computer City Store 7.100% 30/360
- -----------------------------------------------------------------------------------------------------------------------------------
159 RFC Seaboard Industrial 6.800% Actual/360
- -----------------------------------------------------------------------------------------------------------------------------------
160 MS Tire Discounters - Dayton (VI) 7.680% Actual/360
161 MS Tire Discounters - Cincinnati (VI) 7.680% Actual/360
- -----------------------------------------------------------------------------------------------------------------------------------
162 RFC Interstate West Office Park 7.430% Actual/360 163,169
- -----------------------------------------------------------------------------------------------------------------------------------
163 RFC North Center Office Building 7.310% Actual/360 162,169
- -----------------------------------------------------------------------------------------------------------------------------------
164 MS Westchase Apartments 7.500% Actual/360
- -----------------------------------------------------------------------------------------------------------------------------------
165 MS Ashewood Apartments 7.120% Actual/360
- -----------------------------------------------------------------------------------------------------------------------------------
166 RFC Oakland Drive Apartments 6.300% Actual/360
- -----------------------------------------------------------------------------------------------------------------------------------
167 RFC Victoria Street Offices 6.970% Actual/360
- -----------------------------------------------------------------------------------------------------------------------------------
168 MS Montague Industrial Building 7.160% Actual/360 37,67,83,132,133,134,151
- -----------------------------------------------------------------------------------------------------------------------------------
169 RFC Sunrise Square Shopping Center 7.630% Actual/360 162,163
- -----------------------------------------------------------------------------------------------------------------------------------
170 WACH Berkmar Park 7.350% Actual/360
- -----------------------------------------------------------------------------------------------------------------------------------
171 MS Crest Ridge Apartments 8.000% 30/360
- -----------------------------------------------------------------------------------------------------------------------------------
172 RFC British Petroleum - Westlake 7.200% Actual/360
- -----------------------------------------------------------------------------------------------------------------------------------
173 RFC Kirkland Way Building 6.950% Actual/360 148
- -----------------------------------------------------------------------------------------------------------------------------------
174 WACH Willow Tree and Coastal Court Apartments (VII) 6.910% Actual/360
- -----------------------------------------------------------------------------------------------------------------------------------
175 RFC Eagle Watch Apartments 6.770% Actual/360 137
- -----------------------------------------------------------------------------------------------------------------------------------
176 RFC Post Alley Market Building 6.640% Actual/360
- -----------------------------------------------------------------------------------------------------------------------------------
177 WACH Cramer Marketplace Shopping Center 6.900% Actual/360
- -----------------------------------------------------------------------------------------------------------------------------------
178 WACH Penn Forest Executive Building 7.500% Actual/360
- -----------------------------------------------------------------------------------------------------------------------------------
179 MS 460 Valley Drive Industrial Building 8.500% 30/360
- -----------------------------------------------------------------------------------------------------------------------------------
180 RFC Bradley Smith Apartments (VIII) 7.200% Actual/360
- -----------------------------------------------------------------------------------------------------------------------------------
181 MS A Storage Place 6.770% Actual/360
- -----------------------------------------------------------------------------------------------------------------------------------
182 RFC Tallmadge Towne Apartments 6.500% Actual/360
- -----------------------------------------------------------------------------------------------------------------------------------
183 MS Garden Ridge I & II Shopping and Office Center 7.520% Actual/360
- -----------------------------------------------------------------------------------------------------------------------------------
184 WACH Greenbriar Village Shopping Center 7.200% Actual/360
- -----------------------------------------------------------------------------------------------------------------------------------
185 RFC Chapel Centre 6.820% Actual/360
- -----------------------------------------------------------------------------------------------------------------------------------
186 RFC Laurel Manor Apartments 7.200% Actual/360
- -----------------------------------------------------------------------------------------------------------------------------------
187 WACH Potter Self Storage 7.620% Actual/360 157
- -----------------------------------------------------------------------------------------------------------------------------------
188 RFC Dorjul Apartments 6.350% Actual/360
- -----------------------------------------------------------------------------------------------------------------------------------
189 RFC Orange Industrial Park 7.380% Actual/360
- -----------------------------------------------------------------------------------------------------------------------------------
190 RFC Fiesta Palms II Retail Center 7.520% Actual/360
- -----------------------------------------------------------------------------------------------------------------------------------
191 RFC Newport Mesa Self Storage 6.920% Actual/360
- -----------------------------------------------------------------------------------------------------------------------------------
192 MS Brunswick Apartments 7.450% Actual/360 207,210,214,221
- -----------------------------------------------------------------------------------------------------------------------------------
193 RFC Canyon Professional Center 7.190% Actual/360
- -----------------------------------------------------------------------------------------------------------------------------------
194 WACH Madison Heights Square 7.000% Actual/360 147,201,215
- -----------------------------------------------------------------------------------------------------------------------------------
195 MS Lexington Apartments 9.125% 30/360
- -----------------------------------------------------------------------------------------------------------------------------------
196 MS Heritage Green Apartments 8.750% 30/360
- -----------------------------------------------------------------------------------------------------------------------------------
197 RFC Aaron Center 6.700% Actual/360
- -----------------------------------------------------------------------------------------------------------------------------------
198 RFC Carlton Way Apartments 6.250% Actual/360
- -----------------------------------------------------------------------------------------------------------------------------------
199 WACH Creekview Townhouse Apartments 7.180% Actual/360
- -----------------------------------------------------------------------------------------------------------------------------------
200 MS Country Village Apartments 8.750% 30/360
- -----------------------------------------------------------------------------------------------------------------------------------
201 WACH Blackstone Square 7.950% Actual/360 147,194,215
- -----------------------------------------------------------------------------------------------------------------------------------
202 RFC Pizza Hut / 7-Eleven (A) 7.200% Actual/360
- -----------------------------------------------------------------------------------------------------------------------------------
203 RFC Quick Chek (A) 7.200% Actual/360
- -----------------------------------------------------------------------------------------------------------------------------------
204 WACH Holcomb Place III 7.270% Actual/360
- -----------------------------------------------------------------------------------------------------------------------------------
205 RFC New Hope Commons 7.090% Actual/360 143
- -----------------------------------------------------------------------------------------------------------------------------------
206 RFC Union Avenue Plaza 7.600% Actual/360
- -----------------------------------------------------------------------------------------------------------------------------------
207 MS Cedargate Apartments 7.450% Actual/360 192,210,214,221
- -----------------------------------------------------------------------------------------------------------------------------------
208 RFC Oakcrest Apartments 6.750% Actual/360
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
- -----------------------------------
Loan Scheduled Balloon
No. Balloon Balance LTV(4)
- -----------------------------------
157 $0 0.0%
- -----------------------------------
158 $1,577,065 46.4%
- -----------------------------------
159 $52,357 1.4%
- -----------------------------------
160 $857,605 58.2%
161 $735,090 58.2%
- -----------------------------------
162 $1,705,468 63.2%
- -----------------------------------
163 $1,534,776 60.2%
- -----------------------------------
164 $73,281 0.0%
- -----------------------------------
165 $1,618,696 52.2%
- -----------------------------------
166 $1,542,646 59.9%
- -----------------------------------
167 $1,571,329 62.5%
- -----------------------------------
168 $1,544,325 59.4%
- -----------------------------------
169 $1,597,975 66.6%
- -----------------------------------
170 $1,159,506 48.3%
- -----------------------------------
171 $1,631,910 66.6%
- -----------------------------------
172 $1,536,847 69.9%
- -----------------------------------
173 $1,402,068 40.1%
- -----------------------------------
174 $1,387,917 61.0%
- -----------------------------------
175 $1,475,959 65.0%
- -----------------------------------
176 $1,348,817 40.9%
- -----------------------------------
177 $1,441,402 63.6%
- -----------------------------------
178 $0 0.0%
- -----------------------------------
179 $1,189,895 42.1%
- -----------------------------------
180 $1,331,922 57.0%
- -----------------------------------
181 $1,386,984 62.5%
- -----------------------------------
182 $1,357,788 64.7%
- -----------------------------------
183 $57,718 0.0%
- -----------------------------------
184 $1,315,240 65.8%
- -----------------------------------
185 $1,304,062 56.7%
- -----------------------------------
186 $1,317,298 63.2%
- -----------------------------------
187 $644,997 28.7%
- -----------------------------------
188 $920,374 43.8%
- -----------------------------------
189 $1,217,431 60.1%
- -----------------------------------
190 $1,431,509 66.9%
- -----------------------------------
191 $1,200,466 38.6%
- -----------------------------------
192 $1,161,168 64.9%
- -----------------------------------
193 $1,129,576 53.8%
- -----------------------------------
194 $578,741 30.8%
- -----------------------------------
195 $1,241,419 23.4%
- -----------------------------------
196 $1,336,982 70.4%
- -----------------------------------
197 $1,085,083 59.5%
- -----------------------------------
198 $1,155,349 64.2%
- -----------------------------------
199 $1,174,375 70.1%
- -----------------------------------
200 $1,264,718 79.0%
- -----------------------------------
201 $915,118 49.5%
- -----------------------------------
202 $541,735 58.8%
- -----------------------------------
203 $507,827 58.8%
- -----------------------------------
204 $1,046,588 60.5%
- -----------------------------------
205 $1,112,179 69.5%
- -----------------------------------
206 $1,109,001 61.6%
- -----------------------------------
207 $1,005,481 64.9%
- -----------------------------------
208 $1,041,293 69.4%
- -----------------------------------
II-9
<PAGE>
APPENDIX II
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
LOAN INFORMATION - II
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Loan Related Borrower Loan Groups
No. Seller Property Name(2) Interest Rate InterestAccrualMethod (by Loan No.)
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <C> <S> <C> <C> <C>
209 RFC City Sports 6.540% Actual/360
- -----------------------------------------------------------------------------------------------------------------------------------
210 MS Glenarm Manor Apartments 7.450% Actual/360 192,207,214,221
- -----------------------------------------------------------------------------------------------------------------------------------
211 RFC Lin-Valle Center 6.650% Actual/360
- -----------------------------------------------------------------------------------------------------------------------------------
212 RFC Cramer Woods Apartments 7.150% actual/360
- -----------------------------------------------------------------------------------------------------------------------------------
213 MS Great Falls Days Inn 7.750% Actual/360
- -----------------------------------------------------------------------------------------------------------------------------------
214 MS Hillside Trace Apartments 7.450% Actual/360 192,207,210,221
- -----------------------------------------------------------------------------------------------------------------------------------
215 WACH Pearisburg Square 8.220% Actual/360 147,194,201
- -----------------------------------------------------------------------------------------------------------------------------------
216 RFC 3180 Presidential Drive 7.550% actual/360
- -----------------------------------------------------------------------------------------------------------------------------------
217 MS Villa Seville Apartments 7.000% Actual/360 91
- -----------------------------------------------------------------------------------------------------------------------------------
218 RFC Montreal Station 7.490% Actual/360 220
- -----------------------------------------------------------------------------------------------------------------------------------
219 WACH Dunwoody Springs Building 7.180% Actual/360
- -----------------------------------------------------------------------------------------------------------------------------------
220 RFC Spring House Office Park 7.040% Actual/360 218
- -----------------------------------------------------------------------------------------------------------------------------------
221 MS Sutton Place Apartments 7.450% Actual/360 192,207,210,214
- -----------------------------------------------------------------------------------------------------------------------------------
222 RFC Garrison Street Apartments 6.590% Actual/360
- -----------------------------------------------------------------------------------------------------------------------------------
223 WACH Airport Drive Shops 7.330% 30/360
- -----------------------------------------------------------------------------------------------------------------------------------
224 RFC 2755 Philmont Ave. 7.580% Actual/360
- -----------------------------------------------------------------------------------------------------------------------------------
225 RFC 9107 Gaither Rd. 7.620% actual/360
- -----------------------------------------------------------------------------------------------------------------------------------
226 RFC Tulwane Apartments 6.830% Actual/360 228
- -----------------------------------------------------------------------------------------------------------------------------------
227 RFC 900-902 Pine Street Apartments 7.220% Actual/360
- -----------------------------------------------------------------------------------------------------------------------------------
228 RFC Rochelle Arms 6.830% Actual/360 226
- -----------------------------------------------------------------------------------------------------------------------------------
229 RFC Pottery Row Apartments 7.200% Actual/360
TOTAL/WEIGHTED AVERAGE 7.198%
</TABLE>
- -----------------------------------
Loan Scheduled Balloon
No. Balloon Balance LTV(4)
- -----------------------------------
209 $948,762 31.6%
- -----------------------------------
210 $973,046 64.0%
- -----------------------------------
211 $888,915 59.3%
- -----------------------------------
212 $886,597 55.4%
- -----------------------------------
213 $769,439 41.6%
- -----------------------------------
214 $882,229 64.9%
- -----------------------------------
215 $829,181 59.2%
- -----------------------------------
216 $816,060 58.7%
- -----------------------------------
217 $850,430 65.4%
- -----------------------------------
218 $753,216 54.6%
- -----------------------------------
219 $633,834 43.0%
- -----------------------------------
220 $734,080 49.6%
- -----------------------------------
221 $713,567 64.9%
- -----------------------------------
222 $712,988 56.1%
- -----------------------------------
223 $0 0.0%
- -----------------------------------
224 $559,197 41.4%
- -----------------------------------
225 $33,289 2.4%
- -----------------------------------
226 $538,761 56.7%
- -----------------------------------
227 $548,277 70.3%
- -----------------------------------
228 $458,944 59.2%
- -----------------------------------
229 $456,822 66.7%
$677,961,976 56.4554%
II-10
<PAGE>
APPENDIX II
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
PROPERTY INFORMATION
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
Loan
No. Seller Property Name(2) Address
- ------------------------------------------------------------------------------------------------------------------------------
<C> <C> <S> <C>
1 MS Key West Hilton Resort 245 Front Street
- ------------------------------------------------------------------------------------------------------------------------------
2 RFC Lancaster Commerce Center Avenue K & Tenth Street West
- ------------------------------------------------------------------------------------------------------------------------------
3 MS Cupertino Village Shopping Center 10751 N. Wolfe Road
- ------------------------------------------------------------------------------------------------------------------------------
4 RFC Metro Pike Center 11510A-11560H Rockville Pike
- ------------------------------------------------------------------------------------------------------------------------------
5 RFC Hawthorne Woods 2325 Woodcrest Walk
- ------------------------------------------------------------------------------------------------------------------------------
6 RFC Sybase Building 3665 Discovery Drive
- ------------------------------------------------------------------------------------------------------------------------------
7 MS Alexandria Courtyard Marriott Hotel 2700 Eisenhower Avenue
- ------------------------------------------------------------------------------------------------------------------------------
8 RFC Heritage House 510 Heritage Drive
- ------------------------------------------------------------------------------------------------------------------------------
9 RFC Spanish Trace East Apartments 2929 Panthersville Rd.
- ------------------------------------------------------------------------------------------------------------------------------
10 MS Four Allegheny Office Center 4 Allegheny Center
- ------------------------------------------------------------------------------------------------------------------------------
11 MS Town Center Lodge Motel (I) 2665 N. Cobb Parkway
12 MS Decatur Lodge Motel (I) 3675 Flat Sholes Road
13 MS Fulton Lodge Motel (I) 4050 Wendell Drive
14 MS Douglasville Lodge Motel (I) 2420 Fairburn Road
15 MS West Georgia Lodge Motel (I) 7801 Bankhead Highway
16 MS East Point Lodge Motel (I) 1295 Norman Berry Drive
- ------------------------------------------------------------------------------------------------------------------------------
17 MS Holiday Inn Hotel- Bar Harbor 123 Eden Street
- ------------------------------------------------------------------------------------------------------------------------------
18 MS Kirkwood Crossings Office and Retail Building 333-353 South Kirkwood Road
- ------------------------------------------------------------------------------------------------------------------------------
19 RFC North Salado Village Shopping Center 2331 NW Military Highway
- ------------------------------------------------------------------------------------------------------------------------------
20 RFC Golden Miles Market Place 1300-1312 W. Patrick Street
- ------------------------------------------------------------------------------------------------------------------------------
21 WACH New Market Madison U.S. Hwy. 220 (Bus)
- ------------------------------------------------------------------------------------------------------------------------------
22 RFC Valencia Apartments 555 Ramona Drive
- ------------------------------------------------------------------------------------------------------------------------------
23 RFC Rollingwood Shopping Center 13851 & 13520 Foulger Square
- ------------------------------------------------------------------------------------------------------------------------------
24 MS 525 Almanor Industrial Building 521-525 Almanor Avenue
- ------------------------------------------------------------------------------------------------------------------------------
25 WACH Town Country S C 1255-1355 Roswell Road
- ------------------------------------------------------------------------------------------------------------------------------
26 MS Lucky/Long's Plaza Shopping Center 2080-2170 Newbury Road
- ------------------------------------------------------------------------------------------------------------------------------
27 RFC Koret Distribution Center 1011 Marauder Street
- ------------------------------------------------------------------------------------------------------------------------------
28 RFC Colony By The Mall Apartments 8470 Towson Boulevard
- ------------------------------------------------------------------------------------------------------------------------------
29 MS Manekin Industrial Portfolio 8679 Greenwood Place
- ------------------------------------------------------------------------------------------------------------------------------
30 RFC St. Andrews Professional Center 2499 Glades Road
- ------------------------------------------------------------------------------------------------------------------------------
31 RFC Green Ridge Heights Apartments 1929 -1949 Green Road
- ------------------------------------------------------------------------------------------------------------------------------
32 RFC Cove Center 5803-5967 SE Federal Hwy
- ------------------------------------------------------------------------------------------------------------------------------
33 RFC Golden Isle Plaza SWC of N. Golden Isles Parkway & Scranton Road
- ------------------------------------------------------------------------------------------------------------------------------
34 MS 2040-2060 Corporate Court Industrial 2040 - 2060 Corporate Court
- ------------------------------------------------------------------------------------------------------------------------------
35 RFC Miami Lakes Corporate Center 14750 NW 77 Court
- ------------------------------------------------------------------------------------------------------------------------------
36 MS Bon Air Professional Center 2 and 20 Bon Air Road
- ------------------------------------------------------------------------------------------------------------------------------
37 MS Woodside Apartments 12001 Woodside Ave.
- ------------------------------------------------------------------------------------------------------------------------------
38 RFC Cambridge Commons Apartments 841 Gawain Circle
- ------------------------------------------------------------------------------------------------------------------------------
39 MS Alicia Valencia Plaza Shopping Center 25351-25461 Alicia Parkway
- ------------------------------------------------------------------------------------------------------------------------------
40 RFC Willow Tree 400 Willow Tree Road
- ------------------------------------------------------------------------------------------------------------------------------
41 MS Bayport Marina Plaza Industrial 629-643 Blair Island Road
- ------------------------------------------------------------------------------------------------------------------------------
42 RFC New Market Square 2700 S. Church Street
- ------------------------------------------------------------------------------------------------------------------------------
43 WACH Shoppes at Cresthaven 2601 S. Military Trail
- ------------------------------------------------------------------------------------------------------------------------------
44 WACH Southport Centre 4525 South Boulevard
- ------------------------------------------------------------------------------------------------------------------------------
45 RFC Half-A-Car 308 East Lancaster Avenue
- ------------------------------------------------------------------------------------------------------------------------------
46 MS Merchants Centre 1040-1224 E. Katella Avenue
- ------------------------------------------------------------------------------------------------------------------------------
47 RFC Plaza K Shopping Center 179-185 U.S. Hwy Route 1
- ------------------------------------------------------------------------------------------------------------------------------
48 RFC Parkway Shopping Center 1471-1523 Lehigh Street
- ------------------------------------------------------------------------------------------------------------------------------
49 MS 788 North Jefferson Office Building 788 North Jefferson St.
- ------------------------------------------------------------------------------------------------------------------------------
50 WACH Comfort Suites 1620 Cotton Grove Road
- ------------------------------------------------------------------------------------------------------------------------------
51 MS Taft Corners Shopping Center 299 Williston Rd & 415 Essex Rd
- ------------------------------------------------------------------------------------------------------------------------------
52 MS Mickelberry Shopping Center 9991 Mickelberry Road NW
- ------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
Loan
No. City County State Zipcode Property Type
- -------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C>
1 Key West Monroe FL 33040 Hospitality
- -------------------------------------------------------------------------------------------------------------
2 Lancaster Los Angeles CA 93534 Retail
- -------------------------------------------------------------------------------------------------------------
3 Cupertino Santa Clara CA 95014 Retail
- -------------------------------------------------------------------------------------------------------------
4 Rockville Montgomery MD 20852 Retail
- -------------------------------------------------------------------------------------------------------------
5 Lithonia Dekalb GA 30058 Multifamily
- -------------------------------------------------------------------------------------------------------------
6 Boulder Boulder CO 80303 Office
- -------------------------------------------------------------------------------------------------------------
7 Alexandria Fairfax VA 22314 Hospitality
- -------------------------------------------------------------------------------------------------------------
8 Madison Davidson TN 37115 Multifamily
- -------------------------------------------------------------------------------------------------------------
9 Decatur Dekalb GA 30034 Multifamily
- -------------------------------------------------------------------------------------------------------------
10 Pittsburgh Allegheny PA 15212 Office
- -------------------------------------------------------------------------------------------------------------
11 Kennesaw Cobb GA 30152 Hospitality
12 Decatur DeKalb GA 30034 Hospitality
13 Atlanta Fulton County GA 30336 Hospitality
14 Douglasville Douglas GA 30135 Hospitality
15 Carrollton Carroll GA 30117 Hospitality
16 East Point Fulton GA 30344 Hospitality
- -------------------------------------------------------------------------------------------------------------
17 Bar Harbor Hancock County ME 04609 Hospitality
- -------------------------------------------------------------------------------------------------------------
18 Kirkwood St. Louis MO 63122 Mixed Use
- -------------------------------------------------------------------------------------------------------------
19 San Antonio Bexar TX 78213 Retail
- -------------------------------------------------------------------------------------------------------------
20 Frederick Frederick MD 21701 Retail
- -------------------------------------------------------------------------------------------------------------
21 Madison Rockingham NC 27025 Retail
- -------------------------------------------------------------------------------------------------------------
22 San Luis Obispo San Luis Obispo CA 93405 Multifamily
- -------------------------------------------------------------------------------------------------------------
23 Woodbridge Prince William VA 22192 Retail
- -------------------------------------------------------------------------------------------------------------
24 Sunnyvale Santa Clara CA 94086 Industrial
- -------------------------------------------------------------------------------------------------------------
25 Atlanta Cobb GA 30060 Retail
- -------------------------------------------------------------------------------------------------------------
26 Thousand Oaks Ventura CA 91320 Retail
- -------------------------------------------------------------------------------------------------------------
27 Chico Butte CA 95973 Industrial
- -------------------------------------------------------------------------------------------------------------
28 Miamisburg Montgomery OH 45342 Multifamily
- -------------------------------------------------------------------------------------------------------------
29 Savage Howard MD 20763 Industrial
- -------------------------------------------------------------------------------------------------------------
30 Boca Raton Palm Beach FL 33431 Office
- -------------------------------------------------------------------------------------------------------------
31 Cleveland Cuyahoga OH 44212 Multifamily
- -------------------------------------------------------------------------------------------------------------
32 Stuart Martin FL 34997 Retail
- -------------------------------------------------------------------------------------------------------------
33 Brunswick Glynn GA 31520 Retail
- -------------------------------------------------------------------------------------------------------------
34 San Jose Santa Clara CA 95131 Industrial
- -------------------------------------------------------------------------------------------------------------
35 Miami Lakes Miami-Dade FL 33016 Office
- -------------------------------------------------------------------------------------------------------------
36 Larkspur Marin CA 94939 Office
- -------------------------------------------------------------------------------------------------------------
37 Lakeside San Diego CA 92040 Multifamily
- -------------------------------------------------------------------------------------------------------------
38 West Carrollton Montgomery OH 45449 Multifamily
- -------------------------------------------------------------------------------------------------------------
39 Laguna Hills Orange CA 92653 Retail
- -------------------------------------------------------------------------------------------------------------
40 Leonia Bergen NJ 7605 Office
- -------------------------------------------------------------------------------------------------------------
41 Redwood City San Mateo CA 94063 Mixed Use
- -------------------------------------------------------------------------------------------------------------
42 Burlington Alamance NC 27215 Retail
- -------------------------------------------------------------------------------------------------------------
43 West Palm Beach Palm Beach FL 33415 Retail
- -------------------------------------------------------------------------------------------------------------
44 Virginia Beach Virginia Beach VA 23452 Office
- -------------------------------------------------------------------------------------------------------------
45 Lower Merion Township Montgomery PA 19096 Office
- -------------------------------------------------------------------------------------------------------------
46 Orange Orange CA 92667 Mixed Use
- -------------------------------------------------------------------------------------------------------------
47 Woodbridge Middlesex NJ 8863 Retail
- -------------------------------------------------------------------------------------------------------------
48 Allentown Lehigh PA 18103 Retail
- -------------------------------------------------------------------------------------------------------------
49 Milwaukee Milwaukee County WI 53202 Office
- -------------------------------------------------------------------------------------------------------------
50 Lexington Davidson NC 27292 Hospitality
- -------------------------------------------------------------------------------------------------------------
51 Williston Chittenden VT 05495 Retail
- -------------------------------------------------------------------------------------------------------------
52 Silverdale Kitsap WA 98383 Retail
- -------------------------------------------------------------------------------------------------------------
</TABLE>
- -----------------------------------------------------------------------------
Loan Units or Year
No. SubType NSF Year Built Renovated
- -----------------------------------------------------------------------------
1 Resort 178 1995 N/A
- -----------------------------------------------------------------------------
2 Shadow Anchored 300,000 1987/1992 NAP
- -----------------------------------------------------------------------------
3 Anchored 109,213 1969 1997
- -----------------------------------------------------------------------------
4 Unanchored 64,087 1990 NAP
- -----------------------------------------------------------------------------
5 Garden 345 1990 NAP
- -----------------------------------------------------------------------------
6 Suburban 96,360 1996 NAP
- -----------------------------------------------------------------------------
7 Full Service 176 1987 1997
- -----------------------------------------------------------------------------
8 Garden 348 1971 NAP
- -----------------------------------------------------------------------------
9 Garden 518 1969 1998
- -----------------------------------------------------------------------------
10 Urban 231,426 1978 N/A
- -----------------------------------------------------------------------------
11 Extended Stay 119 1987 N/A
12 Extended Stay 100 1997 N/A
13 Extended Stay 146 1989 N/A
14 Extended Stay 142 1988 N/A
15 Extended Stay 120 1990 N/A
16 Extended Stay 38 1988 N/A
- -----------------------------------------------------------------------------
17 Full Service 223 1986 1997
- -----------------------------------------------------------------------------
18 Retail/Office 77,622 1997 N/A
- -----------------------------------------------------------------------------
19 Anchored 172,677 1980 NAP
- -----------------------------------------------------------------------------
20 Anchored 97,274 1988 NAP
- -----------------------------------------------------------------------------
21 Anchored 168,843 1992 N/A
- -----------------------------------------------------------------------------
22 Garden 480 1971 1997
- -----------------------------------------------------------------------------
23 Anchored 73,801 1997 NAP
- -----------------------------------------------------------------------------
24 Flex 85,680 1967 1995
- -----------------------------------------------------------------------------
25 Anchored 303,957 1954-1984 1984
- -----------------------------------------------------------------------------
26 Anchored 84,683 1985 N/A
- -----------------------------------------------------------------------------
27 Light 397,710 1988 NAP
- -----------------------------------------------------------------------------
28 Garden 245 1972 1997
- -----------------------------------------------------------------------------
29 Light 239,956 1975 N/A
- -----------------------------------------------------------------------------
30 Medical 58,717 1986 NAP
- -----------------------------------------------------------------------------
31 High-Rise 309 1963 1995-1998
- -----------------------------------------------------------------------------
32 Anchored 150,707 1982 1996
- -----------------------------------------------------------------------------
33 Anchored 97,604 1998 NAP
- -----------------------------------------------------------------------------
34 Flex 131,172 1989 N/A
- -----------------------------------------------------------------------------
35 Suburban 73,759 1985 NAP
- -----------------------------------------------------------------------------
36 Medical 27,560 1960 1991
- -----------------------------------------------------------------------------
37 Garden 180 1984 N/A
- -----------------------------------------------------------------------------
38 Garden 192 1972 1997
- -----------------------------------------------------------------------------
39 Unanchored 61,706 1979 N/A
- -----------------------------------------------------------------------------
40 Suburban 67,800 1983 1995
- -----------------------------------------------------------------------------
41 Office/Industrial 83,209 1979 N/A
- -----------------------------------------------------------------------------
42 Anchored 124,545 1986 NAP
- -----------------------------------------------------------------------------
43 Anchored 177,485 1987 1997
- -----------------------------------------------------------------------------
44 Suburban 61,594 1997 N/A
- -----------------------------------------------------------------------------
45 Suburban 54,000 1956 1993
- -----------------------------------------------------------------------------
46 Retail/Office 63,631 1979 1991
- -----------------------------------------------------------------------------
47 Unanchored 28,432 1992 NAP
- -----------------------------------------------------------------------------
48 Anchored 135,000 1960 1995
- -----------------------------------------------------------------------------
49 Urban 100,995 1969 1995
- -----------------------------------------------------------------------------
50 Limited Service 120 1991 N/A
- -----------------------------------------------------------------------------
51 Unanchored 65,595 1973 1996
- -----------------------------------------------------------------------------
52 Anchored 65,927 1994 N/A
- -----------------------------------------------------------------------------
II-11
<PAGE>
APPENDIX II
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
PROPERTY INFORMATION
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
Loan
No. Seller Property Name(2) Address
- ------------------------------------------------------------------------------------------------------------------------------
<C> <C> <S> <C>
53 RFC Cottonwood Corners Shopping Center 3669 South Mason Street
- ------------------------------------------------------------------------------------------------------------------------------
54 WACH Comfort Inn & Comfort Suites 7619 Thorndike Road
- ------------------------------------------------------------------------------------------------------------------------------
55 RFC Dalton Place Shopping Center Cleveland Hwy and Pleasant Hills Drive
- ------------------------------------------------------------------------------------------------------------------------------
56 RFC Showcase Plaza Shopping Center 2838 Street Road
- ------------------------------------------------------------------------------------------------------------------------------
57 RFC Springrove Mobile Home Park 10771 Dixie Highway
- ------------------------------------------------------------------------------------------------------------------------------
58 RFC Gateway/Lombardi (II) 1421 Guerneville Rd/789-791 Lombardi Ct.
- ------------------------------------------------------------------------------------------------------------------------------
59 RFC Arbors of Wooster Apartments 3783 Friendsville Road
- ------------------------------------------------------------------------------------------------------------------------------
60 MS Sunset Plaza Shopping Center 1300 North Main Street
- ------------------------------------------------------------------------------------------------------------------------------
61 WACH Blackstock Warehouse 3001 North Blackstock Rd.
- ------------------------------------------------------------------------------------------------------------------------------
62 RFC Augusta at Gruene 2293 East Common Street
- ------------------------------------------------------------------------------------------------------------------------------
63 MS Commerce Office Building (III) 127 West Berry Street
- ------------------------------------------------------------------------------------------------------------------------------
64 MS Medical & Professional Office Building (III) 347 West Berry Street
- ------------------------------------------------------------------------------------------------------------------------------
65 RFC Southside Square Shopping Center 1090 South Main Street
- ------------------------------------------------------------------------------------------------------------------------------
66 RFC Saratoga Square Apartments 7816 Rolling View Lane
- ------------------------------------------------------------------------------------------------------------------------------
67 MS Minaret Village Retail and Office Center 437 Old Mammoth Road
- ------------------------------------------------------------------------------------------------------------------------------
68 WACH Redland Crest Apartments 385 Northdale Rd
- ------------------------------------------------------------------------------------------------------------------------------
69 RFC Village of Westover Apartments 120 Pennington Place
- ------------------------------------------------------------------------------------------------------------------------------
70 MS 499 University Avenue 499 University Avenue
- ------------------------------------------------------------------------------------------------------------------------------
71 RFC Manufacturers Bank Building 200 South San Pedro Street
- ------------------------------------------------------------------------------------------------------------------------------
72 WACH Print Pack Buildings 400 Packets Court
- ------------------------------------------------------------------------------------------------------------------------------
73 MS Hennepin Square Office Building 2021 East Hennepin Avenue
- ------------------------------------------------------------------------------------------------------------------------------
74 MS Brandywine III Apartments 2524 Jacqueline Drive
- ------------------------------------------------------------------------------------------------------------------------------
75 RFC V United Plaza 8591 United Plaza Blvd.
- ------------------------------------------------------------------------------------------------------------------------------
76 WACH South Park Shopping Center 3193 Peters Creek Parkway
- ------------------------------------------------------------------------------------------------------------------------------
77 RFC Pineville Towne Market 315 South Polk Street
- ------------------------------------------------------------------------------------------------------------------------------
78 WACH 555 & 565 Old Norcross Rd 555 and 565 Old Norcross Road
- ------------------------------------------------------------------------------------------------------------------------------
79 MS Lake Union Office Building 1500 Fairview Avenue East
- ------------------------------------------------------------------------------------------------------------------------------
80 MS Via Alamos Apartments 300 West Via Alamos
- ------------------------------------------------------------------------------------------------------------------------------
81 RFC Gallery Row 407-417 7th Street, NW
- ------------------------------------------------------------------------------------------------------------------------------
82 RFC Arbour Walk Village Apartments 1570 Hunt Street
- ------------------------------------------------------------------------------------------------------------------------------
83 MS San Fernando Industrial Building 9175 San Fernando Road
- ------------------------------------------------------------------------------------------------------------------------------
84 WACH Village at Cedar Shoals 1055 Gaines School Road
- ------------------------------------------------------------------------------------------------------------------------------
85 MS Kirby Plaza Office Building 1280 Civic Drive
- ------------------------------------------------------------------------------------------------------------------------------
86 MS 800 South Broadway Office Building 800 South Broadway
- ------------------------------------------------------------------------------------------------------------------------------
87 RFC Polifly Plaza 155 Polifly Road
- ------------------------------------------------------------------------------------------------------------------------------
88 MS Summit Apartments 7266 Franklin Avenue
- ------------------------------------------------------------------------------------------------------------------------------
89 RFC Villa Fontana 1150 Coast Village Road
- ------------------------------------------------------------------------------------------------------------------------------
90 MS Laguna Self Storage 3000 Dwight Road
- ------------------------------------------------------------------------------------------------------------------------------
91 MS Hughes Towers Apartments 3520 Hughes Avenue
- ------------------------------------------------------------------------------------------------------------------------------
92 WACH Roswell Oaks 4840 Roswell Road
- ------------------------------------------------------------------------------------------------------------------------------
93 MS Temple Medical Office Building 508 East South Temple
- ------------------------------------------------------------------------------------------------------------------------------
94 RFC Victoria Square Apartments 1550 North Hope Avenue
- ------------------------------------------------------------------------------------------------------------------------------
95 RFC Kmart 7101 Roosevelt Boulevard
- ------------------------------------------------------------------------------------------------------------------------------
96 MS Strathmore Towers Apartments 10941 Strathmore
- ------------------------------------------------------------------------------------------------------------------------------
97 MS 69 Hickory Drive Office Building 69 Hickory Drive
- ------------------------------------------------------------------------------------------------------------------------------
98 MS Rancho Broadway Shopping Center 1206-1218 Broadway
- ------------------------------------------------------------------------------------------------------------------------------
99 MS Union Bank Office Building 390 S. El Camino Real
- ------------------------------------------------------------------------------------------------------------------------------
100 RFC Northampton Apartments 1738 Northampton Road
- ------------------------------------------------------------------------------------------------------------------------------
101 MS 2424 Babcock Office and Medical Building 2424 Babcock Road
- ------------------------------------------------------------------------------------------------------------------------------
102 MS Casa Grande Retail Center 1314 Florence Boulevard
- ------------------------------------------------------------------------------------------------------------------------------
103 RFC The Vineyards Apartments 800 N. Union Road
- ------------------------------------------------------------------------------------------------------------------------------
104 RFC Dunwoody Shallowford Office Park 15 & 17 Dunwoody Park Drive
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
Loan
No. City County State Zipcode Property Type
- -------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C>
53 Fort Collins Larimer CO 80522 Retail
- -------------------------------------------------------------------------------------------------------------
54 Greensboro Guilford NC 27409 Hospitality
- -------------------------------------------------------------------------------------------------------------
55 Dalton Whitfield GA 30720 Retail
- -------------------------------------------------------------------------------------------------------------
56 Bensalem Bucks PA 19020 Retail
- -------------------------------------------------------------------------------------------------------------
57 Springfield Township Oakland MI 48350 Mobile Home Park
- -------------------------------------------------------------------------------------------------------------
58 Santa Rosa Sonoma CA 95403 and 95407 Office
- -------------------------------------------------------------------------------------------------------------
59 Wooster Wayne OH 44691 Multifamily
- -------------------------------------------------------------------------------------------------------------
60 Fuquay Varina Wake NC 27526 Retail
- -------------------------------------------------------------------------------------------------------------
61 Spartanburg Spartanburg SC 29301 Industrial
- -------------------------------------------------------------------------------------------------------------
62 New Braunfels Comal TX 78130 Multifamily
- -------------------------------------------------------------------------------------------------------------
63 Fort Wayne Allen IN 46802 Office
- -------------------------------------------------------------------------------------------------------------
64 Fort Wayne Allen IN 46857 Office
- -------------------------------------------------------------------------------------------------------------
65 Kernersville Forsyth NC 27284 Retail
- -------------------------------------------------------------------------------------------------------------
66 Springfield Fairfax VA 22153 Multifamily
- -------------------------------------------------------------------------------------------------------------
67 Mammoth Lakes Mono County CA 93546 Mixed Use
- -------------------------------------------------------------------------------------------------------------
68 Lawrenceville Gwinnett GA 30245 Multifamily
- -------------------------------------------------------------------------------------------------------------
69 Dover Kent DE 19904 Multifamily
- -------------------------------------------------------------------------------------------------------------
70 Palo Alto Santa Clara CA 94301 Mixed Use
- -------------------------------------------------------------------------------------------------------------
71 Los Angeles Los Angeles CA 90012 Office
- -------------------------------------------------------------------------------------------------------------
72 Williamsburg James City County VA 23185 Industrial
- -------------------------------------------------------------------------------------------------------------
73 Minneapolis Hennepin MN 55413 Office
- -------------------------------------------------------------------------------------------------------------
74 Wilmington New Castle DE 19810 Multifamily
- -------------------------------------------------------------------------------------------------------------
75 Baton Rouge East Parish of Baton Rouge LA 70809 Office
- -------------------------------------------------------------------------------------------------------------
76 Winston-Salem Forsyth NC 27127 Retail
- -------------------------------------------------------------------------------------------------------------
77 Charlotte Mecklenburg NC 28134 Retail
- -------------------------------------------------------------------------------------------------------------
78 Lawrenceville Gwinnett GA 30045 Office
- -------------------------------------------------------------------------------------------------------------
79 Seattle King WA 98102 Office
- -------------------------------------------------------------------------------------------------------------
80 Green Valley Pima AZ 85614 Multifamily
- -------------------------------------------------------------------------------------------------------------
81 Washington District of Columbia DC 20004 Office
- -------------------------------------------------------------------------------------------------------------
82 Normal McLean IL 61761 Multifamily
- -------------------------------------------------------------------------------------------------------------
83 Sun Valley Los Angeles CA 91352 Industrial
- -------------------------------------------------------------------------------------------------------------
84 Athens Clarke GA 30605 Retail
- -------------------------------------------------------------------------------------------------------------
85 Walnut Creek Contra Costa CA 94596 Office
- -------------------------------------------------------------------------------------------------------------
86 Walnut Creek Contra Costa CA 94596 Office
- -------------------------------------------------------------------------------------------------------------
87 Hackensack Bergen NJ 7601 Office
- -------------------------------------------------------------------------------------------------------------
88 Los Angeles Los Angeles CA 90046 Multifamily
- -------------------------------------------------------------------------------------------------------------
89 Santa Barbara Santa Barbara CA 93108 Multifamily
- -------------------------------------------------------------------------------------------------------------
90 Elk Grove Sacramento CA 95758 Self Storage
- -------------------------------------------------------------------------------------------------------------
91 Los Angeles Los Angeles CA 90034 Multifamily
- -------------------------------------------------------------------------------------------------------------
92 Atlanta Fulton GA 30342 Office
- -------------------------------------------------------------------------------------------------------------
93 Salt Lake City Salt Lake County UT 84102 Office
- -------------------------------------------------------------------------------------------------------------
94 Reedley Fresno CA 93654 Multifamily
- -------------------------------------------------------------------------------------------------------------
95 Philadelphia Philadelphia PA 19149 Retail
- -------------------------------------------------------------------------------------------------------------
96 Westwood Los Angeles County CA 90024 Multifamily
- -------------------------------------------------------------------------------------------------------------
97 Waltham Middlesex MA 02154 Office
- -------------------------------------------------------------------------------------------------------------
98 Chula Vista San Diego CA 91911 Retail
- -------------------------------------------------------------------------------------------------------------
99 San Mateo San Mateo CA 94402 Office
- -------------------------------------------------------------------------------------------------------------
100 Akron Summit OH 44313 Multifamily
- -------------------------------------------------------------------------------------------------------------
101 San Antonio Bexar TX 78229 Office
- -------------------------------------------------------------------------------------------------------------
102 Casa Grande Pinal AZ 85222 Retail
- -------------------------------------------------------------------------------------------------------------
103 Englewood Montgomery OH 45322 Multifamily
- -------------------------------------------------------------------------------------------------------------
104 Atlanta Dekalb GA 30338 Office
</TABLE>
- -----------------------------------------------------------------------------
Loan Units or Year
No. SubType NSF Year Built Renovated
- -----------------------------------------------------------------------------
53 Anchored 80,250 1981 NAP
- -----------------------------------------------------------------------------
54 Limited Service 113 1997 N/A
- -----------------------------------------------------------------------------
55 Anchored 72,968 1997 NAP
- -----------------------------------------------------------------------------
56 Unanchored 73,826 1980 NAP
- -----------------------------------------------------------------------------
57 Mobile Home Park 424 1973 1997
- -----------------------------------------------------------------------------
58 Suburban 69,436 1988 NAP
- -----------------------------------------------------------------------------
59 Garden 118 1997 NAP
- -----------------------------------------------------------------------------
60 Anchored 104,545 1987 N/A
- -----------------------------------------------------------------------------
61 Warehouse 432,587 1960-1985 N/A
- -----------------------------------------------------------------------------
62 Garden 92 1997 NAP
- -----------------------------------------------------------------------------
63 Urban 86,891 1923 1995
- -----------------------------------------------------------------------------
64 Urban 45,057 1920 1995
- -----------------------------------------------------------------------------
65 Anchored 158,177 1988 NAP
- -----------------------------------------------------------------------------
66 Garden 100 1986 NAP
- -----------------------------------------------------------------------------
67 Retail/Office 69,854 1982 N/A
- -----------------------------------------------------------------------------
68 Garden 156 1987 N/A
- -----------------------------------------------------------------------------
69 Garden 108 1996 NAP
- -----------------------------------------------------------------------------
70 Retail/Office 19,404 1996 N/A
- -----------------------------------------------------------------------------
71 Urban 38,260 1982 NAP
- -----------------------------------------------------------------------------
72 Manufacturing 149,302 1987 1992/1998
- -----------------------------------------------------------------------------
73 Urban 96,860 1922 1970
- -----------------------------------------------------------------------------
74 Garden 156 1978 N/A
- -----------------------------------------------------------------------------
75 Urban 58,359 1985 1991
- -----------------------------------------------------------------------------
76 Anchored 112,422 1987 1995/1997
- -----------------------------------------------------------------------------
77 Anchored 69,199 1988 NAP
- -----------------------------------------------------------------------------
78 Medical 36,413 1994/1996 N/A
- -----------------------------------------------------------------------------
79 Suburban 27,651 1998 N/A
- -----------------------------------------------------------------------------
80 Garden 160 1984 1995
- -----------------------------------------------------------------------------
81 Urban 38,040 1900 1986
- -----------------------------------------------------------------------------
82 Garden 68 1994/1996 NAP
- -----------------------------------------------------------------------------
83 Warehouse 181,000 1967 1986
- -----------------------------------------------------------------------------
84 Anchored 56,972 1989 N/A
- -----------------------------------------------------------------------------
85 Suburban 36,726 1988 N/A
- -----------------------------------------------------------------------------
86 Suburban 32,075 1975 N/A
- -----------------------------------------------------------------------------
87 Suburban 45,878 1988 NAP
- -----------------------------------------------------------------------------
88 Garden 90 1989 N/A
- -----------------------------------------------------------------------------
89 Garden 36 1963 1997
- -----------------------------------------------------------------------------
90 Self Storage 94,865 1997 N/A
- -----------------------------------------------------------------------------
91 Garden 63 1982 N/A
- -----------------------------------------------------------------------------
92 Suburban 43,084 1984 N/A
- -----------------------------------------------------------------------------
93 Medical 50,036 1950 1991
- -----------------------------------------------------------------------------
94 Garden 104 1988 NAP
- -----------------------------------------------------------------------------
95 Anchored 70,112 1979 1997
- -----------------------------------------------------------------------------
96 Garden 63 1957 N/A
- -----------------------------------------------------------------------------
97 Suburban 22,440 1963 1993
- -----------------------------------------------------------------------------
98 Anchored 45,750 1971 1987
- -----------------------------------------------------------------------------
99 Urban 34,973 1960 N/A
- -----------------------------------------------------------------------------
100 Garden 149 1987 NAP
- -----------------------------------------------------------------------------
101 Medical 50,072 1984 1997
- -----------------------------------------------------------------------------
102 Unanchored 39,162 1987 N/A
- -----------------------------------------------------------------------------
103 Garden 96 1991 NAP
- -----------------------------------------------------------------------------
104 Medical 43,610 1972 1991
II-12
<PAGE>
APPENDIX II
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
PROPERTY INFORMATION
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
Loan
No. Seller Property Name(2) Address
- ------------------------------------------------------------------------------------------------------------------------------
<C> <C> <S> <C>
105 WACH Best Western 1100 W. Atlantic Street
- ------------------------------------------------------------------------------------------------------------------------------
106 MS Kenyon Place Apartments 777 East Kenyon Avenue
- ------------------------------------------------------------------------------------------------------------------------------
107 MS College Square Shopping Center 5131 College Avenue
- ------------------------------------------------------------------------------------------------------------------------------
108 WACH Americana Self Storage 14518 Lee Road
- ------------------------------------------------------------------------------------------------------------------------------
109 WACH Regal Cinemas 941 Laskin Road
- ------------------------------------------------------------------------------------------------------------------------------
110 MS Mission Plaza Shopping Center 7400-7420 Mission Street
- ------------------------------------------------------------------------------------------------------------------------------
111 WACH Collier & Piedmont Rd. Apts. (IV) 2, 22-24 Collier Road & 278 12th St and 1055 Piedmont Ave
- ------------------------------------------------------------------------------------------------------------------------------
112 WACH Canteberi Place Apartments 1 Canteberi Court
- ------------------------------------------------------------------------------------------------------------------------------
113 WACH Holiday Inn Express 2174 Lee Highway South
- ------------------------------------------------------------------------------------------------------------------------------
114 RFC Pacifica Hampden Industrial Park 2331 West Hampden Ave
- ------------------------------------------------------------------------------------------------------------------------------
115 RFC Atlantic Plaza II 15200 Jog Road
- ------------------------------------------------------------------------------------------------------------------------------
116 RFC Bath Street Partners 501-511 Bath Street
- ------------------------------------------------------------------------------------------------------------------------------
117 RFC JM Industrial 26300 Bunert Road
- ------------------------------------------------------------------------------------------------------------------------------
118 RFC Sargent Road Shopping Center. 5601-5615 Sargent Road
- ------------------------------------------------------------------------------------------------------------------------------
119 RFC Little Brook Apartments 1200-1214 Little Brook Drive
- ------------------------------------------------------------------------------------------------------------------------------
120 MS Courtside Office Building (V) 803 South Calhoun Street
- ------------------------------------------------------------------------------------------------------------------------------
121 MS Murphy Office Building (V) 809 South Calhoun Street
- ------------------------------------------------------------------------------------------------------------------------------
122 RFC North Oaks Plaza 950-1086 E. Avenida de los Arboles
- ------------------------------------------------------------------------------------------------------------------------------
123 MS Ohlone Village Shopping and Office Center 1530-1618 Washington Blvd.
- ------------------------------------------------------------------------------------------------------------------------------
124 RFC Palms Plaza 1155 S. Dale Mabry Highway
- ------------------------------------------------------------------------------------------------------------------------------
125 RFC St. Clair Mobile Home Parks 21 Roberta Avenue
- ------------------------------------------------------------------------------------------------------------------------------
126 WACH Claremont Commons 3027-3035 Centennial Boulevard
- ------------------------------------------------------------------------------------------------------------------------------
127 RFC Guilford Street Center 2708 Guilford Street
- ------------------------------------------------------------------------------------------------------------------------------
128 RFC Ski Lodge Apartments 2320 Coleman Road
- ------------------------------------------------------------------------------------------------------------------------------
129 MS Maxwell Labs Industrial Building 4949 Greencraig Lane
- ------------------------------------------------------------------------------------------------------------------------------
130 RFC Lakeshore Apartments 1720 South Lakeshore Blvd.
- ------------------------------------------------------------------------------------------------------------------------------
131 WACH Vidalia Food Lion 300 W. First St. (US 280)
- ------------------------------------------------------------------------------------------------------------------------------
132 MS Rosecrans Avenue Warehouse 1639 Rosecrans Avenue
- ------------------------------------------------------------------------------------------------------------------------------
133 MS 4800 Santa Fe Industrial Building 4800-4820 South Santa Fe Ave.
- ------------------------------------------------------------------------------------------------------------------------------
134 MS Century Warehouse 3750 Century Blvd.
- ------------------------------------------------------------------------------------------------------------------------------
135 MS Pingry Arms and Cornell Arms Apartments 606 Crescent & 735 Park Avenues
- ------------------------------------------------------------------------------------------------------------------------------
136 MS 20195 Stevens Creek Boulevard Office Building 20195 Stevens Creek Blvd.
- ------------------------------------------------------------------------------------------------------------------------------
137 RFC Maple Run Apartments 1804 Belvo
- ------------------------------------------------------------------------------------------------------------------------------
138 WACH Comfort Inn Laurinburg 1705 401 By Pass
- ------------------------------------------------------------------------------------------------------------------------------
139 MS Blockbuster - Westwood Shopping Center 1100 Westwood Boulevard
- ------------------------------------------------------------------------------------------------------------------------------
140 MS Clock Tower Office and Retail Building 3569-3581 Mount Diablo Blvd
- ------------------------------------------------------------------------------------------------------------------------------
141 RFC One Bank Street One Bank Street
- ------------------------------------------------------------------------------------------------------------------------------
142 MS Shoppes of Deerfield 190 Waukegan Road
- ------------------------------------------------------------------------------------------------------------------------------
143 RFC Dartmoor Apartments 310 N. Alma School Rd
- ------------------------------------------------------------------------------------------------------------------------------
144 WACH Lavender Lakes 110-266 Lavender Lakes Drive
- ------------------------------------------------------------------------------------------------------------------------------
145 RFC Sunshine Office Building 151 North Main Street
- ------------------------------------------------------------------------------------------------------------------------------
146 MS Underwood Gartland Industrial Building 14071 NE 200th Street
- ------------------------------------------------------------------------------------------------------------------------------
147 WACH Washington Square Kings Highway (State Route 3)
- ------------------------------------------------------------------------------------------------------------------------------
148 RFC Eastlake Business Park 18338 Redmond - Fall City Rd
- ------------------------------------------------------------------------------------------------------------------------------
149 MS Lindsay Marketplace Shopping Center 2639-2753 E. Broadway Road
- ------------------------------------------------------------------------------------------------------------------------------
150 MS Sierra Meadows Apartments 4236 Eubank Boulevard NE
- ------------------------------------------------------------------------------------------------------------------------------
151 MS 4700 Santa Fe Industrial Building 4700-4826 South Santa Fe Ave.
- ------------------------------------------------------------------------------------------------------------------------------
152 RFC Georgetown Plaza 914 Bay Ridge Road
- ------------------------------------------------------------------------------------------------------------------------------
153 MS Itasca Business Park 21011-29 Itasca Street
- ------------------------------------------------------------------------------------------------------------------------------
154 WACH Shoal Creek Apartments 1090 Barnett Shoals Road
- ------------------------------------------------------------------------------------------------------------------------------
155 RFC Pinnacle Peak Office Building 23200 N Pima Road
- ------------------------------------------------------------------------------------------------------------------------------
156 MS Fishers Crossing Shoppes 11840-11976 Allisonville Road
- ------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
Loan
No. City County State Zipcode Property Type
- -------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C>
105 Emporia Emporia VA 23847 Hospitality
- -------------------------------------------------------------------------------------------------------------
106 Englewood Arapaho CO 80110 Multifamily
- -------------------------------------------------------------------------------------------------------------
107 San Diego San Diego CA 92115 Retail
- -------------------------------------------------------------------------------------------------------------
108 Chantilly Fairfax VA 22021 Self Storage
- -------------------------------------------------------------------------------------------------------------
109 Virginia Beach Virginia Beach VA 23451 Other
- -------------------------------------------------------------------------------------------------------------
110 Daly City San Mateo CA 94014 Retail
- -------------------------------------------------------------------------------------------------------------
111 Atlanta Fulton GA 30309 Multifamily
- -------------------------------------------------------------------------------------------------------------
112 Asheville Buncombe NC 28806 Multifamily
- -------------------------------------------------------------------------------------------------------------
113 Trouteville Botetourt VA 24175 Hospitality
- -------------------------------------------------------------------------------------------------------------
114 Sheridan Arapahoe CO 80110 Industrial
- -------------------------------------------------------------------------------------------------------------
115 Delray Beach Palm Beach FL 33446 Retail
- -------------------------------------------------------------------------------------------------------------
116 Santa Barbara Santa Barbara CA 93101 Office
- -------------------------------------------------------------------------------------------------------------
117 Warren Macomb MI 48089 Industrial
- -------------------------------------------------------------------------------------------------------------
118 Hyattsville Prince George's MD 20782 Retail
- -------------------------------------------------------------------------------------------------------------
119 Fredrick Fredrick MD 21702 Multifamily
- -------------------------------------------------------------------------------------------------------------
120 Fort Wayne Allen IN 46802 Office
- -------------------------------------------------------------------------------------------------------------
121 Fort Wayne Allen IN 46802 Office
- -------------------------------------------------------------------------------------------------------------
122 Thousand Oaks Ventura CA 91360 Retail
- -------------------------------------------------------------------------------------------------------------
123 Fremont Alameda CA 94539 Mixed Use
- -------------------------------------------------------------------------------------------------------------
124 Tampa Hillsborough FL 33629 Retail
- -------------------------------------------------------------------------------------------------------------
125 Caseyville St. Clair IL 62232 Mobile Home Park
- -------------------------------------------------------------------------------------------------------------
126 Claremont Catawba NC 28610 Retail
- -------------------------------------------------------------------------------------------------------------
127 Huntington Huntington IN 46750 Retail
- -------------------------------------------------------------------------------------------------------------
128 Anniston Calhoun AL 36207 Multifamily
- -------------------------------------------------------------------------------------------------------------
129 San Diego San Diego CA 92123 Industrial
- -------------------------------------------------------------------------------------------------------------
130 Austin Travis TX 78741 Multifamily
- -------------------------------------------------------------------------------------------------------------
131 Vidalia Toombs GA 30474 Retail
- -------------------------------------------------------------------------------------------------------------
132 Gardena Los Angeles CA 90249 Industrial
- -------------------------------------------------------------------------------------------------------------
133 Vernon Los Angeles CA 90058 Industrial
- -------------------------------------------------------------------------------------------------------------
134 Inglewood Los Angeles CA 90303 Industrial
- -------------------------------------------------------------------------------------------------------------
135 Plainfield Union NJ 07060 Multifamily
- -------------------------------------------------------------------------------------------------------------
136 Cupertino Santa Clara CA 95014 Office
- -------------------------------------------------------------------------------------------------------------
137 Miamisburg Montgomery OH 45342 Multifamily
- -------------------------------------------------------------------------------------------------------------
138 Laurinburg Scotland NC 28352 Hospitality
- -------------------------------------------------------------------------------------------------------------
139 Los Angeles Los Angeles CA 90024 Retail
- -------------------------------------------------------------------------------------------------------------
140 Lafayette Contra Costa CA 94549 Mixed Use
- -------------------------------------------------------------------------------------------------------------
141 Gaithersburg Montgomery MD 20878 Office
- -------------------------------------------------------------------------------------------------------------
142 Deerfield Lake IL 60015 Retail
- -------------------------------------------------------------------------------------------------------------
143 Mesa Maricopa AZ 85201 Multifamily
- -------------------------------------------------------------------------------------------------------------
144 Athens Clarke GA 30606 Multifamily
- -------------------------------------------------------------------------------------------------------------
145 New City Rockland NY 10956 Office
- -------------------------------------------------------------------------------------------------------------
146 Woodinville King WA 98072 Industrial
- -------------------------------------------------------------------------------------------------------------
147 South Stafford Stafford VA 22405 Retail
- -------------------------------------------------------------------------------------------------------------
148 Redmond King WA 98052 Industrial
- -------------------------------------------------------------------------------------------------------------
149 Mesa Maricopa AZ 85204 Retail
- -------------------------------------------------------------------------------------------------------------
150 Albuquerque Bernalillo NM 87111 Multifamily
- -------------------------------------------------------------------------------------------------------------
151 Vernon Los Angeles CA 90058 Industrial
- -------------------------------------------------------------------------------------------------------------
152 Annapolis Anne Arundel MD 21403 Retail
- -------------------------------------------------------------------------------------------------------------
153 Chatsworth Los Angeles CA 91311 Industrial
- -------------------------------------------------------------------------------------------------------------
154 Athens Clarke GA 30605 Multifamily
- -------------------------------------------------------------------------------------------------------------
155 Scottsdale Maricopa AZ 85255 Office
- -------------------------------------------------------------------------------------------------------------
156 Fishers Hamilton IN 46038 Retail
- -------------------------------------------------------------------------------------------------------------
</TABLE>
- ------------------------------------------------------------------------------
Loan Units or Year
No. SubType NSF Year Built Renovated
- ------------------------------------------------------------------------------
105 Limited Service 99 1992 N/A
- ------------------------------------------------------------------------------
106 Garden 112 1972 N/A
- ------------------------------------------------------------------------------
107 Unanchored 14,805 1990 N/A
- ------------------------------------------------------------------------------
108 Self Storage 72,445 1985 N/A
- ------------------------------------------------------------------------------
109 Movie Theater 20,745 1991 N/A
- ------------------------------------------------------------------------------
110 Anchored 24,901 1987 N/A
- ------------------------------------------------------------------------------
111 Garden 83 1925/1930 1997/1998
- ------------------------------------------------------------------------------
112 Garden 130 1973 1989/1992
- ------------------------------------------------------------------------------
113 Limited Service 84 1995 1997
- ------------------------------------------------------------------------------
114 Light 121,610 1973/1986 NAP
- ------------------------------------------------------------------------------
115 Unanchored 43,970 1985 NAP
- ------------------------------------------------------------------------------
116 Suburban 16,884 1986 1998
- ------------------------------------------------------------------------------
117 Light 105,861 1976/1997 1998
- ------------------------------------------------------------------------------
118 Anchored 55,582 1961 NAP
- ------------------------------------------------------------------------------
119 Garden 94 1988 1998
- ------------------------------------------------------------------------------
120 Urban 46,839 1908 1995
- ------------------------------------------------------------------------------
121 Urban 21,227 1887 1995
- ------------------------------------------------------------------------------
122 Unanchored 47,795 1960 1995
- ------------------------------------------------------------------------------
123 Retail/Office 39,317 1989 N/A
- ------------------------------------------------------------------------------
124 Unanchored 32,741 1983 NAP
- ------------------------------------------------------------------------------
125 Mobile Home Park 319 1969 NAP
- ------------------------------------------------------------------------------
126 Anchored 37,023 1998 N/A
- ------------------------------------------------------------------------------
127 Anchored 53,630 1984 1994
- ------------------------------------------------------------------------------
128 Garden 95 1979 1996-1997
- ------------------------------------------------------------------------------
129 Light 67,950 1987 N/A
- ------------------------------------------------------------------------------
130 Garden 120 1972 1997
- ------------------------------------------------------------------------------
131 Anchored 39,000 1998 N/A
- ------------------------------------------------------------------------------
132 Warehouse 110,000 1969 1997
- ------------------------------------------------------------------------------
133 Light 96,786 1968 N/A
- ------------------------------------------------------------------------------
134 Warehouse 68,714 1990 N/A
- ------------------------------------------------------------------------------
135 Mid-Rise 114 1959 N/A
- ------------------------------------------------------------------------------
136 Suburban 17,679 1985 N/A
- ------------------------------------------------------------------------------
137 Garden 84 1971 1997
- ------------------------------------------------------------------------------
138 Limited Service 80 1989 N/A
- ------------------------------------------------------------------------------
139 Big Box 7,696 1955 1995
- ------------------------------------------------------------------------------
140 Retail/Office 23,035 1945 1985
- ------------------------------------------------------------------------------
141 Suburban 32,531 1970 1988
- ------------------------------------------------------------------------------
142 Unanchored 13,141 1998 N/A
- ------------------------------------------------------------------------------
143 Garden 72 1981 1996-1998
- ------------------------------------------------------------------------------
144 Garden 58 1997 N/A
- ------------------------------------------------------------------------------
145 Suburban 23,450 1989 1997
- ------------------------------------------------------------------------------
146 Warehouse 45,300 1998 N/A
- ------------------------------------------------------------------------------
147 Shadow Anchored 27,100 1998 N/A
- ------------------------------------------------------------------------------
148 Flex 59,572 1985 NAP
- ------------------------------------------------------------------------------
149 Anchored 86,205 1987 N/A
- ------------------------------------------------------------------------------
150 Garden 120 1972 1997
- ------------------------------------------------------------------------------
151 Light 84,146 1966 N/A
- ------------------------------------------------------------------------------
152 Unanchored 37,189 1987 NAP
- ------------------------------------------------------------------------------
153 Light 68,296 1976 N/A
- ------------------------------------------------------------------------------
154 Garden 48 1996 N/A
- ------------------------------------------------------------------------------
155 Suburban 11,618 1998 NAP
- ------------------------------------------------------------------------------
156 Unanchored 23,200 1993 N/A
- ------------------------------------------------------------------------------
II-13
<PAGE>
APPENDIX II
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
PROPERTY INFORMATION
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
Loan
No. Seller Property Name(2) Address
- ------------------------------------------------------------------------------------------------------------------------------
<C> <C> <S> <C>
157 WACH Great Neck Shops & Potter Self Storage 1328 North Great Neck Road
- ------------------------------------------------------------------------------------------------------------------------------
158 MS Computer City Store 1600 W. Interstate Highway 20
- ------------------------------------------------------------------------------------------------------------------------------
159 RFC Seaboard Industrial 3380 North West 114th Street
- ------------------------------------------------------------------------------------------------------------------------------
160 MS Tire Discounters - Dayton (VI) 8081 Springboro Pike
161 MS Tire Discounters - Cincinnati (VI) 2316 Ferguson Road
- ------------------------------------------------------------------------------------------------------------------------------
162 RFC Interstate West Office Park 1056 & 1058 Claussen Road
- ------------------------------------------------------------------------------------------------------------------------------
163 RFC North Center Office Building 4319 Covington Highway
- ------------------------------------------------------------------------------------------------------------------------------
164 MS Westchase Apartments 2900 Gunnison Trail
- ------------------------------------------------------------------------------------------------------------------------------
165 MS Ashewood Apartments 7251 Samuel Drive
- ------------------------------------------------------------------------------------------------------------------------------
166 RFC Oakland Drive Apartments 6000 Oakland Drive
- ------------------------------------------------------------------------------------------------------------------------------
167 RFC Victoria Street Offices 101 E. Victoria Street
- ------------------------------------------------------------------------------------------------------------------------------
168 MS Montague Industrial Building 12300 Montague Street
- ------------------------------------------------------------------------------------------------------------------------------
169 RFC Sunrise Square Shopping Center 656 Indian Trail Road
- ------------------------------------------------------------------------------------------------------------------------------
170 WACH Berkmar Park 2130, 3000-3600 Berkmar Drive
- ------------------------------------------------------------------------------------------------------------------------------
171 MS Crest Ridge Apartments 800 Longview Road
- ------------------------------------------------------------------------------------------------------------------------------
172 RFC British Petroleum - Westlake 10925 Westlake Drive
- ------------------------------------------------------------------------------------------------------------------------------
173 RFC Kirkland Way Building 11200 Kirkland Way
- ------------------------------------------------------------------------------------------------------------------------------
174 WACH Willow Tree and Coastal Court Apartments (VII) 210 Tibet Avenue and 1 and 4 Coastal Court
- ------------------------------------------------------------------------------------------------------------------------------
175 RFC Eagle Watch Apartments 1868-1878 Sunset Avenue
- ------------------------------------------------------------------------------------------------------------------------------
176 RFC Post Alley Market Building 1530 Post Alley and 1525 First Ave.
- ------------------------------------------------------------------------------------------------------------------------------
177 WACH Cramer Marketplace Shopping Center 202 Market Street
- ------------------------------------------------------------------------------------------------------------------------------
178 WACH Penn Forest Executive Building 5115 Bernard Drive
- ------------------------------------------------------------------------------------------------------------------------------
179 MS 460 Valley Drive Industrial Building 460 Valley Drive
- ------------------------------------------------------------------------------------------------------------------------------
180 RFC Bradley Smith Apartments (VIII) 33-40th, 25-27Linden,385 Stuyvesant, 2680-2682 Kennedy
- ------------------------------------------------------------------------------------------------------------------------------
181 MS A Storage Place 2384 Patterson Rd.
- ------------------------------------------------------------------------------------------------------------------------------
182 RFC Tallmadge Towne Apartments 143-181 Overdale Ave. & 196-232 Northwest Ave.
- ------------------------------------------------------------------------------------------------------------------------------
183 MS Garden Ridge I & II Shopping and Office Center 998 N Garden Ridge Boulevard
- ------------------------------------------------------------------------------------------------------------------------------
184 WACH Greenbriar Village Shopping Center 2740 Greenbriar Parkway
- ------------------------------------------------------------------------------------------------------------------------------
185 RFC Chapel Centre 1340-1350 Home Avenue
- ------------------------------------------------------------------------------------------------------------------------------
186 RFC Laurel Manor Apartments 330 Franklin Avenue
- ------------------------------------------------------------------------------------------------------------------------------
187 WACH Potter Self Storage 2226 Campostella Road
- ------------------------------------------------------------------------------------------------------------------------------
188 RFC Dorjul Apartments 3403 Lancaster Pike
- ------------------------------------------------------------------------------------------------------------------------------
189 RFC Orange Industrial Park 1523 and 1547 West Struck Avenue
- ------------------------------------------------------------------------------------------------------------------------------
190 RFC Fiesta Palms II Retail Center 2111 South Alma School Road
- ------------------------------------------------------------------------------------------------------------------------------
191 RFC Newport Mesa Self Storage 2550 Newport Blvd.
- ------------------------------------------------------------------------------------------------------------------------------
192 MS Brunswick Apartments 3203 Brunswick Street
- ------------------------------------------------------------------------------------------------------------------------------
193 RFC Canyon Professional Center 2305-2355 Canyon Boulevard.
- ------------------------------------------------------------------------------------------------------------------------------
194 WACH Madison Heights Square US Rt. 29 & State Rt. 682
- ------------------------------------------------------------------------------------------------------------------------------
195 MS Lexington Apartments 3073 Washington Road
- ------------------------------------------------------------------------------------------------------------------------------
196 MS Heritage Green Apartments 301 Executive Drive
- ------------------------------------------------------------------------------------------------------------------------------
197 RFC Aaron Center 1115 Morrow Industrial Blvd
- ------------------------------------------------------------------------------------------------------------------------------
198 RFC Carlton Way Apartments 5741 Carlton Way
- ------------------------------------------------------------------------------------------------------------------------------
199 WACH Creekview Townhouse Apartments 437 Creekview Court
- ------------------------------------------------------------------------------------------------------------------------------
200 MS Country Village Apartments 110 West Lakeland Road
- ------------------------------------------------------------------------------------------------------------------------------
201 WACH Blackstone Square 1421-1449 South Main St.
- ------------------------------------------------------------------------------------------------------------------------------
202 RFC Pizza Hut / 7-Eleven (A) 231-233 Main Street
- ------------------------------------------------------------------------------------------------------------------------------
203 RFC Quick Chek (A) 354 Kinderkamack Road
- ------------------------------------------------------------------------------------------------------------------------------
204 WACH Holcomb Place III 1530 Old Alabama Road
- ------------------------------------------------------------------------------------------------------------------------------
205 RFC New Hope Commons 60 Crescent Street
- ------------------------------------------------------------------------------------------------------------------------------
206 RFC Union Avenue Plaza 1602-1618 Union Avenue
- ------------------------------------------------------------------------------------------------------------------------------
207 MS Cedargate Apartments 310 Midland Boulevard
- ------------------------------------------------------------------------------------------------------------------------------
208 RFC Oakcrest Apartments 1000 Oakcrest Street
- ------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
Loan
No. City County State Zipcode Property Type
- -------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C>
157 Virginia Beach Virginia Beach VA 23454 Mixed Use
- -------------------------------------------------------------------------------------------------------------
158 Arlington Tarrant County TX 76017 Retail
- -------------------------------------------------------------------------------------------------------------
159 Miami Dade FL 33147 Industrial
- -------------------------------------------------------------------------------------------------------------
160 Dayton Montgomery OH 45458 Retail
161 Cincinnati Hamilton OH 45238 Retail
- -------------------------------------------------------------------------------------------------------------
162 Augusta Richmond GA 30907 Office
- -------------------------------------------------------------------------------------------------------------
163 Decatur Dekalb GA 30035 Office
- -------------------------------------------------------------------------------------------------------------
164 Fort Worth Tarrant TX 76116 Multifamily
- -------------------------------------------------------------------------------------------------------------
165 Westminster Adams CO 80221 Multifamily
- -------------------------------------------------------------------------------------------------------------
166 Portage Kalamazoo MI 49024 Multifamily
- -------------------------------------------------------------------------------------------------------------
167 Santa Barbara Santa Barbara CA 93101 Office
- -------------------------------------------------------------------------------------------------------------
168 Pacoima Los Angeles CA 91331 Industrial
- -------------------------------------------------------------------------------------------------------------
169 Lilburn Gwinnett GA 30087 Retail
- -------------------------------------------------------------------------------------------------------------
170 Charlottesville Albemarle VA 22901 Mixed Use
- -------------------------------------------------------------------------------------------------------------
171 Knoxville Knox TN 37919 Multifamily
- -------------------------------------------------------------------------------------------------------------
172 Charlotte Mecklenburg NC 28273 Industrial
- -------------------------------------------------------------------------------------------------------------
173 Kirkland King WA 98033 Industrial
- -------------------------------------------------------------------------------------------------------------
174 Savannah Chatham GA 31406 Multifamily
- -------------------------------------------------------------------------------------------------------------
175 Cincinnati Hamilton OH 45238 Multifamily
- -------------------------------------------------------------------------------------------------------------
176 Seattle King WA 98101 Retail
- -------------------------------------------------------------------------------------------------------------
177 Cramerton Gaston NC 28032 Retail
- -------------------------------------------------------------------------------------------------------------
178 Roanoke Roanoke VA 24018 Office
- -------------------------------------------------------------------------------------------------------------
179 Brisbane San Mateo CA 94124 Industrial
- -------------------------------------------------------------------------------------------------------------
180 Irvington, Jersey City Essex and Hudson NJ 07111, 07306 Multifamily
- -------------------------------------------------------------------------------------------------------------
181 Grand Junction Mesa CO 81505 Self Storage
- -------------------------------------------------------------------------------------------------------------
182 Tallmadge Portage OH 44278 Multifamily
- -------------------------------------------------------------------------------------------------------------
183 Lewisville Denton TX 75067 Mixed Use
- -------------------------------------------------------------------------------------------------------------
184 Atlanta Fulton GA 30331 Retail
- -------------------------------------------------------------------------------------------------------------
185 Akron Summit OH 44310 Industrial
- -------------------------------------------------------------------------------------------------------------
186 Rockaway Morris NJ 7866 Multifamily
- -------------------------------------------------------------------------------------------------------------
187 Chesapeake N/A VA 23324 Self Storage
- -------------------------------------------------------------------------------------------------------------
188 Wilmington New Castle DE 19805 Multifamily
- -------------------------------------------------------------------------------------------------------------
189 Orange Orange CA 92867 Industrial
- -------------------------------------------------------------------------------------------------------------
190 Mesa Maricopa AZ 85210 Retail
- -------------------------------------------------------------------------------------------------------------
191 Costa Mesa Orange CA 92626 Self Storage
- -------------------------------------------------------------------------------------------------------------
192 Danville Vermillion IL 61832 Multifamily
- -------------------------------------------------------------------------------------------------------------
193 Boulder Boulder CO 80302 Office
- -------------------------------------------------------------------------------------------------------------
194 Madison Heights Amherst VA 24572 Retail
- -------------------------------------------------------------------------------------------------------------
195 East Point Fulton GA 30344 Multifamily
- -------------------------------------------------------------------------------------------------------------
196 Newark Licking OH 43055 Multifamily
- -------------------------------------------------------------------------------------------------------------
197 Morrow Clayton GA 30260 Retail
- -------------------------------------------------------------------------------------------------------------
198 Los Angeles Los Angeles CA 90028 Multifamily
- -------------------------------------------------------------------------------------------------------------
199 Decatur Dekalb GA 30032 Multifamily
- -------------------------------------------------------------------------------------------------------------
200 Morton Tazewell IL 61550 Multifamily
- -------------------------------------------------------------------------------------------------------------
201 Blackstone Nottoway VA 23824 Retail
- -------------------------------------------------------------------------------------------------------------
202 Ridgefield Park Bergen NJ 7660 Retail
- -------------------------------------------------------------------------------------------------------------
203 Emerson Bergen NJ 7630 Retail
- -------------------------------------------------------------------------------------------------------------
204 Roswell Fulton GA 30076 Retail
- -------------------------------------------------------------------------------------------------------------
205 Stamford Fairfield CT 6906 Multifamily
- -------------------------------------------------------------------------------------------------------------
206 Hazlet Monmouth NJ 7730 Retail
- -------------------------------------------------------------------------------------------------------------
207 Shelbyville Shelby KY 40065 Multifamily
- -------------------------------------------------------------------------------------------------------------
208 Iowa City Johnson IA 52240 Multifamily
- -------------------------------------------------------------------------------------------------------------
</TABLE>
- -----------------------------------------------------------------------------
Loan Units or Year
No. SubType NSF Year Built Renovated
- -----------------------------------------------------------------------------
157 Self Storage/Unanchored Retail 74,057 1986/1989 N/A
- -----------------------------------------------------------------------------
158 Big Box 24,888 1992 N/A
- -----------------------------------------------------------------------------
159 Light 157,500 1974 NAP
- -----------------------------------------------------------------------------
160 Unanchored 8,100 1997 N/A
161 Unanchored 6,480 1997 N/A
- -----------------------------------------------------------------------------
162 Suburban 54,280 1976/1978 1997
- -----------------------------------------------------------------------------
163 Suburban 47,042 1974 1990
- -----------------------------------------------------------------------------
164 Garden 160 1984 N/A
- -----------------------------------------------------------------------------
165 Garden 102 1968 N/A
- -----------------------------------------------------------------------------
166 Garden 100 1978 NAP
- -----------------------------------------------------------------------------
167 Suburban 11,805 1950 1997
- -----------------------------------------------------------------------------
168 Warehouse 56,056 1980 N/A
- -----------------------------------------------------------------------------
169 Unanchored 30,776 1986 NAP
- -----------------------------------------------------------------------------
170 Retail/Whse 44,588 1987 N/A
- -----------------------------------------------------------------------------
171 Garden 117 1963 N/A
- -----------------------------------------------------------------------------
172 Light 37,979 1997 NAP
- -----------------------------------------------------------------------------
173 Flex 83,358 1962 1989
- -----------------------------------------------------------------------------
174 Garden 66 1969/1985 N/A
- -----------------------------------------------------------------------------
175 Garden 96 1971 1997
- -----------------------------------------------------------------------------
176 Unanchored 18,456 1983 NAP
- -----------------------------------------------------------------------------
177 Anchored 41,900 1988 N/A
- -----------------------------------------------------------------------------
178 Suburban 34,000 1984 N/A
- -----------------------------------------------------------------------------
179 Flex 50,050 1972 N/A
- -----------------------------------------------------------------------------
180 High-Rise 67 1920/1965 1996
- -----------------------------------------------------------------------------
181 Self Storage 71,935 1995 N/A
- -----------------------------------------------------------------------------
182 Garden 59 1968/1975 1995
- -----------------------------------------------------------------------------
183 Retail/Office 20,500 1996 N/A
- -----------------------------------------------------------------------------
184 Unanchored 13,800 1987 N/A
- -----------------------------------------------------------------------------
185 Light 77,000 1974 NAP
- -----------------------------------------------------------------------------
186 Garden 49 1968 NAP
- -----------------------------------------------------------------------------
187 Self Storage 56,400 1995 N/A
- -----------------------------------------------------------------------------
188 Garden 72 1966 1998
- -----------------------------------------------------------------------------
189 Light 42,568 1976 NAP
- -----------------------------------------------------------------------------
190 Unanchored 28,383 1986 NAP
- -----------------------------------------------------------------------------
191 Self Storage 37,546 1984 NAP
- -----------------------------------------------------------------------------
192 Garden 80 1986 N/A
- -----------------------------------------------------------------------------
193 Suburban 18,524 1976 1994
- -----------------------------------------------------------------------------
194 Shadow Anchored 19,900 1997 N/A
- -----------------------------------------------------------------------------
195 Garden 211 1964 N/A
- -----------------------------------------------------------------------------
196 Garden 129 1971 N/A
- -----------------------------------------------------------------------------
197 Unanchored 42,633 1976 NAP
- -----------------------------------------------------------------------------
198 Garden 51 1963 1998
- -----------------------------------------------------------------------------
199 Garden 42 1983 N/A
- -----------------------------------------------------------------------------
200 Garden 75 1979 N/A
- -----------------------------------------------------------------------------
201 Shadow Anchored 20,880 1998 N/A
- -----------------------------------------------------------------------------
202 Anchored 3,685 1968 1994
- -----------------------------------------------------------------------------
203 Anchored 4,700 1997 NAP
- -----------------------------------------------------------------------------
204 Unanchored 14,160 1987 N/A
- -----------------------------------------------------------------------------
205 Garden 12 1988 NAP
- -----------------------------------------------------------------------------
206 Unanchored 16,425 1985 NAP
- -----------------------------------------------------------------------------
207 Garden 58 1984 N/A
- -----------------------------------------------------------------------------
208 Garden 36 1988 NAP
- -----------------------------------------------------------------------------
II-14
<PAGE>
APPENDIX II
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
PROPERTY INFORMATION
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
Loan
No. Seller Property Name(2) Address
- ------------------------------------------------------------------------------------------------------------------------------
<C> <C> <S> <C>
209 RFC City Sports 11 Bromfield Street
- ------------------------------------------------------------------------------------------------------------------------------
210 MS Glenarm Manor Apartments 2609 Gillionville Road
- ------------------------------------------------------------------------------------------------------------------------------
211 RFC Lin-Valle Center 11012 &11040 Lin-Valle Drive
- ------------------------------------------------------------------------------------------------------------------------------
212 RFC Cramer Woods Apartments Cramer Woods Drive
- ------------------------------------------------------------------------------------------------------------------------------
213 MS Great Falls Days Inn 101 14th Avenue, NW
- ------------------------------------------------------------------------------------------------------------------------------
214 MS Hillside Trace Apartments 37975 Hillside Lane
- ------------------------------------------------------------------------------------------------------------------------------
215 WACH Pearisburg Square 120-154 Kinter Way
- ------------------------------------------------------------------------------------------------------------------------------
216 RFC 3180 Presidential Drive 3180 Presidential Drive
- ------------------------------------------------------------------------------------------------------------------------------
217 MS Villa Seville Apartments 6050 Cadillac Avenue
- ------------------------------------------------------------------------------------------------------------------------------
218 RFC Montreal Station 1841 Montreal Road
- ------------------------------------------------------------------------------------------------------------------------------
219 WACH Dunwoody Springs Building 6160 Peachtree Dunwoody - "C"
- ------------------------------------------------------------------------------------------------------------------------------
220 RFC Spring House Office Park 1720, 1750, 1770 Old Springhouse Lane
- ------------------------------------------------------------------------------------------------------------------------------
221 MS Sutton Place Apartments 3150 Pyramid Parkway #1
- ------------------------------------------------------------------------------------------------------------------------------
222 RFC Garrison Street Apartments 17 Garrison Street
- ------------------------------------------------------------------------------------------------------------------------------
223 WACH Airport Drive Shops 51-73 South Airport Drive
- ------------------------------------------------------------------------------------------------------------------------------
224 RFC 2755 Philmont Ave. 2755 Philmont Ave.
- ------------------------------------------------------------------------------------------------------------------------------
225 RFC 9107 Gaither Rd. 9107 Gaither Rd.
- ------------------------------------------------------------------------------------------------------------------------------
226 RFC Tulwane Apartments 6214 - 6218 Wayne Ave.
- ------------------------------------------------------------------------------------------------------------------------------
227 RFC 900-902 Pine Street Apartments 900-902 Pine Street
- ------------------------------------------------------------------------------------------------------------------------------
228 RFC Rochelle Arms 320 Rochelle Avenue
- ------------------------------------------------------------------------------------------------------------------------------
229 RFC Pottery Row Apartments 53-55 N 2nd Street
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
Loan
No. City County State Zipcode Property Type
- -------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C>
209 Boston Suffolk MA 2108 Retail
- -------------------------------------------------------------------------------------------------------------
210 Albany Dougherty GA 31707 Multifamily
- -------------------------------------------------------------------------------------------------------------
211 Green Park (St. Louis) St. Louis MO 63123 Industrial
- -------------------------------------------------------------------------------------------------------------
212 Malta Saratoga NY 12020 Multifamily
- -------------------------------------------------------------------------------------------------------------
213 Great Falls Cascade MT 59404 Hospitality
- -------------------------------------------------------------------------------------------------------------
214 Dade City Pasco FL 33525 Multifamily
- -------------------------------------------------------------------------------------------------------------
215 Pearisburg Giles VA 24134 Retail
- -------------------------------------------------------------------------------------------------------------
216 Atlanta DeKalb GA 30340 Office
- -------------------------------------------------------------------------------------------------------------
217 Los Angeles Los Angeles CA 90034 Multifamily
- -------------------------------------------------------------------------------------------------------------
218 Tucker Dekalb GA 30084 Office
- -------------------------------------------------------------------------------------------------------------
219 Atlanta Fulton GA 30346 Office
- -------------------------------------------------------------------------------------------------------------
220 Atlanta Dekalb GA 30338 Office
- -------------------------------------------------------------------------------------------------------------
221 Lakeland Polk FL 33805 Multifamily
- -------------------------------------------------------------------------------------------------------------
222 Boston Suffolk MA 2116 Multifamily
- -------------------------------------------------------------------------------------------------------------
223 Richmond Henrico VA 23075 Retail
- -------------------------------------------------------------------------------------------------------------
224 Huntingdon Valley Montgomery PA 19006 Industrial
- -------------------------------------------------------------------------------------------------------------
225 Gaithersburg Montgomery MD 20877 Industrial
- -------------------------------------------------------------------------------------------------------------
226 Philadelphia Philadelphia PA 19144 Multifamily
- -------------------------------------------------------------------------------------------------------------
227 Philadelphia Philadelphia PA 19107 Multifamily
- -------------------------------------------------------------------------------------------------------------
228 Philadelphia Philadelphia PA 19128 Multifamily
- -------------------------------------------------------------------------------------------------------------
229 Philadelphia Philadelphia PA 19106 Multifamily
</TABLE>
- -----------------------------------------------------------------------------
Loan Units or Year
No. SubType NSF Year Built Renovated
- -----------------------------------------------------------------------------
209 Anchored 17,090 1920 1997
- -----------------------------------------------------------------------------
210 Garden 70 1986 N/A
- -----------------------------------------------------------------------------
211 Light 42,709 1988 NAP
- -----------------------------------------------------------------------------
212 Garden 32 1987 NAP
- -----------------------------------------------------------------------------
213 Limited Service 62 1992 N/A
- -----------------------------------------------------------------------------
214 Garden 64 1987 N/A
- -----------------------------------------------------------------------------
215 Shadow Anchored 17,940 1998 N/A
- -----------------------------------------------------------------------------
216 Suburban 24,841 1986 NAP
- -----------------------------------------------------------------------------
217 Garden 18 1990 N/A
- -----------------------------------------------------------------------------
218 Suburban 19,778 1986 NAP
- -----------------------------------------------------------------------------
219 Suburban 15,438 1984 N/A
- -----------------------------------------------------------------------------
220 Suburban 20,844 1971 1992
- -----------------------------------------------------------------------------
221 Garden 55 1984 N/A
- -----------------------------------------------------------------------------
222 Garden 8 1890 1998
- -----------------------------------------------------------------------------
223 Unanchored 18,000 1990 N/A
- -----------------------------------------------------------------------------
224 Light 44,250 1957-1973 1996
- -----------------------------------------------------------------------------
225 Flex 30,565 1968 1997
- -----------------------------------------------------------------------------
226 Garden 34 1939 1997
- -----------------------------------------------------------------------------
227 Garden 12 1870 1981
- -----------------------------------------------------------------------------
228 Garden 28 1934 1996
- -----------------------------------------------------------------------------
229 Garden 9 1880 1984
II-15
<PAGE>
APPENDIX II
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
PROPERTY OPERATING INFORMATION
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
Loan Underwritable Value as
No. Property Name(2) Cash Flow Monthly Payment DSCR(4) Appraised Value of Date
- --------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C> <C> <C>
1 Key West Hilton Resort $4,910,251 $269,437.88 1.52 $54,500,000 10/29/97
- --------------------------------------------------------------------------------------------------------------------------------
2 Lancaster Commerce Center $2,919,008 $191,770.56 1.27 $36,800,000 8/3/98
- --------------------------------------------------------------------------------------------------------------------------------
3 Cupertino Village Shopping Center $2,231,084 $144,386.38 1.29 $28,450,000 4/16/98
- --------------------------------------------------------------------------------------------------------------------------------
4 Metro Pike Center $1,607,352 $105,414.82 1.27 $20,400,000 2/25/98
- --------------------------------------------------------------------------------------------------------------------------------
5 Hawthorne Woods $1,459,883 $85,618.02 1.42 $16,250,000 5/21/98
- --------------------------------------------------------------------------------------------------------------------------------
6 Sybase Building $1,464,514 $101,962.67 1.20 $16,900,000 8/17/98
- --------------------------------------------------------------------------------------------------------------------------------
7 Alexandria Courtyard Marriott Hotel $1,746,939 $99,167.94 1.47 $19,000,000 8/24/98
- --------------------------------------------------------------------------------------------------------------------------------
8 Heritage House $1,312,278 $79,433.75 1.38 $15,000,000 5/14/98
- --------------------------------------------------------------------------------------------------------------------------------
9 Spanish Trace East Apartments $1,305,243 $71,557.11 1.52 $14,400,000 6/25/98
- --------------------------------------------------------------------------------------------------------------------------------
10 Four Allegheny Office Center $1,695,031 $78,351.72 1.80 $21,500,000 7/9/98
- --------------------------------------------------------------------------------------------------------------------------------
11 Town Center Lodge Motel (I) $305,528 $17,086.43 1.82 $3,650,000 1/4/98
12 Decatur Lodge Motel (I) $379,591 $17,009.12 1.82 $3,600,000 12/22/97
13 Fulton Lodge Motel (I) $366,710 $16,081.34 1.82 $3,400,000 12/22/97
14 Douglasville Lodge Motel (I) $390,368 $15,076.26 1.82 $3,200,000 1/4/98
15 West Georgia Lodge Motel (I) $261,870 $11,133.24 1.82 $2,350,000 1/4/98
16 East Point Lodge Motel (I) $61,400 $4,484.22 1.82 $950,000 1/4/98
- --------------------------------------------------------------------------------------------------------------------------------
17 Holiday Inn Hotel- Bar Harbor $1,323,343 $70,382.92 1.57 $13,600,000 2/1/98
- --------------------------------------------------------------------------------------------------------------------------------
18 Kirkwood Crossings Office and Retail Building $1,006,799 $65,052.62 1.29 $12,025,000 4/17/98
- --------------------------------------------------------------------------------------------------------------------------------
19 North Salado Village Shopping Center $720,736 $58,502.04 1.03 $11,500,000 2/24/98
- --------------------------------------------------------------------------------------------------------------------------------
20 Golden Miles Market Place $916,349 $58,667.16 1.30 $11,130,000 7/1/98
- --------------------------------------------------------------------------------------------------------------------------------
21 New Market Madison $920,637 $55,622.60 1.38 $10,850,000 7/9/98
- --------------------------------------------------------------------------------------------------------------------------------
22 Valencia Apartments $1,058,337 $58,888.60 1.50 $12,000,000 5/13/98
- --------------------------------------------------------------------------------------------------------------------------------
23 Rollingwood Shopping Center $924,357 $52,967.91 1.45 $10,200,000 1/1/99
- --------------------------------------------------------------------------------------------------------------------------------
24 525 Almanor Industrial Building $914,630 $53,897.48 1.41 $14,600,000 3/27/98
- --------------------------------------------------------------------------------------------------------------------------------
25 Town Country S C $880,852 $54,321.26 1.35 $10,470,000 9/5/98
- --------------------------------------------------------------------------------------------------------------------------------
26 Lucky/Long's Plaza Shopping Center $955,453 $59,153.27 1.35 $11,000,000 4/28/98
- --------------------------------------------------------------------------------------------------------------------------------
27 Koret Distribution Center $728,865 $48,623.00 1.25 $10,650,000 4/21/98
- --------------------------------------------------------------------------------------------------------------------------------
28 Colony By The Mall Apartments $734,344 $46,998.30 1.30 $9,100,000 5/28/98
- --------------------------------------------------------------------------------------------------------------------------------
29 Manekin Industrial Portfolio $750,646 $47,283.22 1.32 $9,400,000 11/17/97
- --------------------------------------------------------------------------------------------------------------------------------
30 St. Andrews Professional Center $818,617 $48,281.23 1.41 $9,100,000 4/28/98
- --------------------------------------------------------------------------------------------------------------------------------
31 Green Ridge Heights Apartments $769,488 $44,649.00 1.44 $9,100,000 1/7/98
- --------------------------------------------------------------------------------------------------------------------------------
32 Cove Center $743,503 $44,004.95 1.41 $8,900,000 4/15/98
- --------------------------------------------------------------------------------------------------------------------------------
33 Golden Isle Plaza $769,895 $43,520.93 1.47 $9,230,000 9/1/98
- --------------------------------------------------------------------------------------------------------------------------------
34 2040-2060 Corporate Court Industrial $1,090,075 $73,546.31 1.24 $15,500,000 5/4/98
- --------------------------------------------------------------------------------------------------------------------------------
35 Miami Lakes Corporate Center $681,732 $43,506.90 1.31 $8,650,000 6/3/98
- --------------------------------------------------------------------------------------------------------------------------------
36 Bon Air Professional Center $727,747 $44,000.37 1.38 $8,650,000 7/28/98
- --------------------------------------------------------------------------------------------------------------------------------
37 Woodside Apartments $905,821 $42,622.35 1.77 $9,850,000 11/14/97
- --------------------------------------------------------------------------------------------------------------------------------
38 Cambridge Commons Apartments $631,839 $39,767.44 1.32 $7,590,000 5/27/98
- --------------------------------------------------------------------------------------------------------------------------------
39 Alicia Valencia Plaza Shopping Center $869,353 $57,033.74 1.27 $10,200,000 5/1/98
- --------------------------------------------------------------------------------------------------------------------------------
40 Willow Tree $687,646 $38,082.06 1.50 $8,100,000 6/12/98
- --------------------------------------------------------------------------------------------------------------------------------
41 Bayport Marina Plaza Industrial $595,196 $39,115.51 1.27 $9,000,000 5/20/98
- --------------------------------------------------------------------------------------------------------------------------------
42 New Market Square $695,509 $38,637.12 1.50 $8,200,000 7/1/98
- --------------------------------------------------------------------------------------------------------------------------------
43 Shoppes at Cresthaven $672,960 $42,058.33 1.33 $8,900,000 8/31/98
- --------------------------------------------------------------------------------------------------------------------------------
44 Southport Centre $602,170 $39,958.00 1.26 $7,300,000 6/12/98
- --------------------------------------------------------------------------------------------------------------------------------
45 Half-A-Car $708,183 $37,540.21 1.57 $7,150,000 4/7/98
- --------------------------------------------------------------------------------------------------------------------------------
46 Merchants Centre $627,832 $37,332.19 1.40 $7,150,000 6/1/98
- --------------------------------------------------------------------------------------------------------------------------------
47 Plaza K Shopping Center $619,206 $36,433.24 1.42 $7,150,000 6/2/98
- --------------------------------------------------------------------------------------------------------------------------------
48 Parkway Shopping Center $643,967 $40,119.09 1.34 $7,600,000 10/28/97
- --------------------------------------------------------------------------------------------------------------------------------
49 788 North Jefferson Office Building $597,632 $37,781.18 1.32 $7,450,000 5/1/98
- --------------------------------------------------------------------------------------------------------------------------------
50 Comfort Suites $779,538 $39,484.98 1.65 $7,737,000 6/10/98
- --------------------------------------------------------------------------------------------------------------------------------
51 Taft Corners Shopping Center $569,558 $37,301.77 1.27 $7,162,000 5/22/98
- --------------------------------------------------------------------------------------------------------------------------------
52 Mickelberry Shopping Center $600,517 $38,944.46 1.28 $7,350,000 3/5/97
- --------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
Loan Cut-Off Percent Percent Leased Square Footage
No. Date LTV(4) Leased(7) as of Date(7) LargestTenant(8) Largest Tenant
- ----------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C>
1 67.5% 81.2% 10/31/98
- ----------------------------------------------------------------------------------------------------------
2 78.5% 86.2% 08/14/98 Ross Store #158 24,968 sf
- ----------------------------------------------------------------------------------------------------------
3 74.4% 94.8% 06/01/98 A-99 Ranch Market 29,657 sf
- ----------------------------------------------------------------------------------------------------------
4 74.2% 100.0% 09/22/98 Southland - 7-Eleven 3,816 sf
- ----------------------------------------------------------------------------------------------------------
5 79.6% 97.4% 09/23/98
- ----------------------------------------------------------------------------------------------------------
6 76.2% 100.0% 09/24/98 Sybase, Inc. 96,360 sf
- ----------------------------------------------------------------------------------------------------------
7 66.9% 77.8% 06/30/98
- ----------------------------------------------------------------------------------------------------------
8 79.6% 97.4% 09/23/98
- ----------------------------------------------------------------------------------------------------------
9 79.5% 98.3% 08/24/98
- ----------------------------------------------------------------------------------------------------------
10 48.7% 100.0% 04/08/98 Allegheny General Hospital 231,426 sf
- ----------------------------------------------------------------------------------------------------------
11 60.6% 96.0% 06/30/98
12 60.6% 97.0% 06/30/98
13 60.6% 78.0% 06/30/98
14 60.6% 78.0% 06/30/98
15 60.6% 74.0% 06/30/98
16 60.6% 97.0% 06/30/98
- ----------------------------------------------------------------------------------------------------------
17 69.3% 73.3% 06/30/98
- ----------------------------------------------------------------------------------------------------------
18 74.4% 100.0% 07/21/98 Barnes-Jewish Hospital 17,064 sf
- ----------------------------------------------------------------------------------------------------------
19 75.8% 76.4% 11/01/98 Michaels 42,130 sf
- ----------------------------------------------------------------------------------------------------------
20 77.1% 99.1% 08/15/98 Toys R Us 45,000 sf
- ----------------------------------------------------------------------------------------------------------
21 77.8% 100.0% 08/25/98 K-Mart 91,266 sf
- ----------------------------------------------------------------------------------------------------------
22 70.2% 78.1% 06/16/98
- ----------------------------------------------------------------------------------------------------------
23 79.1% 100.0% 10/01/98 SuperFresh 56,301 sf
- ----------------------------------------------------------------------------------------------------------
24 54.5% 100.0% 03/10/98 Phoenix American Inc. 56,340 sf
- ----------------------------------------------------------------------------------------------------------
25 75.2% 96.0% 09/30/98 Burlington Coat Factory 105,405 sf
- ----------------------------------------------------------------------------------------------------------
26 68.7% 96.5% 09/25/98 Lucky's Stores, Inc. 33,564 sf
- ----------------------------------------------------------------------------------------------------------
27 70.1% 100.0% 09/09/98 Koret of California, Inc. 397,710 sf
- ----------------------------------------------------------------------------------------------------------
28 77.6% 86.9% 08/25/98
- ----------------------------------------------------------------------------------------------------------
29 74.2% 91.1% 11/23/98 Pierce Archives 50,960 sf
- ----------------------------------------------------------------------------------------------------------
30 74.5% 100.0% 07/29/98 Mudrick, Witt, Levy 2,323 sf
- ----------------------------------------------------------------------------------------------------------
31 74.1% 92.2% 10/01/98
- ----------------------------------------------------------------------------------------------------------
32 75.4% 100.0% 07/02/98 Beall's 55,552 sf
- ----------------------------------------------------------------------------------------------------------
33 72.5% 100.0% 11/04/98 TJ Maxx 28,000 sf
- ----------------------------------------------------------------------------------------------------------
34 42.8% 100.0% 03/11/98 Therma 71,566 sf
- ----------------------------------------------------------------------------------------------------------
35 74.8% 100.0% 09/23/98 Multi-Care 17,899 sf
- ----------------------------------------------------------------------------------------------------------
36 74.3% 100.0% 08/26/98 Marin General Hospital (Medical Offices) 23,560 sf
- ----------------------------------------------------------------------------------------------------------
37 64.4% 99.4% 10/05/98
- ----------------------------------------------------------------------------------------------------------
38 80.0% 89.1% 08/21/98
- ----------------------------------------------------------------------------------------------------------
39 58.7% 96.4% 09/24/98 Dan W. Hauben 3,600 sf
- ----------------------------------------------------------------------------------------------------------
40 73.8% 100.0% 06/01/98 Equitable Life Assurance 67,800 sf
- ----------------------------------------------------------------------------------------------------------
41 66.4% 100.0% 10/27/98 BBG&S 6,576 sf
- ----------------------------------------------------------------------------------------------------------
42 72.8% 96.0% 07/31/98 Winn-Dixie 54,000 sf
- ----------------------------------------------------------------------------------------------------------
43 65.5% 74.0% 11/12/98 Winn Dixie Marketpalce 66,000 sf
- ----------------------------------------------------------------------------------------------------------
44 79.7% 100.0% 10/01/98 JDR Recovery 20,464 sf
- ----------------------------------------------------------------------------------------------------------
45 79.3% 100.0% 07/06/98 Half-A-Car 54,000 sf
- ----------------------------------------------------------------------------------------------------------
46 78.0% 95.0% 09/17/98 Pacific Wilderness 4,500 sf
- ----------------------------------------------------------------------------------------------------------
47 78.0% 100.0% 09/01/98 Lucille Roberts Health 7,802 sf
- ----------------------------------------------------------------------------------------------------------
48 73.0% 97.4% 08/24/98 Allentown Business 30,000 sf
- ----------------------------------------------------------------------------------------------------------
49 73.5% 98.7% 07/01/98 Allen Bradley 36,893 sf
- ----------------------------------------------------------------------------------------------------------
50 69.4% 67.0% 09/30/98 N/A N/A
- ----------------------------------------------------------------------------------------------------------
51 74.7% 79.1% 11/15/98 Lenny's Shoe & Apparel 5,100 sf
- ----------------------------------------------------------------------------------------------------------
52 72.5% 100.0% 08/31/98 Office Depot 28,900 sf
- ----------------------------------------------------------------------------------------------------------
</TABLE>
II-16
<PAGE>
APPENDIX II
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
PROPERTY OPERATING INFORMATION
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
Loan Underwritable Value as
No. Property Name(2) Cash Flow Monthly Payment DSCR(4) Appraised Value of Date
- --------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C> <C> <C>
53 Cottonwood Corners Shopping Center $556,840 $35,261.79 1.32 $6,700,000 8/1/98
- --------------------------------------------------------------------------------------------------------------------------------
54 Comfort Inn & Comfort Suites $671,322 $40,314.47 1.39 $7,350,000 9/29/98
- --------------------------------------------------------------------------------------------------------------------------------
55 Dalton Place Shopping Center $542,631 $36,008.36 1.26 $6,350,000 2/1/98
- --------------------------------------------------------------------------------------------------------------------------------
56 Showcase Plaza Shopping Center $556,485 $34,108.82 1.36 $6,300,000 8/11/98
- --------------------------------------------------------------------------------------------------------------------------------
57 Springrove Mobile Home Park $1,004,036 $38,227.00 2.19 $12,300,000 4/16/98
- --------------------------------------------------------------------------------------------------------------------------------
58 Gateway/Lombardi (II) $580,899 $33,945.15 1.43 $7,060,000 11/3/97
- --------------------------------------------------------------------------------------------------------------------------------
59 Arbors of Wooster Apartments $521,766 $32,387.10 1.34 $6,000,000 12/30/97
- --------------------------------------------------------------------------------------------------------------------------------
60 Sunset Plaza Shopping Center $546,178 $37,427.48 1.22 $6,300,000 12/22/98
- --------------------------------------------------------------------------------------------------------------------------------
61 Blackstock Warehouse $633,872 $42,356.84 1.25 $6,750,000 9/28/98
- --------------------------------------------------------------------------------------------------------------------------------
62 Augusta at Gruene $493,422 $30,172.63 1.36 $5,750,000 3/30/98
- --------------------------------------------------------------------------------------------------------------------------------
63 Commerce Office Building (III) $357,773 $19,527.88 1.52 $4,100,000 6/1/98
64 Medical & Professional Office Building (III) $188,309 $10,468.86 1.52 $2,200,000 6/1/98
- --------------------------------------------------------------------------------------------------------------------------------
65 Southside Square Shopping Center $497,801 $29,276.71 1.42 $7,275,000 7/1/98
- --------------------------------------------------------------------------------------------------------------------------------
66 Saratoga Square Apartments $637,219 $28,977.84 1.83 $7,000,000 5/21/98
- --------------------------------------------------------------------------------------------------------------------------------
67 Minaret Village Retail and Office Center $645,761 $30,545.47 1.76 $7,100,000 12/15/97
- --------------------------------------------------------------------------------------------------------------------------------
68 Redland Crest Apartments $516,858 $29,159.03 1.48 $5,550,000 10/2/98
- --------------------------------------------------------------------------------------------------------------------------------
69 Village of Westover Apartments $466,637 $27,954.27 1.39 $6,000,000 6/5/98
- --------------------------------------------------------------------------------------------------------------------------------
70 499 University Avenue $602,130 $34,633.02 1.45 $7,655,000 5/1/98
- --------------------------------------------------------------------------------------------------------------------------------
71 Manufacturers Bank Building $531,103 $29,362.75 1.51 $6,300,000 8/25/98
- --------------------------------------------------------------------------------------------------------------------------------
72 Print Pack Buildings $467,299 $31,219.35 1.25 $5,750,000 9/1/98
- --------------------------------------------------------------------------------------------------------------------------------
73 Hennepin Square Office Building $487,761 $30,805.73 1.32 $5,450,000 4/27/98
- --------------------------------------------------------------------------------------------------------------------------------
74 Brandywine III Apartments $486,138 $28,989.26 1.40 $5,700,000 7/7/98
- --------------------------------------------------------------------------------------------------------------------------------
75 V United Plaza $486,256 $33,778.05 1.20 $5,750,000 6/17/98
- --------------------------------------------------------------------------------------------------------------------------------
76 South Park Shopping Center $436,368 $28,246.82 1.29 $5,350,000 7/23/98
- --------------------------------------------------------------------------------------------------------------------------------
77 Pineville Towne Market $542,433 $27,045.98 1.67 $6,100,000 7/1/98
- --------------------------------------------------------------------------------------------------------------------------------
78 555 & 565 Old Norcross Rd $414,214 $27,721.63 1.25 $5,400,000 5/5/98
- --------------------------------------------------------------------------------------------------------------------------------
79 Lake Union Office Building $419,225 $28,041.38 1.25 $5,500,000 6/1/98
- --------------------------------------------------------------------------------------------------------------------------------
80 Via Alamos Apartments $461,784 $26,344.01 1.46 $5,100,000 8/25/98
- --------------------------------------------------------------------------------------------------------------------------------
81 Gallery Row $490,290 $25,546.35 1.60 $6,000,000 3/5/98
- --------------------------------------------------------------------------------------------------------------------------------
82 Arbour Walk Village Apartments $417,431 $23,785.15 1.46 $4,900,000 7/22/98
- --------------------------------------------------------------------------------------------------------------------------------
83 San Fernando Industrial Building $577,194 $25,321.26 1.90 $7,300,000 1/1/98
- --------------------------------------------------------------------------------------------------------------------------------
84 Village at Cedar Shoals $425,617 $26,531.00 1.34 $5,000,000 7/8/98
- --------------------------------------------------------------------------------------------------------------------------------
85 Kirby Plaza Office Building $405,709 $27,227.40 1.24 $4,940,000 10/16/97
- --------------------------------------------------------------------------------------------------------------------------------
86 800 South Broadway Office Building $390,733 $24,840.24 1.31 $5,470,000 5/1/98
- --------------------------------------------------------------------------------------------------------------------------------
87 Polifly Plaza $387,787 $25,244.70 1.28 $5,100,000 3/24/98
- --------------------------------------------------------------------------------------------------------------------------------
88 Summit Apartments $604,091 $23,158.42 2.17 $7,800,000 5/1/98
- --------------------------------------------------------------------------------------------------------------------------------
89 Villa Fontana $473,416 $23,230.01 1.70 $6,225,000 4/3/98
- --------------------------------------------------------------------------------------------------------------------------------
90 Laguna Self Storage $486,938 $25,431.36 1.60 $5,430,000 11/21/97
- --------------------------------------------------------------------------------------------------------------------------------
91 Hughes Towers Apartments $429,981 $23,801.20 1.51 $4,770,000 4/27/98
- --------------------------------------------------------------------------------------------------------------------------------
92 Roswell Oaks $367,571 $22,030.39 1.39 $4,700,000 9/16/98
- --------------------------------------------------------------------------------------------------------------------------------
93 Temple Medical Office Building $350,908 $23,876.17 1.22 $4,950,000 6/4/98
- --------------------------------------------------------------------------------------------------------------------------------
94 Victoria Square Apartments $347,179 $22,955.05 1.26 $4,400,000 5/4/98
- --------------------------------------------------------------------------------------------------------------------------------
95 Kmart $419,204 $27,493.76 1.27 $4,900,000 3/2/98
- --------------------------------------------------------------------------------------------------------------------------------
96 Strathmore Towers Apartments $348,974 $21,806.34 1.33 $4,800,000 4/24/98
- --------------------------------------------------------------------------------------------------------------------------------
97 69 Hickory Drive Office Building $412,465 $22,963.83 1.50 $4,700,000 9/1/98
- --------------------------------------------------------------------------------------------------------------------------------
98 Rancho Broadway Shopping Center $465,519 $30,015.54 1.29 $5,400,000 5/1/98
- --------------------------------------------------------------------------------------------------------------------------------
99 Union Bank Office Building $545,308 $25,922.45 1.75 $6,500,000 5/5/98
- --------------------------------------------------------------------------------------------------------------------------------
100 Northampton Apartments $425,131 $26,229.66 1.35 $4,625,000 12/16/97
- --------------------------------------------------------------------------------------------------------------------------------
101 2424 Babcock Office and Medical Building $369,735 $22,770.91 1.35 $4,300,000 7/1/98
- --------------------------------------------------------------------------------------------------------------------------------
102 Casa Grande Retail Center $394,368 $22,374.91 1.47 $4,000,000 5/8/98
- --------------------------------------------------------------------------------------------------------------------------------
103 The Vineyards Apartments $339,209 $20,755.14 1.36 $4,000,000 5/28/98
- --------------------------------------------------------------------------------------------------------------------------------
104 Dunwoody Shallowford Office Park $386,657 $22,607.12 1.43 $4,100,000 5/13/98
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
Loan Cut-Off Percent Percent Leased Square Footage
No. Date LTV(4) Leased(7) as of Date(7) LargestTenant(8) Largest Tenant
- ----------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C>
53 77.4% 100.0% 11/16/98 Albertson's 41,764 sf
- ----------------------------------------------------------------------------------------------------------
54 69.5% 70.0% 10/31/98 N/A N/A
- ----------------------------------------------------------------------------------------------------------
55 79.2% 94.8% 07/22/98 Winn Dixie 47,718 sf
- ----------------------------------------------------------------------------------------------------------
56 79.1% 96.6% 09/18/98 Maburn Nat-I-Lene 7,450 sf
- ----------------------------------------------------------------------------------------------------------
57 40.2% 95.5% 08/04/98
- ----------------------------------------------------------------------------------------------------------
58 67.5% 98.3% 09/30/98 Sonoma County 16,817 sf
- ----------------------------------------------------------------------------------------------------------
59 79.3% 99.2% 10/01/98
- ----------------------------------------------------------------------------------------------------------
60 73.2% 100.0% 12/31/98 Rose's Stores, Inc. 45,495 sf
- ----------------------------------------------------------------------------------------------------------
61 68.1% 87.0% 12/17/98 Specialty Equipment Co., Inc 144,468 sf
- ----------------------------------------------------------------------------------------------------------
62 79.5% 100.0% 09/24/98
- ----------------------------------------------------------------------------------------------------------
63 71.9% 77.1% 09/24/98 Star Bank 10,000 sf
64 71.9% 83.5% 09/24/98 Ear, Nose & Throat Associates 9,122 sf
- ----------------------------------------------------------------------------------------------------------
65 61.5% 79.6% 09/01/98 Kmart 86,479 sf
- ----------------------------------------------------------------------------------------------------------
66 63.9% 98.0% 09/22/98
- ----------------------------------------------------------------------------------------------------------
67 62.9% 99.4% 10/05/98 Town of Mammoth Lakes 20,797 sf
- ----------------------------------------------------------------------------------------------------------
68 79.9% 100.0% 10/01/98 N/A N/A
- ----------------------------------------------------------------------------------------------------------
69 72.1% 99.1% 07/01/98
- ----------------------------------------------------------------------------------------------------------
70 56.4% 100.0% 09/23/98 Steelcase/LVL Communications 13,186 sf
- ----------------------------------------------------------------------------------------------------------
71 68.0% 100.0% 10/01/98 Manufacturers Bank 13,711 sf
- ----------------------------------------------------------------------------------------------------------
72 74.4% 100.0% 08/08/98 Print Pack, Inc 149,302 sf
- ----------------------------------------------------------------------------------------------------------
73 78.4% 93.4% 08/31/98 Metro Visiting 12,596 sf
- ----------------------------------------------------------------------------------------------------------
74 74.7% 97.4% 09/01/98
- ----------------------------------------------------------------------------------------------------------
75 73.9% 100.0% 07/31/98 Unisys 34,509 sf
- ----------------------------------------------------------------------------------------------------------
76 79.1% 100.0% 12/02/98 Food Lion 35,552 sf
- ----------------------------------------------------------------------------------------------------------
77 68.5% 95.5% 07/31/98 Food Lion 32,040 sf
- ----------------------------------------------------------------------------------------------------------
78 76.5% 96.0% 12/07/98 N/A N/A
- ----------------------------------------------------------------------------------------------------------
79 73.2% 100.0% 06/01/98 TPD Publishing 12,719 sf
- ----------------------------------------------------------------------------------------------------------
80 78.2% 95.6% 07/31/98
- ----------------------------------------------------------------------------------------------------------
81 66.4% 100.0% 08/31/98 GSA 28,485 sf
- ----------------------------------------------------------------------------------------------------------
82 79.2% 100.0% 09/15/98
- ----------------------------------------------------------------------------------------------------------
83 53.0% 100.0% 10/05/98 Independent Studio Serv. 62,000 sf
- ----------------------------------------------------------------------------------------------------------
84 76.2% 100.0% 09/30/98 Food Lion 29,000 sf
- ----------------------------------------------------------------------------------------------------------
85 76.0% 100.0% 11/10/98 Norwest Financial 8,209 sf
- ----------------------------------------------------------------------------------------------------------
86 67.3% 100.0% 08/31/98 Pacific 10 Conference 7,736 sf
- ----------------------------------------------------------------------------------------------------------
87 71.7% 100.0% 06/26/98 Enterprise 15,473 sf
- ----------------------------------------------------------------------------------------------------------
88 45.9% 100.0% 04/30/98
- ----------------------------------------------------------------------------------------------------------
89 57.5% 97.2% 06/01/98
- ----------------------------------------------------------------------------------------------------------
90 65.7% 91.6% 06/04/98
- ----------------------------------------------------------------------------------------------------------
91 74.7% 100.0% 09/22/98
- ----------------------------------------------------------------------------------------------------------
92 74.3% 94.0% 12/01/98 American Home Mortgage 7,008 sf
- ----------------------------------------------------------------------------------------------------------
93 70.5% 88.6% 09/11/98 Medical Associates 5,134 sf
- ----------------------------------------------------------------------------------------------------------
94 79.0% 100.0% 06/30/98
- ----------------------------------------------------------------------------------------------------------
95 70.5% 100.0% 05/04/98 Kmart 70,112 sf
- ----------------------------------------------------------------------------------------------------------
96 71.6% 96.8% 08/03/98
- ----------------------------------------------------------------------------------------------------------
97 72.1% 100.0% 10/07/98 Tally Systems Corp. 7,480 sf
- ----------------------------------------------------------------------------------------------------------
98 61.4% 100.0% 09/28/98 Pic-N-Save 24,950 sf
- ----------------------------------------------------------------------------------------------------------
99 50.6% 95.1% 09/23/98 Union Bank of California 9,266 sf
- ----------------------------------------------------------------------------------------------------------
100 70.7% 97.3% 05/20/98
- ----------------------------------------------------------------------------------------------------------
101 74.7% 95.7% 11/30/98 Eye Institute A. 8,101 sf
- ----------------------------------------------------------------------------------------------------------
102 79.7% 100.0% 08/28/98 Coast to Coast Hardware 8,450 sf
- ----------------------------------------------------------------------------------------------------------
103 79.6% 99.0% 07/24/98
- ----------------------------------------------------------------------------------------------------------
104 74.9% 100.0% 06/12/98 Apco Insurance 16,434 sf
</TABLE>
II-17
<PAGE>
APPENDIX II
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
PROPERTY OPERATING INFORMATION
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
Loan Underwritable Value as
No. Property Name(2) Cash Flow Monthly Payment DSCR(4) Appraised Value of Date
- --------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C> <C> <C>
105 Best Western $482,386 $23,759.69 1.69 $4,200,000 7/13/98
- --------------------------------------------------------------------------------------------------------------------------------
106 Kenyon Place Apartments $336,520 $20,262.20 1.38 $4,000,000 9/21/98
- --------------------------------------------------------------------------------------------------------------------------------
107 College Square Shopping Center $344,851 $20,282.48 1.42 $3,790,000 7/17/98
- --------------------------------------------------------------------------------------------------------------------------------
108 Americana Self Storage $483,627 $19,278.81 2.09 $5,000,000 6/9/98
- --------------------------------------------------------------------------------------------------------------------------------
109 Regal Cinemas $361,182 $23,747.65 1.27 $4,100,000 7/2/98
- --------------------------------------------------------------------------------------------------------------------------------
110 Mission Plaza Shopping Center $351,276 $19,557.76 1.50 $5,370,000 5/8/98
- --------------------------------------------------------------------------------------------------------------------------------
111 Collier & Piedmont Rd. Apts. (IV) $336,477 $21,549.10 1.30 $3,900,000 4/29/98
- --------------------------------------------------------------------------------------------------------------------------------
112 Canteberi Place Apartments $355,650 $20,841.15 1.42 $4,000,000 4/5/98
- --------------------------------------------------------------------------------------------------------------------------------
113 Holiday Inn Express $532,008 $27,759.25 1.60 $4,750,000 7/10/98
- --------------------------------------------------------------------------------------------------------------------------------
114 Pacifica Hampden Industrial Park $418,324 $20,774.93 1.68 $3,900,000 4/22/98
- --------------------------------------------------------------------------------------------------------------------------------
115 Atlantic Plaza II $334,728 $20,310.54 1.37 $3,975,000 6/12/98
- --------------------------------------------------------------------------------------------------------------------------------
116 Bath Street Partners $300,171 $19,006.07 1.32 $4,000,000 6/11/98
- --------------------------------------------------------------------------------------------------------------------------------
117 JM Industrial $377,482 $19,612.00 1.60 $3,750,000 4/13/98
- --------------------------------------------------------------------------------------------------------------------------------
118 Sargent Road Shopping Center. $310,418 $20,365.04 1.27 $3,600,000 5/19/98
- --------------------------------------------------------------------------------------------------------------------------------
119 Little Brook Apartments $321,241 $18,325.29 1.46 $3,450,000 2/18/98
- --------------------------------------------------------------------------------------------------------------------------------
120 Courtside Office Building (V) $256,800 $12,739.93 1.56 $2,600,000 6/1/98
121 Murphy Office Building (V) $82,615 $5,389.97 1.56 $1,100,000 6/1/98
- --------------------------------------------------------------------------------------------------------------------------------
122 North Oaks Plaza $333,936 $19,718.01 1.41 $3,850,000 6/9/98
- --------------------------------------------------------------------------------------------------------------------------------
123 Ohlone Village Shopping and Office Center $346,907 $20,072.49 1.44 $4,600,000 5/23/98
- --------------------------------------------------------------------------------------------------------------------------------
124 Palms Plaza $284,248 $17,601.98 1.35 $3,500,000 7/21/98
- --------------------------------------------------------------------------------------------------------------------------------
125 St. Clair Mobile Home Parks $378,685 $19,463.63 1.62 $3,620,000 7/28/98
- --------------------------------------------------------------------------------------------------------------------------------
126 Claremont Commons $305,644 $18,157.58 1.40 $3,340,000 5/11/98
- --------------------------------------------------------------------------------------------------------------------------------
127 Guilford Street Center $293,406 $17,523.86 1.40 $3,450,000 5/13/98
- --------------------------------------------------------------------------------------------------------------------------------
128 Ski Lodge Apartments $310,018 $17,105.44 1.51 $3,300,000 5/27/98
- --------------------------------------------------------------------------------------------------------------------------------
129 Maxwell Labs Industrial Building $393,273 $27,080.34 1.21 $4,890,000 7/1/97
- --------------------------------------------------------------------------------------------------------------------------------
130 Lakeshore Apartments $344,583 $17,941.62 1.60 $3,400,000 7/23/98
- --------------------------------------------------------------------------------------------------------------------------------
131 Vidalia Food Lion $290,566 $18,021.88 1.34 $3,350,000 12/9/98
- --------------------------------------------------------------------------------------------------------------------------------
132 Rosecrans Avenue Warehouse $333,353 $16,314.79 1.70 $4,000,000 1/1/98
- --------------------------------------------------------------------------------------------------------------------------------
133 4800 Santa Fe Industrial Building $281,661 $16,564.02 1.42 $3,500,000 1/6/98
- --------------------------------------------------------------------------------------------------------------------------------
134 Century Warehouse $352,140 $16,250.58 1.81 $4,200,000 1/1/98
- --------------------------------------------------------------------------------------------------------------------------------
135 Pingry Arms and Cornell Arms Apartments $286,183 $18,941.69 1.26 $4,650,000 11/25/97
- --------------------------------------------------------------------------------------------------------------------------------
136 20195 Stevens Creek Boulevard Office Building $341,661 $18,896.39 1.51 $3,985,000 2/5/98
- --------------------------------------------------------------------------------------------------------------------------------
137 Maple Run Apartments $231,192 $15,414.28 1.25 $3,000,000 4/16/98
- --------------------------------------------------------------------------------------------------------------------------------
138 Comfort Inn Laurinburg $306,519 $18,431.71 1.39 $3,430,000 9/28/98
- --------------------------------------------------------------------------------------------------------------------------------
139 Blockbuster - Westwood Shopping Center $242,383 $15,721.27 1.28 $3,100,000 7/6/98
- --------------------------------------------------------------------------------------------------------------------------------
140 Clock Tower Office and Retail Building $328,755 $23,008.01 1.19 $3,550,000 3/20/97
- --------------------------------------------------------------------------------------------------------------------------------
141 One Bank Street $241,866 $15,322.51 1.32 $2,965,000 6/11/98
- --------------------------------------------------------------------------------------------------------------------------------
142 Shoppes of Deerfield $265,484 $14,858.95 1.49 $2,900,000 6/20/98
- --------------------------------------------------------------------------------------------------------------------------------
143 Dartmoor Apartments $232,829 $15,052.67 1.29 $3,150,000 4/17/98
- --------------------------------------------------------------------------------------------------------------------------------
144 Lavender Lakes $238,710 $14,896.39 1.34 $2,725,000 5/13/98
- --------------------------------------------------------------------------------------------------------------------------------
145 Sunshine Office Building $221,246 $14,347.35 1.29 $3,000,000 6/1/98
- --------------------------------------------------------------------------------------------------------------------------------
146 Underwood Gartland Industrial Building $240,561 $14,625.86 1.37 $3,000,000 9/24/98
- --------------------------------------------------------------------------------------------------------------------------------
147 Washington Square $265,280 $16,218.31 1.36 $2,800,000 6/8/98
- --------------------------------------------------------------------------------------------------------------------------------
148 Eastlake Business Park $349,920 $14,615.40 2.00 $4,700,000 4/8/98
- --------------------------------------------------------------------------------------------------------------------------------
149 Lindsay Marketplace Shopping Center $360,943 $16,909.77 1.78 $3,900,000 5/6/97
- --------------------------------------------------------------------------------------------------------------------------------
150 Sierra Meadows Apartments $241,952 $14,958.16 1.35 $3,515,000 11/10/97
- --------------------------------------------------------------------------------------------------------------------------------
151 4700 Santa Fe Industrial Building $216,627 $13,845.84 1.30 $3,000,000 1/6/98
- --------------------------------------------------------------------------------------------------------------------------------
152 Georgetown Plaza $253,200 $16,678.00 1.27 $3,000,000 4/15/98
- --------------------------------------------------------------------------------------------------------------------------------
153 Itasca Business Park $292,197 $18,142.32 1.34 $3,400,000 5/8/98
- --------------------------------------------------------------------------------------------------------------------------------
154 Shoal Creek Apartments $239,379 $15,870.43 1.26 $2,700,000 5/13/98
- --------------------------------------------------------------------------------------------------------------------------------
155 Pinnacle Peak Office Building $229,509 $12,753.37 1.50 $2,685,000 8/14/98
- --------------------------------------------------------------------------------------------------------------------------------
156 Fishers Crossing Shoppes $252,126 $16,853.49 1.25 $2,780,000 7/15/98
- --------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
Loan Cut-Off Percent Percent Leased Square Footage
No. Date LTV(4) Leased(7) as of Date(7) LargestTenant(8) Largest Tenant
- ----------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C>
105 71.4% 68.0% 11/30/98 N/A N/A
- ----------------------------------------------------------------------------------------------------------
106 74.8% 100.0% 06/30/98
- ----------------------------------------------------------------------------------------------------------
107 78.9% 100.0% 08/01/98 Folett College Stores 6,043 sf
- ----------------------------------------------------------------------------------------------------------
108 59.7% 86.1% 05/31/98 N/A N/A
- ----------------------------------------------------------------------------------------------------------
109 72.8% 100.0% 09/01/98 Regal Cinema 20,745 sf
- ----------------------------------------------------------------------------------------------------------
110 55.5% 88.6% 06/30/98 Walgreens 11,613 sf
- ----------------------------------------------------------------------------------------------------------
111 76.2% 98.0% 09/30/98 N/A N/A
- ----------------------------------------------------------------------------------------------------------
112 74.2% 92.0% 09/30/98 N/A N/A
- ----------------------------------------------------------------------------------------------------------
113 62.4% 74.0% 09/30/98 N/A N/A
- ----------------------------------------------------------------------------------------------------------
114 73.7% 95.8% 09/01/98 Steve Bruns T, Constant 10,500 sf
- ----------------------------------------------------------------------------------------------------------
115 70.4% 99.1% 06/30/98 Glick's Kosher Supermkt 5,500 sf
- ----------------------------------------------------------------------------------------------------------
116 69.8% 100.0% 09/01/98 AvTel Communications 6,978 sf
- ----------------------------------------------------------------------------------------------------------
117 74.0% 100.0% 07/01/98 J.M. Industries 105,861 sf
- ----------------------------------------------------------------------------------------------------------
118 77.0% 77.5% 09/28/98 Save-A-Lot 20,537 sf
- ----------------------------------------------------------------------------------------------------------
119 79.6% 95.7% 07/01/98
- ----------------------------------------------------------------------------------------------------------
120 74.0% 94.3% 09/24/98 Data Bank 6,505 sf
121 74.0% 77.4% 09/24/98 Dehayes & Associates 4,710 sf
- ----------------------------------------------------------------------------------------------------------
122 70.8% 96.7% 11/12/98 Roller Dome 22,000 sf
- ----------------------------------------------------------------------------------------------------------
123 58.8% 92.9% 09/23/98 Yen Ching Restaurant 3,546 sf
- ----------------------------------------------------------------------------------------------------------
124 76.8% 96.1% 09/02/98 Blockbuster 6,147 sf
- ----------------------------------------------------------------------------------------------------------
125 74.2% 93.7% 08/29/98
- ----------------------------------------------------------------------------------------------------------
126 79.7% 97.0% 10/26/98 Lowe's Food Store 32,223 sf
- ----------------------------------------------------------------------------------------------------------
127 76.3% 100.0% 06/23/98 Owens Supermarket 34,930 sf
- ----------------------------------------------------------------------------------------------------------
128 79.6% 100.0% 07/06/98
- ----------------------------------------------------------------------------------------------------------
129 53.3% 100.0% 07/24/97 Maxwell Technologies 67,950 sf
- ----------------------------------------------------------------------------------------------------------
130 74.6% 98.3% 10/13/98
- ----------------------------------------------------------------------------------------------------------
131 74.4% 95.0% 12/28/98 Food Lion 33,000 sf
- ----------------------------------------------------------------------------------------------------------
132 61.9% 100.0% 01/05/99 Carmichael International 100,000 sf
- ----------------------------------------------------------------------------------------------------------
133 69.6% 100.0% 10/05/98 Ivy Hill Corporation 96,786 sf
- ----------------------------------------------------------------------------------------------------------
134 57.8% 100.0% 01/05/99 Starlink Freight Systems 20,740 sf
- ----------------------------------------------------------------------------------------------------------
135 51.8% 97.4% 06/30/98
- ----------------------------------------------------------------------------------------------------------
136 59.3% 88.0% 11/05/98 BeHere Corporation 4,267 sf
- ----------------------------------------------------------------------------------------------------------
137 77.9% 91.7% 07/31/98
- ----------------------------------------------------------------------------------------------------------
138 68.1% 67.0% 10/31/98 N/A N/A
- ----------------------------------------------------------------------------------------------------------
139 73.9% 100.0% 07/20/98 Blockbuster Music 7,696 sf
- ----------------------------------------------------------------------------------------------------------
140 64.4% 100.0% 06/25/98 Neos Corporation (Office) 2,985 sf
- ----------------------------------------------------------------------------------------------------------
141 73.9% 99.3% 08/01/98 McShea & Co. 7,132 sf
- ----------------------------------------------------------------------------------------------------------
142 75.5% 100.0% 12/14/98 Healthcare Corp. 9,390 sf
- ----------------------------------------------------------------------------------------------------------
143 69.4% 93.1% 06/30/98
- ----------------------------------------------------------------------------------------------------------
144 79.4% 98.0% 11/10/98 N/A N/A
- ----------------------------------------------------------------------------------------------------------
145 71.3% 100.0% 07/31/98 Terminal Marketing 5,252 sf
- ----------------------------------------------------------------------------------------------------------
146 71.2% 100.0% 09/15/98 Portabox 20,973 sf
- ----------------------------------------------------------------------------------------------------------
147 74.6% 100.0% 09/03/98 Cato 4,160 sf
- ----------------------------------------------------------------------------------------------------------
148 44.3% 99.5% 08/04/98 Software Labs 9,030 sf
- ----------------------------------------------------------------------------------------------------------
149 52.8% 98.6% 09/17/98 Sheplers 25,160 sf
- ----------------------------------------------------------------------------------------------------------
150 58.1% 70.0% 10/15/98
- ----------------------------------------------------------------------------------------------------------
151 68.0% 100.0% 10/05/98 Ivy Hill Corporation 84,146 sf
- ----------------------------------------------------------------------------------------------------------
152 67.4% 97.3% 08/31/98 Jones Communications 9,256 sf
- ----------------------------------------------------------------------------------------------------------
153 59.0% 100.0% 09/15/98 Light Wave System 8,306 sf
- ----------------------------------------------------------------------------------------------------------
154 74.0% 100.0% 10/10/98 N/A N/A
- ----------------------------------------------------------------------------------------------------------
155 74.2% 100.0% 09/01/98 Realty Executives 6,058 sf
- ----------------------------------------------------------------------------------------------------------
156 71.5% 96.1% 10/01/98 Box Office Video 6,000 sf
- ----------------------------------------------------------------------------------------------------------
</TABLE>
II-18
<PAGE>
APPENDIX II
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
PROPERTY OPERATING INFORMATION
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
Loan Underwritable Value as
No. Property Name(2) Cash Flow Monthly Payment DSCR(4) Appraised Value of Date
- --------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C> <C> <C>
157 Great Neck Shops & Potter Self Storage $396,419 $18,381.49 1.80 $3,904,000 9/16/98
- --------------------------------------------------------------------------------------------------------------------------------
158 Computer City Store $271,219 $14,263.43 1.58 $3,400,000 3/23/98
- --------------------------------------------------------------------------------------------------------------------------------
159 Seaboard Industrial $322,821 $17,753.68 1.52 $3,800,000 3/16/98
- --------------------------------------------------------------------------------------------------------------------------------
160 Tire Discounters - Dayton (VI) $130,745 $7,882.76 1.37 $1,485,000 4/1/98
161 Tire Discounters - Cincinnati (VI) $109,612 $6,756.65 1.37 $1,250,000 4/1/98
- --------------------------------------------------------------------------------------------------------------------------------
162 Interstate West Office Park $216,850 $13,402.45 1.35 $2,700,000 3/20/98
- --------------------------------------------------------------------------------------------------------------------------------
163 North Center Office Building $232,549 $13,806.86 1.40 $2,550,000 4/1/98
- --------------------------------------------------------------------------------------------------------------------------------
164 Westchase Apartments $225,983 $15,306.27 1.23 $3,000,000 11/5/97
- --------------------------------------------------------------------------------------------------------------------------------
165 Ashewood Apartments $216,405 $12,457.55 1.45 $3,100,000 9/22/98
- --------------------------------------------------------------------------------------------------------------------------------
166 Oakland Drive Apartments $207,595 $11,141.51 1.55 $2,575,000 8/24/98
- --------------------------------------------------------------------------------------------------------------------------------
167 Victoria Street Offices $197,866 $11,939.20 1.38 $2,516,000 5/19/98
- --------------------------------------------------------------------------------------------------------------------------------
168 Montague Industrial Building $218,050 $12,169.49 1.49 $2,600,000 12/11/97
- --------------------------------------------------------------------------------------------------------------------------------
169 Sunrise Square Shopping Center $225,161 $12,746.48 1.47 $2,400,000 3/20/98
- --------------------------------------------------------------------------------------------------------------------------------
170 Berkmar Park $204,467 $13,126.72 1.30 $2,400,000 7/27/98
- --------------------------------------------------------------------------------------------------------------------------------
171 Crest Ridge Apartments $214,967 $14,278.60 1.25 $2,450,000 1/30/98
- --------------------------------------------------------------------------------------------------------------------------------
172 British Petroleum - Westlake $193,169 $11,878.79 1.36 $2,200,000 3/4/98
- --------------------------------------------------------------------------------------------------------------------------------
173 Kirkland Way Building $265,344 $12,312.87 1.80 $3,500,000 4/8/98
- --------------------------------------------------------------------------------------------------------------------------------
174 Willow Tree and Coastal Court Apartments (VII) $182,385 $12,198.24 1.25 $2,275,000 8/10/98
- --------------------------------------------------------------------------------------------------------------------------------
175 Eagle Watch Apartments $178,728 $11,048.78 1.35 $2,270,000 4/15/98
- --------------------------------------------------------------------------------------------------------------------------------
176 Post Alley Market Building $248,001 $11,627.68 1.78 $3,300,000 4/21/98
- --------------------------------------------------------------------------------------------------------------------------------
177 Cramer Marketplace Shopping Center $188,435 $10,913.00 1.44 $2,267,000 10/1/98
- --------------------------------------------------------------------------------------------------------------------------------
178 Penn Forest Executive Building $229,654 $15,481.11 1.24 $2,900,000 5/26/98
- --------------------------------------------------------------------------------------------------------------------------------
179 460 Valley Drive Industrial Building $240,892 $14,753.00 1.36 $2,825,000 5/12/97
- --------------------------------------------------------------------------------------------------------------------------------
180 Bradley Smith Apartments (VIII) $243,000 $11,873.21 1.71 $2,335,000 4/23/98
- --------------------------------------------------------------------------------------------------------------------------------
181 A Storage Place $191,228 $10,398.85 1.53 $2,220,000 6/8/98
- --------------------------------------------------------------------------------------------------------------------------------
182 Tallmadge Towne Apartments $178,958 $9,955.07 1.50 $2,100,000 4/23/98
- --------------------------------------------------------------------------------------------------------------------------------
183 Garden Ridge I & II Shopping and Office Center $211,249 $12,425.08 1.42 $2,200,000 5/1/98
- --------------------------------------------------------------------------------------------------------------------------------
184 Greenbriar Village Shopping Center $167,572 $10,181.82 1.37 $2,000,000 8/12/98
- --------------------------------------------------------------------------------------------------------------------------------
185 Chapel Centre $179,330 $9,798.87 1.53 $2,300,000 3/19/98
- --------------------------------------------------------------------------------------------------------------------------------
186 Laurel Manor Apartments $176,664 $10,181.82 1.45 $2,085,000 4/14/98
- --------------------------------------------------------------------------------------------------------------------------------
187 Potter Self Storage $195,286 $12,194.20 1.33 $2,250,000 11/2/98
- --------------------------------------------------------------------------------------------------------------------------------
188 Dorjul Apartments $195,123 $9,987.96 1.63 $2,100,000 6/11/98
- --------------------------------------------------------------------------------------------------------------------------------
189 Orange Industrial Park $169,004 $10,968.05 1.28 $2,025,000 3/10/98
- --------------------------------------------------------------------------------------------------------------------------------
190 Fiesta Palms II Retail Center $180,888 $10,508.77 1.43 $2,140,000 12/10/97
- --------------------------------------------------------------------------------------------------------------------------------
191 Newport Mesa Self Storage $280,474 $10,525.26 2.22 $3,110,000 4/9/98
- --------------------------------------------------------------------------------------------------------------------------------
192 Brunswick Apartments $190,339 $10,535.83 1.51 $1,790,000 3/25/97
- --------------------------------------------------------------------------------------------------------------------------------
193 Canyon Professional Center $160,824 $10,065.24 1.33 $2,100,000 7/1/98
- --------------------------------------------------------------------------------------------------------------------------------
194 Madison Heights Square $183,313 $10,854.19 1.41 $1,880,000 5/11/98
- --------------------------------------------------------------------------------------------------------------------------------
195 Lexington Apartments $274,454 $13,616.71 1.68 $5,300,000 8/27/98
- --------------------------------------------------------------------------------------------------------------------------------
196 Heritage Green Apartments $166,309 $11,265.55 1.23 $1,900,000 12/4/97
- --------------------------------------------------------------------------------------------------------------------------------
197 Aaron Center $160,345 $9,387.89 1.42 $1,825,000 4/6/98
- --------------------------------------------------------------------------------------------------------------------------------
198 Carlton Way Apartments $159,248 $8,312.19 1.60 $1,800,000 7/13/98
- --------------------------------------------------------------------------------------------------------------------------------
199 Creekview Townhouse Apartments $147,124 $9,077.63 1.35 $1,675,000 6/15/98
- --------------------------------------------------------------------------------------------------------------------------------
200 Country Village Apartments $147,097 $10,656.64 1.15 $1,600,000 12/17/97
- --------------------------------------------------------------------------------------------------------------------------------
201 Blackstone Square $165,064 $10,833.30 1.27 $1,850,000 10/6/98
- --------------------------------------------------------------------------------------------------------------------------------
202 Pizza Hut / 7-Eleven (A) $76,564 $4,828.44 1.41 $905,000 4/16/98
- --------------------------------------------------------------------------------------------------------------------------------
203 Quick Chek (A) $81,871 $4,526.21 1.41 $880,000 4/16/98
- --------------------------------------------------------------------------------------------------------------------------------
204 Holcomb Place III $144,345 $9,395.14 1.28 $1,730,000 5/22/98
- --------------------------------------------------------------------------------------------------------------------------------
205 New Hope Commons $146,397 $8,526.24 1.43 $1,600,000 4/20/98
- --------------------------------------------------------------------------------------------------------------------------------
206 Union Avenue Plaza $141,029 $8,825.93 1.33 $1,800,000 3/18/98
- --------------------------------------------------------------------------------------------------------------------------------
207 Cedargate Apartments $168,144 $9,123.20 1.54 $1,550,000 3/25/97
- --------------------------------------------------------------------------------------------------------------------------------
208 Oakcrest Apartments $149,376 $7,783.18 1.60 $1,500,000 6/1/98
- --------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
Loan Cut-Off Percent Percent Leased Square Footage
No. Date LTV(4) Leased(7) as of Date(7) LargestTenant(8) Largest Tenant
- -----------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C>
157 50.8% 100.0% 11/01/98 Beckett's 1,800 sf
- -----------------------------------------------------------------------------------------------------------
158 58.2% 100.0% 03/23/98 Computer City (dark) 24,888 sf
- -----------------------------------------------------------------------------------------------------------
159 51.4% 100.0% 05/01/98 Drusco, Inc. 72,300 sf
- -----------------------------------------------------------------------------------------------------------
160 70.8% 100.0% 09/18/98 Tire Discounters 8,100 sf
161 70.8% 100.0% 09/18/98 Tire Discounters 6,480 sf
- -----------------------------------------------------------------------------------------------------------
162 71.1% 92.1% 08/01/98 Salant 23,549 sf
- -----------------------------------------------------------------------------------------------------------
163 73.7% 89.8% 07/31/98 The Infinity Group 2,954 sf
- -----------------------------------------------------------------------------------------------------------
164 62.0% 88.8% 10/27/98
- -----------------------------------------------------------------------------------------------------------
165 59.5% 90.2% 06/09/98
- -----------------------------------------------------------------------------------------------------------
166 69.6% 96.0% 10/07/98
- -----------------------------------------------------------------------------------------------------------
167 71.2% 100.0% 07/01/98 Penfield Smith 11,805 sf
- -----------------------------------------------------------------------------------------------------------
168 68.8% 100.0% 05/06/98 Woodpecker Manufacturing Company 56,056 sf
- -----------------------------------------------------------------------------------------------------------
169 74.5% 92.2% 06/30/98 Mandal Pipe Co. 3,831 sf
- -----------------------------------------------------------------------------------------------------------
170 74.5% 100.0% 11/30/98 Medical Fitness 13,212 sf
- -----------------------------------------------------------------------------------------------------------
171 72.1% 93.2% 10/09/98
- -----------------------------------------------------------------------------------------------------------
172 79.1% 100.0% 07/14/98 BP Amer. Chem. Co. 37,979 sf
- -----------------------------------------------------------------------------------------------------------
173 49.7% 100.0% 09/22/98 Wald Imports 50,993 sf
- -----------------------------------------------------------------------------------------------------------
174 76.1% 100.0% 09/30/98 N/A N/A
- -----------------------------------------------------------------------------------------------------------
175 74.5% 94.8% 08/18/98
- -----------------------------------------------------------------------------------------------------------
176 51.2% 91.1% 07/31/98 Voula Xenos 2,364 sf
- -----------------------------------------------------------------------------------------------------------
177 72.9% 100.0% 12/07/98 Food Lion 25,000 sf
- -----------------------------------------------------------------------------------------------------------
178 56.7% 92.0% 09/30/98 Maid Bess 5,888 sf
- -----------------------------------------------------------------------------------------------------------
179 58.1% 100.0% 05/12/97 George Lithograph Co. 50,050 sf
- -----------------------------------------------------------------------------------------------------------
180 70.1% 100.0% 06/19/98,
07/08/98,
06/18/98
- -----------------------------------------------------------------------------------------------------------
181 71.8% 97.4% 06/30/98
- -----------------------------------------------------------------------------------------------------------
182 74.7% 94.9% 09/01/98
- -----------------------------------------------------------------------------------------------------------
183 69.2% 100.0% 08/19/98 Greater Lewisville Therapy Ctr 3,000 sf
- -----------------------------------------------------------------------------------------------------------
184 74.7% 100.0% 10/01/98 U.S. Government 2,060 sf
- -----------------------------------------------------------------------------------------------------------
185 64.9% 100.0% 08/01/98 Enviro-Cote, Inc. 29,750 sf
- -----------------------------------------------------------------------------------------------------------
186 71.6% 100.0% 10/09/98
- -----------------------------------------------------------------------------------------------------------
187 66.3% 90.0% 10/31/98 N/A N/A
- -----------------------------------------------------------------------------------------------------------
188 71.0% 94.4% 09/01/98
- -----------------------------------------------------------------------------------------------------------
189 73.5% 100.0% 06/30/98 Trade American Card 6,716 sf
- -----------------------------------------------------------------------------------------------------------
190 69.5% 86.6% 06/30/98 Earl's Beauty 4,760 sf
- -----------------------------------------------------------------------------------------------------------
191 47.8% 94.7% 06/23/98
- -----------------------------------------------------------------------------------------------------------
192 78.6% 96.2% 08/27/98
- -----------------------------------------------------------------------------------------------------------
193 66.2% 100.0% 11/01/98 Chery Creek Mortgage 2,781 sf
- -----------------------------------------------------------------------------------------------------------
194 73.8% 100.0% 09/15/98 Cato 4,200 sf
- -----------------------------------------------------------------------------------------------------------
195 26.1% 89.6% 08/01/98
- -----------------------------------------------------------------------------------------------------------
196 72.2% 76.7% 09/01/98
- -----------------------------------------------------------------------------------------------------------
197 74.3% 88.6% 08/04/98 Aaron Rents, Inc. 20,256 sf
- -----------------------------------------------------------------------------------------------------------
198 74.7% 94.1% 09/18/98
- -----------------------------------------------------------------------------------------------------------
199 79.6% 93.0% 09/27/98 N/A N/A
- -----------------------------------------------------------------------------------------------------------
200 81.1% 92.0% 09/30/98
- -----------------------------------------------------------------------------------------------------------
201 70.0% 100.0% 10/01/98 Cato 4,160 sf
- -----------------------------------------------------------------------------------------------------------
202 72.4% 100.0% 06/10/98 7-Eleven 2,365 sf
- -----------------------------------------------------------------------------------------------------------
203 72.4% 100.0% 06/10/98 Quick Chek 4,700 sf
- -----------------------------------------------------------------------------------------------------------
204 74.5% 100.0% 09/18/98 Tae Ju Jung 2,500 sf
- -----------------------------------------------------------------------------------------------------------
205 78.8% 100.0% 06/30/98
- -----------------------------------------------------------------------------------------------------------
206 69.3% 100.0% 09/29/98 Quick Check 3,300 sf
- -----------------------------------------------------------------------------------------------------------
207 78.6% 98.3% 09/24/98
- -----------------------------------------------------------------------------------------------------------
208 79.6% 97.2% 07/31/98
- -----------------------------------------------------------------------------------------------------------
</TABLE>
II-19
<PAGE>
APPENDIX II
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
PROPERTY OPERATING INFORMATION
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
Loan Underwritable Value as
No. Property Name(2) Cash Flow Monthly Payment DSCR(4) Appraised Value of Date
- --------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C> <C> <C>
209 City Sports $217,894 $8,132.50 2.23 $3,000,000 7/16/98
- --------------------------------------------------------------------------------------------------------------------------------
210 Glenarm Manor Apartments $168,254 $8,828.90 1.59 $1,520,000 3/27/97
- --------------------------------------------------------------------------------------------------------------------------------
211 Lin-Valle Center $130,353 $7,667.64 1.42 $1,500,000 4/2/98
- --------------------------------------------------------------------------------------------------------------------------------
212 Cramer Woods Apartments $131,034 $7,880.14 1.39 $1,600,000 5/12/98
- --------------------------------------------------------------------------------------------------------------------------------
213 Great Falls Days Inn $227,260 $9,030.43 2.10 $1,850,000 2/16/98
- --------------------------------------------------------------------------------------------------------------------------------
214 Hillside Trace Apartments $129,436 $8,004.87 1.35 $1,360,000 3/28/97
- --------------------------------------------------------------------------------------------------------------------------------
215 Pearisburg Square $118,196 $7,864.46 1.25 $1,400,000 10/12/98
- --------------------------------------------------------------------------------------------------------------------------------
216 3180 Presidential Drive $122,941 $7,422.47 1.38 $1,390,000 4/3/98
- --------------------------------------------------------------------------------------------------------------------------------
217 Villa Seville Apartments $101,926 $6,486.70 1.31 $1,300,000 4/27/98
- --------------------------------------------------------------------------------------------------------------------------------
218 Montreal Station $109,339 $6,829.65 1.33 $1,380,000 6/8/98
- --------------------------------------------------------------------------------------------------------------------------------
219 Dunwoody Springs Building $108,914 $7,271.80 1.25 $1,475,000 4/17/98
- --------------------------------------------------------------------------------------------------------------------------------
220 Spring House Office Park $117,015 $6,483.30 1.50 $1,480,000 6/3/98
- --------------------------------------------------------------------------------------------------------------------------------
221 Sutton Place Apartments $107,271 $6,474.53 1.38 $1,100,000 3/28/97
- --------------------------------------------------------------------------------------------------------------------------------
222 Garrison Street Apartments $92,530 $5,263.49 1.46 $1,270,000 4/16/98
- --------------------------------------------------------------------------------------------------------------------------------
223 Airport Drive Shops $122,675 $7,568.37 1.35 $1,250,000 5/20/98
- --------------------------------------------------------------------------------------------------------------------------------
224 2755 Philmont Ave. $113,753 $6,483.94 1.46 $1,350,000 2/24/98
- --------------------------------------------------------------------------------------------------------------------------------
225 9107 Gaither Rd. $101,363 $5,690.63 1.48 $1,400,000 2/26/98
- --------------------------------------------------------------------------------------------------------------------------------
226 Tulwane Apartments $82,196 $4,697.81 1.46 $950,000 9/11/98
- --------------------------------------------------------------------------------------------------------------------------------
227 900-902 Pine Street Apartments $78,582 $4,244.09 1.54 $780,000 3/27/98
- --------------------------------------------------------------------------------------------------------------------------------
228 Rochelle Arms $69,297 $4,001.84 1.44 $775,000 9/11/98
- --------------------------------------------------------------------------------------------------------------------------------
229 Pottery Row Apartments $56,955 $3,529.70 1.34 $685,000 2/27/98
TOTAL/WEIGHTED AVERAGE $104,442,135 $6,124,116 1.42 $1,237,796,000
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
Loan Cut-Off Percent Percent Leased Square Footage
No. Date LTV(4) Leased(7) as of Date(7) LargestTenant(8) Largest Tenant
- ----------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C>
209 39.8% 100.0% 10/14/98 City Sports 17,090 sf
- ----------------------------------------------------------------------------------------------------------
210 77.6% 98.6% 09/24/98
- ----------------------------------------------------------------------------------------------------------
211 74.2% 88.9% 09/01/98 Comnet, Inc. 3,190 sf
- ----------------------------------------------------------------------------------------------------------
212 68.2% 100.0% 07/17/98
- ----------------------------------------------------------------------------------------------------------
213 58.6% 71.2% 01/06/98
- ----------------------------------------------------------------------------------------------------------
214 78.6% 92.2% 09/24/98
- ----------------------------------------------------------------------------------------------------------
215 71.3% 91.0% 10/01/98 Dollar Tree 4,000 sf
- ----------------------------------------------------------------------------------------------------------
216 71.3% 100.0% 06/22/98 Prism, Inc. 8,890 sf
- ----------------------------------------------------------------------------------------------------------
217 74.7% 94.4% 09/01/98
- ----------------------------------------------------------------------------------------------------------
218 66.5% 94.5% 07/01/98 Options for Supported Living 4,793 sf
- ----------------------------------------------------------------------------------------------------------
219 62.1% 100.0% 10/31/98 Dataradio 15,438 sf
- ----------------------------------------------------------------------------------------------------------
220 61.3% 86.4% 08/01/98 Daniel and Associates 3,100 sf
- ----------------------------------------------------------------------------------------------------------
221 78.6% 96.4% 08/27/98
- ----------------------------------------------------------------------------------------------------------
222 64.7% 100.0% 08/23/98
- ----------------------------------------------------------------------------------------------------------
223 64.6% 100.0% 11/30/98 Movie Time 7,600 sf
- ----------------------------------------------------------------------------------------------------------
224 58.4% 87.0% 05/26/98 Joe Valenti (Bargain Hunters) 17,000 sf
- ----------------------------------------------------------------------------------------------------------
225 49.3% 100.0% 05/28/98 Worldpac 17,546 sf
- ----------------------------------------------------------------------------------------------------------
226 70.8% 97.1% 10/20/98
- ----------------------------------------------------------------------------------------------------------
227 79.6% 100.0% 06/12/98
- ----------------------------------------------------------------------------------------------------------
228 73.9% 96.4% 10/20/98
- ----------------------------------------------------------------------------------------------------------
229 75.5% 100.0% 08/08/98
70.8%
</TABLE>
II-20
<PAGE>
APPENDIX II
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
PREPAYMENT AND SERVICING INFORMATION
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Prepayment Code(10)
Loan
No. Seller(1) Property Name(2) Seasoning(9) LO YM3 YM2 YM1 YM Def/YM Def
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <C> <S> <C> <C> <C> <C> <C> <C> <C> <C>
1 MS Key West Hilton Resort 11 59 58
- -----------------------------------------------------------------------------------------------------------------------------------
2 RFC Lancaster Commerce Center 5 29 88
- -----------------------------------------------------------------------------------------------------------------------------------
3 MS Cupertino Village Shopping Center 6 30 89
- -----------------------------------------------------------------------------------------------------------------------------------
4 RFC Metro Pike Center 8 48 66
- -----------------------------------------------------------------------------------------------------------------------------------
5 RFC Hawthorne Woods 7 31 86
- -----------------------------------------------------------------------------------------------------------------------------------
6 RFC Sybase Building 5 77 100
- -----------------------------------------------------------------------------------------------------------------------------------
7 MS Alexandria Courtyard Marriott Hotel 3 27 90
- -----------------------------------------------------------------------------------------------------------------------------------
8 RFC Heritage House 7 31 62
- -----------------------------------------------------------------------------------------------------------------------------------
9 RFC Spanish Trace East Apartments 5 48 69
- -----------------------------------------------------------------------------------------------------------------------------------
10 MS Four Allegheny Office Center 7 19 145
- -----------------------------------------------------------------------------------------------------------------------------------
11 MS Town Center Lodge Motel (I) 6 30 87
- -----------------------------------------------------------------------------------------------------------------------------------
12 MS Decatur Lodge Motel (I) 6 30 87
- -----------------------------------------------------------------------------------------------------------------------------------
13 MS Fulton Lodge Motel (I) 6 30 87
- -----------------------------------------------------------------------------------------------------------------------------------
14 MS Douglasville Lodge Motel (I) 6 30 87
- -----------------------------------------------------------------------------------------------------------------------------------
15 MS West Georgia Lodge Motel (I) 6 30 87
- -----------------------------------------------------------------------------------------------------------------------------------
16 MS East Point Lodge Motel (I) 6 30 87
- -----------------------------------------------------------------------------------------------------------------------------------
17 MS Holiday Inn Hotel- Bar Harbor 9 60 57
- -----------------------------------------------------------------------------------------------------------------------------------
18 MS Kirkwood Crossings Office and Retail Building 5 60 54
- -----------------------------------------------------------------------------------------------------------------------------------
19 RFC North Salado Village Shopping Center 10 48 66
- -----------------------------------------------------------------------------------------------------------------------------------
20 RFC Golden Miles Market Place 3 27 90
- -----------------------------------------------------------------------------------------------------------------------------------
21 WACH New Market Madison 5 60 57
- -----------------------------------------------------------------------------------------------------------------------------------
22 RFC Valencia Apartments 7 48 69
- -----------------------------------------------------------------------------------------------------------------------------------
23 RFC Rollingwood Shopping Center 4 28 89
- -----------------------------------------------------------------------------------------------------------------------------------
24 MS 525 Almanor Industrial Building 6 24 90
- -----------------------------------------------------------------------------------------------------------------------------------
25 WACH Town Country S C 4 36 81
- -----------------------------------------------------------------------------------------------------------------------------------
26 MS Lucky/Long's Plaza Shopping Center 35 117
- -----------------------------------------------------------------------------------------------------------------------------------
27 RFC Koret Distribution Center 5 29 88
- -----------------------------------------------------------------------------------------------------------------------------------
28 RFC Colony By The Mall Apartments 6 30 87
- -----------------------------------------------------------------------------------------------------------------------------------
29 MS Manekin Industrial Portfolio 13 60 57
- -----------------------------------------------------------------------------------------------------------------------------------
30 RFC St. Andrews Professional Center 6 30 87
- -----------------------------------------------------------------------------------------------------------------------------------
31 RFC Green Ridge Heights Apartments 11 96 81
- -----------------------------------------------------------------------------------------------------------------------------------
32 RFC Cove Center 7 48 69
- -----------------------------------------------------------------------------------------------------------------------------------
33 RFC Golden Isle Plaza 3 27 87
- -----------------------------------------------------------------------------------------------------------------------------------
34 MS 2040-2060 Corporate Court Industrial 32 177
- -----------------------------------------------------------------------------------------------------------------------------------
35 RFC Miami Lakes Corporate Center 6 30 84
- -----------------------------------------------------------------------------------------------------------------------------------
36 MS Bon Air Professional Center 5 29 88
- -----------------------------------------------------------------------------------------------------------------------------------
37 MS Woodside Apartments 11 60 72
- -----------------------------------------------------------------------------------------------------------------------------------
38 RFC Cambridge Commons Apartments 6 30 87
- -----------------------------------------------------------------------------------------------------------------------------------
39 MS Alicia Valencia Plaza Shopping Center 29 117
- -----------------------------------------------------------------------------------------------------------------------------------
40 RFC Willow Tree 4 36 78
- -----------------------------------------------------------------------------------------------------------------------------------
41 MS Bayport Marina Plaza Industrial 5 29 88
- -----------------------------------------------------------------------------------------------------------------------------------
42 RFC New Market Square 6 30 84
- -----------------------------------------------------------------------------------------------------------------------------------
43 WACH Shoppes at Cresthaven 3 60 57
- -----------------------------------------------------------------------------------------------------------------------------------
44 WACH Southport Centre 5 29 88
- -----------------------------------------------------------------------------------------------------------------------------------
45 RFC Half-A-Car 7 48 66
- -----------------------------------------------------------------------------------------------------------------------------------
46 MS Merchants Centre 5 29 88
- -----------------------------------------------------------------------------------------------------------------------------------
47 RFC Plaza K Shopping Center 5 96 78
- -----------------------------------------------------------------------------------------------------------------------------------
48 RFC Parkway Shopping Center 14 36 81
- -----------------------------------------------------------------------------------------------------------------------------------
49 MS 788 North Jefferson Office Building 7 31 86
- -----------------------------------------------------------------------------------------------------------------------------------
50 WACH Comfort Suites 5 90 87
- -----------------------------------------------------------------------------------------------------------------------------------
51 MS Taft Corners Shopping Center 5 29 88
</TABLE>
- -------------------------------------------------------------------
Prepayment Code(10)
Loan Total Admin
No. 5 4.5 4 3.5 3 2.5 2 1 Open Cost (bps)(11)
- -------------------------------------------------------------------
1 3 10.37
- -------------------------------------------------------------------
2 3 10.37
- -------------------------------------------------------------------
3 3 10.37
- -------------------------------------------------------------------
4 6 10.37
- -------------------------------------------------------------------
5 3 10.37
- -------------------------------------------------------------------
6 3 10.37
- -------------------------------------------------------------------
7 3 13.37
- -------------------------------------------------------------------
8 3 10.37
- -------------------------------------------------------------------
9 3 10.37
- -------------------------------------------------------------------
10 13.37
- -------------------------------------------------------------------
11 3 10.37
- -------------------------------------------------------------------
12 3 10.37
- -------------------------------------------------------------------
13 3 10.37
- -------------------------------------------------------------------
14 3 10.37
- -------------------------------------------------------------------
15 3 10.37
- -------------------------------------------------------------------
16 3 10.37
- -------------------------------------------------------------------
17 3 10.37
- -------------------------------------------------------------------
18 6 13.37
- -------------------------------------------------------------------
19 6 10.37
- -------------------------------------------------------------------
20 3 10.37
- -------------------------------------------------------------------
21 3 10.37
- -------------------------------------------------------------------
22 3 10.37
- -------------------------------------------------------------------
23 3 10.37
- -------------------------------------------------------------------
24 6 13.37
- -------------------------------------------------------------------
25 3 10.37
- -------------------------------------------------------------------
26 3 10.37
- -------------------------------------------------------------------
27 3 10.37
- -------------------------------------------------------------------
28 3 10.37
- -------------------------------------------------------------------
29 3 13.37
- -------------------------------------------------------------------
30 3 10.37
- -------------------------------------------------------------------
31 3 10.37
- -------------------------------------------------------------------
32 3 10.37
- -------------------------------------------------------------------
33 6 10.37
- -------------------------------------------------------------------
34 3 10.37
- -------------------------------------------------------------------
35 6 10.37
- -------------------------------------------------------------------
36 3 10.37
- -------------------------------------------------------------------
37 13.37
- -------------------------------------------------------------------
38 3 10.37
- -------------------------------------------------------------------
39 3 10.37
- -------------------------------------------------------------------
40 6 10.37
- -------------------------------------------------------------------
41 3 10.37
- -------------------------------------------------------------------
42 6 10.37
- -------------------------------------------------------------------
43 3 10.37
- -------------------------------------------------------------------
44 3 10.37
- -------------------------------------------------------------------
45 6 10.37
- -------------------------------------------------------------------
46 3 14.37
- -------------------------------------------------------------------
47 6 10.37
- -------------------------------------------------------------------
48 3 10.37
- -------------------------------------------------------------------
49 3 13.37
- -------------------------------------------------------------------
50 3 10.37
- -------------------------------------------------------------------
51 3 10.37
II-21
<PAGE>
APPENDIX II
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
PREPAYMENT AND SERVICING INFORMATION
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Prepayment Code(10)
Loan
No. Seller(1) Property Name(2) Seasoning(9) LO YM3 YM2 YM1 YM Def/YM Def
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <C> <S> <C> <C> <C> <C> <C> <C> <C> <C>
52 MS Mickelberry Shopping Center 7 61 60
- -----------------------------------------------------------------------------------------------------------------------------------
53 RFC Cottonwood Corners Shopping Center 4 28 89
- -----------------------------------------------------------------------------------------------------------------------------------
54 WACH Comfort Inn & Comfort Suites 3 27 90
- -----------------------------------------------------------------------------------------------------------------------------------
55 RFC Dalton Place Shopping Center 14 36 201
- -----------------------------------------------------------------------------------------------------------------------------------
56 RFC Showcase Plaza Shopping Center 5 36 81
- -----------------------------------------------------------------------------------------------------------------------------------
57 RFC Springrove Mobile Home Park 6 84 153
- -----------------------------------------------------------------------------------------------------------------------------------
58 RFC Gateway/Lombardi (II) 7 48 69
- -----------------------------------------------------------------------------------------------------------------------------------
59 RFC Arbors of Wooster Apartments 12 72 105
- -----------------------------------------------------------------------------------------------------------------------------------
60 MS Sunset Plaza Shopping Center 17 60 57
- -----------------------------------------------------------------------------------------------------------------------------------
61 WACH Blackstock Warehouse 3 28 149
- -----------------------------------------------------------------------------------------------------------------------------------
62 RFC Augusta at Gruene 8 48 69
- -----------------------------------------------------------------------------------------------------------------------------------
63 MS Commerce Office Building (III) 6 30 87
- -----------------------------------------------------------------------------------------------------------------------------------
64 MS Medical & Professional Office Building (III) 6 30 87
- -----------------------------------------------------------------------------------------------------------------------------------
65 RFC Southside Square Shopping Center 6 30 84
- -----------------------------------------------------------------------------------------------------------------------------------
66 RFC Saratoga Square Apartments 7 31 86
- -----------------------------------------------------------------------------------------------------------------------------------
67 MS Minaret Village Retail and Office Center 11 60 120
- -----------------------------------------------------------------------------------------------------------------------------------
68 WACH Redland Crest Apartments 4 28 89
- -----------------------------------------------------------------------------------------------------------------------------------
69 RFC Village of Westover Apartments 7 48 66
- -----------------------------------------------------------------------------------------------------------------------------------
70 MS 499 University Avenue 18 117
- -----------------------------------------------------------------------------------------------------------------------------------
71 RFC Manufacturers Bank Building 4 28 89
- -----------------------------------------------------------------------------------------------------------------------------------
72 WACH Print Pack Buildings 4 60 117
- -----------------------------------------------------------------------------------------------------------------------------------
73 MS Hennepin Square Office Building 9 38 79
- -----------------------------------------------------------------------------------------------------------------------------------
74 MS Brandywine III Apartments 6 30 87
- -----------------------------------------------------------------------------------------------------------------------------------
75 RFC V United Plaza 6 120 114
- -----------------------------------------------------------------------------------------------------------------------------------
76 WACH South Park Shopping Center 5 29 88
- -----------------------------------------------------------------------------------------------------------------------------------
77 RFC Pineville Towne Market 6 30 84
- -----------------------------------------------------------------------------------------------------------------------------------
78 WACH 555 & 565 Old Norcross Rd 6 60 57
- -----------------------------------------------------------------------------------------------------------------------------------
79 MS Lake Union Office Building 8 32 109
- -----------------------------------------------------------------------------------------------------------------------------------
80 MS Via Alamos Apartments 4 28 89
- -----------------------------------------------------------------------------------------------------------------------------------
81 RFC Gallery Row 5 48 69
- -----------------------------------------------------------------------------------------------------------------------------------
82 RFC Arbour Walk Village Apartments 5 29 88
- -----------------------------------------------------------------------------------------------------------------------------------
83 MS San Fernando Industrial Building 9 60 72
- -----------------------------------------------------------------------------------------------------------------------------------
84 WACH Village at Cedar Shoals 6 60 57
- -----------------------------------------------------------------------------------------------------------------------------------
85 MS Kirby Plaza Office Building 8 60 57
- -----------------------------------------------------------------------------------------------------------------------------------
86 MS 800 South Broadway Office Building 7 31 86
- -----------------------------------------------------------------------------------------------------------------------------------
87 RFC Polifly Plaza 7 48 66
- -----------------------------------------------------------------------------------------------------------------------------------
88 MS Summit Apartments 6 60 57
- -----------------------------------------------------------------------------------------------------------------------------------
89 RFC Villa Fontana 8 48 69
- -----------------------------------------------------------------------------------------------------------------------------------
90 MS Laguna Self Storage 7 72 50
- -----------------------------------------------------------------------------------------------------------------------------------
91 MS Hughes Towers Apartments 5 29 88
- -----------------------------------------------------------------------------------------------------------------------------------
92 WACH Roswell Oaks 3 27 90
- -----------------------------------------------------------------------------------------------------------------------------------
93 MS Temple Medical Office Building 4 28 89
- -----------------------------------------------------------------------------------------------------------------------------------
94 RFC Victoria Square Apartments 7 48 69
- -----------------------------------------------------------------------------------------------------------------------------------
95 RFC Kmart 7 48 66
- -----------------------------------------------------------------------------------------------------------------------------------
96 MS Strathmore Towers Apartments 5 29 88
- -----------------------------------------------------------------------------------------------------------------------------------
97 MS 69 Hickory Drive Office Building 4 28 89
- -----------------------------------------------------------------------------------------------------------------------------------
98 MS Rancho Broadway Shopping Center 30 117
- -----------------------------------------------------------------------------------------------------------------------------------
99 MS Union Bank Office Building 17 117
- -----------------------------------------------------------------------------------------------------------------------------------
100 RFC Northampton Apartments 9 168 66
- -----------------------------------------------------------------------------------------------------------------------------------
101 MS 2424 Babcock Office and Medical Building 5 29 88
- -----------------------------------------------------------------------------------------------------------------------------------
102 MS Casa Grande Retail Center 5 60 57
</TABLE>
- -------------------------------------------------------------------
Prepayment Code(10)
Loan Total Admin
No. 5 4.5 4 3.5 3 2.5 2 1 Open Cost (bps)(11)
- -------------------------------------------------------------------
52 13.37
- -------------------------------------------------------------------
53 3 10.37
- -------------------------------------------------------------------
54 3 10.37
- -------------------------------------------------------------------
55 3 10.37
- -------------------------------------------------------------------
56 3 10.37
- -------------------------------------------------------------------
57 3 10.37
- -------------------------------------------------------------------
58 3 10.37
- -------------------------------------------------------------------
59 3 10.37
- -------------------------------------------------------------------
60 3 14.37
- -------------------------------------------------------------------
61 3 10.37
- -------------------------------------------------------------------
62 3 10.37
- -------------------------------------------------------------------
63 3 10.37
- -------------------------------------------------------------------
64 3 10.37
- -------------------------------------------------------------------
65 6 10.37
- -------------------------------------------------------------------
66 3 10.37
- -------------------------------------------------------------------
67 13.37
- -------------------------------------------------------------------
68 3 10.37
- -------------------------------------------------------------------
69 6 10.37
- -------------------------------------------------------------------
70 3 10.37
- -------------------------------------------------------------------
71 3 10.37
- -------------------------------------------------------------------
72 3 10.37
- -------------------------------------------------------------------
73 3 10.37
- -------------------------------------------------------------------
74 3 10.37
- -------------------------------------------------------------------
75 6 10.37
- -------------------------------------------------------------------
76 3 10.37
- -------------------------------------------------------------------
77 6 10.37
- -------------------------------------------------------------------
78 3 10.37
- -------------------------------------------------------------------
79 3 13.37
- -------------------------------------------------------------------
80 3 10.37
- -------------------------------------------------------------------
81 3 10.37
- -------------------------------------------------------------------
82 3 10.37
- -------------------------------------------------------------------
83 13.37
- -------------------------------------------------------------------
84 3 10.37
- -------------------------------------------------------------------
85 3 10.37
- -------------------------------------------------------------------
86 3 10.37
- -------------------------------------------------------------------
87 6 10.37
- -------------------------------------------------------------------
88 3 10.37
- -------------------------------------------------------------------
89 3 10.37
- -------------------------------------------------------------------
90 3 10.37
- -------------------------------------------------------------------
91 3 10.37
- -------------------------------------------------------------------
92 3 10.37
- -------------------------------------------------------------------
93 3 10.37
- -------------------------------------------------------------------
94 3 10.37
- -------------------------------------------------------------------
95 6 10.37
- -------------------------------------------------------------------
96 3 13.37
- -------------------------------------------------------------------
97 3 13.37
- -------------------------------------------------------------------
98 3 10.37
- -------------------------------------------------------------------
99 3 10.37
- -------------------------------------------------------------------
100 6 10.37
- -------------------------------------------------------------------
101 3 13.37
- -------------------------------------------------------------------
102 3 10.37
II-22
<PAGE>
APPENDIX II
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
PREPAYMENT AND SERVICING INFORMATION
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Prepayment Code(10)
Loan
No. Seller(1) Property Name(2) Seasoning(9) LO YM3 YM2 YM1 YM Def/YM Def
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <C> <S> <C> <C> <C> <C> <C> <C> <C> <C>
103 RFC The Vineyards Apartments 6 30 87
- -----------------------------------------------------------------------------------------------------------------------------------
104 RFC Dunwoody Shallowford Office Park 8 48 69
- -----------------------------------------------------------------------------------------------------------------------------------
105 WACH Best Western 4 28 86
- -----------------------------------------------------------------------------------------------------------------------------------
106 MS Kenyon Place Apartments 3 60 54
- -----------------------------------------------------------------------------------------------------------------------------------
107 MS College Square Shopping Center 5 29 88
- -----------------------------------------------------------------------------------------------------------------------------------
108 WACH Americana Self Storage 5 60 57
- -----------------------------------------------------------------------------------------------------------------------------------
109 WACH Regal Cinemas 3 90 87
- -----------------------------------------------------------------------------------------------------------------------------------
110 MS Mission Plaza Shopping Center 7 31 86
- -----------------------------------------------------------------------------------------------------------------------------------
111 WACH Collier & Piedmont Rd. Apts. (IV) 8 60 57
- -----------------------------------------------------------------------------------------------------------------------------------
112 WACH Canteberi Place Apartments 9 60 57
- -----------------------------------------------------------------------------------------------------------------------------------
113 WACH Holiday Inn Express 4 90 87
- -----------------------------------------------------------------------------------------------------------------------------------
114 RFC Pacifica Hampden Industrial Park 8 48 66
- -----------------------------------------------------------------------------------------------------------------------------------
115 RFC Atlantic Plaza II 6 30 84
- -----------------------------------------------------------------------------------------------------------------------------------
116 RFC Bath Street Partners 3 27 90
- -----------------------------------------------------------------------------------------------------------------------------------
117 RFC JM Industrial 7 84 90
- -----------------------------------------------------------------------------------------------------------------------------------
118 RFC Sargent Road Shopping Center. 9 48 66
- -----------------------------------------------------------------------------------------------------------------------------------
119 RFC Little Brook Apartments 7 31 86
- -----------------------------------------------------------------------------------------------------------------------------------
120 MS Courtside Office Building (V) 6 30 87
- -----------------------------------------------------------------------------------------------------------------------------------
121 MS Murphy Office Building (V) 6 30 87
- -----------------------------------------------------------------------------------------------------------------------------------
122 RFC North Oaks Plaza 7 31 86
- -----------------------------------------------------------------------------------------------------------------------------------
123 MS Ohlone Village Shopping and Office Center 14 114
- -----------------------------------------------------------------------------------------------------------------------------------
124 RFC Palms Plaza 5 29 88
- -----------------------------------------------------------------------------------------------------------------------------------
125 RFC St. Clair Mobile Home Parks 5 29 88
- -----------------------------------------------------------------------------------------------------------------------------------
126 WACH Claremont Commons 7 120 108
- -----------------------------------------------------------------------------------------------------------------------------------
127 RFC Guilford Street Center 8 48 69
- -----------------------------------------------------------------------------------------------------------------------------------
128 RFC Ski Lodge Apartments 6 48 69
- -----------------------------------------------------------------------------------------------------------------------------------
129 MS Maxwell Labs Industrial Building 18
- -----------------------------------------------------------------------------------------------------------------------------------
130 RFC Lakeshore Apartments 4 28 89
- -----------------------------------------------------------------------------------------------------------------------------------
131 WACH Vidalia Food Lion 2 26 91
- -----------------------------------------------------------------------------------------------------------------------------------
132 MS Rosecrans Avenue Warehouse 11 60 84
- -----------------------------------------------------------------------------------------------------------------------------------
133 MS 4800 Santa Fe Industrial Building 8 32 97
- -----------------------------------------------------------------------------------------------------------------------------------
134 MS Century Warehouse 11 60 60
- -----------------------------------------------------------------------------------------------------------------------------------
135 MS Pingry Arms and Cornell Arms Apartments 38 36
- -----------------------------------------------------------------------------------------------------------------------------------
136 MS 20195 Stevens Creek Boulevard Office Building 8 60 60
- -----------------------------------------------------------------------------------------------------------------------------------
137 RFC Maple Run Apartments 6 48 66
- -----------------------------------------------------------------------------------------------------------------------------------
138 WACH Comfort Inn Laurinburg 3 27 90
- -----------------------------------------------------------------------------------------------------------------------------------
139 MS Blockbuster - Westwood Shopping Center 5 29 88
- -----------------------------------------------------------------------------------------------------------------------------------
140 MS Clock Tower Office and Retail Building 18
- -----------------------------------------------------------------------------------------------------------------------------------
141 RFC One Bank Street 6 48 66
- -----------------------------------------------------------------------------------------------------------------------------------
142 MS Shoppes of Deerfield 6 30 87
- -----------------------------------------------------------------------------------------------------------------------------------
143 RFC Dartmoor Apartments 9 48 69
- -----------------------------------------------------------------------------------------------------------------------------------
144 WACH Lavender Lakes 7 60 57
- -----------------------------------------------------------------------------------------------------------------------------------
145 RFC Sunshine Office Building 6 48 66
- -----------------------------------------------------------------------------------------------------------------------------------
146 MS Underwood Gartland Industrial Building 4 28 89
- -----------------------------------------------------------------------------------------------------------------------------------
147 WACH Washington Square 3 60 57
- -----------------------------------------------------------------------------------------------------------------------------------
148 RFC Eastlake Business Park 6 60 56
- -----------------------------------------------------------------------------------------------------------------------------------
149 MS Lindsay Marketplace Shopping Center 18
- -----------------------------------------------------------------------------------------------------------------------------------
150 MS Sierra Meadows Apartments 13 60 57
- -----------------------------------------------------------------------------------------------------------------------------------
151 MS 4700 Santa Fe Industrial Building 7 31 86
- -----------------------------------------------------------------------------------------------------------------------------------
152 RFC Georgetown Plaza 8 120 114
- -----------------------------------------------------------------------------------------------------------------------------------
153 MS Itasca Business Park 32 117
</TABLE>
- -------------------------------------------------------------------
Prepayment Code(10)
Loan Total Admin
No. 5 4.5 4 3.5 3 2.5 2 1 Open Cost (bps)(11)
- -------------------------------------------------------------------
103 3 10.37
- -------------------------------------------------------------------
104 3 10.37
- -------------------------------------------------------------------
105 6 10.37
- -------------------------------------------------------------------
106 6 10.37
- -------------------------------------------------------------------
107 3 10.37
- -------------------------------------------------------------------
108 3 10.37
- -------------------------------------------------------------------
109 3 10.37
- -------------------------------------------------------------------
110 3 13.37
- -------------------------------------------------------------------
111 3 10.37
- -------------------------------------------------------------------
112 3 10.37
- -------------------------------------------------------------------
113 3 10.37
- -------------------------------------------------------------------
114 6 10.37
- -------------------------------------------------------------------
115 6 10.37
- -------------------------------------------------------------------
116 3 10.37
- -------------------------------------------------------------------
117 6 10.37
- -------------------------------------------------------------------
118 6 17.87
- -------------------------------------------------------------------
119 3 10.37
- -------------------------------------------------------------------
120 3 10.37
- -------------------------------------------------------------------
121 3 10.37
- -------------------------------------------------------------------
122 3 10.37
- -------------------------------------------------------------------
123 6 10.37
- -------------------------------------------------------------------
124 3 10.37
- -------------------------------------------------------------------
125 3 10.37
- -------------------------------------------------------------------
126 12 10.37
- -------------------------------------------------------------------
127 3 10.37
- -------------------------------------------------------------------
128 3 10.37
- -------------------------------------------------------------------
129 90 84 6 13.37
- -------------------------------------------------------------------
130 3 10.37
- -------------------------------------------------------------------
131 3 10.37
- -------------------------------------------------------------------
132 13.37
- -------------------------------------------------------------------
133 3 13.37
- -------------------------------------------------------------------
134 13.37
- -------------------------------------------------------------------
135 12 6 6 10.37
- -------------------------------------------------------------------
136 13.37
- -------------------------------------------------------------------
137 6 10.37
- -------------------------------------------------------------------
138 3 10.37
- -------------------------------------------------------------------
139 3 10.37
- -------------------------------------------------------------------
140 96 96 13.37
- -------------------------------------------------------------------
141 6 17.87
- -------------------------------------------------------------------
142 3 13.37
- -------------------------------------------------------------------
143 3 10.37
- -------------------------------------------------------------------
144 3 10.37
- -------------------------------------------------------------------
145 6 10.37
- -------------------------------------------------------------------
146 3 12.37
- -------------------------------------------------------------------
147 3 10.37
- -------------------------------------------------------------------
148 4 10.37
- -------------------------------------------------------------------
149 24 24 24 24 24 13.37
- -------------------------------------------------------------------
150 3 11.37
- -------------------------------------------------------------------
151 3 13.37
- -------------------------------------------------------------------
152 6 10.37
- -------------------------------------------------------------------
153 3 10.37
II-23
<PAGE>
APPENDIX II
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
PREPAYMENT AND SERVICING INFORMATION
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Prepayment Code(10)
Loan
No. Seller(1) Property Name(2) Seasoning(9) LO YM3 YM2 YM1 YM Def/YM Def
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <C> <S> <C> <C> <C> <C> <C> <C> <C> <C>
154 WACH Shoal Creek Apartments 7 120 117
- -----------------------------------------------------------------------------------------------------------------------------------
155 RFC Pinnacle Peak Office Building 5 29 88
- -----------------------------------------------------------------------------------------------------------------------------------
156 MS Fishers Crossing Shoppes 4 28 89
- -----------------------------------------------------------------------------------------------------------------------------------
157 WACH Great Neck Shops & Potter Self Storage 3 90 87
- -----------------------------------------------------------------------------------------------------------------------------------
158 MS Computer City Store 8 36
- -----------------------------------------------------------------------------------------------------------------------------------
159 RFC Seaboard Industrial 7 84 93
- -----------------------------------------------------------------------------------------------------------------------------------
160 MS Tire Discounters - Dayton (VI) 7 31 86
- -----------------------------------------------------------------------------------------------------------------------------------
161 MS Tire Discounters - Cincinnati (VI) 7 31 86
- -----------------------------------------------------------------------------------------------------------------------------------
162 RFC Interstate West Office Park 8 48 69
- -----------------------------------------------------------------------------------------------------------------------------------
163 RFC North Center Office Building 9 48 70
- -----------------------------------------------------------------------------------------------------------------------------------
164 MS Westchase Apartments 12 84 120
- -----------------------------------------------------------------------------------------------------------------------------------
165 MS Ashewood Apartments 3 60 54
- -----------------------------------------------------------------------------------------------------------------------------------
166 RFC Oakland Drive Apartments 4 28 89
- -----------------------------------------------------------------------------------------------------------------------------------
167 RFC Victoria Street Offices 7 31 86
- -----------------------------------------------------------------------------------------------------------------------------------
168 MS Montague Industrial Building 8 32 97
- -----------------------------------------------------------------------------------------------------------------------------------
169 RFC Sunrise Square Shopping Center 9 48 69
- -----------------------------------------------------------------------------------------------------------------------------------
170 WACH Berkmar Park 6 90 87
- -----------------------------------------------------------------------------------------------------------------------------------
171 MS Crest Ridge Apartments 38 60
- -----------------------------------------------------------------------------------------------------------------------------------
172 RFC British Petroleum - Westlake 7 48 66
- -----------------------------------------------------------------------------------------------------------------------------------
173 RFC Kirkland Way Building 5 60 56
- -----------------------------------------------------------------------------------------------------------------------------------
174 WACH Willow Tree and Coastal Court Apartments (VII) 4 28 89
- -----------------------------------------------------------------------------------------------------------------------------------
175 RFC Eagle Watch Apartments 6 48 66
- -----------------------------------------------------------------------------------------------------------------------------------
176 RFC Post Alley Market Building 5 48 66
- -----------------------------------------------------------------------------------------------------------------------------------
177 WACH Cramer Marketplace Shopping Center 3 60 57
- -----------------------------------------------------------------------------------------------------------------------------------
178 WACH Penn Forest Executive Building 5 90 87
- -----------------------------------------------------------------------------------------------------------------------------------
179 MS 460 Valley Drive Industrial Building 20
- -----------------------------------------------------------------------------------------------------------------------------------
180 RFC Bradley Smith Apartments (VIII) 7 31 86
- -----------------------------------------------------------------------------------------------------------------------------------
181 MS A Storage Place 5 29 88
- -----------------------------------------------------------------------------------------------------------------------------------
182 RFC Tallmadge Towne Apartments 5 29 88
- -----------------------------------------------------------------------------------------------------------------------------------
183 MS Garden Ridge I & II Shopping and Office Center 6 30 207
- -----------------------------------------------------------------------------------------------------------------------------------
184 WACH Greenbriar Village Shopping Center 5 60 57
- -----------------------------------------------------------------------------------------------------------------------------------
185 RFC Chapel Centre 6 48 69
- -----------------------------------------------------------------------------------------------------------------------------------
186 RFC Laurel Manor Apartments 7 31 86
- -----------------------------------------------------------------------------------------------------------------------------------
187 WACH Potter Self Storage 3 90 87
- -----------------------------------------------------------------------------------------------------------------------------------
188 RFC Dorjul Apartments 4 48 129
- -----------------------------------------------------------------------------------------------------------------------------------
189 RFC Orange Industrial Park 7 48 66
- -----------------------------------------------------------------------------------------------------------------------------------
190 RFC Fiesta Palms II Retail Center 12 24 33
- -----------------------------------------------------------------------------------------------------------------------------------
191 RFC Newport Mesa Self Storage 7 48 69
- -----------------------------------------------------------------------------------------------------------------------------------
192 MS Brunswick Apartments 15 60 54
- -----------------------------------------------------------------------------------------------------------------------------------
193 RFC Canyon Professional Center 6 48 66
- -----------------------------------------------------------------------------------------------------------------------------------
194 WACH Madison Heights Square 5 90 87
- -----------------------------------------------------------------------------------------------------------------------------------
195 MS Lexington Apartments 45 60
- -----------------------------------------------------------------------------------------------------------------------------------
196 MS Heritage Green Apartments 59 36
- -----------------------------------------------------------------------------------------------------------------------------------
197 RFC Aaron Center 5 48 66
- -----------------------------------------------------------------------------------------------------------------------------------
198 RFC Carlton Way Apartments 4 48 69
- -----------------------------------------------------------------------------------------------------------------------------------
199 WACH Creekview Townhouse Apartments 7 60 57
- -----------------------------------------------------------------------------------------------------------------------------------
200 MS Country Village Apartments 59 36
- -----------------------------------------------------------------------------------------------------------------------------------
201 WACH Blackstone Square 2 60 57
- -----------------------------------------------------------------------------------------------------------------------------------
202 RFC Pizza Hut / 7-Eleven (A) 5 48 66
- -----------------------------------------------------------------------------------------------------------------------------------
203 RFC Quick Chek (A) 5 48 66
- -----------------------------------------------------------------------------------------------------------------------------------
204 WACH Holcomb Place III 6 60 57
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
- -------------------------------------------------------------------
Prepayment Code(10)
Loan Total Admin
No. 5 4.5 4 3.5 3 2.5 2 1 Open Cost (bps)(11)
- -------------------------------------------------------------------
154 3 10.37
- -------------------------------------------------------------------
155 3 5.37
- -------------------------------------------------------------------
156 3 10.37
- -------------------------------------------------------------------
157 3 10.37
- -------------------------------------------------------------------
158 81 3 13.37
- -------------------------------------------------------------------
159 3 10.37
- -------------------------------------------------------------------
160 3 10.37
- -------------------------------------------------------------------
161 3 10.37
- -------------------------------------------------------------------
162 3 10.37
- -------------------------------------------------------------------
163 3 10.37
- -------------------------------------------------------------------
164 36 10.37
- -------------------------------------------------------------------
165 6 10.37
- -------------------------------------------------------------------
166 3 10.37
- -------------------------------------------------------------------
167 3 10.37
- -------------------------------------------------------------------
168 3 13.37
- -------------------------------------------------------------------
169 3 10.37
- -------------------------------------------------------------------
170 3 10.37
- -------------------------------------------------------------------
171 12 6 6 10.37
- -------------------------------------------------------------------
172 6 10.37
- -------------------------------------------------------------------
173 4 10.37
- -------------------------------------------------------------------
174 3 10.37
- -------------------------------------------------------------------
175 6 10.37
- -------------------------------------------------------------------
176 6 10.37
- -------------------------------------------------------------------
177 3 10.37
- -------------------------------------------------------------------
178 3 10.37
- -------------------------------------------------------------------
179 60 60 13.37
- -------------------------------------------------------------------
180 3 10.37
- -------------------------------------------------------------------
181 3 10.37
- -------------------------------------------------------------------
182 3 10.37
- -------------------------------------------------------------------
183 3 10.37
- -------------------------------------------------------------------
184 3 10.37
- -------------------------------------------------------------------
185 3 10.37
- -------------------------------------------------------------------
186 3 10.37
- -------------------------------------------------------------------
187 3 10.37
- -------------------------------------------------------------------
188 3 10.37
- -------------------------------------------------------------------
189 6 10.37
- -------------------------------------------------------------------
190 3 10.37
- -------------------------------------------------------------------
191 3 10.37
- -------------------------------------------------------------------
192 6 10.37
- -------------------------------------------------------------------
193 6 10.37
- -------------------------------------------------------------------
194 3 10.37
- -------------------------------------------------------------------
195 12 6 6 10.37
- -------------------------------------------------------------------
196 12 12 12 9 3 10.37
- -------------------------------------------------------------------
197 6 10.37
- -------------------------------------------------------------------
198 3 10.37
- -------------------------------------------------------------------
199 3 10.37
- -------------------------------------------------------------------
200 12 12 12 9 3 10.37
- -------------------------------------------------------------------
201 3 10.37
- -------------------------------------------------------------------
202 6 10.37
- -------------------------------------------------------------------
203 6 10.37
- -------------------------------------------------------------------
204 3 10.37
- -------------------------------------------------------------------
II-24
<PAGE>
APPENDIX II
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
PREPAYMENT AND SERVICING INFORMATION
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Prepayment Code(10)
Loan
No. Seller(1) Property Name(2) Seasoning(9) LO YM3 YM2 YM1 YM Def/YM Def
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <C> <S> <C> <C> <C> <C> <C> <C> <C> <C>
205 RFC New Hope Commons 9 48 69
- -----------------------------------------------------------------------------------------------------------------------------------
206 RFC Union Avenue Plaza 3 27 90
- -----------------------------------------------------------------------------------------------------------------------------------
207 MS Cedargate Apartments 15 60 54
- -----------------------------------------------------------------------------------------------------------------------------------
208 RFC Oakcrest Apartments 6 30 87
- -----------------------------------------------------------------------------------------------------------------------------------
209 RFC City Sports 4 48 69
- -----------------------------------------------------------------------------------------------------------------------------------
210 MS Glenarm Manor Apartments 15 60 54
- -----------------------------------------------------------------------------------------------------------------------------------
211 RFC Lin-Valle Center 5 48 69
- -----------------------------------------------------------------------------------------------------------------------------------
212 RFC Cramer Woods Apartments 7 48 66
- -----------------------------------------------------------------------------------------------------------------------------------
213 MS Great Falls Days Inn 8 60 57
- -----------------------------------------------------------------------------------------------------------------------------------
214 MS Hillside Trace Apartments 15 60 54
- -----------------------------------------------------------------------------------------------------------------------------------
215 WACH Pearisburg Square 1 60 57
- -----------------------------------------------------------------------------------------------------------------------------------
216 RFC 3180 Presidential Drive 8 48 66
- -----------------------------------------------------------------------------------------------------------------------------------
217 MS Villa Seville Apartments 5 29 88
- -----------------------------------------------------------------------------------------------------------------------------------
218 RFC Montreal Station 7 48 69
- -----------------------------------------------------------------------------------------------------------------------------------
219 WACH Dunwoody Springs Building 5 29 85
- -----------------------------------------------------------------------------------------------------------------------------------
220 RFC Spring House Office Park 6 48 69
- -----------------------------------------------------------------------------------------------------------------------------------
221 MS Sutton Place Apartments 15 60 54
- -----------------------------------------------------------------------------------------------------------------------------------
222 RFC Garrison Street Apartments 5 48 66
- -----------------------------------------------------------------------------------------------------------------------------------
223 WACH Airport Drive Shops 7 60 117
- -----------------------------------------------------------------------------------------------------------------------------------
224 RFC 2755 Philmont Ave. 8 36 78
- -----------------------------------------------------------------------------------------------------------------------------------
225 RFC 9107 Gaither Rd. 8 48 186
- -----------------------------------------------------------------------------------------------------------------------------------
226 RFC Tulwane Apartments 3 48 69
- -----------------------------------------------------------------------------------------------------------------------------------
227 RFC 900-902 Pine Street Apartments 7 48 66
- -----------------------------------------------------------------------------------------------------------------------------------
228 RFC Rochelle Arms 3 48 69
- -----------------------------------------------------------------------------------------------------------------------------------
229 RFC Pottery Row Apartments 8 48 66
TOTAL/WEIGHTED AVERAGE 8
</TABLE>
- -------------------------------------------------------------------
Prepayment Code(10)
Loan Total Admin
No. 5 4.5 4 3.5 3 2.5 2 1 Open Cost (bps)(11)
- -------------------------------------------------------------------
205 3 10.37
- -------------------------------------------------------------------
206 3 10.37
- -------------------------------------------------------------------
207 6 10.37
- -------------------------------------------------------------------
208 3 10.37
- -------------------------------------------------------------------
209 3 10.37
- -------------------------------------------------------------------
210 6 10.37
- -------------------------------------------------------------------
211 3 10.37
- -------------------------------------------------------------------
212 6 10.37
- -------------------------------------------------------------------
213 3 10.37
- -------------------------------------------------------------------
214 6 10.37
- -------------------------------------------------------------------
215 3 10.37
- -------------------------------------------------------------------
216 6 10.37
- -------------------------------------------------------------------
217 3 10.37
- -------------------------------------------------------------------
218 3 10.37
- -------------------------------------------------------------------
219 6 10.37
- -------------------------------------------------------------------
220 3 10.37
- -------------------------------------------------------------------
221 6 10.37
- -------------------------------------------------------------------
222 6 10.37
- -------------------------------------------------------------------
223 3 10.37
- -------------------------------------------------------------------
224 6 10.37
- -------------------------------------------------------------------
225 6 17.87
- -------------------------------------------------------------------
226 3 10.37
- -------------------------------------------------------------------
227 6 10.37
- -------------------------------------------------------------------
228 3 10.37
- -------------------------------------------------------------------
229 6 10.37
TOTAL/WEIGHTED AVERAGE 10.93
II-25
<PAGE>
APPENDIX II
ADDITIONAL INFORMATION REGARDING MULTIFAMILY PROPERTIES - I
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
Loan Studios Avg Studio Rent 1 BR Avg One BR
No. Seller Property Name # Studios Mo Rent Range # 1 BR Mo Rent Rent Range
- ---------------------------------------------------------------------------------------------------------------------------------
<C> <C> <S> <C> <C> <C> <C> <C> <C>
5 RFC Hawthorne Woods 64 $520 $465-$549 104 $556 $500-$589
- ---------------------------------------------------------------------------------------------------------------------------------
8 RFC Heritage House 117 $468 $425-$585
- ---------------------------------------------------------------------------------------------------------------------------------
9 RFC Spanish Trace East Apartments 24 $413 $399-$440 186 $468 $405-$515
- ---------------------------------------------------------------------------------------------------------------------------------
22 RFC Valencia Apartments 480 $354 $248-$1179
- ---------------------------------------------------------------------------------------------------------------------------------
28 RFC Colony By The Mall Apartments 1 $400 $400 24 $434 $429-$439
- ---------------------------------------------------------------------------------------------------------------------------------
31 RFC Green Ridge Heights Apartments 65 $547 $510-$613
- ---------------------------------------------------------------------------------------------------------------------------------
37 MS Woodside Apartments 0 N/A N/A 1 $575 $575-$575
- ---------------------------------------------------------------------------------------------------------------------------------
38 RFC Cambridge Commons Apartments 40 $439 $439
- ---------------------------------------------------------------------------------------------------------------------------------
59 RFC Arbors of Wooster Apartments 62 $517 $500-$565
- ---------------------------------------------------------------------------------------------------------------------------------
62 RFC Augusta at Gruene 28 $611 $580-$675
- ---------------------------------------------------------------------------------------------------------------------------------
66 RFC Saratoga Square Apartments 24 $881 $745-$925
- ---------------------------------------------------------------------------------------------------------------------------------
68 WACH Redland Crest Apartments 0 N/A N/A 147 $488 $410-$570
- ---------------------------------------------------------------------------------------------------------------------------------
69 RFC Village of Westover Apartments 18 $550 $530-$574
- ---------------------------------------------------------------------------------------------------------------------------------
74 MS Brandywine III Apartments 7 $455 $440-$460 89 $494 $450-$535
- ---------------------------------------------------------------------------------------------------------------------------------
80 MS Via Alamos Apartments 0 N/A N/A 89 $373 $300-$455
- ---------------------------------------------------------------------------------------------------------------------------------
82 RFC Arbour Walk Village Apartments
- ---------------------------------------------------------------------------------------------------------------------------------
88 MS Summit Apartments 9 $677 $645-$725 29 $954 $650-$1100
- ---------------------------------------------------------------------------------------------------------------------------------
89 RFC Villa Fontana 6 $1,267 $1200-$1300 12 $1,471 $1450-$1500
- ---------------------------------------------------------------------------------------------------------------------------------
91 MS Hughes Towers Apartments 0 N/A N/A 45 $817 $700-$950
- ---------------------------------------------------------------------------------------------------------------------------------
94 RFC Victoria Square Apartments 16 $450 $450
- ---------------------------------------------------------------------------------------------------------------------------------
96 MS Strathmore Towers Apartments 34 $652 $450-$750 28 $890 $750-$950
- ---------------------------------------------------------------------------------------------------------------------------------
100 RFC Northampton Apartments 29 $376 $310-$440 111 $466 $300-$520
- ---------------------------------------------------------------------------------------------------------------------------------
103 RFC The Vineyards Apartments
- ---------------------------------------------------------------------------------------------------------------------------------
106 MS Kenyon Place Apartments 0 N/A N/A 88 $424 $395-$445
- ---------------------------------------------------------------------------------------------------------------------------------
111 WACH Collier & Piedmont Rd. Apts. 19 $509 $370-$685 49 $730 $275-$875
- ---------------------------------------------------------------------------------------------------------------------------------
112 WACH Canteberi Place Apartments 0 N/A N/A 20 $415 $400-$440
- ---------------------------------------------------------------------------------------------------------------------------------
119 RFC Little Brook Apartments 15 $445 $445 72 $520 $494-$539
- ---------------------------------------------------------------------------------------------------------------------------------
128 RFC Ski Lodge Apartments 1 $535 $535 33 $406 $385-$585
- ---------------------------------------------------------------------------------------------------------------------------------
130 RFC Lakeshore Apartments 84 $540 $495-$635
- ---------------------------------------------------------------------------------------------------------------------------------
135 MS Pingry Arms and Cornell Arms Apartments 23 $526 $466-$560 65 $668 $640-$700
- ---------------------------------------------------------------------------------------------------------------------------------
137 RFC Maple Run Apartments
- ---------------------------------------------------------------------------------------------------------------------------------
143 RFC Dartmoor Apartments 43 $495 $425-$575
- ---------------------------------------------------------------------------------------------------------------------------------
144 WACH Lavender Lakes 0 N/A N/A 2 $425 425.00
- ---------------------------------------------------------------------------------------------------------------------------------
150 MS Sierra Meadows Apartments 0 N/A N/A 16 $469 $455-$475
- ---------------------------------------------------------------------------------------------------------------------------------
154 WACH Shoal Creek Apartments 0 N/A N/A 0 N/A N/A
- ---------------------------------------------------------------------------------------------------------------------------------
164 MS Westchase Apartments 0 N/A N/A 80 $345 $295-$360
- ---------------------------------------------------------------------------------------------------------------------------------
165 MS Ashewood Apartments 0 N/A N/A 96 $453 $395-$500
- ---------------------------------------------------------------------------------------------------------------------------------
166 RFC Oakland Drive Apartments 50 $400 $395-$405
- ---------------------------------------------------------------------------------------------------------------------------------
171 MS Crest Ridge Apartments 17 $350 $340-$385 76 $414 $395-$430
- ---------------------------------------------------------------------------------------------------------------------------------
174 WACH Willow Tree and Coastal Court Apartments 0 N/A N/A 0 N/A N/A
- ---------------------------------------------------------------------------------------------------------------------------------
175 RFC Eagle Watch Apartments 16 $333 $325-$360
- ---------------------------------------------------------------------------------------------------------------------------------
180 RFC Bradley Smith Apartments 46 $592 $490-$680
- ---------------------------------------------------------------------------------------------------------------------------------
182 RFC Tallmadge Towne Apartments
- ---------------------------------------------------------------------------------------------------------------------------------
186 RFC Laurel Manor Apartments 36 $691 $665-$735
- ---------------------------------------------------------------------------------------------------------------------------------
188 RFC Dorjul Apartments 1 $380 $380 10 $442 $430-$470
- ---------------------------------------------------------------------------------------------------------------------------------
192 MS Brunswick Apartments 8 $382 $357-$387 60 $425 $393-$464
- ---------------------------------------------------------------------------------------------------------------------------------
195 MS Lexington Apartments 0 N/A N/A 65 $462 $405-$510
- ---------------------------------------------------------------------------------------------------------------------------------
196 MS Heritage Green Apartments 0 N/A N/A 0 N/A N/A
- ---------------------------------------------------------------------------------------------------------------------------------
198 RFC Carlton Way Apartments 13 $411 $375-$570 31 $547 $375-$761
- ---------------------------------------------------------------------------------------------------------------------------------
199 WACH Creekview Townhouse Apartments 0 N/A N/A 0 N/A N/A
- ---------------------------------------------------------------------------------------------------------------------------------
200 MS Country Village Apartments 0 N/A N/A 51 $347 $320-$375
- ---------------------------------------------------------------------------------------------------------------------------------
205 RFC New Hope Commons
- ---------------------------------------------------------------------------------------------------------------------------------
207 MS Cedargate Apartments 6 $374 $355-$380 40 $418 $399-$470
- ---------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
Loan 2 BR Avg Two BR 3 BR Avg Three BR 4BR Avg Four BR Rent Range for
No. #2 BR Mo Rent Rent Range # 3BR Mo Rent Rent Range #4 BR Mo Rent Rent Range Entire Property
- -------------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
5 177 $673 $630-$775 $465-$775
- -------------------------------------------------------------------------------------------------------------------------
8 183 $581 $480-$800 44 $746 $675-$800 4 $812 $800-$820 $425-$820
- -------------------------------------------------------------------------------------------------------------------------
9 256 $540 $460-$590 52 $644 $665-$685 $399-$685
- -------------------------------------------------------------------------------------------------------------------------
22 $248-$1179
- -------------------------------------------------------------------------------------------------------------------------
28 202 $527 $479-$569 18 $669 $669 $400-$669
- -------------------------------------------------------------------------------------------------------------------------
31 244 $614 $542-$648 $510-$648
- -------------------------------------------------------------------------------------------------------------------------
37 92 $665 $645-$775 87 $772 $745-$860 0 N/A N/A $575-$860
- -------------------------------------------------------------------------------------------------------------------------
38 112 $537 $519-$559 40 $637 $589-$639 $439-$639
- -------------------------------------------------------------------------------------------------------------------------
59 56 $617 $525-$675 $500-$675
- -------------------------------------------------------------------------------------------------------------------------
62 64 $763 $670-$895 $580-$895
- -------------------------------------------------------------------------------------------------------------------------
66 76 $957 $750-$1018 $745-$1018
- -------------------------------------------------------------------------------------------------------------------------
68 9 $598 $550-$640 0 N/A N/A 0 N/A N/A $410-$640
- -------------------------------------------------------------------------------------------------------------------------
69 72 $605 $585-$680 18 $696 $685-$750 $530-$750
- -------------------------------------------------------------------------------------------------------------------------
74 60 $585 $541-$595 0 N/A N/A 0 N/A N/A $440-$595
- -------------------------------------------------------------------------------------------------------------------------
80 71 $476 $400-$650 0 N/A N/A 0 N/A N/A $300-$650
- -------------------------------------------------------------------------------------------------------------------------
82 68 $737 $695-$875 $695-$875
- -------------------------------------------------------------------------------------------------------------------------
88 52 $1,064 $683-$1290 0 N/A N/A 0 N/A N/A $645-$1290
- -------------------------------------------------------------------------------------------------------------------------
89 18 $1,817 $1800-$1850 $1200-$1850
- -------------------------------------------------------------------------------------------------------------------------
91 18 $971 $825-$1150 0 N/A N/A 0 N/A N/A $700-$1150
- -------------------------------------------------------------------------------------------------------------------------
94 88 $558 $275-$1050 $275-$1050
- -------------------------------------------------------------------------------------------------------------------------
96 0 N/A N/A 1 $2,100 $2,100 0 N/A N/A $450-$2100
- -------------------------------------------------------------------------------------------------------------------------
100 9 $582 $545-$600 $300-$600
- -------------------------------------------------------------------------------------------------------------------------
103 96 $522 $300-$539 $300-$539
- -------------------------------------------------------------------------------------------------------------------------
106 24 $547 $520-$570 0 N/A N/A 0 N/A N/A $395-$570
- -------------------------------------------------------------------------------------------------------------------------
111 15 $839 $715-$1050 0 N/A N/A 0 N/A N/A $275-$1050
- -------------------------------------------------------------------------------------------------------------------------
112 48 $486 $390-$515 50 $525 $495-$550 12 $595 $595 $390-$595
- -------------------------------------------------------------------------------------------------------------------------
119 7 $643 $628-$655 $445-$655
- -------------------------------------------------------------------------------------------------------------------------
128 61 $479 $450-$850 $385-$850
- -------------------------------------------------------------------------------------------------------------------------
130 36 $696 $650-$750 $495-$750
- -------------------------------------------------------------------------------------------------------------------------
135 15 $829 $700-$840 11 $903 $840-$925 0 N/A N/A $466-$925
- -------------------------------------------------------------------------------------------------------------------------
137 45 $481 $429-$499 39 $571 $459-$599 $429-$599
- -------------------------------------------------------------------------------------------------------------------------
143 29 $607 $595-$660 $425-$660
- -------------------------------------------------------------------------------------------------------------------------
144 46 $550 $550 10 $675 $675 0 N/A N/A $425-$675
- -------------------------------------------------------------------------------------------------------------------------
150 80 $549 $500-$575 24 $640 $325-$665 0 N/A N/A $325-$665
- -------------------------------------------------------------------------------------------------------------------------
154 48 $628 $300-$660 0 N/A N/A 0 N/A N/A $300-$660
- -------------------------------------------------------------------------------------------------------------------------
164 80 $444 $390-$475 0 N/A N/A 0 N/A N/A $295-$475
- -------------------------------------------------------------------------------------------------------------------------
165 6 $580 $560-$590 0 N/A N/A 0 N/A N/A $395-$590
- -------------------------------------------------------------------------------------------------------------------------
166 50 $460 $455-$465 $395-$465
- -------------------------------------------------------------------------------------------------------------------------
171 24 $505 $480-$545 0 N/A N/A 0 N/A N/A $340-$545
- -------------------------------------------------------------------------------------------------------------------------
174 56 $486 $265-$550 10 $561 $489-$600 0 N/A N/A $265-$600
- -------------------------------------------------------------------------------------------------------------------------
175 80 $406 $390-$440 $325-$440
- -------------------------------------------------------------------------------------------------------------------------
180 21 $730 $615-$785 $490-$785
- -------------------------------------------------------------------------------------------------------------------------
182 58 $544 $525-$590 1 $560 $560 $525-$590
- -------------------------------------------------------------------------------------------------------------------------
186 13 $796 $755-$825 $665-$825
- -------------------------------------------------------------------------------------------------------------------------
188 50 $529 $460-$570 11 $574 $490-$590 $380-$590
- -------------------------------------------------------------------------------------------------------------------------
192 12 $559 $519-$639 0 N/A N/A 0 N/A N/A $357-$639
- -------------------------------------------------------------------------------------------------------------------------
195 82 $569 $520-$615 64 $671 $619-$790 0 N/A N/A $405-$790
- -------------------------------------------------------------------------------------------------------------------------
196 113 $377 $315-$430 16 $435 $400-$475 0 N/A N/A $315-$475
- -------------------------------------------------------------------------------------------------------------------------
198 7 $731 $618-$850 $375-$850
- -------------------------------------------------------------------------------------------------------------------------
199 42 $658 $506-$690 0 N/A N/A 0 N/A N/A $506-$690
- -------------------------------------------------------------------------------------------------------------------------
200 24 $456 $395-$510 0 N/A N/A 0 N/A N/A $320-$510
- -------------------------------------------------------------------------------------------------------------------------
205 12 $1,540 $1500-$1575 $1500-$1575
- -------------------------------------------------------------------------------------------------------------------------
207 12 $515 $504-$525 0 N/A N/A 0 N/A N/A $355-$525
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
II-26
<PAGE>
APPENDIX II
ADDITIONAL INFORMATION REGARDING MULTIFAMILY PROPERTIES - I
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
Loan Studios Avg Studio Rent 1 BR Avg One BR
No. Seller Property Name # Studios Mo Rent Range # 1 BR Mo Rent Rent Range
- ---------------------------------------------------------------------------------------------------------------------------------
<C> <C> <S> <C> <C> <C> <C> <C> <C>
208 RFC Oakcrest Apartments 2 $475 $450-$500
- ---------------------------------------------------------------------------------------------------------------------------------
210 MS Glenarm Manor Apartments 0 N/A N/A 58 $368 $350-$375
- ---------------------------------------------------------------------------------------------------------------------------------
212 RFC Cramer Woods Apartments
- ---------------------------------------------------------------------------------------------------------------------------------
214 MS Hillside Trace Apartments 13 $320 $320 46 $386 $365-$395
- ---------------------------------------------------------------------------------------------------------------------------------
217 MS Villa Seville Apartments 0 N/A N/A 4 $706 $525-$825
- ---------------------------------------------------------------------------------------------------------------------------------
221 MS Sutton Place Apartments 6 $350 $345-$355 43 $398 $380-$420
- ---------------------------------------------------------------------------------------------------------------------------------
222 RFC Garrison Street Apartments 7 $1,407 $1300-$1550
- ---------------------------------------------------------------------------------------------------------------------------------
226 RFC Tulwane Apartments 28 $512 $425-$553
- ---------------------------------------------------------------------------------------------------------------------------------
227 RFC 900-902 Pine Street Apartments 3 $687 $595-$840
- ---------------------------------------------------------------------------------------------------------------------------------
228 RFC Rochelle Arms 9 $465 $425-$510 19 $497 $435-$525
- ---------------------------------------------------------------------------------------------------------------------------------
229 RFC Pottery Row Apartments 3 $695 $675-$735
Total/Weighted Average 305 $181 3,057 $490
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
Loan 2 BR Avg Two BR 3 BR Avg Three BR 4BR Avg Four BR Rent Range for
No. #2 BR Mo Rent Rent Range # 3BR Mo Rent Rent Range #4 BR Mo Rent Rent Range Entire Property
- -------------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
208 34 $603 $560-$610 $450-$610
- -------------------------------------------------------------------------------------------------------------------------
210 12 $460 $445-$470 0 N/A N/A 0 N/A N/A $350-$470
- -------------------------------------------------------------------------------------------------------------------------
212 32 $572 $550-$620 $550-$620
- -------------------------------------------------------------------------------------------------------------------------
214 5 $483 $475-$485 0 N/A N/A 0 N/A N/A $320-$485
- -------------------------------------------------------------------------------------------------------------------------
217 14 $842 $800-$880 0 N/A N/A 0 N/A N/A $525-$880
- -------------------------------------------------------------------------------------------------------------------------
221 6 $494 $490-$500 0 N/A N/A 0 N/A N/A $345-$500
- -------------------------------------------------------------------------------------------------------------------------
222 1 $2,295 $2295 $1300-$2295
- -------------------------------------------------------------------------------------------------------------------------
226 6 $624 $595-$647 $425-$647
- -------------------------------------------------------------------------------------------------------------------------
227 9 $884 $495-$1200 $495-$1200
- -------------------------------------------------------------------------------------------------------------------------
228 $425-$525
- -------------------------------------------------------------------------------------------------------------------------
229 6 $875 $775-$950 $675-$950
3,344 $616 496 $265 16 $58
</TABLE>
II-27
<PAGE>
APPENDIX II
ADDITIONAL INFORMATION REGARDING MULTIFAMILY PROPERTIES - II
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Loan Cut-Off Date Sub-Property
No. Property Name Balance Property Type Type Elevator Units Utilities Tenants Pay
- ------------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C> <C> <C> <C>
5 Hawthorne Woods $12,927,771 Multifamily Garden No 345 Electric
- ------------------------------------------------------------------------------------------------------------------------------------
8 Heritage House $11,934,054 Multifamily Garden No 348 Electric
- ------------------------------------------------------------------------------------------------------------------------------------
9 Spanish Trace East Apartments $11,448,025 Multifamily Garden No 518 Electric, Water
- ------------------------------------------------------------------------------------------------------------------------------------
22 Valencia Apartments $8,425,975 Multifamily Garden No 480 Electric
- ------------------------------------------------------------------------------------------------------------------------------------
28 Colony By The Mall Apartments $7,065,649 Multifamily Garden No 245 Electric, Gas
- ------------------------------------------------------------------------------------------------------------------------------------
31 Green Ridge Heights Apartments $6,740,657 Multifamily High-Rise Yes 309 Electric
- ------------------------------------------------------------------------------------------------------------------------------------
37 Woodside Apartments $6,345,884 Multifamily Garden No 180 Electricity
- ------------------------------------------------------------------------------------------------------------------------------------
38 Cambridge Commons Apartments $6,069,549 Multifamily Garden No 192 Electric, Gas
- ------------------------------------------------------------------------------------------------------------------------------------
59 Arbors of Wooster Apartments $4,757,522 Multifamily Garden No 118 Electric, Water
- ------------------------------------------------------------------------------------------------------------------------------------
62 Augusta at Gruene $4,571,095 Multifamily Garden No 92 Electric, Water
- ------------------------------------------------------------------------------------------------------------------------------------
66 Saratoga Square Apartments $4,473,773 Multifamily Garden No 100 Electric, Gas, Water
- ------------------------------------------------------------------------------------------------------------------------------------
68 Redland Crest Apartments $4,434,859 Multifamily Garden No 156 Electricity, Gas
- ------------------------------------------------------------------------------------------------------------------------------------
69 Village of Westover Apartments $4,324,538 Multifamily Garden No 108 Electric, Gas
- ------------------------------------------------------------------------------------------------------------------------------------
74 Brandywine III Apartments $4,255,336 Multifamily Garden No 156 Electricity
- ------------------------------------------------------------------------------------------------------------------------------------
80 Via Alamos Apartments $3,986,523 Multifamily Garden No 160 Electricity.
- ------------------------------------------------------------------------------------------------------------------------------------
82 Arbour Walk Village Apartments $3,881,673 Multifamily Garden No 68 Electric, Gas
- ------------------------------------------------------------------------------------------------------------------------------------
88 Summit Apartments $3,581,539 Multifamily Garden Yes 90 Electricity.
- ------------------------------------------------------------------------------------------------------------------------------------
89 Villa Fontana $3,576,550 Multifamily Garden Yes 36 Electric
- ------------------------------------------------------------------------------------------------------------------------------------
91 Hughes Towers Apartments $3,563,391 Multifamily Garden Yes 63 Electricity
- ------------------------------------------------------------------------------------------------------------------------------------
94 Victoria Square Apartments $3,477,262 Multifamily Garden No 104 Electric, Gas, Water
- ------------------------------------------------------------------------------------------------------------------------------------
96 Strathmore Towers Apartments $3,434,884 Multifamily Garden Yes 63 Gas, Electricity
- ------------------------------------------------------------------------------------------------------------------------------------
100 Northampton Apartments $3,269,819 Multifamily Garden No 149 Water
- ------------------------------------------------------------------------------------------------------------------------------------
103 The Vineyards Apartments $3,183,859 Multifamily Garden No 96 Electric, Gas
- ------------------------------------------------------------------------------------------------------------------------------------
106 Kenyon Place Apartments $2,992,807 Multifamily Garden Yes 112 Electricity
- ------------------------------------------------------------------------------------------------------------------------------------
111 Collier & Piedmont Rd. Apts. $2,972,464 Multifamily Garden No 83 Electricity, Gas
- ------------------------------------------------------------------------------------------------------------------------------------
112 Canteberi Place Apartments $2,966,629 Multifamily Garden No 130 Electricity
- ------------------------------------------------------------------------------------------------------------------------------------
119 Little Brook Apartments $2,744,932 Multifamily Garden No 94 Electric
- ------------------------------------------------------------------------------------------------------------------------------------
128 Ski Lodge Apartments $2,626,656 Multifamily Garden No 95 Gas
- ------------------------------------------------------------------------------------------------------------------------------------
130 Lakeshore Apartments $2,537,208 Multifamily Garden No 120 Electric
- ------------------------------------------------------------------------------------------------------------------------------------
135 Pingry Arms and Cornell Arms Apartments $2,406,395 Multifamily Mid-Rise Yes 114 Electricity
- ------------------------------------------------------------------------------------------------------------------------------------
137 Maple Run Apartments $2,338,415 Multifamily Garden No 84 Electric, Gas
- ------------------------------------------------------------------------------------------------------------------------------------
143 Dartmoor Apartments $2,185,656 Multifamily Garden No 72 Electric
- ------------------------------------------------------------------------------------------------------------------------------------
144 Lavender Lakes $2,163,916 Multifamily Garden No 58 Water, Sewer, Electricity
- ------------------------------------------------------------------------------------------------------------------------------------
150 Sierra Meadows Apartments $2,042,934 Multifamily Garden No 120 Electricity
- ------------------------------------------------------------------------------------------------------------------------------------
154 Shoal Creek Apartments $1,998,601 Multifamily Garden No 48 Electricity
- ------------------------------------------------------------------------------------------------------------------------------------
164 Westchase Apartments $1,859,449 Multifamily Garden No 160 Electricity
- ------------------------------------------------------------------------------------------------------------------------------------
165 Ashewood Apartments $1,845,538 Multifamily Garden Yes 102 Electricity, Gas.
- ------------------------------------------------------------------------------------------------------------------------------------
166 Oakland Drive Apartments $1,793,186 Multifamily Garden No 100 Electric
- ------------------------------------------------------------------------------------------------------------------------------------
171 Crest Ridge Apartments $1,766,189 Multifamily Garden Yes 117 Electricity
- ------------------------------------------------------------------------------------------------------------------------------------
174 Willow Tree and Coastal Court Apartments $1,731,216 Multifamily Garden No 66 Electricity
- ------------------------------------------------------------------------------------------------------------------------------------
175 Eagle Watch Apartments $1,691,461 Multifamily Garden No 96 Electric
- ------------------------------------------------------------------------------------------------------------------------------------
180 Bradley Smith Apartments $1,636,623 Multifamily High-Rise No 67 N/A
- ------------------------------------------------------------------------------------------------------------------------------------
182 Tallmadge Towne Apartments $1,568,099 Multifamily Garden No 59 Electric, Gas
- ------------------------------------------------------------------------------------------------------------------------------------
186 Laurel Manor Apartments $1,492,201 Multifamily Garden No 49 Electric
- ------------------------------------------------------------------------------------------------------------------------------------
188 Dorjul Apartments $1,491,738 Multifamily Garden No 72 Electric
- ------------------------------------------------------------------------------------------------------------------------------------
192 Brunswick Apartments $1,407,768 Multifamily Garden No 80 Electricity
- ------------------------------------------------------------------------------------------------------------------------------------
195 Lexington Apartments $1,381,921 Multifamily Garden No 211 Electricity
- ------------------------------------------------------------------------------------------------------------------------------------
196 Heritage Green Apartments $1,371,530 Multifamily Garden No 129 Electricity
- ------------------------------------------------------------------------------------------------------------------------------------
198 Carlton Way Apartments $1,344,840 Multifamily Garden Yes 51 Electric, Gas, Water
- ------------------------------------------------------------------------------------------------------------------------------------
199 Creekview Townhouse Apartments $1,333,001 Multifamily Garden No 42 Electricity, Gas
- ------------------------------------------------------------------------------------------------------------------------------------
200 Country Village Apartments $1,297,399 Multifamily Garden No 75 Electricity, Gas, Water,
Sewer
- ------------------------------------------------------------------------------------------------------------------------------------
205 New Hope Commons $1,261,355 Multifamily Garden No 12 Electric, Water
- ------------------------------------------------------------------------------------------------------------------------------------
207 Cedargate Apartments $1,219,019 Multifamily Garden No 58 Electricity
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
II-28
<PAGE>
APPENDIX II
ADDITIONAL INFORMATION REGARDING MULTIFAMILY PROPERTIES - II
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Loan Cut-Off Date Sub-Property
No. Property Name Balance Property Type Type Elevator Units Utilities Tenants Pay
- ------------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
208 Oakcrest Apartments $1,193,947 Multifamily Garden Yes 36 Electric, Gas
- ------------------------------------------------------------------------------------------------------------------------------------
210 Glenarm Manor Apartments $1,179,694 Multifamily Garden No 70 Electricity
- ------------------------------------------------------------------------------------------------------------------------------------
212 Cramer Woods Apartments $1,091,005 Multifamily Garden No 32 Electric
- ------------------------------------------------------------------------------------------------------------------------------------
214 Hillside Trace Apartments $1,069,589 Multifamily Garden No 64 Electricity
- ------------------------------------------------------------------------------------------------------------------------------------
217 Villa Seville Apartments $971,155 Multifamily Garden No 18 Electricity
- ------------------------------------------------------------------------------------------------------------------------------------
221 Sutton Place Apartments $865,109 Multifamily Garden No 55 Electricity
- ------------------------------------------------------------------------------------------------------------------------------------
222 Garrison Street Apartments $821,452 Multifamily Garden No 8 Electric
- ------------------------------------------------------------------------------------------------------------------------------------
226 Tulwane Apartments $672,420 Multifamily Garden No 34 Electric
- ------------------------------------------------------------------------------------------------------------------------------------
227 900-902 Pine Street Apartments $620,770 Multifamily Garden No 12 Electric, Gas
- ------------------------------------------------------------------------------------------------------------------------------------
228 Rochelle Arms $572,802 Multifamily Garden Yes 28 Electric, Water
- ------------------------------------------------------------------------------------------------------------------------------------
229 Pottery Row Apartments $516,977 Multifamily Garden No 9 Electric, Gas, Water
Total/Weighted Average $196,774,257 7,218
</TABLE>
II-29
<PAGE>
APPENDIX II
RESERVE ACCOUNT (ALL MORTGAGE LOANS)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
Insurance Initial Capital
Loan Escrow Tax Escrow Capital Expense Expense Reserve
No. Property Name Required(12) Required(12) Deposit(13) Balance(14)
- --------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C> <C>
1 Key West Hilton Resort No Yes $50,596 $170,684
- --------------------------------------------------------------------------------------------------------------------------
2 Lancaster Commerce Center No Yes $13,250 $11,250
- --------------------------------------------------------------------------------------------------------------------------
3 Cupertino Village Shopping Center Yes Yes $0 $6,553
- --------------------------------------------------------------------------------------------------------------------------
4 Metro Pike Center No Yes $0 $4,025
- --------------------------------------------------------------------------------------------------------------------------
5 Hawthorne Woods No Yes $71,125 $98,072
- --------------------------------------------------------------------------------------------------------------------------
6 Sybase Building No No $3,750 $6,159
- --------------------------------------------------------------------------------------------------------------------------
7 Alexandria Courtyard Marriott Hotel No Yes $4,688 $21,861
- --------------------------------------------------------------------------------------------------------------------------
8 Heritage House No Yes $9,188 $33,128
- --------------------------------------------------------------------------------------------------------------------------
9 Spanish Trace East Apartments No Yes $2,963 $24,547
- --------------------------------------------------------------------------------------------------------------------------
10 Four Allegheny Office Center No No $0 $0
- --------------------------------------------------------------------------------------------------------------------------
11 Town Center Lodge Motel (I) Yes Yes $0 $10,904
12 Decatur Lodge Motel (I) Yes Yes $0 $9,086
13 Fulton Lodge Motel (I) Yes Yes $6,125 $13,327
14 Douglasville Lodge Motel (I) Yes Yes $0 $12,721
15 West Georgia Lodge Motel (I) Yes Yes $3,813 $10,904
16 East Point Lodge Motel (I) Yes Yes $4,375 $3,635
- --------------------------------------------------------------------------------------------------------------------------
17 Holiday Inn Hotel- Bar Harbor Yes Yes $44,702 $103,187
- --------------------------------------------------------------------------------------------------------------------------
18 Kirkwood Crossings Office and Retail Building No No $0 $0
- --------------------------------------------------------------------------------------------------------------------------
19 North Salado Village Shopping Center Yes Yes $0 $14,429
- --------------------------------------------------------------------------------------------------------------------------
20 Golden Miles Market Place Yes Yes $12,188 $12,188
- --------------------------------------------------------------------------------------------------------------------------
21 New Market Madison Yes Yes $0 $6,754
- --------------------------------------------------------------------------------------------------------------------------
22 Valencia Apartments No Yes $5,373 $26,867
- --------------------------------------------------------------------------------------------------------------------------
23 Rollingwood Shopping Center Yes Yes $6,625 $7,548
- --------------------------------------------------------------------------------------------------------------------------
24 525 Almanor Industrial Building No No $0 $0
- --------------------------------------------------------------------------------------------------------------------------
25 Town Country S C Yes Yes $59,375 $74,573
- --------------------------------------------------------------------------------------------------------------------------
26 Lucky/Long's Plaza Shopping Center No No $0 $0
- --------------------------------------------------------------------------------------------------------------------------
27 Koret Distribution Center No No $2,045 $2,405
- --------------------------------------------------------------------------------------------------------------------------
28 Colony By The Mall Apartments Yes Yes $74,771 $90,084
- --------------------------------------------------------------------------------------------------------------------------
29 Manekin Industrial Portfolio Yes Yes $29,000 $70,579
- --------------------------------------------------------------------------------------------------------------------------
30 St. Andrews Professional Center Yes Yes $0 $2,954
- --------------------------------------------------------------------------------------------------------------------------
31 Green Ridge Heights Apartments Yes Yes $16,250 $36,925
- --------------------------------------------------------------------------------------------------------------------------
32 Cove Center Yes Yes $2,823 $14,117
- --------------------------------------------------------------------------------------------------------------------------
33 Golden Isle Plaza No Yes $0 $0
- --------------------------------------------------------------------------------------------------------------------------
34 2040-2060 Corporate Court Industrial No No $0 $0
- --------------------------------------------------------------------------------------------------------------------------
35 Miami Lakes Corporate Center Yes Yes $157,544 $163,649
- --------------------------------------------------------------------------------------------------------------------------
36 Bon Air Professional Center Yes Yes $0 $1,837
- --------------------------------------------------------------------------------------------------------------------------
37 Woodside Apartments No No $0 $0
- --------------------------------------------------------------------------------------------------------------------------
38 Cambridge Commons Apartments Yes Yes $2,256 $14,256
- --------------------------------------------------------------------------------------------------------------------------
39 Alicia Valencia Plaza Shopping Center No No $0 $0
- --------------------------------------------------------------------------------------------------------------------------
40 Willow Tree No No $18,036 $18,036
- --------------------------------------------------------------------------------------------------------------------------
41 Bayport Marina Plaza Industrial Yes Yes $0 $3,120
- --------------------------------------------------------------------------------------------------------------------------
42 New Market Square Yes Yes $14,063 $11,946
- --------------------------------------------------------------------------------------------------------------------------
43 Shoppes at Cresthaven Yes Yes $2,625 $5,325
- --------------------------------------------------------------------------------------------------------------------------
44 Southport Centre Yes Yes $0 $3,080
- --------------------------------------------------------------------------------------------------------------------------
45 Half-A-Car No Yes $6,250 $8,950
- --------------------------------------------------------------------------------------------------------------------------
46 Merchants Centre Yes Yes $0 $3,128
- --------------------------------------------------------------------------------------------------------------------------
47 Plaza K Shopping Center Yes Yes $0 $1,020
- --------------------------------------------------------------------------------------------------------------------------
48 Parkway Shopping Center Yes Yes $250 $12,472
- --------------------------------------------------------------------------------------------------------------------------
49 788 North Jefferson Office Building Yes Yes $160,000 $20,825
- --------------------------------------------------------------------------------------------------------------------------
50 Comfort Suites Yes Yes $3,844 $31,184
51 Taft Corners Shopping Center Yes Yes $158,588 $313,380
52 Mickelberry Shopping Center No No $15,000 $0
- --------------------------------------------------------------------------------------------------------------------------
53 Cottonwood Corners Shopping Center Yes Yes $16,063 $2,608
- --------------------------------------------------------------------------------------------------------------------------
54 Comfort Inn & Comfort Suites Yes Yes $8,250 $25,992
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
- -------------------------------------------------------
Annual Initial Current
Loan Capital Expense TI/LC TI/LC
No. Deposit(15) Deposit(16) Balance(17)
- -------------------------------------------------------
1 $299,999 N/A N/A
- -------------------------------------------------------
2 $45,000 $20,000 $27,995
- -------------------------------------------------------
3 $19,658 $250,000 $251,768
- -------------------------------------------------------
4 $9,661 $0 $0
- -------------------------------------------------------
5 $80,840 $0 $0
- -------------------------------------------------------
6 $14,454 $0 $16,667
- -------------------------------------------------------
7 $206,096 N/A N/A
- -------------------------------------------------------
8 $74,820 $0 $0
- -------------------------------------------------------
9 $129,504 $0 $0
- -------------------------------------------------------
10 $0 N/A N/A
- -------------------------------------------------------
11 $33,895 N/A N/A
12 $34,735 N/A N/A
13 $35,630 N/A N/A
14 $30,763 N/A N/A
15 $23,640 N/A N/A
16 $10,865 N/A N/A
- -------------------------------------------------------
17 $154,347 N/A N/A
- -------------------------------------------------------
18 $0 N/A N/A
- -------------------------------------------------------
19 $24,175 $0 $46,335
- -------------------------------------------------------
20 $7,788 $0 $0
- -------------------------------------------------------
21 $20,261 $0 $0
- -------------------------------------------------------
22 $64,480 $0 $0
- -------------------------------------------------------
23 $11,070 $154,000 $154,000
- -------------------------------------------------------
24 $0 N/A $132,000
- -------------------------------------------------------
25 $60,791 $0 $0
- -------------------------------------------------------
26 $0 N/A N/A
- -------------------------------------------------------
27 $24,540 $5,955 $5,955
- -------------------------------------------------------
28 $61,250 $0 $0
- -------------------------------------------------------
29 $45,088 N/A N/A
- -------------------------------------------------------
30 $11,743 $1,767 $7,067
- -------------------------------------------------------
31 $61,800 $0 $0
- -------------------------------------------------------
32 $33,880 $8,760 $43,800
- -------------------------------------------------------
33 $9,960 $0 $0
- -------------------------------------------------------
34 $0 N/A N/A
- -------------------------------------------------------
35 $24,420 $4,306 $17,439
- -------------------------------------------------------
36 $5,512 N/A $34,285
- -------------------------------------------------------
37 $0 N/A N/A
- -------------------------------------------------------
38 $48,000 $0 $0
- -------------------------------------------------------
39 $0 N/A N/A
- -------------------------------------------------------
40 $0 $0 $0
- -------------------------------------------------------
41 $12,481 N/A N/A
- -------------------------------------------------------
42 $18,684 $0 $0
- -------------------------------------------------------
43 $31,947 $350,000 $0
- -------------------------------------------------------
44 $9,239 $0 $0
- -------------------------------------------------------
45 $8,100 $500,000 $511,250
- -------------------------------------------------------
46 $17,180 $100,000 $71,837
- -------------------------------------------------------
47 $6,120 $0 $4,800
- -------------------------------------------------------
48 $13,333 $0 $47,850
- -------------------------------------------------------
49 $22,017 N/A $41,717
- -------------------------------------------------------
50 $82,022 $0 $0
51 $9,839 $150,000 $11,316
52 $0 N/A N/A
- -------------------------------------------------------
53 $12,038 $0 $0
- -------------------------------------------------------
54 $106,455 $0 $0
- -------------------------------------------------------
II-30
<PAGE>
APPENDIX II
RESERVE ACCOUNT (ALL MORTGAGE LOANS)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
Insurance Initial Capital
Loan Escrow Tax Escrow Capital Expense Expense Reserve
No. Property Name Required(12) Required(12) Deposit(13) Balance(14)
- --------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C> <C>
55 Dalton Place Shopping Center Yes Yes $0 $22,309
- --------------------------------------------------------------------------------------------------------------------------
56 Showcase Plaza Shopping Center Yes Yes $250,000 $252,461
- --------------------------------------------------------------------------------------------------------------------------
57 Springrove Mobile Home Park No Yes $0 $0
- --------------------------------------------------------------------------------------------------------------------------
58 Gateway/Lombardi (II) Yes Yes $1,567 $4,704
- --------------------------------------------------------------------------------------------------------------------------
59 Arbors of Wooster Apartments Yes Yes $0 $0
- --------------------------------------------------------------------------------------------------------------------------
60 Sunset Plaza Shopping Center Yes Yes $12,812 $1,818
- --------------------------------------------------------------------------------------------------------------------------
61 Blackstock Warehouse Yes Yes $0 $14,420
- --------------------------------------------------------------------------------------------------------------------------
62 Augusta at Gruene Yes Yes $0 $0
- --------------------------------------------------------------------------------------------------------------------------
63 Commerce Office Building (III) No Yes $12,438 $16,582
64 Medical & Professional Office Building (III) No Yes $4,238 $8,890
- --------------------------------------------------------------------------------------------------------------------------
65 Southside Square Shopping Center Yes Yes $21,438 $17,370
- --------------------------------------------------------------------------------------------------------------------------
66 Saratoga Square Apartments Yes Yes $41,000 $15,012
- --------------------------------------------------------------------------------------------------------------------------
67 Minaret Village Retail and Office Center No No $0 $0
- --------------------------------------------------------------------------------------------------------------------------
68 Redland Crest Apartments Yes Yes $1,625 $11,375
- --------------------------------------------------------------------------------------------------------------------------
69 Village of Westover Apartments Yes Yes $0 $7,200
- --------------------------------------------------------------------------------------------------------------------------
70 499 University Avenue No No $0 $0
- --------------------------------------------------------------------------------------------------------------------------
71 Manufacturers Bank Building Yes Yes $0 $637
- --------------------------------------------------------------------------------------------------------------------------
72 Print Pack Buildings Yes Yes $0 $5,599
- --------------------------------------------------------------------------------------------------------------------------
73 Hennepin Square Office Building Yes Yes $2,431 $13,824
- --------------------------------------------------------------------------------------------------------------------------
74 Brandywine III Apartments Yes Yes $0 $210,962
- --------------------------------------------------------------------------------------------------------------------------
75 V United Plaza Yes Yes $3,806 25000 (L/C)
- --------------------------------------------------------------------------------------------------------------------------
76 South Park Shopping Center Yes Yes $0 $5,621
- --------------------------------------------------------------------------------------------------------------------------
77 Pineville Towne Market Yes Yes $25,313 $26,033
- --------------------------------------------------------------------------------------------------------------------------
78 555 & 565 Old Norcross Rd Yes Yes $1,563 $3,080
- --------------------------------------------------------------------------------------------------------------------------
79 Lake Union Office Building Yes Yes $20,000 $2,074
80 Via Alamos Apartments Yes Yes $0 $0
81 Gallery Row Yes Yes $893 $2,678
- --------------------------------------------------------------------------------------------------------------------------
82 Arbour Walk Village Apartments Yes Yes $0 $0
- --------------------------------------------------------------------------------------------------------------------------
83 San Fernando Industrial Building No No $0 $0
- --------------------------------------------------------------------------------------------------------------------------
84 Village at Cedar Shoals Yes Yes $1,875 $5,436
- --------------------------------------------------------------------------------------------------------------------------
85 Kirby Plaza Office Building Yes Yes $0 $4,587
- --------------------------------------------------------------------------------------------------------------------------
86 800 South Broadway Office Building Yes Yes $10,313 $26,984
- --------------------------------------------------------------------------------------------------------------------------
87 Polifly Plaza Yes Yes $10,875 $13,169
- --------------------------------------------------------------------------------------------------------------------------
88 Summit Apartments No Yes $0 $0
- --------------------------------------------------------------------------------------------------------------------------
89 Villa Fontana No Yes $4,471 $13,329
- --------------------------------------------------------------------------------------------------------------------------
90 Laguna Self Storage Yes Yes $0 $6,249
- --------------------------------------------------------------------------------------------------------------------------
91 Hughes Towers Apartments Yes Yes $3,125 $7,063
- --------------------------------------------------------------------------------------------------------------------------
92 Roswell Oaks Yes Yes $2,450 $3,886
- --------------------------------------------------------------------------------------------------------------------------
93 Temple Medical Office Building Yes Yes $277,031 $281,409
- --------------------------------------------------------------------------------------------------------------------------
94 Victoria Square Apartments Yes Yes $2,167 $10,835
- --------------------------------------------------------------------------------------------------------------------------
95 Kmart No No $18,868 $22,372
- --------------------------------------------------------------------------------------------------------------------------
96 Strathmore Towers Apartments No No $0 $0
- --------------------------------------------------------------------------------------------------------------------------
97 69 Hickory Drive Office Building Yes Yes $0 $687
- --------------------------------------------------------------------------------------------------------------------------
98 Rancho Broadway Shopping Center No No $0 $0
- --------------------------------------------------------------------------------------------------------------------------
99 Union Bank Office Building No No $0 $0
- --------------------------------------------------------------------------------------------------------------------------
100 Northampton Apartments Yes Yes $10,750 $3,730
- --------------------------------------------------------------------------------------------------------------------------
101 2424 Babcock Office and Medical Building Yes Yes $8,456 $5,004
- --------------------------------------------------------------------------------------------------------------------------
102 Casa Grande Retail Center Yes Yes $8,125 $10,914
- --------------------------------------------------------------------------------------------------------------------------
103 The Vineyards Apartments Yes Yes $3,000 $9,000
- --------------------------------------------------------------------------------------------------------------------------
104 Dunwoody Shallowford Office Park Yes Yes $2,125 $6,668
- --------------------------------------------------------------------------------------------------------------------------
105 Best Western Yes Yes $0 $12,060
- --------------------------------------------------------------------------------------------------------------------------
106 Kenyon Place Apartments Yes Yes $26,188 $28,428
- --------------------------------------------------------------------------------------------------------------------------
107 College Square Shopping Center No Yes $0 $444
- --------------------------------------------------------------------------------------------------------------------------
108 Americana Self Storage Yes Yes $813 $4,434
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
- -------------------------------------------------------
Annual Initial Current
Loan Capital Expense TI/LC TI/LC
No. Deposit(15) Deposit(16) Balance(17)
- -------------------------------------------------------
55 $10,535 $0 $0
- -------------------------------------------------------
56 $14,765 $0 $0
- -------------------------------------------------------
57 $0 $0 $0
- -------------------------------------------------------
58 $18,800 $3,481 $0
- -------------------------------------------------------
59 $0 $0 $0
- -------------------------------------------------------
60 $25,091 N/A N/A
- -------------------------------------------------------
61 $86,517 $0 $0
- -------------------------------------------------------
62 $0 $0 $0
- -------------------------------------------------------
63 $17,378 $89,100 $88,627
64 $9,011 $45,900 $47,513
- -------------------------------------------------------
65 $23,727 $0 $0
- -------------------------------------------------------
66 $30,000 $0 $0
- -------------------------------------------------------
67 $0 N/A N/A
- -------------------------------------------------------
68 $39,000 $0 $0
- -------------------------------------------------------
69 $21,600 $0 $0
- -------------------------------------------------------
70 $0 N/A N/A
- -------------------------------------------------------
71 $7,644 $0 $5,960
- -------------------------------------------------------
72 $22,395 $0 $0
- -------------------------------------------------------
73 $19,353 N/A $60,067
- -------------------------------------------------------
74 $39,000 N/A N/A
- -------------------------------------------------------
75 $0 $0 175000 "(L/C)
- -------------------------------------------------------
76 $16,863 $0 $0
- -------------------------------------------------------
77 $10,380 $0 $0
- -------------------------------------------------------
78 $3,641 $0 $0
- -------------------------------------------------------
79 $4,148 N/A $6,939
80 $0 N/A N/A
81 $10,713 $5,000 $15,000
- -------------------------------------------------------
82 $0 $0 $0
- -------------------------------------------------------
83 $0 N/A N/A
- -------------------------------------------------------
84 $8,546 $0 $0
- -------------------------------------------------------
85 $9,164 $20,000 $26,358
- -------------------------------------------------------
86 $9,412 N/A $0
- -------------------------------------------------------
87 $6,882 $0 $5,561
- -------------------------------------------------------
88 $0 N/A N/A
- -------------------------------------------------------
89 $13,157 $0 $0
- -------------------------------------------------------
90 $15,937 N/A N/A
- -------------------------------------------------------
91 $15,750 N/A N/A
- -------------------------------------------------------
92 $8,617 $0 $12,997
- -------------------------------------------------------
93 $17,513 $110,000 $110,000
- -------------------------------------------------------
94 $26,004 $0 $0
- -------------------------------------------------------
95 $10,512 $0 $0
- -------------------------------------------------------
96 $0 N/A N/A
- -------------------------------------------------------
97 $4,124 $272,000 $272,000
- -------------------------------------------------------
98 $0 N/A N/A
- -------------------------------------------------------
99 $0 N/A N/A
- -------------------------------------------------------
100 $43,032 $0 $0
- -------------------------------------------------------
101 $10,515 N/A $6,259
- -------------------------------------------------------
102 $11,146 N/A $5,106
- -------------------------------------------------------
103 $24,000 $0 $0
- -------------------------------------------------------
104 $10,903 $100,000 $100,000
- -------------------------------------------------------
105 $48,241 $0 $0
- -------------------------------------------------------
106 $26,880 N/A N/A
- -------------------------------------------------------
107 $1,777 N/A $1,851
- -------------------------------------------------------
108 $10,863 $0 $0
- -------------------------------------------------------
II-31
<PAGE>
APPENDIX II
RESERVE ACCOUNT (ALL MORTGAGE LOANS)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
Insurance Initial Capital
Loan Escrow Tax Escrow Capital Expense Expense Reserve
No. Property Name Required(12) Required(12) Deposit(13) Balance(14)
- --------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C> <C>
109 Regal Cinemas No No $0 $519
- --------------------------------------------------------------------------------------------------------------------------
110 Mission Plaza Shopping Center No No $0 $0
- --------------------------------------------------------------------------------------------------------------------------
111 Collier & Piedmont Rd. Apts. (IV) Yes Yes $89,949 $36,895
- --------------------------------------------------------------------------------------------------------------------------
112 Canteberi Place Apartments Yes Yes $40,310 $21,667
- --------------------------------------------------------------------------------------------------------------------------
113 Holiday Inn Express Yes Yes $0 $13,359
- --------------------------------------------------------------------------------------------------------------------------
114 Pacifica Hampden Industrial Park No Yes $46,188 $106,038
- --------------------------------------------------------------------------------------------------------------------------
115 Atlantic Plaza II Yes Yes $28,425 $17,135
- --------------------------------------------------------------------------------------------------------------------------
116 Bath Street Partners No Yes $7,157 $7,157
- --------------------------------------------------------------------------------------------------------------------------
117 JM Industrial Yes Yes $1,323 $6,616
- --------------------------------------------------------------------------------------------------------------------------
118 Sargent Road Shopping Center. Yes Yes $4,500 $5,558
- --------------------------------------------------------------------------------------------------------------------------
119 Little Brook Apartments Yes Yes $30,250 $39,306
- --------------------------------------------------------------------------------------------------------------------------
120 Courtside Office Building (V) No Yes $5,500 $7,976
121 Murphy Office Building (V) No Yes $713 $3,370
- --------------------------------------------------------------------------------------------------------------------------
122 North Oaks Plaza Yes Yes $27,904 $15,274
- --------------------------------------------------------------------------------------------------------------------------
123 Ohlone Village Shopping and Office Center No No $5,588 $0
- --------------------------------------------------------------------------------------------------------------------------
124 Palms Plaza Yes Yes $113,795 $115,161
- --------------------------------------------------------------------------------------------------------------------------
125 St. Clair Mobile Home Parks Yes Yes $750 $2,658
- --------------------------------------------------------------------------------------------------------------------------
126 Claremont Commons Yes Yes $0 $1,851
- --------------------------------------------------------------------------------------------------------------------------
127 Guilford Street Center Yes Yes $18,750 $4,701
- --------------------------------------------------------------------------------------------------------------------------
128 Ski Lodge Apartments Yes Yes $0 $5,940
- --------------------------------------------------------------------------------------------------------------------------
129 Maxwell Labs Industrial Building No No $0 $0
- --------------------------------------------------------------------------------------------------------------------------
130 Lakeshore Apartments Yes Yes $9,750 $9,750
- --------------------------------------------------------------------------------------------------------------------------
131 Vidalia Food Lion Yes Yes $0 $0
- --------------------------------------------------------------------------------------------------------------------------
132 Rosecrans Avenue Warehouse No No $0 $0
- --------------------------------------------------------------------------------------------------------------------------
133 4800 Santa Fe Industrial Building No No $0 $0
- --------------------------------------------------------------------------------------------------------------------------
134 Century Warehouse No No $0 $0
- --------------------------------------------------------------------------------------------------------------------------
135 Pingry Arms and Cornell Arms Apartments Yes Yes $4,375 $28,169
- --------------------------------------------------------------------------------------------------------------------------
136 20195 Stevens Creek Boulevard Office Building No No $0 $0
- --------------------------------------------------------------------------------------------------------------------------
137 Maple Run Apartments No Yes $2,675 $4,200
- --------------------------------------------------------------------------------------------------------------------------
138 Comfort Inn Laurinburg Yes Yes $8,875 $18,904
- --------------------------------------------------------------------------------------------------------------------------
139 Blockbuster - Westwood Shopping Center Yes Yes $0 $192
- --------------------------------------------------------------------------------------------------------------------------
140 Clock Tower Office and Retail Building No No $0 $0
- --------------------------------------------------------------------------------------------------------------------------
141 One Bank Street Yes Yes $0 $1,805
- --------------------------------------------------------------------------------------------------------------------------
142 Shoppes of Deerfield Yes Yes $0 $438
- --------------------------------------------------------------------------------------------------------------------------
143 Dartmoor Apartments Yes Yes $8,375 $10,148
- --------------------------------------------------------------------------------------------------------------------------
144 Lavender Lakes Yes Yes $25,393 $7,277
- --------------------------------------------------------------------------------------------------------------------------
145 Sunshine Office Building Yes Yes $0 $882
- --------------------------------------------------------------------------------------------------------------------------
146 Underwood Gartland Industrial Building Yes Yes $0 $1,510
- --------------------------------------------------------------------------------------------------------------------------
147 Washington Square Yes Yes $0 $678
- --------------------------------------------------------------------------------------------------------------------------
148 Eastlake Business Park No Yes $65,913 $9,811
- --------------------------------------------------------------------------------------------------------------------------
149 Lindsay Marketplace Shopping Center No No $0 $0
- --------------------------------------------------------------------------------------------------------------------------
150 Sierra Meadows Apartments Yes Yes $412,517 $53,505
- --------------------------------------------------------------------------------------------------------------------------
151 4700 Santa Fe Industrial Building No No $0 $0
- --------------------------------------------------------------------------------------------------------------------------
152 Georgetown Plaza Yes Yes $56,250 $59,349
- --------------------------------------------------------------------------------------------------------------------------
153 Itasca Business Park No No $0 $0
- --------------------------------------------------------------------------------------------------------------------------
154 Shoal Creek Apartments Yes Yes $4,424 $6,406
- --------------------------------------------------------------------------------------------------------------------------
155 Pinnacle Peak Office Building Yes Yes $0 $291
- --------------------------------------------------------------------------------------------------------------------------
156 Fishers Crossing Shoppes Yes Yes $1,600 $2,435
- --------------------------------------------------------------------------------------------------------------------------
157 Great Neck Shops & Potter Self Storage Yes Yes $0 $1,851
- --------------------------------------------------------------------------------------------------------------------------
158 Computer City Store No No $0 $0
- --------------------------------------------------------------------------------------------------------------------------
159 Seaboard Industrial No Yes $0 $5,783
- --------------------------------------------------------------------------------------------------------------------------
160 Tire Discounters - Dayton (VI) No No $0 $303
161 Tire Discounters - Cincinnati (VI) No No $0 $868
- --------------------------------------------------------------------------------------------------------------------------
162 Interstate West Office Park Yes Yes $6,501 $4,355
</TABLE>
- -------------------------------------------------------
Annual Initial Current
Loan Capital Expense TI/LC TI/LC
No. Deposit(15) Deposit(16) Balance(17)
- -------------------------------------------------------
109 $3,112 $0 $0
- -------------------------------------------------------
110 $0 N/A N/A
- -------------------------------------------------------
111 $20,750 $0 $0
- -------------------------------------------------------
112 $32,500 $0 $0
- -------------------------------------------------------
113 $53,436 $0 $0
- -------------------------------------------------------
114 $18,228 $0 $0
- -------------------------------------------------------
115 $14,074 $2,083 $8,333
- -------------------------------------------------------
116 $3,384 $2,000 $0
- -------------------------------------------------------
117 $15,879 $0 $0
- -------------------------------------------------------
118 $11,116 $0 $0
- -------------------------------------------------------
119 $27,166 $0 $0
- -------------------------------------------------------
120 $10,773 $45,695 $45,695
121 $4,620 $19,305 $19,305
- -------------------------------------------------------
122 $7,109 $26,550 $2,142
- -------------------------------------------------------
123 $0 N/A N/A
- -------------------------------------------------------
124 $8,196 $0 $20,000
- -------------------------------------------------------
125 $15,948 $0 $0
- -------------------------------------------------------
126 $3,702 $0 $0
- -------------------------------------------------------
127 $11,283 $0 $0
- -------------------------------------------------------
128 $23,760 $0 $0
- -------------------------------------------------------
129 $0 N/A N/A
- -------------------------------------------------------
130 $30,000 $0 $0
- -------------------------------------------------------
131 $0 $0 $0
- -------------------------------------------------------
132 $0 N/A N/A
- -------------------------------------------------------
133 $0 N/A N/A
- -------------------------------------------------------
134 $0 N/A N/A
- -------------------------------------------------------
135 $26,790 N/A N/A
- -------------------------------------------------------
136 $0 N/A N/A
- -------------------------------------------------------
137 $16,800 $0 $0
- -------------------------------------------------------
138 $60,173 $0 $0
- -------------------------------------------------------
139 $770 $100,000 $100,000
- -------------------------------------------------------
140 $0 N/A N/A
- -------------------------------------------------------
141 $7,218 $0 $0
- -------------------------------------------------------
142 $1,314 $46,950 $51,330
- -------------------------------------------------------
143 $24,984 $0 $0
- -------------------------------------------------------
144 $14,500 $0 $0
- -------------------------------------------------------
145 $3,528 $0 $0
- -------------------------------------------------------
146 $9,060 N/A N/A
- -------------------------------------------------------
147 $4,065 $0 $0
- -------------------------------------------------------
148 $0 $0 $0
- -------------------------------------------------------
149 $0 N/A N/A
- -------------------------------------------------------
150 $36,120 N/A N/A
- -------------------------------------------------------
151 $0 N/A N/A
- -------------------------------------------------------
152 $7,437 $0 $0
- -------------------------------------------------------
153 $0 N/A N/A
- -------------------------------------------------------
154 $12,768 $0 $0
- -------------------------------------------------------
155 $1,743 $1,000 $3,000
- -------------------------------------------------------
156 $3,341 $8,400 $12,784
- -------------------------------------------------------
157 $11,109 $0 $0
- -------------------------------------------------------
158 $0 N/A N/A
- -------------------------------------------------------
159 $17,325 $0 $7,210
- -------------------------------------------------------
160 $1,215 N/A N/A
161 $972 N/A N/A
- -------------------------------------------------------
162 $10,452 $0 $25,021
II-32
<PAGE>
APPENDIX II
RESERVE ACCOUNT (ALL MORTGAGE LOANS)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
Insurance Initial Capital
Loan Escrow Tax Escrow Capital Expense Expense Reserve
No. Property Name Required(12) Required(12) Deposit(13) Balance(14)
- --------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C> <C>
163 North Center Office Building Yes Yes $6,688 $12,470
- --------------------------------------------------------------------------------------------------------------------------
164 Westchase Apartments Yes Yes $104,438 $106,330
- --------------------------------------------------------------------------------------------------------------------------
165 Ashewood Apartments Yes Yes $0 $1,700
- --------------------------------------------------------------------------------------------------------------------------
166 Oakland Drive Apartments No Yes $0 $3,938
- --------------------------------------------------------------------------------------------------------------------------
167 Victoria Street Offices Yes Yes $168 $10,835
- --------------------------------------------------------------------------------------------------------------------------
168 Montague Industrial Building No No $0 $0
- --------------------------------------------------------------------------------------------------------------------------
169 Sunrise Square Shopping Center Yes Yes $1,163 $2,310
- --------------------------------------------------------------------------------------------------------------------------
170 Berkmar Park Yes Yes $0 $4,007
- --------------------------------------------------------------------------------------------------------------------------
171 Crest Ridge Apartments Yes Yes $7,500 $13,198
- --------------------------------------------------------------------------------------------------------------------------
172 British Petroleum - Westlake No Yes $0 $1,268
- --------------------------------------------------------------------------------------------------------------------------
173 Kirkland Way Building No Yes $71,500 $74,225
- --------------------------------------------------------------------------------------------------------------------------
174 Willow Tree and Coastal Court Apartments (VII) Yes Yes $0 $4,125
- --------------------------------------------------------------------------------------------------------------------------
175 Eagle Watch Apartments No Yes $21,875 $26,675
- --------------------------------------------------------------------------------------------------------------------------
176 Post Alley Market Building Yes Yes $7,088 $19,548
- --------------------------------------------------------------------------------------------------------------------------
177 Cramer Marketplace Shopping Center Yes Yes $2,250 $3,717
- --------------------------------------------------------------------------------------------------------------------------
178 Penn Forest Executive Building Yes Yes $0 $1,962
- --------------------------------------------------------------------------------------------------------------------------
179 460 Valley Drive Industrial Building No No $0 $0
- --------------------------------------------------------------------------------------------------------------------------
180 Bradley Smith Apartments (VIII) Yes Yes $35,269 $1,379
- --------------------------------------------------------------------------------------------------------------------------
181 A Storage Place Yes Yes $0 $1,198
- --------------------------------------------------------------------------------------------------------------------------
182 Tallmadge Towne Apartments Yes Yes $33,750 $36,750
- --------------------------------------------------------------------------------------------------------------------------
183 Garden Ridge I & II Shopping and Office Center Yes Yes $0 $1,230
- --------------------------------------------------------------------------------------------------------------------------
184 Greenbriar Village Shopping Center Yes Yes $1,875 $2,565
- --------------------------------------------------------------------------------------------------------------------------
185 Chapel Centre Yes Yes $27,500 $29,002
- --------------------------------------------------------------------------------------------------------------------------
186 Laurel Manor Apartments Yes Yes $0 $4,188
- --------------------------------------------------------------------------------------------------------------------------
187 Potter Self Storage Yes Yes $0 $1,410
- --------------------------------------------------------------------------------------------------------------------------
188 Dorjul Apartments Yes Yes $49,375 $43,735
- --------------------------------------------------------------------------------------------------------------------------
189 Orange Industrial Park Yes Yes $8,250 $10,806
- --------------------------------------------------------------------------------------------------------------------------
190 Fiesta Palms II Retail Center Yes Yes $4,375 $3,195
- --------------------------------------------------------------------------------------------------------------------------
191 Newport Mesa Self Storage No No $0 $0
- --------------------------------------------------------------------------------------------------------------------------
192 Brunswick Apartments Yes Yes $19,350 $18,344
- --------------------------------------------------------------------------------------------------------------------------
193 Canyon Professional Center Yes Yes $5,375 $2,302
- --------------------------------------------------------------------------------------------------------------------------
194 Madison Heights Square Yes Yes $0 $995
- --------------------------------------------------------------------------------------------------------------------------
195 Lexington Apartments Yes Yes $113,180 $42,491
- --------------------------------------------------------------------------------------------------------------------------
196 Heritage Green Apartments Yes Yes $64,073 $100,000
- --------------------------------------------------------------------------------------------------------------------------
197 Aaron Center Yes Yes $0 $1,066
- --------------------------------------------------------------------------------------------------------------------------
198 Carlton Way Apartments Yes Yes $202,187 $203,250
- --------------------------------------------------------------------------------------------------------------------------
199 Creekview Townhouse Apartments Yes Yes $1,313 $6,563
- --------------------------------------------------------------------------------------------------------------------------
200 Country Village Apartments Yes Yes $25,000 $6,715
- --------------------------------------------------------------------------------------------------------------------------
201 Blackstone Square Yes Yes $0 $261
202 Pizza Hut / 7-Eleven (A) No No $0 $0
- --------------------------------------------------------------------------------------------------------------------------
203 Quick Chek (A) No No $0 $0
- --------------------------------------------------------------------------------------------------------------------------
204 Holcomb Place III Yes Yes $1,938 $1,475
- --------------------------------------------------------------------------------------------------------------------------
205 New Hope Commons Yes Yes $6,000 $24,884
- --------------------------------------------------------------------------------------------------------------------------
206 Union Avenue Plaza Yes Yes $1,188 $1,188
- --------------------------------------------------------------------------------------------------------------------------
207 Cedargate Apartments Yes Yes $28,800 $11,979
- --------------------------------------------------------------------------------------------------------------------------
208 Oakcrest Apartments Yes Yes $0 $1,264
- --------------------------------------------------------------------------------------------------------------------------
209 City Sports Yes Yes $43,750 $37,500
- --------------------------------------------------------------------------------------------------------------------------
210 Glenarm Manor Apartments Yes Yes $6,875 $15,931
- --------------------------------------------------------------------------------------------------------------------------
211 Lin-Valle Center Yes Yes $11,250 $12,318
- --------------------------------------------------------------------------------------------------------------------------
212 Cramer Woods Apartments Yes Yes $0 $2,933
- --------------------------------------------------------------------------------------------------------------------------
213 Great Falls Days Inn Yes Yes $5,188 $19,627
- --------------------------------------------------------------------------------------------------------------------------
214 Hillside Trace Apartments Yes Yes $3,750 $17,039
- --------------------------------------------------------------------------------------------------------------------------
215 Pearisburg Square Yes Yes $0 $0
- --------------------------------------------------------------------------------------------------------------------------
216 3180 Presidential Drive Yes Yes $0 $1,555
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
- -------------------------------------------------------
Annual Initial Current
Loan Capital Expense TI/LC TI/LC
No. Deposit(15) Deposit(16) Balance(17)
- -------------------------------------------------------
163 $12,459 $0 $18,333
- -------------------------------------------------------
164 $0 N/A N/A
- -------------------------------------------------------
165 $20,400 N/A N/A
- -------------------------------------------------------
166 $25,000 $0 $0
- -------------------------------------------------------
167 $2,020 $2,000 $10,000
- -------------------------------------------------------
168 $0 N/A N/A
- -------------------------------------------------------
169 $4,620 $0 $0
- -------------------------------------------------------
170 $9,616 $0 $0
- -------------------------------------------------------
171 $26,676 N/A N/A
- -------------------------------------------------------
172 $3,804 $0 $8,605
- -------------------------------------------------------
173 $15,972 $0 $0
- -------------------------------------------------------
174 $16,500 $0 $0
- -------------------------------------------------------
175 $19,200 $0 $0
- -------------------------------------------------------
176 $2,760 $0 $0
- -------------------------------------------------------
177 $8,799 $0 $0
- -------------------------------------------------------
178 $5,885 $0 $0
- -------------------------------------------------------
179 $0 N/A N/A
- -------------------------------------------------------
180 $16,549 $0 $0
- -------------------------------------------------------
181 $4,784 N/A N/A
- -------------------------------------------------------
182 $17,995 $0 $0
- -------------------------------------------------------
183 $3,690 $3,400 $7,723
- -------------------------------------------------------
184 $2,070 $0 $0
- -------------------------------------------------------
185 $6,000 $0 $0
- -------------------------------------------------------
186 $12,565 $0 $0
- -------------------------------------------------------
187 $8,460 $0 $0
- -------------------------------------------------------
188 $22,320 $0 $0
- -------------------------------------------------------
189 $7,668 $0 $0
- -------------------------------------------------------
190 $4,260 $200,000 $0
- -------------------------------------------------------
191 $0 $0 $0
- -------------------------------------------------------
192 $24,000 N/A N/A
- -------------------------------------------------------
193 $3,708 $0 $0
- -------------------------------------------------------
194 $2,985 $0 $0
- -------------------------------------------------------
195 $60,768 N/A N/A
- -------------------------------------------------------
196 $25,800 N/A N/A
- -------------------------------------------------------
197 $6,396 $0 $0
- -------------------------------------------------------
198 $12,750 $100,000 $100,000
- -------------------------------------------------------
199 $10,500 $0 $0
- -------------------------------------------------------
200 $15,000 N/A N/A
- -------------------------------------------------------
201 $3,132 $0 $0
- -------------------------------------------------------
202 $0 $0 $0
203 $0 $0 $0
- -------------------------------------------------------
204 $3,540 $0 $0
- -------------------------------------------------------
205 $3,768 $0 $0
- -------------------------------------------------------
206 $4,081 $0 $0
- -------------------------------------------------------
207 $17,400 N/A N/A
- -------------------------------------------------------
208 $7,584 $0 $0
- -------------------------------------------------------
209 $0 $0 $0
- -------------------------------------------------------
210 $21,000 N/A N/A
- -------------------------------------------------------
211 $6,406 $0 $0
- -------------------------------------------------------
212 $8,800 $0 $0
- -------------------------------------------------------
213 $28,524 N/A N/A
- -------------------------------------------------------
214 $19,200 N/A N/A
- -------------------------------------------------------
215 $2,691 $0 $0
- -------------------------------------------------------
216 $3,732 $0 $0
- -------------------------------------------------------
II-33
<PAGE>
APPENDIX II
RESERVE ACCOUNT (ALL MORTGAGE LOANS)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
Insurance Initial Capital
Loan Escrow Tax Escrow Capital Expense Expense Reserve
No. Property Name Required(12) Required(12) Deposit(13) Balance(14)
- --------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C> <C>
217 Villa Seville Apartments Yes Yes $1,063 $2,158
- --------------------------------------------------------------------------------------------------------------------------
218 Montreal Station Yes Yes $15,125 $16,773
- --------------------------------------------------------------------------------------------------------------------------
219 Dunwoody Springs Building No No $0 $1,698
- --------------------------------------------------------------------------------------------------------------------------
220 Spring House Office Park Yes Yes $0 $1,407
- --------------------------------------------------------------------------------------------------------------------------
221 Sutton Place Apartments Yes Yes $12,447 $10,010
- --------------------------------------------------------------------------------------------------------------------------
222 Garrison Street Apartments No Yes $0 $267
- --------------------------------------------------------------------------------------------------------------------------
223 Airport Drive Shops Yes Yes $0 $1,710
- --------------------------------------------------------------------------------------------------------------------------
224 2755 Philmont Ave. Yes Yes $9,785 $10,351
- --------------------------------------------------------------------------------------------------------------------------
225 9107 Gaither Rd. Yes Yes $12,500 $16,066
- --------------------------------------------------------------------------------------------------------------------------
226 Tulwane Apartments Yes Yes $7,000 $7,000
- --------------------------------------------------------------------------------------------------------------------------
227 900-902 Pine Street Apartments Yes Yes $8,688 $9,868
- --------------------------------------------------------------------------------------------------------------------------
228 Rochelle Arms Yes Yes $21,881 $21,881
- --------------------------------------------------------------------------------------------------------------------------
229 Pottery Row Apartments Yes Yes $3,500 $4,250
</TABLE>
- -------------------------------------------------------
Annual Initial Current
Loan Capital Expense TI/LC TI/LC
No. Deposit(15) Deposit(16) Balance(17)
- -------------------------------------------------------
217 $3,285 N/A N/A
- -------------------------------------------------------
218 $4,945 $0 $5,810
- -------------------------------------------------------
219 $5,095 $0 $8,350
- -------------------------------------------------------
220 $5,628 $0 $4,815
- -------------------------------------------------------
221 $16,500 N/A N/A
- -------------------------------------------------------
222 $1,600 $0 $0
- -------------------------------------------------------
223 $3,420 $0 $0
- -------------------------------------------------------
224 $6,638 $0 $0
- -------------------------------------------------------
225 $8,558 $0 $0
- -------------------------------------------------------
226 $8,500 $0 $0
- -------------------------------------------------------
227 $3,540 $0 $0
- -------------------------------------------------------
228 $7,000 $0 $0
- -------------------------------------------------------
229 $1,800 $0 $0
II-34
<PAGE>
FOOTNOTES TO APPENDIX II
1 "RFC" "MS" and "WACH" denote Residential Funding Corporation, Morgan
Stanley Mortgage Capital Inc., and Wachovia Bank, National Association,
respectively, as Sellers.
2 Sets of Mortgage Loans that have identical alphabetical coding designate
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 purposes of the Prospectus
Supplement, the latter are treated as if they were multiple loans that are
cross-collateralized and cross-defaulted. The following Mortgage Loans so
noted have the following characteristics:
Loan No. 29, The Manekin Portfolio, is a single loan secured by two light
industrial buildings of 48,900 square feet and 61,056 square feet, located
in Columbia, MD, and one light industrial building of 130,000 square feet,
located in Savage, MD. The related borrower has the right to release the
130,000 square feet property from the mortgage lien on or about June 30,
2002, provided there is a pay-down of at least 43% of the then outstanding
loan balance, and a maximum LTV ratio of 70% and minimum DSCR of 1.40x is
maintained. Any applicable prepayment premium will be required for the
partial release.
Loan No. 58, Gateway/Lombardi, is a single loan secured by one office
property of 26,598 square feet, and one set of industrial buildings of
42,838 square feet, located in Santa Rosa, CA.
Loan No. 180, Bradley Smith, is a single loan secured by three multifamily
properties of 25 units, 11 units, and 12 units, located in Irvington, NJ,
and one multifamily property of 19 units, located in Jersey City, NJ.
3 Loan Nos. 37, Woodside Apartments, 67, Minaret Village, 83, San Fernando
Industrial Building, 96, Strathmore Apartments, 132, Rosecrans Avenue
Warehouse, 133, 4800 Santa Fe Industrial Building, 134, Century Warehouse,
151, 4700 Sante Fe Industrial Building, and 168, Montague Industrial
Building, permit future additional, subordinate debt that is secured by
the related property, subject to combined maximum LTV ratios of 70%, and
minimum DSCRs of 1.30x.
Loan No. 52, Mickelberry Shopping Center, permits future additional,
subordinate debt that is secured by the related property, subject to a
combined maximum LTV ratio of 70%, and a minimum DSCR of 1.25x.
Loan No. 98, Rancho Broadway Shopping Center, permits future additional,
subordinate debt that is secured by the related property, subject to a
combined maximum LTV ratio of 75%, and a minimum DSCR of 1.25x.
Loan No. 229, Pottery Row Apartments, permits future, additional debt that
is unsecured by the related property (but secured by partnership interests
in the borrower), and payable only to a borrower-related entity, subject
to a combined, maximum LTV ratio of 75%.
Loan No. 2, Lancaster Commerce Center, is known to have additional,
unsecured debt totaling approximately $605,500, at loan origination,
payable to a borrower-related entity.
Loan No. 124, Palms Plaza, is known to have additional, unsecured debt
totaling approximately $578,000, at loan origination, payable to a
borrower-related entity.
II-35
<PAGE>
FOOTNOTES TO APPENDIX II
Loan No. 195, Lexington Apartments, is known to have additional, mezzanine
debt, which is unsecured by the related property. The additional debt had
an original principal balance of $4,900,000, at its origination in 1984,
and is payable to a borrower-related entity.
4 Certain ratios including Cut-Off Date Balance / 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. For purposes of information contained within the Prospectus
Supplement, Balloon Loans are defined as having a balance at maturity
totaling 10% or more of the related Mortgage Loan's original principal
balance.
5 "ARD" indicates the Anticipated Repayment Date for hyper-amortizing
Mortgage Loans. Loan No. 1, Key West Hilton Resort, Loan No. 3, Cupertino
Village Shopping Center, and Loan No. 35, Miami Lakes Corporate Center,
are the only hyper-amortizing Mortgage Loans in the Mortgage Pool.
6 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.
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 immediately preceding twelve month period.
8 "Largest Tenant" refers to the tenant that represents the greatest
percentage of the total square footage at the subject property.
9 "Seasoning" represents the approximate number of months elapsed from the
date of the first regularly scheduled payment or due date to the Cut-Off
Date.
10 Indicates prepayment provisions from the first Due Date as stated in the
Mortgage Loan. "YM" represents yield maintenance, "YM3" represents the
greater of yield maintenance or three percent, and "YM1" represents the
greater of yield maintenance or one percent, of the outstanding principal
balance at such time, respectively. 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.
For Loan No. 25, Town Country S C, the borrower has the option to choose
(a) a twenty-eight month Lockout period (LO) followed by eighty-nine
months of defeasance (Def), then a three month Open period (Open), or (b)
a thirty-six month Lockout period (LO) followed by eighty-one months of
the greater of a yield maintenance formula and 1% of the prepaid principal
balance (YM1), then a three month open period (Open).
For Loan 112, Canteberi Place Apartments, the borrower has the option to
choose (a) a thirty-three month Lockout period (LO) followed by
eighty-four months of defeasance (Def), then a three month open period
(Open), or (b) a sixty month Lockout period (LO) followed by fifty-seven
months of the greater of a yield maintenance formula and 1% of the prepaid
principal balance (YM1), then a three month open period (Open).
II-36
<PAGE>
FOOTNOTES TO APPENDIX II
For Loan Nos. 144, Lavender Lakes, and 199, Creekview Townhouse
Apartments, the respective borrowers have the option to choose in each
case (a) a thirty-one month Lockout period (LO) followed by eighty-six
months of defeasance (Def), then a three month open period (Open), or (b)
a sixty month Lockout period (LO) followed by fifty-seven months of the
greater of a yield maintenance formula and 1% of the prepaid principal
balance (YM1), then a three month open period (Open).
For Loan No. 154, Shoal Creek Apartments, the borrower has the option to
choose (a) a thirty-one month Lockout period (LO) followed by
two-hundred-six months of defeasance (Def), then a three month open period
(Open), or (b) a one-hundred-twenty month Lockout period (LO) followed by
one-hundred-seventeen months of the greater of a yield maintenance formula
and 1% of the prepaid principal balance (YM1), then a three month open
period (Open).
In all cases listed above, for purposes of Appendix II presentation,
option (b) is assumed.
Loan Nos. 129, Maxwell Labs Industrial Building, 149, Lindsay Marketplace
Shopping Center, and 179, 460 Valley Drive Industrial Building, permit
prepayment of up to 10% of the original loan balance in any loan year
without a Prepayment Premium. In addition, Loan No. 23, Rollingwood
Shopping Center, provides that a $154,000 holdback be applied to the loan
balance on March 1, 1999, if certain leasing objectives are not met. This
principal pay-down will be without a Prepayment Premium.
11 The "Administrative Cost Rate" indicated for each Mortgage Loan will be
calculated based on the same interest calculation methodology (i.e.,
actual/360) applicable to each Mortgage Loan.
12 For "Insurance Escrow Required" and "Tax Escrow Required", a "yes"
generally indicates that the lender requires on-going property hazard
insurance escrows, and real estate tax escrows, respectively, in amounts
adequate to pay real estate tax bills and property hazard insurance bills,
when due.
13 Initial Capital Expense Deposit indicates the amount the lender collected
(or, in certain cases, a letter of credit received), for deposit into the
related property's Capital Expense account at loan closing to fully or
partially fund estimated, property-related deferred maintenance costs
and/or on-going estimated capital expenses.
14 Capital Expense Reserve Balance indicates the balance of the
related-property's Capital Expense account (or, in certain cases, a letter
of credit balance), as of January 1, 1999. In certain cases, balances will
not be replenished upon a release of funds.
15 Annual Capital Expense Deposit indicates the amount the lender currently
collects annually, on a monthly basis, for deposit into the related
property's Capital Expense account. In certain cases, the related deposits
will end upon certain events (for example, certain tenant renewals), or
upon certain dates, or are capped at certain amounts. In certain cases,
annual collection amounts may change, such as in the case of Hospitality
Mortgage Loans which generally base collections on related-property
revenues. On-going collections may not be adequate to fund all capital
expense requirements for the related property for the term of the related
Mortgage Loan.
16 Initial TI/LC Deposit indicates the amount the lender collected (or, in
certain cases, a letter of credit received), for deposit into the related
property's Tenant Improvement/Leasing Commission Capital Expense account
at loan closing.
II-37
<PAGE>
FOOTNOTES TO APPENDIX II
17 TI/LC Current Balance indicates the balance of the related-property's
Tenant Improvement/Leasing Commission Capital Expense account (or, in
certain cases, a letter of credit balance), as of January 1, 1999. In
certain cases, balances will not be replenished upon a release of funds.
II-38
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
APPENDIX III
SIGNIFICANT LOAN SUMMARIES
LOAN NO. 1 - KEY WEST HILTON RESORT LOAN AND PROPERTY
<TABLE>
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cut-off Date Balance: $36,790,447 Property Type: Hospitality
Loan Type: Principal and Interest; Location: Key West, FL
Balloon (Hyper-Amortized) Year Built / Renovated: 1995 / N/A
Origination Date: 3/10/1998 No. of Units: 178
Anticipated Repayment Date ("ARD"): 4/1/2008 Cut-off Date Balance/Unit: $206,688
Maturity Date: 4/1/2023 Appraised Value: $54,500,000
Mortgage Rate: 7.255% Current LTV: 67.5%
Annual Debt Service: $3,233,255 Balance at Maturity LTV: 55.1%
DSCR: 1.52x Average Occupancy: 81.2%
Underwritable Cash Flow: $4,910,251 Occupancy for 12 months ending: 10/31/998
Balance at Maturity (ARD): $30,048,330
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
THE LOAN
The Key West Hilton Resort Loan (the "Key West Hilton Loan") is secured by
a restated mortgage on a 178-room oceanfront resort located in Key West, Florida
(the "Key West Hilton Property"). The Key West Hilton Loan was originated by
Morgan Stanley Mortgage Capital Inc. ("MSMC") on March 10, 1998.
THE BORROWER. The borrower is Tannex Development Corp., a Florida
corporation (the "Key West Hilton Borrower"). The Key West Hilton Borrower is
sponsored by entities controlled by the Thomas T. Walsh family, and is a
bankruptcy remote special purpose entity.
SECURITY. The Key West Hilton Loan is secured by a Restated Renewal
Mortgage and Security Agreement (the "Mortgage"), UCC Financing Statements and
certain additional security documents. The Mortgage is a first lien on a fee
interest in the Key West Hilton Property. The Key West Hilton Loan is
non-recourse, subject to certain limited exceptions.
PAYMENT TERMS. The Mortgage Rate is fixed at 7.255% per annum until the
anticipated repayment date of April 1, 2008 (the "Anticipated Repayment Date").
The Key West Hilton Loan requires monthly payments of principal and interest of
$269,437.88 until the Anticipated Repayment Date, following which, unless the
Key West Hilton Loan is paid off in full, the Mortgage Rate will increase to the
greater of (i) the initial interest rate plus five percentage points (5.00%), or
(ii) the applicable Treasury Rate plus five percentage points (5.00%). Upon the
Anticipated Repayment Date, Excess Cash Flow (as defined in the loan document
and which is generally cash flow from the operations of the Key West Hilton
Property in excess of principal, interest, operating expenses, escrows and
reserves) will be applied to the outstanding principal balance. The Key West
Hilton Loan accrues interest computed on the basis of the actual number of days
elapsed each month in a 360-day year.
PREPAYMENT/DEFEASANCE. By its terms, the Key West Hilton Loan may not be
prepaid prior to March 1, 2003. On or after that date, the Key West Hilton Loan
may be prepaid in whole with an additional payment of an amount equal to the
greater of a Yield Maintenance Premium calculated by reference to U.S. Treasury
obligations, or 1% of the principal balance prepaid. The Key West Hilton Loan
may be prepaid without any premium ninety (90) days prior to the Anticipated
Repayment Date, or thereafter.
III-1
<PAGE>
LATE FEES AND DEFAULT INTEREST. There is a late fee on overdue
installments equal to the lesser of 5% of such overdue amount or the maximum
amount permitted by law. The Key West Hilton Loan accrues interest at the lesser
of the Mortgage Rate plus 5% per annum or the maximum amount permitted by law
while the Key West Hilton Loan is in default.
TRANSFER OF PROPERTY OR INTEREST IN BORROWER. The Key West Hilton Loan
becomes immediately due and payable upon the transfer of the Key West Hilton
Property or any ownership interest in the Key West Hilton Borrower, except in
connection with the rights of transfer described below. The Key West Hilton
Borrower has the limited one-time right to transfer the Key West Hilton Property
subsequent to the first 9 months of the loan term upon the payment of a fee
equal to 1% of the unpaid balance of the loan. The Key West Hilton Borrower also
has a limited right of transfer to the lineal descendants of Thomas T. Walsh, or
entities owned or controlled by such descendants.
ESCROWS/RESERVES. There is a tax escrow which requires monthly deposits in
an amount sufficient to pay estimated taxes when due. There is also an escrow
required for capital expenditures which is required to be funded monthly in an
amount equal to the lesser of (i) 4% of total revenue, or (ii) $25,000. Such
amounts will be disbursed to pay such costs and provide additional security for
the Key West Hilton Loan.
SUBORDINATE/OTHER DEBT. Subordinate indebtedness and encumbrances are
prohibited.
THE PROPERTY
The Key West Hilton Property consists of two, three-story concrete
buildings and a 415 space parking garage located within a resort complex. The
Key West Hilton Property is located in Key West, Florida and had an average
daily occupancy of 81.2%, and an average daily rate of $209.57, for the
immediately preceding 12 month period ending October 31, 1998, based on an
occupancy statement provided by the Key West Hilton Borrower.
The Key West Hilton Property was completed in 1995. Many of the 178 rooms
comprising the Key West Hilton Property offer views of the Key West Harbor and
the Gulf of Mexico. Facilities include 20,817 square feet of retail space,
dining and lounge facilities, meeting facilities, a fitness center and an
outdoor pool.
MANAGEMENT
The Key West Hilton Property is managed by a Key West Hilton Borrower
affiliate, Tannex Development Corporation. Both the Key West Hilton Borrower and
Tannex Development Corporation are affiliates of Ocean Properties, Inc. and
Ocean Properties, Ltd., privately held entities that represent ownership and/or
management of more than 90 hospitality properties (13,000 rooms) in the United
States, Canada, and the Caribbean.
III-2
<PAGE>
LOAN NO. 2 - LANCASTER LOAN AND PROPERTY
<TABLE>
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cut-off Date Balance: $28,884,160 Property Type: Retail
Loan Type: Principal and Interest; Balloon Location: Lancaster, CA
Origination Date: 9/14/1998 Year Built/Renovated: 1987/N/A
Maturity Date: 10/1/2008 Square Footage: 300,000
Mortgage Rate: 6.940% Cut-Off Date Balance/SF: $96
Annual Debt Service: $2,301,247 Appraised Value: $36,800,000
DSCR: 1.27x Current LTV: 78.5%
Underwritable Cash Flow: $2,919,008 Balance at Maturity LTV: 68.7%
Balance at Maturity: $25,299,927 Percent Leased: 86.2%
Percent Leased as of Date: 8/14/1998
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
THE LOAN
The Lancaster Commerce Center Loan (the "Lancaster Loan") is secured by a
mortgage on a portion of the Lancaster Commerce Center, consisting of a 300,000
net rentable square foot, shadow-anchored retail center located in Lancaster,
California (the "Lancaster Property"). The Lancaster Property is a part of a
larger 545,000 square foot regional shopping center known as Lancaster Commerce
Center. The Lancaster Loan was originated by Residential Funding Corporation on
September 14, 1998.
THE BORROWER. The borrower is Lancaster Commerce Center, a single purpose,
bankruptcy remote California limited partnership (the "Lancaster Borrower"). The
general partner of the Lancaster Borrower is Lancaster CC, Inc., a California
corporation. The directors and shareholders of Lancaster CC, Inc. are Gregory M.
Daniels and William P. Healey.
SECURITY. The Lancaster Loan is secured by a Deed of Trust (the "Deed of
Trust"), an Absolute Assignment of Leases and Rents, UCC Financing Statements
and certain additional security documents. The Deed of Trust is a first lien on
a fee simple interest in the Lancaster Property. The Lancaster Loan is
nonrecourse, subject to certain limited exceptions.
PAYMENT TERMS. The Mortgage Rate is fixed at 6.940%. The Lancaster Loan
has an original amortization term of 360 months. The Lancaster Loan requires
monthly payments of principal and interest of $191,770.56 until September 1,
2008 and the balance of said principal sum together with accrued and unpaid
interest and any other amounts due under the Note shall be due on the Maturity
Date. The Lancaster Loan accrues interest computed on the basis of the actual
number of days elapsed each month in a 360-day year.
PREPAYMENT/DEFEASANCE. The Lancaster Loan may be prepaid in whole during
the ninety (90) days immediately prior to the Maturity Date, or in whole or in
part through application of insurance proceeds or condemnation awards without
premium. The Lancaster Borrower may defease the Lancaster Loan in whole, but not
in part, at any time after two years following issuance of the Certificates by
providing lender with non-callable U.S. Treasury obligations sufficient to pay
its remaining obligations.
LATE FEES AND DEFAULT INTEREST. There is a late fee on overdue
installments equal to the lesser of 5% of such overdue amount or the maximum
amount permitted by law. The Lancaster Loan accrues interest at the Mortgage
Rate plus 5% per annum while the Lancaster Loan is in default.
TRANSFER OF PROPERTIES OR INTEREST IN BORROWER. The Lancaster Loan becomes
immediately due and payable upon the transfer of the Lancaster Property or any
ownership interest in the Lancaster Borrower, except in connection with the
rights of transfer described below. The Lancaster Borrower has limited rights to
transfer in the case of (a) transfers by devise or descent or by operation of
law upon the death of a partner, (b) transfers to a qualifying single asset
entity upon the payment of a fee equal to 1% of the unpaid balance of the loan,
and (c)
III-3
<PAGE>
transfers of limited partnership interests in the Lancaster Borrower for estate
planning purposes or among existing limited partners, provided that such
transfers do not violate any of the single purpose entity covenants of the loan
documents.
ESCROW/RESERVES. There is a tax reserve which requires, at the option of
lender, deposits in an amount sufficient to pay taxes when due. There is a
reserve for tenant improvements and leasing commissions which requires monthly
deposits of $20,000 which are to be applied to any re-leasing costs applicable
generally to the leasing of space in the Lancaster Property; provided, however,
the obligation to make the monthly deposits is suspended for any period of time
where the amount held in the reserve is greater than $240,000. Lancaster
Borrower also deposits $3,750 monthly into a reserve to provide funds for
ongoing future capital improvements to the Lancaster Property. A reserve in the
amount of $9,500 was established at the Origination Date to provide funds for
the refurbishing of the roof on the "Music Plus" building.
SUBORDINATE/OTHER DEBT. Except as described below, subordinate
indebtedness and encumbrances are prohibited. Please note lender has permitted
the existence of subordinate debt in the amount of $605,452.63 ("Affiliate
Debt") as given by the Lancaster Borrower to Gregory M. Daniels and William P.
Healey, affiliates of the Lancaster Borrower Payments due under the Affiliate
Debt, and the lien of the Affiliate Debt, are subordinate to the Lancaster Loan.
THE PROPERTY
The Lancaster Property is a shadow-anchored retail center situated on
28.26 acres of land with 300,00 square feet of net rentable area. The Lancaster
Property was developed in three (3) phases from 1987 to 1992, and consists of
twenty-eight (28) single story buildings and 3,010 parking spaces. The Lancaster
Property is part of a larger 545,000 square foot regional shopping complex known
as Lancaster Commerce Center, which is anchored by a Target Store, a Ralph's
Supermarket, an H&E, and a Pic N' Save. The Lancaster Commerce Center is located
in the Antelope Valley area, which is part of the Los Angeles Metropolitan
Statistical Area.
The Lancaster Property at August 14, 1998 was 86.2% leased to 59 tenants,
including a number of national and regional chains, such as Ross Dress for Less
(24,968 square feet), Blockbuster Video (19,000 square feet), Big 5 (8,000
square feet), Bank of America (4,800 square feet), Payless Shoes (4,796 square
feet) and Waldenbooks (3,012 square feet). Contractual lease expirations during
the term of the loan for all tenants are as follows: 12,051 square feet (4%) in
1999, 49,782 square feet (17%) in 2000, 38,569 square feet (13%) in 2001, 34,937
square feet (12%) in 2002, 53,598 square feet (18%) in 2003, 32,542 square feet
(11%) in 2004, 0 square feet (0%) in 2005 and 2006, 10,720 square feet (4%) in
2007, and 12,101 square feet (4%) in 2008.
MANAGEMENT
Lancaster Property is currently managed and operated by William P. Healey
and Associates, a newly formed California corporation, affiliated with the key
principals of the Lancaster Borrower, Gregory M. Daniels and William P. Healey.
The key principals are the original developers and only owners of the Lancaster
Property.
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LOAN NO. 3 - CUPERTINO VILLAGE SHOPPING CENTER LOAN AND PROPERTY
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<S> <C> <C> <C>
Cut-off Date Balance: $21,152,666 Property Type: Retail
Loan Type: Principal and Interest; Location: Cupertino, CA
Balloon (Hyper-Amortized) Year Built / Renovated: 1969/1997
Origination Date: 8/4/1998 Square Footage: 109,213
Anticipated Repayment Date ("ARD"): 11/2/2008 Cut-off Date Balance/SF: $194
Maturity Date: 9/1/2028 Appraised Value: $28,450,000
Mortgage Rate: 7.210% Current LTV: 74.4%
Annual Debt Service: $1,732,637 Balance at Maturity LTV: 65.3%
DSCR: 1.29x Percent Leased: 94.8%
Underwritable Cash Flow: $2,231,084 Percent Leased as of Date: 6/1/1998
Balance at Maturity (ARD): $18,573,862
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</TABLE>
THE LOAN
The Cupertino Village Shopping Center Loan (the "Cupertino Village Loan")
is secured by a first mortgage on a 109,213 square foot shopping center located
in Cupertino, California (the "Cupertino Village Property"). The Cupertino
Village Loan was originated by MSMC on August 4, 1998.
THE BORROWER. The borrower is Cupertino Village Associates, LLC, a
California limited liability company (the "Cupertino Village Borrower"). The
Cupertino Village Borrower is a special purpose bankruptcy remote entity.
SECURITY. The Cupertino Village Loan is secured by a Deed of Trust,
Assignment of Leases and Rents, Security Agreement and Fixture Filing (the "Deed
of Trust"), UCC Financing Statements and certain additional security documents.
The Deed of Trust is a first lien on a fee interest in the Cupertino Village
Property. The Cupertino Village Loan is non-recourse, subject to certain limited
exceptions.
PAYMENT TERMS. The Mortgage Rate is fixed at 7.210% per annum until the
anticipated repayment date of November 1, 2008 (the "Anticipated Repayment
Date"). The Cupertino Village Loan requires monthly payments of principal and
interest of $144,386.38 until the Anticipated Repayment Date, following which,
unless the Cupertino Village Loan is paid off in full, the Mortgage Rate will
increase to the greater of (i) the initial interest rate plus three percentage
points (3.00%), or (ii) the applicable Treasury Rate plus three percentage
points (3.00%). Upon the Anticipated Repayment Date, Excess CashFlow (as defined
in the loan document and which is generally cash flow from the operations of the
Cupertino Village Property in excess of principal, interest, operating expenses,
escrows and reserves) will be applied to the outstanding principal balance. The
Cupertino Village Loan accrues interest computed on the basis of the actual
number of days elapsed each month in a 360-day year.
PREPAYMENT/DEFEASANCE. Voluntary prepayment is prohibited until ninety
(90) days prior to the Anticipated Repayment Date. However, the Cupertino
Village Borrower may defease the Cupertino Village Loan with United States
Treasury securities, in whole, but not in part, at any time after two (2) years
following issuance of the Certificates. Defeasance is permitted only upon the
satisfaction of certain conditions specified in the Cupertino Village loan
documents, including confirmation from each Rating Agency that defeasance would
not result in a downgrade, qualification or withdrawal of the then current
ratings assigned to any Class of Certificates.
LATE FEES AND DEFAULT INTEREST. There is a late fee on overdue
installments equal to the lesser of 5% of the unpaid sum or the maximum amount
permitted by law. The Cupertino Village Loan accrues interest at the lesser of
the Mortgage Rate plus 5% per annum or the maximum amount permitted by law while
the Cupertino Village Loan is in default.
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<PAGE>
TRANSFER OF PROPERTY OR INTEREST IN BORROWER. The Cupertino Village Loan
becomes immediately due and payable upon the transfer of the Cupertino Village
Property or any ownership interest in the Cupertino Village Borrower, except in
connection with the rights of transfer described below. The Cupertino Village
Borrower has the limited one-time right to transfer the Cupertino Village
Property subsequent to the first 12 months of the loan term upon the payment of
a fee equal to 1% of the unpaid balance of the loan.
ESCROWS/RESERVES. There is a tax and insurance escrow which requires
deposits in an amount sufficient to pay taxes and insurance premiums when due.
There is also an escrow for capital expenditures which is funded monthly in the
amount of $1,638. There is also a $250,000 tenant improvement/leasing commission
escrow in place, which is replenished at the monthly rate of $6,825, when the
balance falls below $250,000. Such amounts will be disbursed to pay such costs
and provide additional security for the Cupertino Village Loan.
SUBORDINATE/OTHER DEBT. Subordinate indebtedness and encumbrances are
prohibited.
THE PROPERTY
The Cupertino Village Property is a 109,213 square foot shopping center
located in Cupertino, California. The Cupertino Village Property was 94.8%
leased as of June 1, 1998 to 38 tenants based on a rent roll provided by the
Cupertino Village Borrower. The Cupertino Village Property was built in 1969 and
renovated in 1997; it consists of six single story wood frame buildings with
stucco exterior.
Approximately 27.2% of the space is rented by 99 Ranch Market, a regional
supermarket carrying Asian specialty items. The 99 Ranch Market lease expires on
3/24/2007. Per the June 22, 1998 rent roll provided by the Cupertino Village
Borrower, average base rental was $22.89 per square foot. Contractual lease
expirations during the loan term for all tenants are as follows: 10,243 square
feet (9%) in 2001, 34,776 square feet (32%) in 2002, 6,659 square feet (6%) in
2003, zero square feet (0%) in 2004, 2005 and 2006, 38,483 square feet (35%) in
2007, and 13,378 square feet (12%) in 2008 or later.
MANAGEMENT
The Cupertino Village Property is managed by Sand Hill Property, a
Cupertino Village Borrower affiliate.
III-6
<PAGE>
LOAN NO. 4 - METRO PIKE CENTER LOAN AND PROPERTY
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<S> <C> <C> <C>
Cut-off Date Balance: $15,140,544 Property Type: Retail
Loan Type: Principal and Interest; Balloon Location: Rockville, MD
Origination Date: 6/12/1998 Year Built/Renovated: 1990/N/A
Maturity Date: 7/1/2008 Square Footage: 64,197
Mortgage Rate: 7.400% Cut-off Date Balance/SF: $263
Annual Debt Service: $1,264,978 Appraised Value: $20,400,000
DSCR: 1.27x Current LTV: 74.2%
Underwritable Cash Flow: $1,607,352 Balloon at Maturity LTV: 65.9%
Balance at Maturity: $13,443,596 Percent Leased: 100.0%
Percent Leased as of Date: 9/22/1998
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</TABLE>
THE LOAN
The Metro Pike Center Loan (the "Metro Pike Loan") is secured by a first
mortgage on the Metro Pike Center, a 64,087 square foot two (2) story unanchored
shopping center located in Rockville, Maryland (the "Metro Pike Property"). The
Metro Loan was originated by Residential Funding Corporation on June 12, 1998.
THE BORROWER. The Borrower is Green Acres Metro Limited Partnership, a
single-purpose, Maryland limited partnership (the "Metro Pike Borrower"). The
general partner of the Metro Pike Borrower is CHH Corporation, a Maryland
corporation. The directors of CHH Corporation are Wallace F. Holladay, Wallace
F. Holladay, Jr., and Donald M. Wolf.
SECURITY. The Metro Pike Loan is secured by a Deed of Trust (the "Deed of
Trust"), an Assignment of Leases and Rents, UCC Financing Statements and certain
additional security documents. The Deed of Trust is a first lien on the Metro
Borrower's fee interest in the Metro Pike Property. The Metro Pike Loan is
non-recourse, subject to certain limited exceptions.
PAYMENT TERMS. The interest rate is fixed at 7.400% with an amortization
term of 360 months. The Metro Pike Loan requires monthly payments of principal
and interest of $105,414.82 until the Maturity Date. The balance of the
principal sum together with all accrued and unpaid interest thereon is due and
payable on the Maturity Date. The Metro Pike 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 July 1, 2002, the Metro Pike Loan may be prepaid
in whole but not in part, with the additional payment of an amount equal to the
greater of a Yield Maintenance Premium calculated by reference to U.S. Treasury
obligations, or 1% of the principal balance prepaid. The Metro Pike Loan may be
prepaid without penalty within one hundred-eighty (180) days of the Maturity
Date.
LAKE FEES AND DEFAULT INTEREST. There is a late fee on overdue
installments equal to the lesser of 5% of such overdue amount or the maximum
amount permitted by law. The Metro Loan accrues interest at the Mortgage Rate
plus 5% per annum while the Metro Loan is in default.
TRANSFER OF PROPERTIES OR INTEREST IN BORROWER. The Metro Pike Loan
becomes immediately due and payable upon the transfer of the Metro Pike Property
or any ownership interest in the Metro Pike Borrower, except in connection with
the rights of transfer described below. The Metro Pike Borrower has limited
rights to transfer in the case of (a) transfers by devise or descent or by
operation of law upon the death of a partner, (b) transfers to a qualifying
single asset entity upon the payment of a fee equal to one percent (1%) of the
unpaid balance of the loan, and (c) transfers of limited partnership interests
in the Metro Pike Borrower for estate planning purposes or among existing
limited partners, provided that such transfers do not violate any of the single
purpose entity covenants of the loan documents.
III-7
<PAGE>
ESCROW/RESERVES. There is a tax reserve which, at the option of lender,
requires monthly deposits in an amount sufficient to pay taxes when due. The
Metro Pike Borrower is also required to pay to the lender monthly deposits in
the amount of $805 to maintain a fund for replacements with respect to the Metro
Pike Property.
SUBORDINATE/OTHER DEBT. Subordinate indebtedness and encumbrances are
prohibited.
THE PROPERTY
The Metro Pike Property consists of a 64,087 square foot two (2) story
unanchored shopping center built in 1990 on 4.5 acres of land. There are 279
parking spaces on the Metro Pike Property. For ease of access, the Metro Pike
Property has five (5) ingress and egress points. There is also direct access to
the second story from the above grade parking lot at the back of the building.
As of September 22, 1998, the Metro Pike Property was 100% leased to 28
tenants, including a number of national and regional chains such as David's
Bridal (8,173 square feet), Kinko's Copies (8,223 square feet), Long & Foster
(5,015 square feet), Jennifer Leather (4,784 square feet), Rocky's Video (4,645
square feet) and a 7 Eleven convenience store (3,816 square feet). Contractual
lease expirations during the loan term for all tenants are as follows: 8,076
square feet (13%) in 1999, 7,487 square feet (12%) in 2000, 11,655 square feet
(18%) in 2001, 9,997 square feet (16%) in 2002, 10,374 square feet (16%) in
2003, 4,784 square feet (7%) in 2004, 10,119 square feet (16%) in 2005, zero
square feet (0%) in 2006, and 1,595 square feet (2%) in 2007. Occupancy rates
for 1996 and 1997 were 94% in each year.
MANAGEMENT
The Metro Pike Property is managed by Holladay Property Services
("Holladay"), an entity related to the Metro Pike Borrower. Holladay manages
most of the properties owned by the Holladay Group, the owner of a diversified
portfolio of residential, industrial, commercial and senior housing properties.
Holladay currently manages approximately 822,000 square feet of property in the
Washington D.C. and northern Indiana areas.
III-8
<PAGE>
LOAN NO. 5 - HAWTHORNE WOODS LOAN AND PROPERTY
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<S> <C> <C> <C>
Cut-off Date Balance: $12,927,771 Property Type: Multifamily
Loan Type: Principal and Interest; Balloon Location: Lithonia, GA
Origination Date: 7/20/1998 Year Built/Renovated: 1990/N/A
Maturity Date: 8/1/2008 No. of Units: 345
Mortgage Rate: 6.900% Cutoff Date Balance/Unit: 37,472
Annual Debt Service: $1,027,416 Appraised Value: $16,250,000
DSCR: 1.42x Balance at Maturity LTV: 69.7%
Underwritable Cash Flow: $1,459,883 Current LTV: 79.6%
Balance at Maturity: $11,327,518 Percent Leased: 97.4%
Percent Leased as of Date: 9/23/1998
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</TABLE>
THE LOAN
The Hawthorne Woods Loan (the "Hawthorne Woods Loan") is secured by a
first mortgage on a 345 unit, garden-style complex comprised of 18 residential
buildings plus a clubhouse/leasing center in Lithonia, Georgia (the "Hawthorne
Woods Property"). The Hawthorne Woods Loan was originated by Residential Funding
Corporation on July 20, 1998.
THE BORROWER. The borrower is Woodcrest Walk Partners, a single purpose
New York general partnership (the "Hawthorne Woods Borrower"). The general
partners of the Hawthorne Woods Borrower are Samuel Ginsburg and Martin
Ginsburg.
SECURITY. The Hawthorne Woods Loan is secured by a Fee Mortgage (the "Fee
Mortgage"), an Assignment of Leases and Rents, UCC Financing Statements and
certain additional security documents. The Fee Mortgage is a first lien on a fee
interest in the Hawthorne Woods Property. The Hawthorne Woods Loan is
non-recourse, subject to certain limited exceptions.
PAYMENT TERMS. The Mortgage Rate is fixed at 6.900%. The Hawthorne Woods
Loan has an original amortization term of 360 months. The Hawthorne Woods Loan
requires monthly payments of principal and interest of $85,618.02 until July 1,
2008 and the balance of said principal sum together with accrued and unpaid
interest and any other amounts due under the Note shall be due on the Maturity
Date. The Hawthorne Woods Loan accrues interest computed on the basis of the
actual number of days elapsed each month in a 360-day year.
PREPAYMENT/DEFEASANCE. By its terms, the Hawthorne Woods Loan may be
prepaid within ninety (90) days immediately prior to the Maturity Date, without
a premium. The Hawthorne Woods Borrower may defease the Hawthorne Woods Loan in
whole, but not in part, at any time after two (2) years following the issuance
of the Certificates by providing lender with non-callable U.S. Treasury
obligations sufficient to pay its remaining obligations.
LATE FEES AND DEFAULT INTEREST. There is a late fee on overdue
installments equal to the lesser of 5% of such overdue amount or the maximum
amount permitted by law. The Hawthorne Woods Loan accrues interest at the
Mortgage Rate plus 5% per annum while the Hawthorne Woods Loan is in default.
TRANSFER OF PROPERTIES OR INTEREST IN BORROWER. The Hawthorne Woods Loan
becomes immediately due and payable upon the transfer of the Hawthorne Woods
Property or any ownership interest in the Hawthorne Woods Borrower except in
connection with the rights of transfer described below. The Hawthorne Woods
Borrower has limited rights to transfer in the case of (a) transfers by devise
or descent or by operation of law upon the death of a partner, (b) sales or
transfers to a qualifying single asset entity upon the payment of a fee equal to
1% of the unpaid balance of the loan, and (c) transfer of partnership interests
in the Hawthorne Woods Borrower for estate planning
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<PAGE>
purposes or among existing partners, provided that such transfers do not violate
any single purpose entity covenants of the loan documents.
ESCROW/RESERVES. There is a tax reserve which requires deposits in an
amount sufficient to pay taxes when due. A reserve in the amount of $71,125 was
established at closing to provide funds for the repairs recommended in the
engineering report prepared in connection with the Hawthorne Woods Loan. The
Woodcrest Borrower is also required to pay to the lender monthly deposits in the
amount of $6,737 to maintain a fund for replacements with respect to the
Hawthorne Woods Property.
SUBORDINATE/OTHER DEBT. Subordinate indebtedness and encumbrances are
prohibited.
THE PROPERTY
The subject property known as Hawthorne Woods is a 345 unit, two and three
story walk-up, garden-style complex comprised of 18 residential buildings plus a
clubhouse/leasing center, situated on a 31.7 acre site in Lithonia, Georgia.
Built in 1990, the property contains efficiency, one bedroom and two bedroom
units totaling 573 square feet, 652 square feet and 1,003 square feet
respectively. Project amenities include a centrally located swimming pool,
laundry facilities, a clubhouse, two tennis courts, and a car wash facility.
Additionally, each unit has either a patio or deck. All units are individually
metered with the landlord paying for water, sewer and trash. Each unit has an
individual water heater and central HVAC. The appliance package contains a
stove, refrigerator, central a/c, and other standard appliances. There are 567
open parking spaces on the property, for a ratio of 1.6 parking spaces per unit.
The property is located along Covington Highway, approximately 15 miles
east of the Atlanta CBD, in Lithonia, Dekalb County, GA. Hawthorne Woods is
proximate to Interstate-20 (1.25 miles south) and Interstate-285 (Atlanta's
beltway). Neighborhood land uses include residential, retail and industrial.
MANAGEMENT
The Hawthorne Woods Property is currently managed by GDC Properties, Inc.,
a party related to the key principles (i.e., Samuel Ginsburg and Martin
Ginsburg) of the Hawthorne Woods Borrower.
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LOAN NO. 6 - SYBASE BUILDING LOAN AND PROPERTY
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<S> <C> <C> <C>
Cut-off Date Balance: $12,878,713 Property Type: Office
Loan Type: Principal and Interest; Balloon Location: Boulder, CO
Origination Date: 9/24/1998 Year Built/Renovated: 1996/N/A
Maturity Date: 10/1/2013 Square Footage: 96,360
Mortgage Rate: 7.150% Cut-off Date Balance/SF: $134
Annual Debt Service: $l,223,552 Appraised Value: $16,900,000
DSCR: 1.20x Current LTV: 76.2%
Underwritable Cash Flow: $1,464,514 Balance at Maturity LTV: 32.5%
Balance at Maturity: $5,495,265 Percent Leased: 100.0%
Percent Leased as of Date: 9/24/1998
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</TABLE>
THE LOAN
The Sybase Building Loan (the "Sybase Loan") is secured by a first
leasehold mortgage on the Sybase Building, a 96,360 net rentable square feet
suburban garden office in Boulder, Colorado (the "Sybase Property"). The Sybase
Loan was originated by Residential Funding Corporation on September 24, 1998.
THE BORROWER. The borrower is SPI/Boulder, LLLP, a single-purpose Colorado
limited liability limited partnership (the "Sybase Borrower"). The general
partner of the Sybase Borrower is SPI Holdings, LLC, a Delaware Limited
liability company. The member of SPI Holdings, LLC is Dennis J. Wong.
SECURITY. The Sybase Loan is secured by a Leasehold Mortgage and Security
Agreement (the "Leasehold Mortgage"), a Collateral Assignment of Leases and
Rents, UCC Financing Statements and certain additional security documents. The
Leasehold Mortgage is a first lien on a leasehold interest in the Sybase
Property. The Sybase Loan is non-recourse, subject to certain limited
exceptions.
PAYMENT TERMS. The Mortgage Rate is fixed at 7.150%. The Sybase Loan has
an original amortization term of 240 months. The Sybase Loan requires monthly
payments of principal and interest of $101,962.67 until September 1, 2013 and
the balance of said principal sum together with accrued and unpaid interest and
any other amounts due under the Note shall be due on the Maturity Date. The
Sybase Loan accrues interest computed on the basis of the actual number of days
elapsed each month in a 360-day year.
LOCKBOX. Thirty-six (36) months prior to the expiration of the lease
between the Sybase Borrower and Sybase, Inc. (i.e. August 31,2007) (the "Sybase
Lease"), all gross income from the Sybase Property is deposited into a lockbox
account (the "Lockbox Account") controlled by the lender. Disbursements from the
Lockbox Account are made as follows: (a) to fund required reserves for the
payment of taxes and insurance; (b) to pay all principal and interest then due
with respect to the Sybase Loan; (c) to pay the Sybase Borrower an amount equal
to the operating expenses, including management fees; (d) to fund the reserve
for on-going future capital improvements; (e) to fund the reserve for tenant
improvement and leasing commission expenses; and (f) to pay the property
manager. After the application of funds from the Lockbox Account, the lender
shall deposit $22,658.00 on a monthly basis into an operating account (the
"Operating Account"), and shall release to the Sybase Borrower the remainder of
the funds deposited into the Lockbox Account. Once the funds in the Operating
Account equal $815,688.00, lender shall discontinue depositing funds in the
Operating Account.
LETTER OF CREDIT. As a condition to making the loan, lender has required
that the irrevocable letter of credit from Sybase, Inc. to Sybase Borrower, in
the amount of $667,500.00, be assigned to lender. The letter of credit secures
the performance of certain construction obligations of Sybase, Inc. under the
Sybase Lease, including the construction and build-out of the third floor of the
building. The letter of credit shall be released by lender to the Sybase
Borrower upon completion of the third-floor improvements and build-out.
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<PAGE>
PREPAYMENT/DEFEASANCE. By its terms, the Sybase Loan may be prepaid within
ninety (90) days immediately prior to the Maturity Date. The Sybase Borrower may
defease the Sybase Loan in whole, but not in part, at any time after six (6)
years following the issuance of the Certificates by providing lender with
non-callable U.S. Treasury obligations sufficient to pay its remaining
obligations.
LATE FEES AND DEFAULT INTEREST. There is a late fee on overdue
installments equal to the lesser of 5% of such overdue amount or the maximum
amount permitted by law. The Sybase Loan accrues interest at the Mortgage Rate
plus 5% per annum while the Sybase Loan is in default.
TRANSFER OF PROPERTIES OR INTEREST IN BORROWER. The Sybase Loan
immediately due and payable upon the transfer of the Sybase Property or any
Ownership interest in the Sybase Borrower, except in connection with the rights
of transfer described below, The Sybase Borrower has limited rights to transfer
in the case of (a) transfers by devise or descent or by operation of law upon
the death of a partner, (b) transfers to qualifying single asset entity upon the
payment of a fee equal to 1% of the unpaid balance of the loan, and (c) transfer
of limited partnership interests in the Sybase Borrower planning purposes or
among existing limited partners, provided that such transfers do not violate any
of the single purpose entity covenants of the loan documents.
ESCROW/RESERVES. The ground lease payments of $2,477,475 were paid at the
commencement of the ground lease and therefor no ground rent reserve was
established. There is a reserve for tenant improvements and leasing commissions
which requires monthly deposits of $8,333.33 for the first ten (10) years of the
loan which is to be applied to any re-leasing costs applicable generally to the
leasing of space in the Sybase Property, including protection against the
rollover of the single tenant at the Sybase Property, Sybase, Inc. The Sybase
Lease is scheduled to terminate on August 23, 2010, with two (2) five (5) year
renewal options. The Sybase Borrower also deposits $1,204.50 into a reserve to
provide funds for ongoing future capital improvements to the Sybase Property. A
reserve in the amount of $3,750.00 was established at the Origination Date to
provide funds for the repair of the roof gutters on a portion of the Sybase
Building.
SUBORDINATE/OTHER DEBT. Subordinate indebtedness and encumbrances are
prohibited.
THE PROPERTY
The Sybase Property consists of one (1) three (3) story building located
within the city and county of Boulder, Colorado, approximately 25 miles
northwest of the City of Denver and less than one hour from the new Denver
airport. The construction of the Sybase Building was completed in August of
1996, and is a 96,360 net rentable square foot Class A office building. The
first two (2) floors are improved and the third floor is in shell condition, but
is scheduled for occupancy by September, 1999. An irrevocable letter of credit
in the amount of $667,500 secures the buildout of this floor. While the present
configuration is for a single tenant, the Sybase Building can divide for
multi-tenant use. The Sybase Building is located within the University of
Colorado Research Park which was developed by the University of Colorado. The
ground lease underlying the Sybase Property terminates on September 23, 2010,
with four (4) ten (10) year options to renew. The ground lease payment of
$2,477,475 was paid in full at the commencement of the ground lease. The Regents
of the University of Colorado and Lease Plan U.S.A. is the lessor under such
ground lease.
The Sybase Building is leased to one tenant, Sybase, Inc., a publicly
traded software company that develops, markets and supports client/server
software products and services for the integrated enterprise-wide information
management systems. Sybase, Inc. does not yet occupy the third floor of the
Sybase Building and as such, the building is 72% occupied. However, Sybase, Inc.
is scheduled to occupy the third floor by September, 1999. The lease expires on
September 23, 2010, with two (2) five (5) year renewal options.
MANAGEMENT
Sybase Property is managed by three (3) principals of the Sybase Borrower,
Dennis J. Wong, Terrence McGrath and Richard Squires. The real estate
backgrounds of the three (3) principals are as follows: Dennis J. Wong was the
managing director for Dean Witter Realty from 1983 to 1988; Terrence McGrath was
one of the
III-12
<PAGE>
founding partners of CPS, a commercial brokerage company situated in Pleasanton,
California; and Richard Squires was affiliated with Bass Brothers and Rainwater,
Inc. as a chief financial officer and vice president from 1984 to 1990.
III-13
<PAGE>
LOAN NO. 7 - THE ALEXANDRIA COURTYARD MARRIOTT HOTEL LOAN AND PROPERTY
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<S> <C> <C> <C>
Cut-off Date Balance: $12,710,162 Property Type: Hospitality
Loan Type: Principal and Interest; Balloon Location: Alexandria, VA
Origination Date: 11/2/1998 Year Built/Renovated: 1987/1997
Maturity Date: 12/1/2008 No. of Units: 176
Mortgage Rate: 8.090% Cut-off Date Balance/Unit: $72,217
Annual Debt Service: $1,190,015 Appraised Value: $19,000,000
DSCR: 1.47x Current LTV: 66.9%
Underwritable Cash Flow: $1,746,939 Balance at Maturity LTV: 55.5%
Balance at Maturity: $10,537,775 Average Occupancy: 77.8%
Occupancy for 12 months ending: 6/30/1998
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</TABLE>
THE LOAN
The Alexandria Courtyard Marriott Loan (the "Alexandria Marriott Loan") is
secured by a first mortgage on a 176-room hotel located in Alexandria, Virginia
(the "Alexandria Marriott Property"). The Alexandria Marriott Loan was
originated by MSMC on November 2, 1998.
THE BORROWER. The borrower is Alexandria Hotel, a Florida general
partnership (the "Alexandria Marriott Borrower"). The Alexandria Marriott
Borrower is a special purpose bankruptcy remote entity.
SECURITY. The Alexandria Marriott Loan is secured by an Amended and
Restated Deed of Trust and Security Agreement (the "Deed of Trust"), UCC
Financing Statements and certain additional security documents. The mortgage is
a first lien on a fee interest in the Alexandria Marriott Property. The
Alexandria Marriott Loan is non-recourse, subject to certain limited exceptions.
PAYMENT TERMS. The Mortgage Rate is fixed at 8.090%. The Alexandria
Marriott Loan requires monthly payments of principal and interest of $99,167.94
until its maturity on December 1, 2008, at which time all unpaid principal and
accrued but unpaid interest is due. The Alexandria Marriott Loan accrues
interest computed on the basis of the actual number of days elapsed each month
in a 360-day year.
PREPAYMENT/DEFEASANCE Voluntary prepayment is prohibited until ninety (90)
days prior to the Anticipated Repayment Date. However, the Alexandria Marriott
Borrower may defease the Alexandria Marriott Loan with United States Treasury
securities, in whole, but not in part, at any time after two (2) years following
issuance of the Certificates. Defeasance is permitted only upon the satisfaction
of certain conditions specified in the Alexandria Marriott loan documents,
including confirmation from each Rating Agency that defeasance would not result
in a downgrade, qualification or withdrawal of the then current ratings assigned
to any Class of Certificates.
LATE FEES AND DEFAULT INTEREST. There is a late fee on overdue
installments equal to the lesser of 5% of the unpaid sum or the maximum amount
permitted by law. The Alexandria Marriott Loan accrues interest at the lesser of
the Mortgage Rate plus 5% per annum or the maximum amount permitted by law while
the Alexandria Marriott Loan is in default.
TRANSFER OF PROPERTIES OR INTEREST IN BORROWER. The Alexandria Marriott
Loan becomes immediately due and payable upon the transfer of the Alexandria
Marriott Property or any ownership interest in the Alexandria Marriott Borrower,
except in connection with the rights of transfer described below. The Alexandria
Marriott Borrower has the limited one-time right to transfer the Alexandria
Marriott Property subsequent to the first 12 months of the loan term upon the
payment of a fee equal to 1% of the unpaid balance of the loan.
III-14
<PAGE>
ESCROWS/RESERVES. There is a tax escrow which requires deposits in an
amount sufficient to pay taxes when due. There is also an escrow for capital
expenditures which is funded monthly in the amount of $17,174 for the first year
of the loan term; thereafter, monthly collections will be based on 4% of total
revenue. Such amounts will be disbursed to pay such costs and provide additional
security for the Alexandria Marriott Loan.
SUBORDINATE/OTHER DEBT. Subordinate indebtedness and encumbrances are
prohibited.
THE PROPERTY
The Alexandria Marriott Property consists of one, eight-story concrete
building with brick and masonry exterior. The Alexandria Marriott Property is
located in Alexandria, Virginia and had an average daily occupancy of 77.8%, and
an average daily rate of $96.40, for the immediately preceding 12 months ending
June 30, 1998, based on an occupancy report provided by the Alexandria Marriott
Borrower.
The Alexandria Marriott Property was built in 1987 and renovated in 1997.
The 176 units comprising the Alexandria Marriott Property average over 300
square feet. Facilities include dining facilities, meeting facilities, and a
fitness center.
MANAGEMENT
The Alexandria Marriott Property is managed by Rahn Alexandria, Inc., an
Alexandria Marriott Borrower affiliate.
III-15
<PAGE>
LOAN NO. 8 - HERITAGE HOUSE LOAN AND PROPERTY
<TABLE>
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cut-off Date Balance: $11,934.054 Property Type: Multifamily
Loan Type: Principal and Interest; Balloon Location: Madison, TN
Origination Date: 7/9/1998 Year Built/Renovated: 1971-1980 (Phases)/NA
Maturity Date: 8/1/2006 No. of Units: 348
Mortgage Rate: 6.950% Cut-off Date Balance/Unit: $34,293
Annual Debt Service: $953,205 Appraised Value: $15,000,000
DSCR: 1.38x Current LTV: 79.6%
Underwritable Cash Flow: $1,312,278 Balance at Maturity LTV: 72.5%
Balance at Maturity: $10,868,743 Percent Leased: 97.4%
Percent Leased as of Date: 9/23/1998
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
THE LOAN
The Heritage House Loan (the "Heritage House Loan") is secured by a first
fee mortgage on a 348 unit, two and three story garden-styled apartment complex
in Madison, Tennessee (the "Heritage House Property"). The Heritage House Loan
was originated by Residential Funding Corporation on July 9, 1998.
THE BORROWER. The borrower is Heritage House Partners, a single purpose
Tennessee general partnership (the "Heritage House Borrower"). The general
partners of the Heritage House Borrower are Samuel Ginsburg and Martin Ginsburg.
SECURITY. The Heritage House Loan is secured by a Fee Mortgage (the "Fee
Mortgage"), an Assignment of Leases and Rents, UCC Financing Statements and
certain additional security documents. The Fee Mortgage is a first lien on a fee
interest in the Heritage House Property. The Heritage House Loan is
non-recourse, subject to certain limited exceptions.
PAYMENT TERMS. The Mortgage Rate is fixed at 6.950%. The Heritage House
Loan has an original amortization term of 360 months. The Heritage House Loan
requires monthly payments of principal and interest of $79,433.75 until July 1,
2006 and the balance of said principal sum together with accrued and unpaid
interest and any other amounts due under the Note shall be due on the Maturity
Date. The Heritage House Loan accrues interest computed on the basis of the
actual number of days elapsed each month in a 360-day year.
PREPAYMENT/DEFEASANCE. By its terms, the Heritage House Loan may be
prepaid within ninety (90) days prior to the Maturity Date without premium. The
Heritage House Borrower may defease the Heritage House Loan in whole, but not in
part, at any time after two (2) years following the issuance of the Certificates
by providing lender with non-callable U.S. Treasury obligations sufficient to
pay its remaining obligations.
LATE FEES AND DEFAULT INTEREST. There is a late fee on overdue
installments equal to the lesser of 5% of such overdue amount or the maximum
amount permitted by law. The Heritage House Loan accrues interest at the
Mortgage Rate plus 5% per annum while the Heritage House Loan is in default.
TRANSFER OF PROPERTIES OR INTEREST IN BORROWER. The Heritage House Loan
becomes immediately due and payable upon the transfer of the Heritage House
Property or any ownership interest in the Heritage House Borrower except in
connection with the rights of transfer described below. The Heritage House
Borrower has limited rights to transfer in the case of (a) transfers by devise
or descent or by operation of law upon the death of a partner, (b) transfers to
qualifying single asset entity upon the payment of a fee equal to 1% of the
unpaid balance of the loan, and (c) transfers of partnership interests in the
Heritage House Borrower for estate planning purposes or among existing partners,
provided that such transfers do not violate any of the single purpose entity
covenants of the loan documents.
III-16
<PAGE>
ESCROW/RESERVES. There is a tax reserve which requires deposits in an
amount sufficient to pay taxes when due. A reserve in the amount of $9,188 was
established at closing to provide funds for repairs recommended in the
engineering report prepared in connection with the Heritage House Loan. The
Heritage House Borrower is also required to pay to the lender monthly deposits
in the amount of $6,235 to maintain a fund for replacements with respect to the
Heritage House Property.
SUBORDINATE/OTHER DEBT. Subordinate indebtedness and encumbrances are
prohibited.
THE PROPERTY
The subject property known as Heritage House Apartments is a 348 unit, two
and three story garden-styled apartment complex comprised of 35 buildings,
situated on 20.5 acres in Madison, Tennessee. Built in two phases (1971 and
1980), the subject property offers 117 one-bedroom units, 183 two-bedroom units,
44 three-bedroom units and 4 four-bedroom units. In addition to the two
aforementioned phases, a house constructed in the 1800's is located on the
subject property and is divided into 2 apartment units, The subject property
amenities include fully equipped kitchens, either patios or balconies, and
washer/dryer connections in the majority of units. On-site project amenities
include two swimming pools, a clubhouse, two lighted tennis courts, a children's
playground and laundry facilities. There are 696 uncovered parking spaces (2.0
parking spaces/unit) available for residents and guests. All units are
individually metered for electric usage and the landlord is responsible for the
water and sewer, and trash.
The property is located in the Nashville, Tennessee suburb of Madison.
Heritage House Apartments are located on Old Hickory Boulevard, a roadway that
encircles Nashville, near its intersection with Gallatin Pike. The property has
visibility and accessibility along Old Hickory. Old Hickory provides access to
Nashville's four major transportation arteries, Gallatin Pike, Ellington
Parkway, Dickerson Pike, and Interstate-65. Immediate surrounding land uses
include condominium projects, retail outlets, and modest residential
development.
MANAGEMENT
The Heritage House Property is currently managed by GDC Properties, Inc.,
a party related to the key principles (i.e., Samuel Ginsburg and Martin
Ginsburg) of the Heritage House Borrower. GDC Properties, Inc. currently manages
approximately 4,500 apartment units at 12 properties in 5 states.
III-17
<PAGE>
LOAN NO. 9 - SPANISH TRACE EAST APARTMENTS LOAN AND PROPERTY
<TABLE>
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cut-off Date Balance: $11,448,025 Property Type: Multifamily
Loan Type: Principal and Interest; Balloon Location: Decatur, GA
Origination Date: 9/2/1998 Year Built/Renovated: 1969/1998
Maturity Date: 10/1/2008 No. of Units: 518
Mortgage Rate: 6.350% Cut-Off Date Balance/Unit: $22,201
Annual Debt Service: $858,685 Appraised Value: $14,400,000
DSCR: 1.52x Current LTV: 79.5%
Underwritable Cash Flow: $1,305,243 Balance at Maturity LTV: 68.6%
Balance at Maturity $9,872,585 Percent Leased: 98.3%
Percent Leased as of Date: 8/24/1998
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
THE LOAN
The Spanish Trace East Apartments Loan (the "Spanish Trace Loan") is
secured by a first mortgage on the Spanish Trace East Apartments, a 518 unit
apartment complex located in Decatur, Georgia (the "Spanish Trace Property").
The Spanish Trace Loan was originated by Residential Funding Corporation on
September 2, 1998.
THE BORROWER. The Borrower is 2929 Panthersville Associates, a
single-purpose, Georgia limited partnership (the "Spanish Trace Borrower"). The
general partner of the Spanish Trace Borrower is Sherwood Apartments, Inc., a
Georgia corporation. The directors of Sherwood Apartments, Inc. are Gerald J.
Ashkouti, Albert M. Ashkouti and Michael H. Hammer.
SECURITY. The Spanish Trace Loan is secured by a Deed to Secure Debt (the
"Deed to Secure Debt"), an Assignment of Leases and Rents, UCC Financing
Statements and certain additional security documents. The Deed to Secure Debt is
a first lien on the Spanish Trace Borrower's fee interest in the Spanish Trace
Property. The Spanish Trace Loan is non-recourse, subject to certain limited
exceptions.
PAYMENT TERMS. The interest rate is fixed at 6.350% with an amortization
term of 360 months. The Spanish Trace Loan requires monthly payments of
principal and interest of $71,557.11 until the Maturity Date. The balance of the
principal sum together with all accrued and unpaid interest thereon is due and
payable on the Maturity Date. The Spanish Trace Loan accrues interest computed
on the basis of the actual number of days elapsed each month in a 360-day year.
PREPAYMENT. By its terms, the Spanish Trace Loan may be prepaid within
ninety (90) days prior to the Maturity Date, without premium. On or after
October 1, 2002, the Spanish Trace Loan may be prepaid in whole or in part with
an additional payment of an amount equal to the greater of a Yield Maintenance
Premium calculated by reference to U.S. Treasury obligations or 1% of the
principal balance prepaid.
LATE FEES AND DEFAULT INTEREST. There is a late fee on overdue
installments equal to the lesser of 5% of such overdue amount or the maximum
amount permitted by law. The Spanish Trace Loan accrues interest at the Mortgage
Rate plus 5% per annum while the Spanish Trace Loan is in default.
TRANSFER OF PROPERTIES OR INTEREST IN BORROWER. The Spanish Trace Loan
becomes immediately due and payable upon the transfer of the Spanish Trace
Property or any ownership interest in the Spanish Trace Borrower, except in
connection with the rights of transfer described below. The Spanish Trace
Borrower has limited rights to transfer in the case of (a) transfers by devise
or descent or by operation of law upon the death of a partner, (b) transfers to
a qualifying single asset entity upon the payment of a fee equal to 1% of the
unpaid balance of the loan, and (c) transfers of interests in the Spanish Trace
Borrower provided that such transfers do not violate the single purpose entity
covenants of the loan documents, and provided that such transfers do not result
in more than 49% of the beneficial interests in the Spanish Trace Borrower
having been transferred.
III-18
<PAGE>
ESCROW/RESERVES. There is a tax reserve which, at the option of lender,
requires monthly deposits in an amount sufficient to pay taxes when due. A
reserve in the amount of $2,963 was established at closing to provide funds for
repairs recommended in the property condition report prepared in connection with
the Spanish Trace Loan. The Spanish Trace Borrower is also required to pay to
the lender monthly deposits in the amount of $10,792 to maintain a fund for
replacements with respect to the Spanish Trace Property.
SUBORDINATE/OTHER DEBT. Subordinate indebtedness and encumbrances are
prohibited.
THE PROPERTY
The Spanish Trace Property is a 518-unit apartment complex which contains
475,945 square feet of net rentable area and 1,036 parking spaces. The buildings
were built in 1969 and consist of 54, two-story buildings, situated on 43 acres.
The complex offers twelve (12) different floor-plans, ranging in size from 450
square feet to 1,313 square feet. Each unit has a fully equipped kitchen and
private patio/balcony. The 54 subject buildings include a 1,740 square foot
leasing office and a 3,264 square foot clubhouse. The clubhouse includes a full
fitness center, three (3) tennis courts, three (3) swimming pools and laundry
facilities. From 1994 to 1998 the Spanish Trace Property underwent a renovation
which included clubhouse repairs, road and ground improvement, carpet
replacement, appliance replacement, exterior painting, roof repairs, replacement
of cabinets, counters and vanities and drapery replacement. As of August 24,
1998, the Spanish Trace Property was 98.3% leased. The occupancy rates for 1996
and 1997 were 93% and 94%, respectively.
MANAGEMENT
The Spanish Trace Property is managed by Gateway Management Co., Inc.
("Gateway"), which was founded in 1978 to manage and lease real property in the
southeastern United States. Gateway currently manages 1,635 units in eight (8)
multifamily properties and nearly 1,000,000 square feet of commercial and office
space in ten (10) locations.
III-19
<PAGE>
LOAN NO. 10 - FOUR ALLEGHENY OFFICE CENTER LOAN AND PROPERTY
<TABLE>
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<S> <C> <C> <C>
Cut-off Date Balance: $10,470,872 Property Type: Office
Loan Type: Principal and Interest; Balloon Location: Pittsburgh, PA
Origination Date: 8/1/1998 Year Built / Renovated: 1978 / N/A
Maturity Date: 4/1/2012 Square Footage: 231,426
Mortgage Rate: 7.550% Cut-off Date Balance / SF: $45
Annual Debt Service: $940,221 Appraised Value: $21,500,000
DSCR: 1.80x Current LTV: 48.7%
Underwritable Cash Flow: $1,695,031 Balance at Maturity LTV: 33.2%
Balance at Maturity: $7,146,415 Percent Leased: 100.0%
Percent Leased as of Date: 4/8/1998
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
THE LOAN
The Four Allegheny Office Center Loan (the "Four Allegheny Loan") is
secured by a first mortgage on a 231,426 square foot office building located in
Pittsburgh, Pennsylvania (the "Four Allegheny Property"). The Four Allegheny
Loan was originated by MSMC on August 1, 1998.
THE BORROWER. The borrower is USRA Allegheny Center Business Trust, a
Delaware business trust (the "Four Allegheny Borrower"). The Four Allegheny
Borrower is sponsored by the San Diego County, San Diego City, and Contra Costa
County Retirement Systems, through US Realty Advisors, as advisor.
SECURITY. The Four Allegheny Loan is secured by a Mortgage (the
"Mortgage"), UCC Financing Statements and certain additional security documents.
The Mortgage is a first lien on a fee interest in the Four Allegheny Property.
The Four Allegheny Loan is non-recourse, subject to certain limited exceptions.
PAYMENT TERMS. The Mortgage Rate is fixed at 7.550%. The Four Allegheny
Loan requires monthly payments of principal and interest of $78,351.72 until its
maturity on April 1, 2012, at which time all unpaid principal and accrued but
unpaid interest is due. The Four Allegheny Loan accrues interest computed on the
basis of an assumed 30-day month and a 360-day year.
PREPAYMENT. By its terms, the Four Allegheny Loan may not be prepaid prior
to March 31, 2000. After that date, the Four Allegheny Loan may be prepaid in
whole, but not in part, with an amount equal to the greater of a Yield
Maintenance Premium calculated by reference to U.S. Treasury obligations or 1%
of the principal amount prepaid.
DEFAULT INTEREST. The Four Allegheny Loan accrues interest at the Mortgage
Rate plus 3% per annum while the Four Allegheny Loan is in default.
TRANSFER OF PROPERTY OR INTEREST IN BORROWER. The Four Allegheny Loan
becomes immediately due and payable upon the transfer of the Four Allegheny
Property except in connection with the rights of transfer described below. The
Four Allegheny Borrower has the limited one-time right to transfer the Four
Allegheny Property subject to (i) the consent of the lender (which consent shall
not be unreasonably withheld), (ii) the payment of a fee equal to 1% of the
unpaid balance of the loan, and (iii) the satisfaction of certain other
conditions.
ESCROWS/RESERVES. No escrows are required for the Allegheny Loan.
SUBORDINATE/OTHER DEBT. Subordinate indebtedness and encumbrances are
prohibited.
III-20
<PAGE>
THE PROPERTY
The Four Allegheny Property is a ten-story, 231,426 square foot office
building, with a detached five-story parking garage, located in the North Shore
section of Pittsburgh, Pennsylvania. The Four Allegheny Property was 100% leased
as of April 8, 1998.
The Four Allegheny Property was built in 1978. Allegheny General Hospital
(the "Tenant") is the sole master tenant of the property, occupying
approximately 59% of the space and subleasing the remainder of the building to
IBM, through 4/30/2002. According to a borrower provided rent roll, the
Allegheny General Hospital lease is at a net rental rate of $9.34/SF, and
expires on June 30, 2011.
Alleghany Health Education and Research Foundation ("AHERF"), the parent
foundation of the Tenant is currently operating under a Chapter 11 bankruptcy
proceeding. An affiliate of the Tenant (also a subsidiary of AHERF) has also
been operating under Chapter 11 bankruptcy protection. The Tenant is not in
bankruptcy, but if it were, it would have the right to reject the lease, and the
related borrower would have an unsecured claim in an amount that is prescribed
by law.
MANAGEMENT
The Four Allegheny Property is managed by Oxford Development Company, a
third-party asset management firm.
III-21
<PAGE>
ABN AMRO Statement Date:
LaSalle National Bank Payment Date:
Prior Payment:
Administrator: Record Date:
Robert Castle (800) 246-5761
135 S. LaSalle Street Suite 1740 WAC:
Chicago, IL 60603 WAMM:
ABN AMRO ACCT: 99-9999-99-9
================================================================================
Number Of Pages
---------------
Table Of Contents
TOTAL PAGES INCLUDED IN THIS PACKAGE
Specially Serviced Loan Detail Appendix A
Modified Loan Detail Appendix B
Realized Loss Detail Appendix C
================================================================================
INFORMATION IS AVAILABLE FOR THIS ISSUE FROM THE FOLLOWING SOURCES
- --------------------------------------------------------------------------------
LaSalle Web Site www.lnbabs.com
LaSalle Bulletin Board (714) 282-3990
LaSalle ASAP Fax System (312) 282-5518
Bloomberg User Terminal
ASAP #:
Monthly Data File Name: 0365MMYY.EXE
================================================================================
================================================================================
<PAGE>
ABN AMRO Statement Date:
LaSalle National Bank Payment Date:
Prior Payment:
Administrator: Record Date:
Robert Castle (800) 246-5761
135 S. LaSalle Street Suite 1740 WAC:
Chicago, IL 60603 WAMM:
ABN AMRO ACCT: 99-9999-99-9
<TABLE>
<CAPTION>
====================================================================================================================================
ORIGINAL OPENING PRINCIPAL PRINCIPAL NEGATIVE CLOSING INTEREST INTEREST PASS-THROUGH
CLASS FACE VALUE (1) BALANCE PAYMENT ADJ. OR LOSS AMORTIZATION BALANCE PAYMENT ADJUSTMENT RATE (2)
CUSIP PER $1,000 PER $1,000 PER $1,000 PER $1,000 PER $1,000 PER $1,000 PER $1,000 PER $1,000 NEXT RATE (3)
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<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
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0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
====================================================================================================================================
TOTAL P&I PAYMENT 0.00
===========================
</TABLE>
Notes:
(1) N denotes notional balance not included in total
(2) Interest Paid minus Interest Adjustment minus Deferred Interest equals
Accrual
(3) Estimated
<PAGE>
ABN AMRO Statement Date:
LaSalle National Bank Payment Date:
Prior Payment:
Administrator: Record Date:
Robert Castle (800) 246-5761
135 S. LaSalle Street Suite 1625
Chicago, IL 60674-4107
ABN AMRO ACCT: 99-9999-99-9
OTHER RELATED INFORMATION
<TABLE>
<CAPTION>
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SERVICER / POOL INFORMATION
BEGINNING SCHEDULED UNSCHEDULED REALIZED ENDING SCHEDULED PREPAYMENT INTEREST
BALANCE PRINCIPAL PRINCIPAL LOSSES BALANCE INTEREST SHORTFALL EXCESS
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<S> <C> <C> <C> <C> <C> <C> <C>
<CAPTION>
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BEGINNING ENDING GROSS W/AVG MONTHS PREPAYMENT DISPOSITION
LOAN COUNT LOAN COUNT SERVICING FEES TO MATURITY PENALTIES FEES
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<S> <C> <C> <C> <C> <C>
<CAPTION>
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CURRENT CUMULATIVE
UNPAID UNPAID
CLASS INTEREST INTEREST
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<S> <C> <C>
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TOTAL
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</TABLE>
<PAGE>
ABN AMRO Statement Date:
LaSalle National Bank Payment Date:
Prior Payment:
Administrator: Record Date:
Robert Castle (800) 246-5761
135 S. LaSalle Street Suite 1625
Chicago, IL 60674-4107
ABN AMRO ACCT: 99-9999-99-9
OTHER RELATED INFORMATION
<TABLE>
<CAPTION>
====================================================================================================================================
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P&I ADVANCES MADE BY: BEGINNING CURRENT ENDING
UNREIMBURSED PERIOD REIMBURSED UNREIMBURSED
-----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Servicer
Trustee
Fiscal Agent
-----------------------------------------------------------------------------------------------------
Total P&I Advances
-----------------------------------------------------------------------------------------------------
SUMMARY OF EXPENSES:
Current Period Servicing Fees
Current Period Trustee Fees
Current Period Special Servicing Fees
Principal Recovery Fees
Other Servicing Compensation - Interest on Advances
Total
Net Aggregate PPIS Allocable to the Bonds
Trust Fund Expenses
Current Realized Losses on Mortgage Loans
Cumulative Realized Losses on Mortgage Loans
====================================================================================================================================
</TABLE>
<PAGE>
ABN AMRO Statement Date:
LaSalle National Bank Payment Date:
Prior Payment:
Administrator: Record Date:
Robert Castle (800) 246-5761
135 S. LaSalle Street Suite 1625
Chicago, IL 60674-4107
ABN AMRO ACCT: 99-9999-99-9
OTHER RELATED INFORMATION
<TABLE>
<CAPTION>
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REO PROPERTY SOLD OR DISPOSED OF DURING THE RELATED COLLECTION PERIOD
PORTION FINAL
REALIZED INCLUDED IN RECOVERY
LOAN LOSS SALE OTHER AVAILABLE DETERMINATION
NUMBER ATTRIBUTABLE PROCEEDS PROCEEDS FUNDS DATE
-----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1
2
3
=====================================================================================================
TOTALS
=====================================================================================================
<CAPTION>
-----------------------------------------------------------------------------------------------------
REO PROPERTY SOLD OR DISPOSED OF DURING THE RELATED COLLECTION PERIOD
MOST AGGREGATE AGGREGATE PORTION
RECENT AMOUNT AMOUNT INCLUDED IN
LOAN APPRAISAL OF NET OF OTHER AVAILABLE
NUMBER VALUATION INCOME REVENUES FUNDS
-----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1
2
3
=====================================================================================================
TOTALS
=====================================================================================================
====================================================================================================================================
</TABLE>
<PAGE>
ABN AMRO Statement Date:
LaSalle National Bank Payment Date:
Prior Payment:
Administrator: Record Date:
Robert Castle (800) 246-5761
135 S. LaSalle Street Suite 1625
Chicago, IL 60674-4107
ABN AMRO ACCT: 99-9999-99-9
OTHER RELATED INFORMATION
<TABLE>
<CAPTION>
====================================================================================================================================
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MORTGAGED PROPERTIES THAT BECAME REO DURING THE PRECEDING CALENDAR MONTH
UNPAID
DEBT PRINCIPAL
SERVICE STATED BALANCE
LOAN PROPERTY COVERAGE PRINCIPAL AS OF REO
NUMBER CITY STATE TYPE RATIO BALANCE DATE
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<S> <C> <C> <C> <C> <C> <C>
========================================================================================================================
TOTALS
========================================================================================================================
<CAPTION>
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APPRAISAL REDUCTION AMOUNTS
LOAN CURRENT TOTAL
NUMBER PERIOD REDUCTION
-------------------------------------------------------------------------------
<S> <C> <C>
1
2
3
===============================================================================
TOTALS
===============================================================================
====================================================================================================================================
</TABLE>
<PAGE>
ABN AMRO Statement Date:
LaSalle National Bank Payment Date:
Prior Payment:
Administrator: Record Date:
Robert Castle (800) 246-5761
135 S. LaSalle Street Suite 1740
Chicago, IL 60603
ABN AMRO ACCT: 99-9999-99-9
<TABLE>
<CAPTION>
====================================================================================================================================
DISTRIBUTION DELINQ 1 MONTH DELINQ 2 MONTHS DELINQ 3+ MONTHS FORECLOSURE/BANKRUPTCY REO MODIFICATIONS
---------------------------------------------------------------------------------------------------------------------
DATE # BALANCE # BALANCE # BALANCE # BALANCE # BALANCE # BALANCE
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
10/15/98 0 0 0 0 0 0 0 0 0 0 0 0
0.00% 0.000% 0.00% 0.000% 0.00% 0.000% 0.00% 0.000% 0.00% 0.000% 0.00% 0.000%
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</TABLE>
====================================================
DISTRIBUTION PREPAYMENTS CURR WEIGHTED AVG.
--------------------------------------
DATE # BALANCE COUPON REMIT
====================================================
10/15/98 0 0
0.00% 0.000%
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====================================================
Note: Foreclosure and REO Totals are Included in the Appropriate Delinquency
Aging Category
<PAGE>
ABN AMRO Statement Date:
LaSalle National Bank Payment Date:
Prior Payment:
Administrator: Record Date:
Robert Castle (800) 246-5761
135 S. LaSalle Street Suite 1740
Chicago, IL 60603
ABN AMRO ACCT: 99-9999-99-9
DELINQUENT LOAN DETAIL
<TABLE>
<CAPTION>
====================================================================================================================================
PAID OUTSTANDING OUT. PROPERTY SPECIAL
DISCLOSURE DOC THRU CURRENT P&I P&I PROTECTION ADVANCE SERVICER FORECLOSURE BANKRUPTCY REO
CONTROL # DATE ADVANCE ADVANCES** ADVANCES DESCRIPTION (1) TRANSFER DATE DATE DATE DATE
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
====================================================================================================================================
====================================================================================================================================
</TABLE>
A. P&I Advance - Loan in Grace Period
B. P&I Advance - Late Payment but < one month delinq
1. P&I Advance - Loan delinquent 1 month
2. P&I Advance - Loan delinquent 2 months
3. P&I Advance - Loan delinquent 3 months or More
4. Matured Balloon/Assumed Scheduled Payment
================================================================================
** Outstanding P&I Advances include the current period P&I Advance
<PAGE>
ABN AMRO Statement Date:
LaSalle National Bank Payment Date:
Prior Payment:
Administrator: Record Date:
Robert Castle (800) 246-5761
135 S. LaSalle Street Suite 1740
Chicago, IL 60603
ABN AMRO ACCT: 99-9999-99-9
POOL TOTAL
DISTRIBUTION OF PRINCIPAL BALANCES
- --------------------------------------------------------------------------------
(2) CURRENT SCHEDULED NUMBER (2) SCHEDULED BASED ON
BALANCES OF LOANS BALANCE BALANCE
================================================================================
$0 to $500,000
$500,000 to $1,000,000
$1,000,000 to $1,500,000
$1,500,000 to $2,000,000
$2,000,000 to $2,500,000
$2,500,000 to $3,000,000
$3,000,000 to $3,500,000
$3,500,000 to $4,000,000
$4,000,000 to $5,000,000
$5,000,000 to $6,000,000
$6,000,000 to $7,000,000
$7,000,000 to $8,000,000
$8,000,000 to $9,000,000
$9,000,000 to $10,000,000
$10,000,000 to $11,000,000
$11,000,000 to $12,000,000
$12,000,000 to $13,000,000
$13,000,000 to $14,000,000
$14,000,000 to $15,000,000
$15,000,000 & Above
================================================================================
Total 0 0 0.00%
- --------------------------------------------------------------------------------
Average Scheduled Balance is 0
Maximum Scheduled Balance is 0
Minimum Scheduled Balance is 0
DISTRIBUTION OF PROPERTY TYPES
- --------------------------------------------------------------------------------
NUMBER (2) SCHEDULED BASED ON
PROPERTY TYPES OF LOANS BALANCE BALANCE
================================================================================
================================================================================
Total 0 0 0.00%
- --------------------------------------------------------------------------------
DISTRIBUTION OF MORTGAGE INTEREST RATES
- --------------------------------------------------------------------------------
CURRENT MORTGAGE NUMBER (2) SCHEDULED BASED ON
INTEREST RATE OF LOANS BALANCE BALANCE
================================================================================
7.000% or less
7.000% to 7.125%
7.125% to 7.375%
7.375% to 7.625%
7.625% to 7.875%
7.875% to 8.125%
8.125% to 8.375%
8.375% to 8.625%
8.625% to 8.875%
8.875% to 9.125%
9.125% to 9.375%
9.375% to 9.625%
9.625% to 9.875%
9.875% to 10.125%
20.125% & Above
================================================================================
Total 0 0 0.00%
- --------------------------------------------------------------------------------
W/Avg Mortgage Interest Rate is 0.0000%
Minimum Mortgage Interest Rate is 0.0000%
Maximum Mortgage Interest Rate is 0.0000%
GEOGRAPHIC DISTRIBUTION
- --------------------------------------------------------------------------------
NUMBER (2) SCHEDULED BASED ON
GEOGRAPHIC LOCATION OF LOANS BALANCE BALANCE
================================================================================
================================================================================
Total 0 0 0.00%
- --------------------------------------------------------------------------------
<PAGE>
ABN AMRO Statement Date:
LaSalle National Bank Payment Date:
Prior Payment:
Administrator: Record Date:
Robert Castle (800) 246-5761
135 S. LaSalle Street Suite 1740
Chicago, IL 60603
ABN AMRO ACCT: 99-9999-99-9
POOL TOTAL
LOAN SEASONING
- --------------------------------------------------------------------------------
NUMBER (2) SCHEDULED BASED ON
NUMBER OF YEARS OF LOANS BALANCE BALANCE
================================================================================
================================================================================
- --------------------------------------------------------------------------------
Weighted Average Seasoning is 0.0
DISTRIBUTION OF AMORTIZATION TYPE
- --------------------------------------------------------------------------------
NUMBER (2) SCHEDULED BASED ON
AMORTIZATION TYPE OF LOANS BALANCE BALANCE
================================================================================
================================================================================
Total 0 0 0.00%
- --------------------------------------------------------------------------------
DISTRIBUTION OF REMAINING TERM
FULLY AMORTIZING
- --------------------------------------------------------------------------------
FULLY AMORTIZING NUMBER (2) SCHEDULED BASED ON
MORTGAGE LOANS OF LOANS BALANCE BALANCE
================================================================================
60 months or less
61 to 120 months
121 to 180 months
181 to 240 months
241 to 360 months
================================================================================
Total 0 0 0.00%
- --------------------------------------------------------------------------------
Weighted Average Months to Maturity is 0
DISTRIBUTION OF REMAINING TERM
BALLOON LOANS
- --------------------------------------------------------------------------------
BALLOON NUMBER (2) SCHEDULED BASED ON
MORTGAGE LOANS OF LOANS BALANCE BALANCE
================================================================================
12 months or less
13 to 24 months
25 to 36 months
37 to 48 months
49 to 60 months
61 to 120 months
121 to 180 months
181 to 240 months
================================================================================
Total 0 0 0.00%
- --------------------------------------------------------------------------------
Weighted Average Months to Maturity is 0
DISTRIBUTION OF DSCR
- --------------------------------------------------------------------------------
DEBT SERVICE NUMBER (2) SCHEDULED BASED ON
COVERAGE RATIO (1) OF LOANS BALANCE BALANCE
================================================================================
0.500 or less
0.500 to 0.625
0.625 to 0.750
0.750 to 0.875
0.875 to 1.000
1.000 to 1.125
1.125 to 1.250
1.250 to 1.375
1.375 to 1.500
1.500 to 1.625
1.625 to 1.750
1.750 to 1.875
1.875 to 2.000
2.000 to 2.125
2.125 & above
Unknown
================================================================================
Total 0 0 0.00%
- --------------------------------------------------------------------------------
Weighted Average Debt Service Coverage Ratio is 0.000
NOI AGING
- --------------------------------------------------------------------------------
NUMBER (2) SCHEDULED BASED ON
NOI DATE OF LOANS BALANCE BALANCE
================================================================================
1 year or less
1 to 2 years
2 Years or More
Unknown
================================================================================
Total 0 0 0.00%
- --------------------------------------------------------------------------------
(1) Debt Service Coverage Ratios are calculated as described in the
prospectus, values are updated periodically as new NOI figures became
available from borrowers on an asset level.
Neither the Trustee, Servicer, Special Servicer or Underwriter makes any
representation as to the accuracy of the data provided by the borrower for
this calculation.
<PAGE>
ABN AMRO Statement Date:
LaSalle National Bank Payment Date:
Prior Payment:
Administrator: Record Date:
Robert Castle (800) 246-5761
135 S. LaSalle Street Suite 1740
Chicago, IL 60603
ABN AMRO ACCT: 99-9999-99-9
LOAN LEVEL DETAIL
<TABLE>
<CAPTION>
====================================================================================================================================
APPRAISAL PROPERTY OPERATING ENDING LOAN
DISCLOSURE REDUCTION TYPE MATURITY STATEMENT PRINCIPAL NOTE SCHEDULED PREPAYMENT STATUS
CONTROL # AMOUNTS CODE DATE DSCR NOI DATE BALANCE RATE P&I PREPAYMENT DATE CODE (1)
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
====================================================================================================================================
</TABLE>
* NOI and DSCR, if available and reportable under the terms of the trust
agreement, are based on information obtained from the related borrower,
and no other party to the agreement shall be held liable for the accuracy
or methodology used to determine such figures.
- --------------------------------------------------------------------------------
(1) Legend:
A. P&I Adv - in Grace Period
B. P&I Adv - < one month delinq
1. P&I Adv - delinquent 1 month
2. P&I Adv - delinquent 2 months
3. P&I Adv - delinquent 3+ months
4. Mat. Balloon/Assumed P&I
5. Prepaid in Full
6. Specially Serviced
7. Foreclosure
8. Bankruptcy
9. REO
10. DPO
11. Modification
================================================================================
<PAGE>
ABN AMRO Statement Date:
LaSalle National Bank Payment Date:
Prior Payment:
Administrator: Record Date:
Robert Castle (800) 246-5761
135 S. LaSalle Street Suite 1740
Chicago, IL 60603
ABN AMRO ACCT: 99-9999-99-9
SPECIALLY SERVICED LOAN DETAIL
<TABLE>
<CAPTION>
====================================================================================================================================
BEGINNING SPECIALLY
DISCLOSURE SCHEDULED INTEREST MATURITY PROPERTY SERVICED
CONTROL # BALANCE RATE DATE TYPE STATUS CODE (1) COMMENTS
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
====================================================================================================================================
</TABLE>
(1)Legend :
1) Request for waiver of Prepayment Penalty
2) Payment default
3) Request for Loan Modification or Workout
4) Loan with Borrower Bankruptcy
5) Loan in Process of Foreclosure
6) Loan now REO Property
7) Loans Paid Off
8) Loans Returned to Master Servicer
================================================================================
APPENDIX A
<PAGE>
ABN AMRO Statement Date:
LaSalle National Bank Payment Date:
Prior Payment:
Administrator: Record Date:
Robert Castle (800) 246-5761
135 S. LaSalle Street Suite 1740
Chicago, IL 60603
ABN AMRO ACCT: 99-9999-99-9
MODIFIED LOAN DETAIL
<TABLE>
<CAPTION>
====================================================================================================================================
DISCLOSURE MODIFICATION MODIFICATION
CONTROL # DATE DESCRIPTION
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
====================================================================================================================================
APPENDIX B
</TABLE>
<PAGE>
ABN AMRO Statement Date:
LaSalle National Bank Payment Date:
Prior Payment:
Administrator: Record Date:
Robert Castle (800) 246-5761
135 S. LaSalle Street Suite 1740
Chicago, IL 60603
ABN AMRO ACCT: 99-9999-99-9
REALIZED LOSS DETAIL
<TABLE>
<CAPTION>
====================================================================================================================================
Beginning Gross Proceeds Aggregate Net Net Proceeds
Dist. Disclosure Appraisal Appraisal Scheduled Gross as a % of Liquidation Liquidation as a % of Realized
Date Control # Date Value Balance Proceeds Sched Principal Expenses* Proceeds Sched. Balance Loss
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
CURRENT TOTAL 0.00 0.00 0.00 0.00 0.00
CUMULATIVE 0.00 0.00 0.00 0.00 0.00
====================================================================================================================================
APPENDIX C
</TABLE>
* Aggregate liquidation expenses also include outstanding P&I advances and
unpaid servicing fees, unpaid trustee fees, etc..
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
- --------------------------------------------------------------------------------
MORGAN STANLEY [LOGO] February 10, 1999
Real Estate Debt Capital Markets
Mortgage Capital Markets MORGAN STANLEY DEAN WITTER
- --------------------------------------------------------------------------------
CMBS NEW ISSUE
PRELIMINARY TERM SHEET
----------------------
EXPECTED PRICING DATE: FEBRUARY 23, 1999
----------------------
$764,782,000
(APPROXIMATE)
MORGAN STANLEY CAPITAL I INC.
AS DEPOSITOR
RESIDENTIAL FUNDING CORPORATION
MORGAN STANLEY MORTGAGE CAPITAL INC.
WACHOVIA BANK, NATIONAL ASSOCIATION
AS SELLERS
AMRESCO SERVICES, L.P.
AS MASTER SERVICER
BANC ONE MORTGAGE CAPITAL MARKETS LLC
AS SPECIAL SERVICER
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 1999-RM1
----------------------
MORGAN STANLEY DEAN WITTER
RESIDENTIAL FUNDING SECURITIES CORPORATION
- --------------------------------------------------------------------------------
This information is being delivered to a specific number of prospective
sophisticated investors in order to assist them in determining whether they have
an interest in the type of security described herein. It has been prepared
solely for information purposes and is not an offer to buy or sell or a
solicitation of an offer to buy or sell any security or instrument or to
participate in any trading strategy. No representation or warranty can be given
with respect to the accuracy or completeness of the information, or with respect
to the terms of any future offer of securities conforming to the terms hereof.
Any such offer of securities would be made pursuant to a definitive Prospectus
or Private Placement Memorandum, as the case may be, prepared by the issuer
which could contain material information not contained herein and to which the
prospective purchasers are referred. In the event of any such offering, this
information shall be deemed superseded, amended and supplemented in its entirety
by such Prospectus or Private Placement Memorandum. Such Prospectus or Private
Placement Memorandum will contain all material information in respect of any
securities offered thereby and any decision to invest in such securities should
be made solely in reliance upon such Prospectus or Private Placement Memorandum.
Certain assumptions may have been made in this analysis which have resulted in
any returns detailed herein. No representation is made that any returns
indicated will be achieved. Changes to the assumptions may have a material
impact on any returns detailed. Morgan Stanley & Co. Incorporated and
Residential Funding Securities Corporation (collectively the "Underwriters")
disclaim any and all liability relating to this information, including without
limitation any express or implied representations and warranties for, statements
contained in, and omissions from, this information. Additional information is
available upon request. The Underwriters and others associated with them may
have positions in, and may effect transaction in, securities and instruments of
issuers mentioned herein and may also perform or seek to perform investment
banking services for the issuers of such securities and instruments. Past
performance is not necessarily indicative of future results. Price and
availability are subject to change without notice. This material may be filed
with the Securities and Exchange Commission (the "SEC") and incorporated by
reference into an effective registration statement previously filed with the SEC
under Rule 415 of the Securities Act of 1933, including in cases where the
material does not pertain to securities that are ultimately offered for sale
pursuant to such registration statement. To Morgan Stanley's readers worldwide:
In addition, please note that this publication has been issued by Morgan Stanley
& Co. Incorporated, approved by Morgan Stanley International Limited, a member
of The Securities and Futures Authority, and by Morgan Stanley Japan Ltd. Morgan
Stanley recommends that such readers obtain the advice of their Morgan Stanley &
Co. Incorporated, Morgan Stanley International or Morgan Stanley Japan Ltd.
representative about the investments concerned.
NOT FOR DISTRIBUTION TO PRIVATE CUSTOMERS AS DEFINED BY THE U.K. SECURITIES
AND FUTURES AUTHORITY
- --------------------------------------------------------------------------------
<PAGE>
$764,782,000 (APPROXIMATE)
MORGAN STANLEY CAPITAL I INC.
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 1999-RM1
TRANSACTION HIGHLIGHTS
o Contributors:
SELLERS
----------------------------------------------
NO. CUT-OFF DATE %
OF PRINCIPAL OF
LOANS BALANCE POOL
----------------------------------------------
RFC 103 399,229,750 46.46
MS 87 341,231,299 39.71
WACH 39 118,845,489 13.83
----------------------------------------------
TOTAL: 229 859,306,538 100.00
----------------------------------------------
o Diversified Loan Pool:
o Average Loan Balance: $3.8 million (0.4% of Pool)
o Largest Loan Balance: 4.3% of Pool
o Five Largest Loans: 13.4% of Pool
o Ten Largest Loans: 20.3% of Pool
o Traditional Property Types:
[GRAPHIC OMITTED]
[The following table was depicted as a pie chart in the printed material.]
Retail 31.9%
MultiFamily 22.9%
Office 18.4%
Hospitality 10.4%
Industrial 9.3%
Mixed Use 4.6%
Self Storage 1.3%
Mobile Home Park 0.9%
Other 0.3%
o Call Protection:
o Lockout period followed by defeasance: 44.0% of Pool
o Lockout period followed by yield maintenance or the greater of yield
maintenance and 1% of the principal amount prepaid: 47.8% of Pool
o Lockout period followed by a 3% prepayment penalty: 0.2% of Pool
o Lockout period followed by, at the borrower's choice, the greater of
yield maintenance and 1% of the principal amount prepaid or
defeasance: 1.9% of Pool
o Credit Statistics:
o Weighted average debt service coverage ratio of 1.42x
o Weighted average cut-off date loan-to-value ratio of 70.8%
o Collateral Terms: The Pool has a WAC of 7.20% and a WAM of 122 months
o Collateral Information: Updated loan information will be part of the
monthly remittance report available from the Trustee in addition to
detailed payment and delinquency information. Updated property operating
and occupancy information, to the extent delivered by borrowers, will be
available to Certificateholders from the Master Servicer
o Bond Information: Cash flows will be modeled by TREPP and will be
available on BLOOMBERG
- --------------------------------------------------------------------------------
<PAGE>
$764,782,000 (APPROXIMATE)
MORGAN STANLEY CAPITAL I INC.
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 1999-RM1
OFFERED CERTIFICATES
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
RATING EXPECTED FINAL INITIAL
SUBORDINATION (MOODY'S/ AVERAGE PRINCIPAL DISTRIBUTION PASS-THROUGH
CLASS AMOUNT(1) LEVELS DCR) LIFE(2) WINDOW(2)(3) DATE(3) RATE(4)(5)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
A-1 183,000,000 28.75% Aaa /AAA 5.50 1-106 1/15/08 [6.00]%
- ------------------------------------------------------------------------------------------------------------------------------------
A-2 429,255,000 28.75 Aaa /AAA 9.44 106-115 10/15/08 [6.31]
- ------------------------------------------------------------------------------------------------------------------------------------
B 42,966,000 23.75 Aa2/AA 9.67 115-116 11/15/08 [6.45]
- ------------------------------------------------------------------------------------------------------------------------------------
C 45,113,000 18.50 A2/A 9.70 116-116 11/15/08 [6.70]
- ------------------------------------------------------------------------------------------------------------------------------------
D 12,890,000 17.00 A3/A- 9.77 116-117 12/15/08 NWAC - [0.28]
- ------------------------------------------------------------------------------------------------------------------------------------
E 34,372,000 13.00 Baa2/BBB 9.78 117-117 12/15/08 NWAC - [0.03]
- ------------------------------------------------------------------------------------------------------------------------------------
F 17,186,000 11.00 NR /BBB- 9.95 117-122 5/15/09 NWAC - [0.03]
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
PRIVATE CERTIFICATES
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
RATING EXPECTED FINAL INITIAL
AMOUNT(1) SUBORDINATION (DCR/ AVERAGE PRINCIPAL DISTRIBUTION PASS-THROUGH
CLASS ($MM) LEVELS MOODY'S) LIFE(2) WINDOW(2)(3) DATE(3) RATE(4) (5)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
G-O 94,524,538 -- -- -- -- -- [6.00]%
- ------------------------------------------------------------------------------------------------------------------------------------
X 859,306,538 -- AAA/Aaa 9.14 -- 9/15/18 Variable Rate
(Notional)
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Notes: (1): In the case of each such Class, subject to a permitted
variance of plus or minus 5%. The Class X Notional Amount is
equal to the sum of all Certificate Balances outstanding from
time to time.
(2) In years, based on Maturity Assumptions and a 0% CPR as
described in the Prospectus Supplement.
(3) 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 and a 0% CPR as described in the
Prospectus Supplement.
(4) Other than the Class D, Class E and Class F Certificates, each
Class of Certificates will accrue interest generally at a
fixed rate of interest except in limited circumstances as
described in the Prospectus Supplement.
(5) The pass-through rates shown are only for indicative purposes.
The final pass-through rates will be determined at pricing.
T-1
<PAGE>
$764,782,000 (APPROXIMATE)
MORGAN STANLEY CAPITAL I INC.
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 1999-RM1
I. ISSUE CHARACTERISTICS
Issue Type: Public: Class A-1, A-2, B, C, D, E and F (the
"Offered Certificates")
Private (Rule 144A): Class X, G, H, J, K, L,
M, N and O
Securities Offered: $764,782,000 monthly pay, multi-class
sequential pay commercial mortgage REMIC
Pass-Through Certificates, including four
fixed-rate principal and interest classes
(A-1, A-2, B and C) and three weighted average
coupon principal and interest classes (D, E
and F).
Collateral: The collateral consists of a $859,306,538 pool
of fixed-rate commercial and multifamily
Mortgage Loans
Sellers: Residential Funding Corporation, Morgan
Stanley Mortgage Capital Inc. and Wachovia
Bank
Lead Manager: Morgan Stanley & Co. Incorporated
Co-Manager: Residential Funding Securities Corporation
Master Servicer: Amresco Services, L.P.
Special Servicer: Banc One Mortgage Capital Markets LLC
Trustee/Fiscal Agent: LaSalle National Bank/ABN AMRO Bank N.V.
Expected Pricing Date: On or about February 23, 1999
Expected Closing Date: On or about March 9, 1999
Distribution Dates: The 15th of each month, commencing April 15,
1999
Cut-Off Date: March 1, 1999
Minimum Denominations: $25,000 for Class A Certificates; $100,000 for
all other Certificates (other than the Class R
Certificates)
Settlement Terms: DTC, Euroclear and Cedel, same day funds, with
accrued interest
Legal/Regulatory Status: Class A-1, A-2 and X Certificates are expected
to 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>
$764,782,000 (APPROXIMATE)
MORGAN STANLEY CAPITAL I INC.
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 1999-RM1
II. STRUCTURE CHARACTERISTICS
The Offered Certificates (other than the Class D, E and F Certificates) are
fixed-rate, monthly pay, multi-class, sequential pay REMIC Pass-Through
Certificates. The Class D, E and F Certificates are weighted average coupon
REMIC Pass-Through Certificates. The Class X Certificates are variable rate
interest only REMIC Pass-Through Certificates. All Classes of Certificates
derive their cash flows from the entire pool of Mortgage Loans.
[GRAPHIC OMITTED]
[The following table was depicted as a bar graph in the printed material.]
Class X(1)
---------------------------------------------
Class A-1 AAA/Aaa $183.00MM
[6.00%]
---------------------------------------------
Class A-2 AAA/Aaa $429.3MM
[6.31%]
---------------------------------------------
Class B AA/Aa2 $43.0MM
[6.45%]
---------------------------------------------
Class C A/A2 $45.1MM
[6.70%]
---------------------------------------------
Class D A-/A3 $12.9MM
NWAC - [0.28%]
---------------------------------------------
Class E BBB/Baa2 $34.4MM
NWAC - [0.03%]
---------------------------------------------
Class F BBB-/NR $17.2MM
BWAC - [0.03%]
---------------------------------------------
Classes -- $94.5MM
G - O [6.00%]
---------------------------------------------
Note: (1) Class X is entitled to interest (on a notional amount equal to the
aggregate pool balance) at the weighted average Class X Strip Rates
for the respective classes of Principal Balance Certificates. The
Class X Strip Rate for each such class for any Distribution Date is
equal to the NWAC minus the Pass-Through Rate for such class and
such Distribution Date.
T-3
<PAGE>
$764,782,000 (APPROXIMATE)
MORGAN STANLEY CAPITAL I INC.
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 1999-RM1
[GRAPHIC OMITTED]
[The following table was depicted as a bar graph in the printed material.]
[BAR GRAPH DEPICTING CASH FLOW AND APPLIED LOSSES FOR
PASS-THROUGH CERTIFICATES]
Notes:(1) The class A-1, A-2 and X certificates will be paid interest on a pro
rata basis.
(2) The above analysis is based on the Maturity Assumptions and a 0% CPR
as described in the Prospectus Supplement.
T-4
<PAGE>
$764,782,000 (APPROXIMATE)
MORGAN STANLEY CAPITAL I INC.
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 1999-RM1
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: [6.00]%
Class A-2: [6.31]%
Class B: [6.45]%
Class C: [6.70]%
Class D: NWAC - [0.28]%
Class E: NWAC - [0.03]%
Class F: NWAC - [0.03]%
Classes G-O: [6.00]%
Class X: See Note on page T-3
The Pass-Through Rate for each class of
Principal Balance Certificates for any
Distribution Date will not exceed the
Weighted Average Net Mortgage Rate
("NWAC") for such Distribution Date.
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 O 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 The holders of each Class of Principal
Allocation: Certificates (other than an excluded class
as defined below) then entitled to
distributions of principal on such
distribution date will be entitled to an
aggregate amount (allocable on a pro-rata
basis if there is more than one Class of
Principal Balance Certificates entitled to
a distribution of principal) 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 in the
Prospectus Supplement), 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. The portion, if
any, of the Prepayment Premium remaining
after such payments to the holders of the
Principal Balance Certificates will be
distributed to the holders of the Class X
Certificates. For the purposes of the
foregoing, the classes G, H, J, K, L, M, N
and O are the excluded classes.
T-5
<PAGE>
$764,782,000 (APPROXIMATE)
MORGAN STANLEY CAPITAL I INC.
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 1999-RM1
Credit Enhancement: Each Class of Certificates (other than
Classes A-1, A-2 and X) will be
subordinate to all other Classes with an
earlier alphabetical Class designation.
Advancing: The Master Servicer and the Trustee (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 Expense Realized Losses and Expense Losses, if
Losses: any, will be allocated to the Class O
Class N, Class M, 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.
Prepayment Interest Shortfalls: For any Distribution Date, any Net
Aggregate Prepayment Interest Shortfall
not offset by the Servicing Fee (less the
amount payable to Sub-Servicers 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
Certificate 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 advise the Special
Servicer with respect to certain actions
regarding 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 25% of the initial Certificate
Balance of such Class, the next most
subordinate Class of Principal Balance
Certificates.
T-6
<PAGE>
$764,782,000 (APPROXIMATE)
MORGAN STANLEY CAPITAL I INC.
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 1999-RM1
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-I
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 Certificateholders: The Trustee will prepare and deliver
monthly 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-7
<PAGE>
$764,782,000 (APPROXIMATE)
MORGAN STANLEY CAPITAL I INC.
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 1999-RM1
III. ORIGINATORS Residential Funding Corporation
The Mortgage Pool includes 103 Mortgage
Loans, representing approximately 46.5% of
the Initial Pool Balance, which were
either acquired or originated by or on
behalf of Residential Funding Corporation
("RFC").
RFC is an indirect wholly owned subsidiary
of GMAC Mortgage Group, Inc. RFC
Commercial is a division of RFC which
originates and acquires mortgage loans
secured by mortgages on commercial and
multifamily real estate. Residential
Funding Securities Corporation is an
affiliate of RFC.
Morgan Stanley Mortgage Capital Inc.
The Mortgage Pool includes 87 Mortgage
Loans, representing approximately 39.7% of
the Initial Pool Balance, which were
either acquired or originated by or on
behalf of Morgan Stanley Mortgage Capital
Inc. ("MSMC"). MSMC is a subsidiary of
Morgan Stanley & Co. Incorporated that was
formed to originate and purchase mortgage
loans secured by commercial and
multifamily real estate.
Wachovia Bank
The Mortgage Pool includes 39 Mortgage
Loans, representing approximately 13.8% of
the Initial Pool Balance, which were
either acquired or originated by or on
behalf of Wachovia Bank.
Wachovia Bank, National Association, (the
"Bank") is a national banking association
headquartered in Winston-Salem, North
Carolina, and is a wholly owned subsidiary
of Wachovia Corporation. The Bank
currently offers credit and deposit
services and investment and trust services
to consumers primarily located in Georgia,
North Carolina, South Carolina, Virginia
and Florida and to corporations located
both inside and outside the United States.
Consumer products and services are
provided through a network of retail
branches and ATMs, 1-800-WACHOVIA On-Call
24 hour telephone banking, automated Phone
Access, and internet-based investing and
banking at www.wachovia.com. The Bank
originated and performed the underwriting
of the Wachovia loans covered in this
prospectus.
T-8
<PAGE>
$764,782,000 (APPROXIMATE)
MORGAN STANLEY CAPITAL I INC.
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 1999-RM1
IV. COLLATERAL DESCRIPTION
Summary:
The Mortgage Pool consists of a
$859,306,538 pool of 229 fixed-rate, first
lien mortgage loans secured by first liens
on commercial and multifamily properties
located throughout 34 states and the
District of Columbia. As of the Cut-Off
Date, the Mortgage Loans have a weighted
average mortgage rate of 7.198% and a
weighted average remaining term to
maturity of 122 months. See the Appendices
to the Prospectus Supplement for more
detailed collateral information.
Seismic Review For loans originated by RFC or MSMC, all
Process: loan requests secured by properties in
California are subject to a third party
seismic report. Wachovia Bank does not
originate loans in California.
Generally, any proposed loan originated by
RFC or MSMC as to which the property was
estimated to have a PML in excess of 20%
of the estimated replacement cost would
either be subject to a lower loan-to-value
limit at origination, be conditioned on
seismic upgrading, be conditioned on
satisfactory earthquake insurance or be
declined.
T-9
<PAGE>
$764,782,000 (APPROXIMATE)
MORGAN STANLEY CAPITAL I INC.
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 1999-RM1
GEOGRAPHIC DISTRIBUTION
[MAP OMITTED]
[The following table was depicted as a map graphic in the printed material.]
AL 0.31%
AZ 1.73%
Northern CA 10.99%
Southern CA 14.72%
CO 3.35%
CT 0.15%
DC 0.46%
DE 1.17%
FL 8.37%
GA 11.87%
IA 0.14%
IL 1.33%
IN 1.38%
KY 0.14%
LA 0.49%
MA 0.63%
MD 4.78%
ME 1.10%
MI 1.11%
MN 0.50%
MO 1.17%
MT 0.13%
NC 6.26%
NJ 2.71%
NM 0.24%
NY 0.38%
OH 4.83%
PA 3.87%
SC 0.53%
TN 1.59%
TX 2.84%
UT 0.41%
VA 7.07%
VT 0.62%
WA 1.98%
WI 0.64%
T-10
<PAGE>
$764,782,000 (APPROXIMATE)
MORGAN STANLEY CAPITAL I INC.
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 1999-RM1
SELLERS
- --------------------------------------------------------------------------------
NO. CUT-OFF DATE %
OF PRINCIPAL OF
LOANS BALANCE POOL
- --------------------------------------------------------------------------------
RFC 103 399,229,750 46.46
MS 87 341,231,299 39.71
WACH 39 118,845,489 13.83
- --------------------------------------------------------------------------------
TOTAL: 229 859,306,538 100.00
- --------------------------------------------------------------------------------
CUT-OFF DATE BALANCES
- --------------------------------------------------------------------------------
NO. CUT-OFF DATE %
OF PRINCIPAL OF
LOANS BALANCE POOL
- --------------------------------------------------------------------------------
1 to 1,000,000 20 15,634,021 1.82
1,000,001 - 2,000,000 62 96,314,163 11.21
2,000,001 - 3,000,000 51 128,069,100 14.90
3,000,001 - 4,000,000 25 88,174,514 10.26
4,000,001 - 5,000,000 22 97,628,653 11.36
5,000,001 - 6,000,000 17 94,772,803 11.03
6,000,001 - 7,000,000 10 65,846,343 7.66
7,000,001 - 8,000,000 5 37,920,340 4.41
8,000,001 - 9,000,000 6 51,183,059 5.96
9,000,001 - 10,000,000 1 9,426,129 1.10
10,000,001 - 15,000,000 6 72,369,597 8.42
15,000,001 - 20,000,000 1 15,140,544 1.76
20,000,001 - 25,000,000 1 21,152,666 2.46
25,000,001 and above 2 65,674,607 7.64
- --------------------------------------------------------------------------------
TOTAL: 229 859,306,538 100.00
- --------------------------------------------------------------------------------
Min: 516,977 Max: 36,790,477 Average: 3,752,430
- --------------------------------------------------------------------------------
STATES
- --------------------------------------------------------------------------------
NO. CUT-OFF DATE %
OF PRINCIPAL OF
LOANS BALANCE POOL
- --------------------------------------------------------------------------------
California 48 220,969,222 25.71
Georgia 34 102,020,276 11.87
Florida 10 71,954,176 8.37
Virginia 18 60,766,272 7.07
North Carolina 13 53,752,139 6.26
Other 106 349,844,453 40.71
- --------------------------------------------------------------------------------
TOTAL: 229 859,306,538 100.00
- --------------------------------------------------------------------------------
PROPERTY TYPE
- --------------------------------------------------------------------------------
NO. CUT-OFF DATE %
OF PRINCIPAL OF
LOANS BALANCE POOL
- --------------------------------------------------------------------------------
Retail 62 274,151,700 31.90
Multifamily 64 196,774,257 22.90
Office 43 157,810,158 18.36
Hospitality 15 89,184,584 10.38
Industrial 27 80,089,833 9.32
Mixed Use 10 39,561,336 4.60
Self Storage 5 11,125,915 1.29
Mobile Home Park 2 7,625,562 0.89
Other 1 2,983,195 0.35
- --------------------------------------------------------------------------------
TOTAL: 229 859,306,538 100.00
- --------------------------------------------------------------------------------
MORTGAGE RATES (%)
- --------------------------------------------------------------------------------
NO. CUT-OFF DATE %
OF PRINCIPAL OF
LOANS BALANCE POOL
- --------------------------------------------------------------------------------
6.001 - 6.500 8 28,452,839 3.31
6.501 - 7.000 72 288,989,531 33.63
7.001 - 7.500 101 394,284,218 45.88
7.501 - 8.000 24 76,283,899 8.88
8.001 - 8.500 16 45,716,974 5.32
8.501 - 9.000 6 18,211,574 2.12
9.001 - 9.500 2 7,367,503 0.86
- --------------------------------------------------------------------------------
TOTAL: 229 859,306,538 100.00
- --------------------------------------------------------------------------------
Min: 6.160 Max: 9.125 WAC: 7.198
- --------------------------------------------------------------------------------
ORIGINAL TERMS TO STATED MATURITY (MOS.)
- --------------------------------------------------------------------------------
NO. CUT-OFF DATE %
OF PRINCIPAL OF
LOANS BALANCE POOL
- --------------------------------------------------------------------------------
1 - 60 2 3,894,265 0.45
61 - 120 184 682,356,043 79.41
121 - 180 32 142,524,864 16.59
181 - 240 11 30,531,366 3.55
- --------------------------------------------------------------------------------
TOTAL: 229 859,306,538 100.00
- --------------------------------------------------------------------------------
Min: 60 Max: 240 Wtd. Avg.: 130
- --------------------------------------------------------------------------------
REMAINING TERMS TO STATED MATURITY (MOS.)
- --------------------------------------------------------------------------------
NO. CUT-OFF DATE %
OF PRINCIPAL OF
LOANS BALANCE POOL
- --------------------------------------------------------------------------------
1 - 60 6 9,711,303 1.13
61 - 120 184 708,470,456 82.45
121 - 180 29 112,881,126 13.14
181 - 240 10 28,243,653 3.29
- --------------------------------------------------------------------------------
TOTAL: 229 859,306,538 100.00
- --------------------------------------------------------------------------------
Min: 22 Max: 234 Wtd. Avg.: 122
- --------------------------------------------------------------------------------
BALLOON LOANS
- --------------------------------------------------------------------------------
NO. CUT-OFF DATE %
OF PRINCIPAL OF
LOANS BALANCE POOL
- --------------------------------------------------------------------------------
Yes 212 813,271,573 94.64
No 17 46,034,966 5.36
- --------------------------------------------------------------------------------
TOTAL: 229 859,306,538 100.00
- --------------------------------------------------------------------------------
DEBT SERVICE COVERAGE RATIOS (X)
- --------------------------------------------------------------------------------
NO. CUT-OFF DATE %
OF PRINCIPAL OF
LOANS BALANCE POOL
- --------------------------------------------------------------------------------
1.01 - 1.15 2 10,010,854 1.16
1.16 - 1.25 22 79,624,501 9.27
1.26 - 1.35 65 284,217,638 33.08
1.36 - 1.50 78 271,174,736 31.56
1.51 - 1.75 39 146,997,446 17.11
1.76 - 2.00 17 52,005,452 6.05
2.01 >= 6 15,275,912 1.78
- --------------------------------------------------------------------------------
TOTAL: 229 859,306,538 100.00
- --------------------------------------------------------------------------------
Min: 1.03 Max: 2.23 Wtd. Avg.: 1.42
- --------------------------------------------------------------------------------
CUT-OFF DATE LOAN-TO-VALUE RATIOS (%)
- --------------------------------------------------------------------------------
NO. CUT-OFF DATE %
OF PRINCIPAL OF
LOANS BALANCE POOL
- --------------------------------------------------------------------------------
20.1 - 30.0 1 1,381,921 0.16
30.1 - 40.0 1 1,193,582 0.14
40.1 - 50.0 8 31,632,770 3.68
50.1 - 60.0 25 68,196,632 7.94
60.1 - 70.0 51 193,661,678 22.54
70.1 - 80.0 142 561,942,557 65.39
80.1 - 90.0 1 1,297,399 0.15
- --------------------------------------------------------------------------------
TOTAL: 229 859,306,538 100.00
- --------------------------------------------------------------------------------
Min: 26.1 Max: 81.1 Wtd. Avg.: 70.8
- --------------------------------------------------------------------------------
BALLOON LOAN-TO-VALUE RATIOS (%)
- --------------------------------------------------------------------------------
NO. CUT-OFF DATE %
OF PRINCIPAL OF
LOANS BALANCE POOL
- --------------------------------------------------------------------------------
0.0 11 28,905,312 3.36
0.1 - 20.0 6 17,129,654 1.99
20.1 - 30.0 2 2,873,870 0.33
30.1 - 40.0 8 36,066,041 4.20
40.1 - 50.0 33 96,688,886 11.25
50.1 - 60.0 57 218,657,635 25.45
60.1 - 70.0 103 426,982,619 49.69
70.1 - 80.0 9 32,002,523 3.72
- --------------------------------------------------------------------------------
TOTAL: 229 859,306,538 100.00
- --------------------------------------------------------------------------------
Min: 0.0 Max: 79.0 Wtd. Avg.: 56.5
- --------------------------------------------------------------------------------
T-11
<PAGE>
$764,782,000 (APPROXIMATE)
MORGAN STANLEY CAPITAL I INC.
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 1999-RM1
PERCENTAGE OF MORTGAGE POOL BALANCE BY PREPAYMENT RESTRICTION (%)(1)(2)(3)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
PREPAYMENT RESTRICTIONS MARCH 1999 MARCH 2000 MARCH 2001 MARCH 2002 MARCH 2003
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Locked Out 93.88% 92.56% 90.72% 88.53% 65.40%
Yield Maintenance Total 4.53% 5.87% 7.65% 9.94% 33.44%
Penalty Points:
5.00% and greater 0.24 0.00 0.00 0.00 0.00
4.00% to 4.99% 1.07 0.98 0.97 0.71 0.50
3.00% to 3.99% 0.00 0.31 0.00 0.47 0.65
2.00% to 2.99% 0.28 0.00 0.36 0.00 0.00
1.00% to 1.99% 0.00 0.28 0.00 0.20 0.00
Open 0.00 0.00 0.31 0.15 0.00
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL 100.00% 100.00% 100.00% 100.00% 100.00%
- ------------------------------------------------------------------------------------------------------------------------------------
Pool Balance Outstanding $859,306,538.32 $848,207,930.04 $833,779,966.88 $818,236,125.53 $800,053,197.01
% of initial Pool Balance 100.00% 98.71% 97.03% 95.22% 93.10%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
PERCENTAGE OF MORTGAGE POOL BALANCE BY PREPAYMENT RESTRICTION (%) -
CONTINUED(1)(2)(3)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
PREPAYMENT RESTRICTIONS MARCH 2004 MARCH 2005 MARCH 2006 MARCH 2007 MARCH 2008 MARCH 2009
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Locked Out 51.36% 50.78% 49.62% 46.56% 45.26% 23.85%
Yield Maintenance Total 47.51% 48.13% 48.48% 52.39% 34.08% 74.15%
Penalty Points:
5.00% and greater 0.00 0.00 0.00 0.00 0.00 0.00
4.00% to 4.99% 0.48 0.22 0.00 0.00 0.00 0.00
3.00% to 3.99% 0.41 0.64 0.82 0.80 0.61 2.00
2.00% to 2.99% 0.24 0.24 0.00 0.00 0.00 0.00
1.00% to 1.99% 0.00 0.00 0.24 0.25 0.00 0.00
Open 0.00 0.00 0.84 0.00 20.04 0.00
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%
- ------------------------------------------------------------------------------------------------------------------------------------
Pool Balance Outstanding $785,321,664.84 $769,327,105.80 $752,112,938.05 $708,464,378.75 $656,851,879.14 $100,579,781.66
% of Initial Pool 91.39% 89.53% 87.53% 82.45% 76.44% 11.70%
Balance
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Notes: (1) For 5 of the Mortgage Loans (1.9% of the Cut-Off Date Balance)
which allow borrowers to choose between Defeasance and Yield
Maintenance, Yield Maintenance is assumed.
(2) The above analysis is based on Maturity Assumptions and a 0% CPR
as discussed in the Prospectus Supplement.
(3) Three loans comprising 0.7% of the Cut-Off Date Balance permit
voluntary principal prepayments of up to 10% of the original
principal balance of the mortgage loan in any calendar year
without the imposition of the prepayment premium.
T-12
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
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."
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.
------------------------------
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.
---------------------------------
MORGAN STANLEY & CO.
INCORPORATED
October 9, 1998
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.
<PAGE>
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.
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
2
<PAGE>
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.
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.
3
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TABLE OF CONTENTS
PAGE
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PROSPECTUS SUPPLEMENT.........................................................2
AVAILABLE INFORMATION.........................................................3
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE.............................3
SUMMARY OF PROSPECTUS.........................................................5
RISK FACTORS.................................................................15
DESCRIPTION OF THE TRUST FUNDS...............................................22
USE OF PROCEEDS..............................................................28
YIELD CONSIDERATIONS.........................................................28
THE DEPOSITOR................................................................31
DESCRIPTION OF THE CERTIFICATES..............................................32
DESCRIPTION OF THE AGREEMENTS................................................39
DESCRIPTION OF CREDIT SUPPORT................................................56
CERTAIN LEGAL ASPECTS OF THE MORTGAGE LOANS AND THE LEASES...................58
CERTAIN FEDERAL INCOME TAX CONSEQUENCES......................................73
STATE TAX CONSIDERATIONS.....................................................99
CERTAIN ERISA CONSIDERATIONS.................................................99
LEGAL INVESTMENT............................................................101
PLAN OF DISTRIBUTION........................................................103
LEGAL MATTERS...............................................................104
FINANCIAL INFORMATION.......................................................104
RATING .....................................................................104
INDEX OF PRINCIPAL DEFINITIONS..............................................105
4
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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
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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"). 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
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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 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."
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(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 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
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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 (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
distributions of principal sequentially, based on
specified payment schedules or other
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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
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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 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
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11
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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."
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"
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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 "Certain ERISA Considerations"
herein and in the related 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 "Certain
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
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"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.
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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
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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 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
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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 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.
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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 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
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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 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
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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 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. Moreoever, the presence of hazardous or
toxic substances, or the failure to remediate such property, may adversely
affect the owner or operator's ability to borrow using such property as
collateral. In addition, under the laws of some states and under the federal
Comprehensive Environmental Response, Compensation and Liability Act of 1980
("CERCLA") and other federal law, 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
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mortgage under certain circumstances. 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 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 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."
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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."
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
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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 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.
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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 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
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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 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
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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 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.
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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.
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."
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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."
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
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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, 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
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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 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.
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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 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
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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."
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."
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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 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
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(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.
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."
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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 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)
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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) 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
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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;
(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;
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(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;
(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.
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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.
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.
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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 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
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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.
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.
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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.
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
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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, 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
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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;
(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";
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(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";
(xi) 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
(xii) 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;
(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";
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(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;
(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.
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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.
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.
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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 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
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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 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."
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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
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
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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, 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
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(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 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.
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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.
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.
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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.
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
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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 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
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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 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
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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 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
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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.
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.
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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.
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,
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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
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
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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 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
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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 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.
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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 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
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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 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
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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 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.
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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 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,
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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 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
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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 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
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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 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.
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Under the federal Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended ("CERCLA"), and under other federal law and
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 or under state law. 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 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,
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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 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
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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 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
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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.
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
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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
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
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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.
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 Brown & Wood LLP or Cadwalader, Wickersham & Taft or
Latham & Watkins 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, Brown & Wood LLP or Cadwalader,
Wickersham & Taft or Latham & Watkins 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
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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 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;
(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); and
(iv) a Grantor Trust Certificate owned by a financial asset securitization
investment trust will represent "permitted assets" with the meaning of Code
Section 860L(c).
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
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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 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
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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.
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
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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).
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
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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.
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) and
"permitted assets" within the meaning of Code Section 860L(c).
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
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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 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
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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 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 generally be long-term capital gain if the Grantor Trust Certificate has
been owned for more than one year. Long-
term capital gains of individuals are subject to reduced maximum tax rates while
capital gains recognized by individuals on capital assets held less than twelve
months are generally subject to ordinary income tax rates. The use of capital
losses is limited.
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.
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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 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
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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,
1999, 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 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, Brown & Wood LLP or Cadwalader, Wickersham
& Taft or Latham & Watkins 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, Brown &
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Wood LLP or Cadwalader, Wickersham & Taft or Latham & Watkins 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 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
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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. 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
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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.
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.
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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.
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,
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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 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
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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.
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.
Such capital gain or loss will generally be long-term capital gain or loss
if the REMIC Regular Certificate was held for more than one year. Long-term
capital gains of individuals are subject to reduced maximum tax rates while
capital gains recognized by individual on capital assets held less than twelve
months are generally subject to ordinary income tax rates. The use of capital
losses is limited.
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
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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.
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
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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 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
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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 REMIC 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) 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,
1999, 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
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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.
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
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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 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
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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 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.
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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. Such capital gain or loss will
generally be long-term capital gain or loss if the REMIC Regular Certificate was
held for more than one year. Long-term capital gains of individuals are subject
to reduced maximum tax rates while capital gains recognized by individuals on
capital assets held less than twelve months are generally subject to ordinary
income tax rates. The use of capital losses is limited. 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 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.
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.
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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 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.
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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 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, provided that all partners of an "electing large
partnership" as defined in Section 775 of the Code, are deemed to be
disqualified organizations. 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
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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 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 Sates 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
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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.
CERTAIN 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, subject
thereto 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,
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may become fiduciaries subject to the fiduciary responsibility provisions of
Title I of ERISA, or may otherwise become 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 the
assets of an 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 held 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.
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
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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
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"). Generally, only 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 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, depository insitutions,
insurance companies, trustees and pension funds) created pursuant to or existing
under the laws of the United States or of any state (including the District of
Columbia and Puerto Rico) whose authorized investments are subject to state
regulation to the same extent 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, on or before the October 3,
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 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. Accordingly,
investors affected by such legislation, when and if enacted, will be authorized
to invest in SMMEA Certificates only to the extent provided in such legislation.
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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 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. The National Credit Union
Administration ("NCUA") has adopted rules, codified at 12 C.F.R. Section 703,
which permit federal credit unions to invest in "mortgage related securities"
under certain limited circumstances, other than 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 Investment
Securities and End-User Derivatives Activities" (the "1998 Policy Statement") of
the Federal Financial Institutions Examination Council (the "FFIEC"), 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 effective May 26, 1998, and by the NCUA, effective October 1, 1998.
The 1998 Policy Statement sets forth general guidelines which depository
institutions must follow in managing risks (including market, credit, liquidity,
operational (transaction), and legal risks) applicable to all securities
(including mortgage pass-through securities and mortgage-derivative products)
used for investment purposes. Until October 1, 1998, federal credit unions will
still be subject to the FFIEC's now-superseded "Supervisory Policy Statement on
Securities Activities" dated January 28, 1992, as adopted by the NCUA with
certain modifications, which prohibited depository institutions from investing
in certain "high-risk mortgage securities," 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 to be 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
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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 certain classes of Offered 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 purposes,
financial institution regulatory purposes, or other 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.
Accordingly, all investors whose investment activities are subject to
legal investment laws and regulations, regulatory capital requirements or review
by regulatory authorities 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.
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.
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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 Cadwalader, Wickersham & Taft or Latham & Watkins, 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.
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.
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INDEX OF PRINCIPAL DEFINITIONS
Page(s) on which
term is defined
Term in the Prospectus
- ---- -----------------
Accrual Certificates.........................................................9
ADA.........................................................................74
Applicable Amount...........................................................95
ARM Loans...............................................................26, 80
Asset Conservation Act......................................................70
Asset Seller................................................................22
Assets.......................................................................1
Balloon Mortgage Loans......................................................18
Bankruptcy Code.............................................................65
Book-Entry Certificates.....................................................32
Cash Flow Agreement..........................................................8
Cash Flow Agreements.........................................................1
Cede.....................................................................3, 39
CERCLA..................................................................20, 70
Certificate Account.........................................................43
Certificate Balance..........................................................9
Certificate Owners..........................................................39
Certificateholders...........................................................3
Closing Date................................................................85
Commercial Loans............................................................22
Commercial Properties........................................................6
Commission...................................................................2
Contributions Tax...........................................................97
Cooperatives................................................................23
Covered Trust...............................................................57
CPR.........................................................................30
Credit Support........................................................1, 8, 28
Crime Control Act...........................................................75
Deferred Interest...........................................................82
Definitive Certificates.................................................32, 40
Depositor...................................................................22
Determination Date..........................................................33
DTC......................................................................3, 39
Due Period..................................................................33
Environmental Hazard Condition..............................................71
Equity Participations.......................................................26
ERISA......................................................................101
Exchange Act.................................................................3
Exemption..................................................................102
FDIC........................................................................43
FHLMC.......................................................................53
FNMA........................................................................71
Government Securities.................................................1, 7, 22
Indirect Participants.......................................................39
Insurance Proceeds..........................................................44
IRS.........................................................................77
L/C Bank....................................................................58
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Page(s) on which
term is defined
Term in the Prospectus
- ---- -----------------
Labor......................................................................101
Lease........................................................................3
Lease Assignment.............................................................1
Legislative History.........................................................85
Lessee.......................................................................3
Liquidation Proceeds........................................................44
Lock-out Date...............................................................26
Lock-out Period.............................................................26
Mark-to-Market Regulations..................................................95
Master REMIC................................................................84
MBS...................................................................1, 5, 22
MBS Agreement...............................................................26
MBS Issuer..................................................................26
MBS Servicer................................................................26
MBS Trustee.................................................................26
Morgan Stanley.............................................................105
Mortgage Loans........................................................1, 5, 22
Mortgage Notes..............................................................23
Mortgage Rate............................................................7, 26
Mortgages...................................................................23
Multifamily Loans...........................................................22
Multifamily Properties...................................................6, 22
NCUA.......................................................................104
Nonrecoverable Advance......................................................36
OID.....................................................................75, 77
OID Regulations.............................................................77
Originator..................................................................23
Participants................................................................39
Pass-Through Rate........................................................9, 34
Payment Lag Certificates....................................................91
Permitted Investments.......................................................43
Plans......................................................................101
Prepayment Assumption.......................................................81
Prepayment Premium..........................................................26
Prohibited Transactions Tax.................................................97
RCRA........................................................................70
Record Date.................................................................33
Related Proceeds............................................................36
Relief Act..................................................................74
REMIC Certificates..........................................................84
REMIC Regular Certificateholders............................................85
REMIC Regular Certificates..............................................12, 84
REMIC Regulations...........................................................75
REMIC Residual Certificateholder............................................92
REMIC Residual Certificates.............................................84, 94
REO Extension...............................................................63
REO Tax.....................................................................64
Restricted Group...........................................................102
RICO........................................................................74
Senior Certificates......................................................9, 32
Servicing Standard..........................................................47
SMMEA......................................................................103
SMMEA Certificates.........................................................103
Special Servicer.........................................................5, 48
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Page(s) on which
term is defined
Term in the Prospectus
- ---- -----------------
Stripped ARM Obligations....................................................82
Stripped Bond Certificates..................................................79
Stripped Coupon Certificates................................................79
Stripped Interest Certificates...........................................9, 32
Stripped Principal Certificates..........................................9, 32
Subordinate Certificates.................................................9, 32
Sub-Servicer................................................................47
Sub-Servicing Agreement.....................................................48
Subsidiary REMIC............................................................84
Super-Premium Certificates..................................................86
Title V.....................................................................73
Trust Assets.................................................................2
Trust Fund...................................................................1
UCC.........................................................................39
Voting Rights...............................................................21
Warrantying Party...........................................................42
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