<PAGE>
PROSPECTUS SUPPLEMENT Filed pursuant to Rule 424(b)(5)
(To Prospectus dated May 26, 1998) Registration No. 333-51151
$892,260,200
(APPROXIMATE)
GE CAPITAL MORTGAGE SERVICES, INC.
(SELLER AND SERVICER)
REMIC MULTI-CLASS PASS-THROUGH CERTIFICATES, SERIES 1998-13.
Principal and interest payable monthly, beginning September 25, 1998.
------------------------
The REMIC Multi-Class Pass-Through Certificates, Series 1998-13 (the
'Certificates') will evidence beneficial ownership interests in a trust fund
(the 'Trust Fund'). The assets of the Trust Fund will consist primarily of a
pool (the 'Mortgage Pool') of conventional, fixed-rate, first-lien,
fully-amortizing, one- to four-family residential mortgage loans (the 'Mortgage
Loans') having original terms to maturity of 20 to 30 years and sold by GE
Capital Mortgage Services, Inc. (the 'Company'). See 'Description of the
Mortgage Pool and the Mortgaged Properties' herein.
(Cover continued on next page)
------------------------
NEITHER THESE CERTIFICATES NOR THE UNDERLYING MORTGAGE LOANS ARE INSURED OR
GUARANTEED BY ANY GOVERNMENTAL AGENCY OR INSTRUMENTALITY.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE ACCOMPANYING
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
CLASS
CERTIFICATE CERTIFICATE
PRINCIPAL INTEREST
BALANCE (1) RATE
<S> <C> <C>
Class A1............................... $ 51,008,000 6.75%
Class A2............................... 29,552,000 6.75
Class A3............................... 110,000,000 6.75
Class A4............................... 100,000,000 6.75
Class A5............................... 21,901,000 6.75
Class A6............................... 40,997,000 6.25
Class A7............................... 20,000,000 6.25
Class A8............................... 30,000,000 6.25
Class A9............................... 32,615,223 6.25
Class A10.............................. 35,317,777 (4)
Class A11.............................. (3) (4)
Class A12.............................. 64,958,597 (4)
Class A13.............................. 16,841,118 (4)
Class A14.............................. 57,922,000 6.75
Class A15.............................. 75,604,991 (4)
Class A16.............................. 11,513,000 (4)
<CAPTION>
CLASS
CERTIFICATE CERTIFICATE
PRINCIPAL INTEREST
BALANCE (1) RATE
<S> <C> <C>
Class A17.............................. $ 4,715,570 (4)
Class A18.............................. 3,372,724 (4)
Class A19.............................. 19,134,000 6.75(2)
Class A20.............................. 36,642,750 (4)
Class A21.............................. 12,214,250 (4)
Class A22.............................. 27,794,118 (4)
Class A23.............................. 7,205,882 (4)
Class A24.............................. 38,395,000 6.75
Class A25.............................. 12,453,750 (4)
Class A26.............................. 4,151,250 (4)
Class R................................ 100 6.75
Class RL............................... 100 6.75
Class M................................ 16,680,000 6.75
Class B1............................... 7,213,000 6.75
Class B2............................... 4,057,000 6.75
</TABLE>
(1) Approximate, subject to adjustment as described herein.
(2) The amount of interest accruing on the Class A19 Certificates will not be
distributable on such Certificates through the Class A19 Accretion
Termination Date (as defined herein) but will instead be added to the Class
Certificate Principal Balance thereof, except as described herein.
(3) The Class A11 Certificates will be interest-only Certificates. Interest will
accrue on the Class A11 Certificates on the aggregate Notional Principal
Balance (as defined herein) thereof (initially, approximately $35,317,777,
subject to adjustment as described herein).
(4) The Class A10, Class A11, Class A12, Class A13, Class A15, Class A16, Class
A17, Class A18, Class A20, Class A21, Class A22, Class A23, Class A25 and
Class A26 Certificates will accrue interest during the initial Interest
Accrual Period (as defined herein) at the respective rates set forth below,
and each such Certificate will accrue interest during each subsequent
Interest Accrual Period at the respective rates determined as set forth
below.
<TABLE>
<CAPTION>
FORMULA FOR
INITIAL MAXIMUM MINIMUM CALCULATING CERTIFICATE
CLASS INTEREST RATE INTEREST RATE INTEREST RATE INTEREST RATE
- ---------- ------------- ------------- ------------- --------------------------------------
<S> <C> <C> <C> <C>
A10....... 5.956250% 8.500000% 0.30% LIBOR + 0.300%
A11....... 2.543750 8.200000 0.00 8.200000% - LIBOR
A12....... 6.056250 8.500000 0.40 LIBOR + 0.400%
A13....... 9.425892 31.242857 0.00 31.242857% - (3.857143 x LIBOR)
A15....... 6.156250 8.500000 0.50 LIBOR + 0.500%
A16....... 9.040178 30.857143 0.00 30.857143% - (3.857143 x LIBOR)
A17....... 8.890105 46.311244 0.00 46.311244% - (6.615892 x LIBOR)
A18....... 9.250000 9.250000 0.00 74.000000% - (9.250 x LIBOR)
A20....... 6.456250 9.000000 0.80 LIBOR + 0.800%
A21....... 7.631250 24.600000 0.00 24.600000% - (3.000 x LIBOR)
A22....... 6.406250 8.500000 0.75 LIBOR + 0.750%
A23....... 8.075894 29.892859 0.00 29.892859% - (3.857143 x LIBOR)
A25....... 6.456250 9.000000 0.80 LIBOR + 0.800%
A26....... 7.631250 24.600000 0.00 24.600000% - (3.000 x LIBOR)
</TABLE>
--------------------------
As described further herein, the Class M, Class B1 and Class B2 Certificates
may not be acquired by ERISA Plans (as defined herein). The Class R and Class RL
Certificates (together, the 'Residual Certificates') may not be purchased by or
transferred to (i) a Disqualified Organization or Book-Entry Nominee (as defined
in the accompanying Prospectus), (ii) except under limited circumstances, a
person who is not a U.S. Person (as defined in the accompanying Prospectus),
(iii) an ERISA Plan or (iv) any person or entity who the transferor has reason
to believe intends to impede the assessment or collection of any federal, state
or local taxes legally required to be paid with respect thereto. See 'ERISA
Considerations' and 'Description of the Certificates--Restrictions on Transfer
of the Residual Certificates' herein.
There is currently no secondary market for the Certificates offered hereby.
PaineWebber Incorporated (the 'Underwriter' or 'PaineWebber') has indicated its
intention to make a market in the respective Certificates offered hereby but is
not obligated to do so. There can be no assurance that such a secondary market
for such Certificates will develop or, if it does develop, that it will
continue. See 'Summary of Terms--Liquidity Considerations' herein.
As described herein, the Certificates offered hereby will be purchased by
the Underwriter from the Company, and are being offered by the Underwriter from
time to time in negotiated transactions or otherwise at varying prices to be
determined at the time of sale. Proceeds to the Company from the sale of the
Certificates offered hereby will be approximately 99.501861% of the aggregate
initial Class Certificate Principal Balance of the Certificates offered hereby,
plus accrued interest thereon from the Cut-off Date, before deducting expenses
payable by the Company. See 'Plan of Distribution' herein.
The Certificates offered hereby are offered when, as and if issued,
delivered to and accepted by the Underwriter, subject to prior sale, withdrawal
or modification of the offer without notice, the approval of counsel and other
conditions. It is expected that delivery of the Certificates offered hereby
(other than the Residual Certificates) will be made through the book-entry
facilities of The Depository Trust Company, and that delivery of the Residual
Certificates in definitive, fully-registered form will be made at the offices of
PaineWebber Incorporated, 1285 Avenue of the Americas, New York, New York 10019,
in each case, on or about August 27, 1998.
------------------------
PAINEWEBBER INCORPORATED
------------------------
THE DATE OF THIS PROSPECTUS SUPPLEMENT IS AUGUST 24, 1998.
<PAGE>
For federal income tax purposes, the Trust Fund will consist of two 'real
estate mortgage investment conduits' (each a 'REMIC' or the 'Lower-Tier REMIC'
and the 'Upper-Tier REMIC,' as the case may be). All Classes of Certificates
other than the Class R and Class RL Certificates will be designated as regular
interests in the Upper-Tier REMIC. The Class R and Class RL Certificates will be
designated as the residual interests in the Upper-Tier REMIC and Lower-Tier
REMIC, respectively. Prospective investors are cautioned that the Class R and
Class RL Certificateholders' REMIC taxable income and the tax liability thereon
may exceed cash distributions to such holders during certain periods, in which
event such holders must have sufficient alternative sources of funds to pay such
tax liability. See 'Summary of Terms--Certain Federal Income Tax Consequences'
and 'Certain Federal Income Tax Consequences' herein and 'Certain Federal Income
Tax Consequences' in the Prospectus.
------------------------
THE CERTIFICATES OFFERED HEREBY CONSTITUTE A PART OF A SERIES OF
PASS-THROUGH CERTIFICATES BEING OFFERED BY THE COMPANY FROM TIME TO TIME
PURSUANT TO ITS PROSPECTUS DATED MAY 26, 1998 OF WHICH THIS PROSPECTUS
SUPPLEMENT IS A PART. THIS PROSPECTUS SUPPLEMENT DOES NOT CONTAIN COMPLETE
INFORMATION ABOUT THE OFFERING OF THE CERTIFICATES. ADDITIONAL INFORMATION IS
CONTAINED IN THE PROSPECTUS AND PURCHASERS ARE URGED TO READ BOTH THIS
PROSPECTUS SUPPLEMENT AND THE PROSPECTUS IN FULL. SALES OF THE CERTIFICATES MAY
NOT BE CONSUMMATED UNLESS THE PURCHASER HAS RECEIVED BOTH THIS PROSPECTUS
SUPPLEMENT AND THE PROSPECTUS.
S-2
<PAGE>
SUMMARY OF TERMS
The following summary is qualified in its entirety by reference to the
detailed information appearing elsewhere herein and in the Prospectus.
Capitalized terms used herein and not otherwise defined have the meanings
assigned in the Prospectus.
<TABLE>
<S> <C>
SECURITIES OFFERED........ REMIC Multi-Class Pass-Through Certificates, Series
1998-13 (the 'Certificates'), in the Classes and
aggregate original Certificate Principal Balances,
subject to adjustment as described herein (each, a
'Class Certificate Principal Balance'), set forth on
the cover hereof. The aggregate original Certificate
Principal Balance of the Certificates will be
approximately $901,613,270, subject to a permitted
variance such that the aggregate original
Certificate Principal Balance will not be less than
$855,000,000 or greater than $945,000,000.
The Certificates will consist of twenty-nine classes
(each, a 'Class') of senior certificates (the 'Class
A1, Class A2, and so on in consecutive numerical
sub-designation through Class A26, Class PO, Class R
and Class RL Certificates,' and collectively, the
'Senior Certificates') and six classes of
subordinated certificates (the 'Class M, Class B1,
Class B2, Class B3, Class B4 and Class B5
Certificates,' and collectively, the 'Junior
Certificates'). The Junior Certificates are
subordinate in right of distribution to the Senior
Certificates to the extent described herein. The
initial aggregate Certificate Principal Balance of
the Junior Certificates will equal approximately
4.00% of the initial aggregate Certificate Principal
Balance of all of the Certificates.
The Class M Certificates are subordinate to the
Senior Certificates to the extent described herein.
The Class B1, Class B2, Class B3, Class B4 and Class
B5 Certificates (collectively, the 'Class B
Certificates') are subordinate to the Senior
Certificates and the Class M Certificates, and each
Class of Class B Certificates is subordinate to the
Class or Classes of Class B Certificates having a
lower numerical designation (i.e., the Class B5
Certificates are subordinate to the Class B4
Certificates, the Class B4 Certificates are
subordinate to the Class B3 Certificates, and so on)
to the extent described herein. The initial
aggregate Certificate Principal Balance of the Class
B3, Class B4 and Class B5 Certificates will equal
approximately 0.90% of the initial aggregate
Certificate Principal Balance of all of the
Certificates and approximately 22.50% of the initial
aggregate Certificate Principal Balance of all of
the Junior Certificates.
The Class PO, Class B3, Class B4 and Class B5
Certificates are not offered hereby. The Class PO
Certificates will not bear interest. The Company
will initially retain and may subsequently transfer
the Class PO Certificates.
The Class A11 Certificates will not have a Class
Certificate Principal Balance and will bear interest
at the rate described herein.
The Classes of Certificates offered hereby, other
than the Residual Certificates (as defined below),
will each be registered as a single certificate held
by a nominee of The Depository Trust Company (the
'Depository'), and beneficial interests therein will
be held by investors through the book-entry
facilities of the Depository, as described herein,
in minimum denominations in Certificate Principal
Balance or Notional Principal Balance, as the case
may be, of $25,000 (in the case of each Class of
Senior Certificates other than the Class A11, Class
R and Class
</TABLE>
S-3
<PAGE>
<TABLE>
<S> <C>
RL Certificates), $417,000 (in the case of the Class
A11 Certificates) or $100,000 (in the case of the
Class M, Class B1 and Class B2 Certificates), and,
in each case, in integral multiples of $1,000 in
excess thereof. The Class R and Class RL
Certificates (together, the 'Residual Certificates')
will be issued in certificated form as a single
Certificate per Class representing the entire Class
Certificate Principal Balance thereof.
SELLER AND SERVICER....... GE Capital Mortgage Services, Inc., a New Jersey
corporation (the 'Company'). See 'GE Capital
Mortgage Services, Inc.' and 'The Pooling and
Servicing Agreement--Servicing Arrangement with
Respect to the Mortgage Loans' herein.
TRUSTEE................... State Street Bank and Trust Company, a Massachusetts
banking corporation (the 'Trustee'). See 'The
Pooling and Servicing Agreement--Trustee' herein.
CUT-OFF DATE.............. August 1, 1998.
CLOSING DATE.............. On or about August 27, 1998.
MORTGAGE POOL............. The Certificates will represent the entire beneficial
ownership interest in a trust fund (the 'Trust
Fund'). The assets of the Trust Fund will consist
primarily of a pool (the 'Mortgage Pool') of
fixed-rate, fully-amortizing, conventional Mortgage
Loans secured by first liens on one-to four-family
residential properties (the 'Mortgaged Properties').
The Mortgage Loans (as defined herein) will have
original terms to maturity of 20 to 30 years. The
Mortgage Loans will have an aggregate Scheduled
Principal Balance (as defined herein) as of the
Cut-off Date, after deducting payments of principal
due on or before such date, of approximately
$901,613,270, subject to the variance described
herein. See 'Description of the Mortgage Pool and
the Mortgaged Properties' herein.
DOUBLE REMIC STRUCTURE.... Two separate REMIC elections will be made with
respect to the assets underlying the Certificates.
The Certificates, other than the Class RL
Certificates, will represent interests in an
'Upper-Tier REMIC,' the assets of which will consist
of all the 'regular interests' in a Lower-Tier
REMIC. The 'Lower-Tier REMIC' will consist of the
Mortgage Loans and the related assets described
herein. The Certificates other than the Class R and
Class RL Certificates will be designated as 'regular
interests,' and the Class R Certificates will be
designated as the 'residual interest' in the
Upper-Tier REMIC. The Class RL Certificates will be
designated as the 'residual interest' in the Lower-
Tier REMIC. See 'Certain Federal Income Tax
Consequences' herein.
DESCRIPTION OF THE
CERTIFICATES............ The Certificates will be issued pursuant to a Pooling
and Servicing Agreement, to be dated as of the
Cut-off Date (the 'Agreement'), between the Company
and the Trustee. To the extent funds are available
therefor in the Certificate Account, distributions
on the Certificates will be made on the 25th day of
each month or, if such 25th day is not a business
day, on the succeeding business day (each, a
'Distribution Date'), commencing in September 1998,
to holders of record on the close of business on the
last business day of the month preceding the month
of such Distribution Date (the 'Record Date').
</TABLE>
S-4
<PAGE>
<TABLE>
<S> <C>
DISTRIBUTIONS ON THE
CERTIFICATES............ General. On each Distribution Date, (i) the Senior
Certificates will be entitled to receive all amounts
distributable to them for such Distribution Date
before any distributions are made to the Junior
Certificates on such date and (ii) the Junior
Certificates of each Class will be entitled to
receive all amounts distributable to them for such
Distribution Date before any distributions are made
on such date on any Class of Junior Certificates
subordinate thereto. The Available Funds (as defined
herein) for such Distribution Date will be allocated
first, to pay interest due the holders of the Senior
Certificates and then to reduce the Class
Certificate Principal Balances of the Senior
Certificates; second, to pay the Class PO Deferred
Amount (as defined herein) for such Distribution
Date to holders of the Class PO Certificates, but
only from amounts that would otherwise be
distributable on such Distribution Date as principal
on the Junior Certificates; and third, to pay
interest and principal due the holders of the Junior
Certificates in order of priority among the Classes
thereof. The Available Funds will be allocated among
the Classes of Certificates offered hereby in the
manner set forth in 'Description of the
Certificates--Distributions on the
Certificates--Allocation of Available Funds' herein.
No distribution of interest or principal will be
made on any Class of Junior Certificates on any
Distribution Date until all distributions of
interest and principal have been made on such date
on each Class of Certificates having a higher
priority and the Class PO Deferred Amount for such
Distribution Date has, subject to the limitation
described above, been paid.
Interest. Interest will accrue on each Class of
Certificates offered hereby, other than the Class
A10, Class A11, Class A12, Class A13, Class A15,
Class A16, Class A17, Class A18, Class A20, Class
A21, Class A22, Class A23, Class A25 and Class A26
Certificates, at the respective fixed Certificate
Interest Rates set forth on the cover hereof during
each applicable Interest Accrual Period (as defined
herein). Interest will accrue on the Class A10,
Class A11, Class A12, Class A13, Class A15, Class
A16, Class A17, Class A18, Class A20, Class A21,
Class A22, Class A23, Class A25 and Class A26
Certificates (together, the 'LIBOR Certificates') at
the applicable floating Certificate Interest Rates
described on the cover hereof during each applicable
Interest Accrual Period.
On each Distribution Date through the Class A19
Accretion Termination Date (as defined herein), the
Accrued Certificate Interest on the Class A19
Certificates for such Distribution Date will not be
distributed on such Certificates but will instead be
added to the Class Certificate Principal Balance of
such Class, except as described herein. On each
Distribution Date after the Class A19 Accretion
Termination Date (and, in certain circumstances, on
such date), interest on the Class A19 Certificates
will be distributed on such Certificates and will
not be added to the Class Certificate Principal
Balance thereof.
On each Distribution Date, interest will be
distributable on each Class of Certificates offered
hereby (other than the Class A19 Certificates
through the Class A19 Accretion Termination Date,
except as described herein) from the Available Funds
for such Distribution Date in an aggregate amount
equal to the Accrued Certificate Interest for such
</TABLE>
S-5
<PAGE>
<TABLE>
<S> <C>
Class on such Distribution Date, plus any Accrued
Certificate Interest thereon remaining undistributed
from previous Distribution Dates.
The 'Interest Accrual Period' for each Class of
Certificates other than the LIBOR Certificates will
be the one-month period ending on the last day of
the month preceding the month in which a
Distribution Date occurs. For the LIBOR
Certificates, the 'Interest Accrual Period' will be
the one-month period commencing on the 25th day of
the month preceding the month in which a
Distribution Date occurs and ending on the 24th day
of the month of such Distribution Date.
The 'Accrued Certificate Interest' for any
Certificate (other than the Class PO Certificates)
for any Distribution Date will equal the interest
accrued during the related Interest Accrual Period
at the applicable Certificate Interest Rate on the
Certificate Principal Balance (or, in the case of a
Class A11 Certificate, the Notional Principal
Balance) of such Certificate immediately prior to
such Distribution Date, less such Certificate's
share of any Net Interest Shortfall, the interest
portion of any Excess Losses allocable to
Certificateholders through the Cross-Over Date and,
after the Cross-Over Date, the interest portion of
any Realized Losses (as each such term is defined
herein) allocable to Certificateholders.
The shortfall or losses described in the preceding
paragraph will be allocated among the Certificates
(other than the Class PO Certificates) in proportion
to the amount of Accrued Certificate Interest that
would have been allocated thereto in the absence of
such shortfall or losses, and will be allocated
without regard to the relative priority of the
Certificates. Interest will be calculated on the
Certificates on the basis of a 360-day year
consisting of twelve 30-day months.
Excess Losses consist of all Bankruptcy Losses, Fraud
Losses and Special Hazard Losses (each a type of
Realized Loss) occurring after the Bankruptcy
Coverage Termination Date, the Fraud Coverage
Termination Date and the Special Hazard Termination
Date, respectively, as more fully described herein.
The aggregate 'Notional Principal Balance' of the
Class A11 Certificates as of any Distribution Date
will equal the Class Certificate Principal Balance
of the Class A10 Certificates as of such date.
Principal. Principal will be distributable on the
Senior Certificates (other than the Class A11
Certificates) on each Distribution Date in an
aggregate amount equal to the sum of the Class A19
Accrual Amount, the Senior Optimal Principal Amount
and the Class PO Principal Distribution Amount (each
as defined herein) for such Distribution Date, to
the extent of the Available Funds for such
Distribution Date remaining after distributions of
interest are made on the Senior Certificates (other
than the Class PO Certificates) on such date.
Subject to such limitations, the Class A19 Accrual
Amount, the Senior Optimal Principal Amount and the
Class PO Principal Distribution Amount will be
allocated among the Senior Certificates in the
manner described herein.
The Class A22, Class A23, Class A24, Class A25 and
Class A26 Certificates will not receive any
distributions in respect of principal (including
scheduled payments, prepayments and other
unscheduled recoveries of principal) during the
first five years after the Cut-off Date,
</TABLE>
S-6
<PAGE>
<TABLE>
<S> <C>
except as otherwise described herein on or following
the earlier of the Group I Final Distribution Date
(as defined herein) or the Cross-Over Date.
Principal will be distributable on each Class of
Junior Certificates on each Distribution Date in an
aggregate amount equal to such Class's Allocable
Share (as defined herein) for such Distribution Date
to the extent of the Available Funds remaining after
(i) distributions of interest and principal have
been made on each Senior Certificate entitled
thereto, (ii) the Class PO Deferred Amount for such
Distribution Date has, subject to the limitations
described herein, been distributed in respect of the
Class PO Certificates, (iii) distributions of
interest and principal have been made on each Class
of Junior Certificates, if any, ranking prior to
such Class of Junior Certificates and (iv)
distributions of interest have been made on such
Class of Junior Certificates. Distributions of
principal of a Class of Certificates will be made on
a pro rata basis among all outstanding Certificates
of such Class. See 'Description of the
Certificates--Distributions on the Certificates'
herein.
The Class A6, Class A7, Class A8, Class A9, Class A10
and Class A14 Certificates are planned amortization
class Certificates (together, the 'PAC
Certificates'). The Class A16 Certificates are
scheduled amortization class Certificates (the
'Scheduled Certificates'). The Class A19
Certificates support the principal payment stability
of the PAC Certificates, the Scheduled Certificates
and the Class A12, Class A13, Class A14, Class A15,
Class A16, Class A17 and Class A18 Certificates
(together, the 'Aggregate TAC Segment
Certificates'). See 'Yield and Weighted Average Life
Considerations--Weighted Average Lives of the
Certificates--PAC Certificates,' '--Scheduled
Certificates,' '--Aggregate TAC Segment
Certificates' and '-- Support Certificates' herein.
Principal distributions on the PAC Certificates, the
Scheduled Certificates and the Aggregate TAC Segment
Certificates will be made by reference to principal
balance schedules, as described herein. See
'Description of the Certificates--Distributions on
the Certificates' herein.
The principal portion of any Excess Losses will be
allocated pro rata among all the outstanding
Certificates entitled to principal distributions, as
described herein.
Class PO Deferred Amount. On each Distribution Date,
the PO Percentage (as defined herein) of the
principal portion of any Realized Loss (other than a
Debt Service Reduction) in respect of a Discount
Mortgage Loan (as defined herein) will be allocated
to the Class PO Certificates. See 'Description of
the Certificates--Allocation of Realized Losses on
the Certificates.' On each Distribution Date through
the date on which the Class Certificate Principal
Balances of the Junior Certificates have been
reduced to zero (the 'Cross-Over Date'), the Class
PO Certificates will be entitled to receive, to the
extent of Available Funds remaining after
distributions of interest and principal on the
Senior Certificates have been made on such
Distribution Date, any Class PO Deferred Amount for
such Distribution Date, provided, however, that
distributions in respect of the Class PO Deferred
Amount on any Distribution Date will not exceed the
Junior Optimal Principal
</TABLE>
S-7
<PAGE>
<TABLE>
<S> <C>
Amount for such date. Distributions in respect of
the Class PO Deferred Amount will not reduce the
Class Certificate Principal Balance of the Class PO
Certificates. The 'Class PO Deferred Amount' means,
as to each Distribution Date through the Cross-Over
Date, the aggregate of all amounts allocable on such
date to the Class PO Certificates in respect of the
principal portion of Realized Losses (other than
Excess Losses) in respect of the Discount Mortgage
Loans and all amounts previously allocated in
respect of such losses to the Class PO Certificates
and not distributed thereto on prior Distribution
Dates.
ADDITIONAL RIGHTS OF THE
RESIDUAL
CERTIFICATEHOLDERS ..... In addition to distributions of principal and
interest, (a) the holders of the Residual
Certificates will be entitled to receive certain
amounts, if any, remaining in the related REMIC
after distributions of interest and principal are
made on the Certificates. Such amounts are not
expected to be material. See 'Description of the
Certificates--Additional Rights of the Residual
Certificateholders' herein.
ADVANCES.................. The Company will be obligated to advance delinquent
installments of principal and interest (net of the
related Servicing Fees) on the Mortgage Loans
included in the Mortgage Pool under certain
circumstances. See 'The Pooling and Servicing
Agreement-- Advances' herein.
SUBORDINATION............. The rights of the holders of each Class of Junior
Certificates to receive distributions with respect
to the Mortgage Loans will be subordinate to such
rights of the holders of the Senior Certificates and
of each prior-ranking Class of Junior Certificates.
The subordination of the Junior Certificates
relative to the Senior Certificates is intended to
enhance the likelihood of regular receipt by the
holders of the Senior Certificates of the full
amount of the monthly distributions allocable to
them, and to afford such holders protection against
losses resulting from the liquidation of Mortgage
Loans and certain losses resulting from the
bankruptcy of a related borrower (the 'Mortgagor').
The subordination of each Class of Junior
Certificates (other than the Class M Certificates)
relative to each Class of Junior Certificates having
a higher ranking is intended to confer a similar
benefit on such higher ranking Classes of Junior
Certificates. However, the degree of protection
afforded any Class of Junior Certificates by such
subordination, relative to delinquencies and losses
that might occur on the Mortgage Pool, is less than
the protection afforded to the Senior Certificates
by virtue of the subordination of the Junior
Certificates.
As of the date of the initial issuance of the
Certificates, the aggregate Certificate Principal
Balance of the Junior Certificates will equal
approximately 4.00% of the aggregate Certificate
Principal Balance of all the Certificates. As of
such date, the aggregate Certificate Principal
Balance of the Class B3, Class B4 and Class B5
Certificates, all of which are subordinate in right
of distribution to the Certificates offered hereby,
will equal approximately 0.90% of the initial
aggregate Certificate Principal Balance of all of
the Certificates and approximately 22.50% of the
initial aggregate Certificate Principal Balance of
all of the Junior Certificates.
The protection afforded to the holders of Senior
Certificates by means of the subordination feature
described above will be accomplished (i) by the
preferential right of such holders to receive, prior
to any distribution
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being made on a Distribution Date in respect of the
Junior Certificates, the amounts due them on each
Distribution Date out of the Available Funds and, if
necessary, by the right of such holders to receive
future distributions with respect to the Mortgage
Loans that would otherwise have been payable to the
holders of the Junior Certificates and (ii) by the
allocation of the applicable Non-PO Percentage (as
defined herein) of the principal portion of any
Realized Loss (except as provided herein) with
respect to a Mortgage Loan to the Junior
Certificates, subject to the pro rata allocation of
any Excess Loss as described herein, before such
loss is allocated to the Senior Certificates
entitled to principal distributions (other than the
Class PO Certificates). See 'Description of the
Certificates--Subordination--Priority of Senior
Certificates' herein.
In addition, in order to extend the period during
which the Junior Certificates remain available as
credit enhancement for the Senior Certificates, the
entire amount of the applicable Non-PO Percentage
(as defined herein) of any principal prepayments and
certain other unscheduled recoveries of principal
with respect to the Mortgage Loans will be allocated
to the outstanding Senior Certificates (other than
the Class A11 and Class PO Certificates and, to the
extent described herein, the Class A22, Class A23,
Class A24, Class A25 and Class A26 Certificates)
during the first five years after the Cut-off Date
(with such allocation being subject to reduction
thereafter as described herein). This allocation has
the effect of accelerating the amortization of such
Senior Certificates as a whole while, in the absence
of losses in respect of the Mortgage Loans,
increasing the percentage interest in the principal
balance of the Mortgage Loans evidenced by the
Junior Certificates. See 'Description of the
Certificates--Subordination' and '--Distributions on
the Certificates--Principal' herein.
On each Distribution Date, the holders of any
particular Class of Junior Certificates, other than
the Class B5 Certificates, will have a preferential
right to receive the amounts due them on such
Distribution Date out of Available Funds, prior to
any distribution being made on such date on any
Class of Certificates ranking junior to such Class.
In addition, except as described herein, the
applicable Non-PO Percentage of the principal
portion of any Realized Loss with respect to a
Mortgage Loan will be allocated in reduction of the
Class Certificate Principal Balances of the Junior
Certificates in inverse order of priority of such
Certificates, and the applicable PO Percentage (as
defined herein) of any such loss will be similarly
allocated, through the operation of the Class PO
Deferred Payment Writedown Amount (as defined
herein), to the extent distributions are made in
respect of the Class PO Deferred Amount. In order to
maintain the relative levels of subordination among
the Junior Certificates, prepayments and certain
other unscheduled recoveries of principal in respect
of the Mortgage Loans (which will not be
distributable to the Junior Certificates for at
least the first five years, except as otherwise
described herein on or following the Senior Final
Distribution Date (as defined herein)) will not be
distributable to the holders of any Class of Class B
Certificates on any Distribution Date for which the
related Class Prepayment Distribution Trigger (as
defined herein) is not satisfied, except as
described herein. See 'Description of the
Certificates--Distributions on the Certificates'
herein.
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PAYMENT ENTITLEMENT AMONG
THE SENIOR
CERTIFICATES............ The entire amount of the applicable Non-PO Percentage
of any payments of principal (including scheduled
payments, prepayments and other unscheduled
recoveries of principal) with respect to the
Mortgage Loans allocable to the Senior Certificates
(other than the Class A11 and Class PO Certificates)
will be allocated to each such Senior Certificate
except the Class A22, Class A23, Class A24, Class
A25 and Class A26 Certificates (together, the 'Group
I Senior Certificates') during the first five years
after the Cut-off Date (with such allocation being
subject to reduction thereafter as described
herein), except as otherwise described herein on or
following the Group I Final Distribution Date. This
allocation prior to the Group I Final Distribution
Date has the effect of accelerating the amortization
of the Group I Senior Certificates while increasing
the percentage interest in the principal balance of
the Mortgage Loans evidenced by the Class A22, Class
A23, Class A24, Class A25 and Class A26 Certificates
(together, the 'Group II Senior Certificates').
Notwithstanding the foregoing, all distributions of
principal on the outstanding Senior Certificates
other than the Class A11 and Class PO Certificates
will be made pro rata among such Certificates on
each Distribution Date after the Cross-Over Date.
See 'Description of the Certificates--Distributions
on the Certificates-- Principal' herein.
PREPAYMENT AND YIELD
CONSIDERATIONS.......... The rate of principal distributions on the
Certificates, the aggregate amount of each interest
distribution on the Certificates and the yield to
maturity of the Certificates are related to the rate
of principal payments on or in respect of the
Mortgage Loans. Mortgage principal payments may be
in the form of scheduled principal payments,
voluntary prepayments by the mortgagors (such as,
for example, prepayments in full due to
refinancings, including refinancings made by the
Company in the ordinary course of conducting its
mortgage banking business, some of which
refinancings may be solicited by the Company, or
prepayments in connection with biweekly payment
programs, participation in which may be solicited by
the Company) and prepayments resulting from default,
foreclosure, casualty, condemnation and similar
events and certain repurchases by the Company of the
Mortgage Loans under the circumstances described
herein. See 'Yield, Maturity and Weighted Average
Life Considerations' in the Prospectus. Mortgagors
are permitted to prepay the Mortgage Loans, in whole
or in part, at any time without penalty. Mortgage
prepayment rates are likely to fluctuate
significantly. In general, when prevailing mortgage
interest rates decline significantly below the
interest rates on the Mortgage Loans, the prepayment
rate on such Mortgage Loans is likely to increase,
and when prevailing mortgage interest rates rise
significantly above the interest rates on the
Mortgage Loans, the prepayment rate on such Mortgage
Loans is likely to decrease, although other
economic, geographic and social factors also may
influence the prepayment rate. See 'Yield and
Weighted Average Life Considerations--Prepayments.'
The entire amount of the applicable Non-PO
Percentage of any principal prepayments and certain
other unscheduled recoveries of principal with
respect to a Mortgage Loan will be allocated solely
to the outstanding Senior Certificates (other than
the Class A11 and Class PO Certificates) during the
first five years after the Cut-off Date (with such
allocation
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being subject to reduction thereafter as described
herein). Among such Senior Certificates, any such
amounts allocable to the outstanding Senior
Certificates will be allocated to the outstanding
Group I Senior Certificates during the first five
years after the Cut-off Date (except as otherwise
provided herein on or after the Group I Final
Distribution Date), with such allocation being
subject to reduction thereafter as described herein.
Notwithstanding the foregoing, all distributions of
principal will be made pro rata among all of the
outstanding Senior Certificates (other than the
Class A11 and Class PO Certificates) on each
Distribution Date after the Cross-Over Date. The
entire amount of the applicable PO Percentage of any
prepayment or unscheduled recovery of principal with
respect to a Mortgage Loan will be allocated solely
to the Class PO Certificates, so long as such Class
is outstanding. See 'Description of the
Certificates--Distributions on the
Certificates--Principal' herein.
Voluntary prepayments in full of principal on the
Mortgage Loans received from the sixteenth day (or,
in the case of the month of the Cut-off Date, from
the Cut-off Date) through the last day of each
month, and any voluntary partial prepayments of
principal on the Mortgage Loans in each month, will
reduce the amount of interest (or the Class A19
Accrual Amount) available for distribution to
Certificateholders (or added to the Class
Certificate Principal Balance of the Class A19
Certificates) in the following month from the amount
which would have been available in the absence of
such prepayments. Any shortfalls in interest as a
result of such early receipt of principal, to the
extent not offset by a Compensating Interest Payment
(as defined herein), generally will produce a lower
yield on the Certificates than would otherwise be
the case, although such early receipt of principal
by holders of Classes of Certificates purchased at a
discount may offset the yield reduction for such
Classes. The interest (or the Class A19 Accrual
Amount) distributable on the Certificates offered
hereby entitled to interest distributions (or added
to principal) will also be reduced by such
Certificates' share of the interest portion of any
Excess Losses allocable to Certificateholders
through the Cross-Over Date and the entire amount of
the interest portion of all Realized Losses
allocable to Certificateholders after the Cross-Over
Date.
The yields to investors will be sensitive, in varying
degrees, to the rate and timing of Mortgage Loan
prepayments (including unscheduled recoveries of
principal). The extent to which the yield to
maturity of a Certificate is sensitive to
prepayments and other unscheduled receipts of
principal will depend upon the degree to which it is
purchased at a discount or premium. In the case of
Certificates purchased at a premium, and especially
in the case of the Class A11 Certificates, faster
than anticipated rates of principal prepayments on
the Mortgage Loans could result in actual yields to
such investors that are lower than the anticipated
yields and could result in a reduction in the
weighted average lives of such Certificates. In the
case of Certificates purchased at a discount, slower
than anticipated rates of principal prepayments on
the Mortgage Loans (or, in the case of the Class PO
Certificates, the Discount Mortgage Loans) could
result in actual yields to investors that are lower
than the anticipated yields and could result in an
extension of the weighted average lives of such
Certificates. Investors in the Class A11
Certificates should also consider the risk that
rapid rates of
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principal prepayments could result in the failure of
such investors to fully recover their investments.
Low levels of LIBOR will reduce the yields on the
Class A10, Class A12, Class A15, Class A20, Class
A22 and Class A25 Certificates. Conversely, because
the interest rates on the Class A11, Class A13,
Class A16, Class A17, Class A18, Class A21, Class
A23 and Class A26 Certificates (together, the
'Inverse Floating Rate Certificates') can fall as
low as 0.0% (which will occur whenever LIBOR equals
or exceeds 8.20% in the case of the Class A11, Class
A21 and Class A26 Certicates, 8.10% in the case of
the Class A13 Certificates, 8.00% in the case of the
Class A16 and Class A18 Certificates, 7.00% in the
case of the Class A17 Certificates and 7.75% in the
case of the Class A23 Certificates for the relevant
Interest Accrual Period, other than the first such
period), high levels of LIBOR will have a material
negative effect on the yields on the Inverse
Floating Rate Certificates. See 'Yield and Weighted
Average Life Considerations--Sensitivity of the
LIBOR Certificates' herein.
Rapid rates of prepayments on the Mortgage Loans are
likely to coincide with periods of low prevailing
interest rates. During such periods, the yields at
which an investor in the Certificates may be able to
reinvest amounts received as payments on the
investor's Certificates may be lower than the yield
on such Certificates. Conversely, slow rates of
prepayments on the Mortgage Loans are likely to
coincide with periods of high prevailing interest
rates. During such periods, the amount of payments
available to an investor for reinvestment at such
high rates may be relatively low.
The Certificates offered hereby were structured on
the basis of, among other things, a prepayment
assumption of 275% of the Prepayment Assumption (as
defined herein) and corresponding weighted average
lives as described herein. The weighted average
lives of the Certificates offered hereby at 275% of
the Prepayment Assumption, based on the assumptions
described under 'Yield and Weighted Average Life
Considerations--Weighted Average Lives of the
Certificates--Tables of Class Certificate Principal
Balances' herein, are set forth in the tables that
appear under such heading. The Mortgage Loans are
not likely to prepay at a constant rate of 275% of
the Prepayment Assumption or at any other constant
rate, and the actual weighted average lives of the
Certificates are likely to differ from those shown
in such tables.
The yields on the Class M, Class B1 and Class B2
Certificates will be sensitive, in varying degrees,
to the liquidation of and any subsequent loss
experience on the Mortgage Loans and to the timing
of any such losses. Among the Junior Certificates
offered hereby, such yield sensitivity will
generally be greatest among the Class B2
Certificates relative to the Class M and Class B1
Certificates, greater among the Class B1
Certificates than the Class M Certificates and
greater among the Class M Certificates than the
Senior Certificates. See 'Yield and Weighted Average
Life Considerations--The Class M, Class B1 and Class
B2 Certificates' herein. In addition, (i) the
applicable Non-PO Percentage of the principal
portion of any Realized Loss (other than a Debt
Service Reduction and any Realized Loss that
constitutes an Excess Loss, as described below) will
be allocated, to the extent
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described herein, among the Certificates (other than
the Class A11 and Class PO Certificates) in inverse
order of priority, beginning with the Class B5
Certificates and ending with the Senior Certificates
(other than the Class A11 and Class PO Certificates)
and (ii) the applicable PO Percentage of any such
loss will be allocated, to the extent described
herein, among the Junior Certificates in inverse
order of priority, through the operation of the
Class PO Deferred Payment Writedown Amount. Certain
Realized Loss scenarios could result in the failure
of investors in the Class M, Class B1 and Class B2
Certificates to fully recover their investment.
The prepayment, yield, loss and other assumptions to
be used for pricing purposes for the Certificates
may vary as determined at the time of sale. Each
prospective investor is urged to make an investment
decision with respect to the Certificates proposed
to be purchased by such investor based upon a
comparison of the desired yield to the anticipated
yield on such Certificates resulting from the price
to be paid by such investor for such Certificates
and such investor's own determination as to the
anticipated rate of prepayments, defaults and losses
on the Mortgage Pool.
Principal distributions on the PAC Certificates, the
Scheduled Certificates and the Aggregate TAC Segment
Certificates will be made by reference to principal
balance schedules, as described herein.
The weighted average lives of all Classes of the
Certificates will be affected in part by the
prepayment experience of the Mortgage Loans and the
resulting allocation of principal payments on the
Certificates.
OPTIONAL TERMINATION...... The Company may, at its option, repurchase from the
Trust Fund all of the Mortgage Loans underlying the
Certificates, and thereby effect the early
retirement of the Certificates, on any Distribution
Date after the aggregate Scheduled Principal Balance
of the Mortgage Loans is less than 10% of the
aggregate Scheduled Principal Balance thereof as of
the Cut-off Date. If the proceeds realized upon such
early retirement are less than the aggregate Class
Certificate Principal Balance of all outstanding
Certificates plus accrued and unpaid interest
thereon, the resulting shortfall will be allocated
as described herein. See 'The Pooling and Servicing
Agreement--Termination' herein.
FINAL DISTRIBUTION
DATES................... The rate of distribution of
principal of the Certificates will depend on the
rate of payment of principal of the Mortgage Loans
which, in turn, will depend on the characteristics
of the Mortgage Loans, the level of prevailing
interest rates and other economic, geographic and
social factors. No assurance can be given as to the
actual payment experience of the Mortgage Loans.
CERTAIN FEDERAL INCOME TAX
CONSEQUENCES............ The Certificates other than the Class R and Class RL
Certificates (the 'Regular Certificates') will be
treated as regular interests in the Upper-Tier REMIC
and generally will be treated as debt instruments
issued by the Upper-Tier REMIC for federal income
tax purposes. Certain Classes of the Regular
Certificates may be, the Class A11 Certificates will
likely be treated as being, and the Class A19
Certificates will be, issued with original issue
discount. The prepayment assumption that will be
used in determining the rate of accrual of any
original issue discount on the Regular Certificates
for federal income tax purposes (and whether such
original issue discount is de minimis), and that may
be used by a holder
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of a Regular Certificate to amortize premium, will
be 275% of the Prepayment Assumption. No
representation is made that the Mortgage Loans will
prepay at such rate or at any other rate. The
holders of the Residual Certificates will be subject
to special federal income tax rules that may
significantly reduce the after-tax yield of such
Certificates. Further, significant restrictions
apply to the transfer of the Residual Certificates.
See 'Description of the Certificates--Restrictions
on Transfer of the Residual Certificates' herein.
The amount of income reported by a holder of a
Junior Certificate may exceed cash distributions as
a result of the preferential right of other Classes
of Regular Certificates to receive cash
distributions in the event of losses or
delinquencies on the Mortgage Loans.
See 'Certain Federal Income Tax Consequences' herein
and 'Certain Federal Income Tax Consequences--REMIC
Certificates' in the Prospectus.
LEGAL INVESTMENT.......... The Senior Certificates offered hereby and the Class
M Certificates will constitute 'mortgage related
securities' for purposes of the Secondary Mortgage
Market Enhancement Act of 1984 ('SMMEA'). However,
institutions whose investment activities are subject
to legal investment laws and regulations or review
by certain regulatory authorities may be subject to
restrictions on investment in such Certificates. The
Class B1 and Class B2 Certificates will not
constitute 'mortgage related securities' under
SMMEA. The appropriate characterization of the Class
B1 and Class B2 Certificates under various legal
investment restrictions, and thus the ability of
investors subject to these restrictions to purchase
Class B1 and Class B2 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 Class B1 and Class B2 Certificates will
constitute legal investments for them. See 'Legal
Investment Matters' herein and in the Prospectus.
ERISA CONSIDERATIONS...... Fiduciaries of employee benefit plans subject to the
Employee Retirement Income Security Act of 1974, as
amended ('ERISA'), or plans subject to Section 4975
of the Internal Revenue Code of 1986 (the 'Code')
should carefully review with their legal advisors
whether the purchase or holding of the Certificates
offered hereby could give rise to a transaction
prohibited or not otherwise permissible under ERISA
or the Code. The Class M, Class B1 and Class B2
Certificates and the Residual Certificates may not
be acquired by an ERISA Plan (as defined herein) and
transfer thereof is subject to the restrictions
described herein. See 'ERISA Considerations' herein.
CERTIFICATE RATINGS....... It is a condition of issuance of the Certificates
that the Senior Certificates offered hereby (other
than Class A11, Class A13, Class A16, Class A17,
Class A18, Class A21, Class A23 and Class A26
Certificates) be rated 'AAA' by each of Fitch IBCA,
Inc. ('Fitch') and Standard & Poor's Ratings
Services, a division of The McGraw-Hill Companies,
Inc. ('S&P'), that the Class A11, Class A13, Class
A16, Class A17, Class A18, Class A21, Class A23 and
Class A26 Certificates be rated 'AAA' by Fitch and
'AAAr' by S&P, and that the Class M, Class B1 and
Class B2 Certificates be rated 'AA,' 'A' and 'BBB,'
respectively, by Fitch. The ratings of the
Certificates should be evaluated independently from
similar ratings on other types of
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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 do not
address the possibility that Certificateholders may
suffer a lower than anticipated yield. See
'Certificate Ratings' herein.
LIQUIDITY
CONSIDERATIONS.......... There is currently no secondary market for the
Certificates offered hereby, and there can be no
assurance that such a market will develop. The
Underwriter has indicated its intention to establish
a market in the Certificates offered hereby, but is
not obligated to do so. There can be no assurance
that a secondary market for such Certificates will
develop, or if it does develop, will continue for
the life of the related Certificates or provide
investors with liquidity of investment. In addition,
there can be no assurance that an investor in a
Certificate will be able to sell such Certificate at
a price that is equal to or greater than the price
at which such investor purchased such Certificate.
Information available to investors that desire to
sell their Certificates in the secondary market may
be limited. In particular, price quotations
regarding specific Classes of the Certificates are
not currently available in any newspaper or other
source that is widely available to investors.
The Company believes that a number of dealers that
engage in the mortgage-backed securities markets
currently offer price quotations for the Company's
mortgage pass-through certificates to investors that
desire to buy or sell such certificates. However,
there is no assurance that such dealers will
continue to provide such a service or that any such
dealer will offer a price quotation for any
particular series or class of the Company's
certificates. In addition, there is no assurance
that any such dealer will offer a price quotation to
any particular investor, and non-institutional
investors in particular may not have access to such
quotations. The lack of availability of price
information concerning the Certificates offered
hereby may affect their liquidity.
The Company currently maintains an electronic
bulletin board (the 'Bulletin Board') which provides
certain loan-level information about loans included
in various series of mortgage pass-through
securities which have been publicly offered by the
Company. The Company intends to make information
about the Mortgage Loans available on the Bulletin
Board as of the first Distribution Date and
thereafter while the Bulletin Board is maintained.
The loan-level information appearing on the Bulletin
Board is accessible by computer modem. The Company
makes no representation or warranty that such
information will be suitable for any particular
purpose and the Company assumes no responsibility
for the accuracy or completeness of any information
that is generated therefrom. The Company has no
obligation to maintain the Bulletin Board and may
cease to do so at any time. For further information
concerning the Bulletin Board, please call
800-544-3466, extension 5515.
USE OF PROCEEDS........... The net proceeds from the sale of the Certificates
offered hereby will be used by the Company for
general corporate purposes, including the
acquisition of residential mortgage loans and
servicing rights.
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DESCRIPTION OF THE MORTGAGE POOL AND THE MORTGAGED PROPERTIES
GENERAL
The Certificates will represent the entire beneficial ownership interest in
a trust fund (the 'Trust Fund'). The assets of the Trust Fund will consist
primarily of a pool (the 'Mortgage Pool') of conventional, fixed-rate,
fully-amortizing mortgage loans (the 'Mortgage Loans'). The Mortgage Loans are
secured by mortgages, deeds of trust or other security instruments (each, a
'Mortgage') creating a first lien on one- to four-family residential properties
(the 'Mortgaged Properties').
Certain data with respect to the Mortgage Loans are set forth below. A
detailed description of the Mortgage Pool on a Current Report on Form 8-K (the
'Detailed Description') will be available to purchasers of the Certificates at
or before, and will be filed with the Securities and Exchange Commission within
fifteen days after, the initial delivery of the Certificates offered hereby. The
Detailed Description will specify the precise aggregate Scheduled Principal
Balance (as defined herein) of the Mortgage Loans as of the Cut-off Date and
will also include the following information regarding the Mortgage Loans: the
years of origination, the mortgage interest rates borne by the Mortgage Loans
(the 'Mortgage Rates'), the original loan-to-value ratios, the types of
properties securing the Mortgage Loans and the geographical distribution of the
Mortgage Loans by state. The Detailed Description also will specify the original
Class Certificate Principal Balance (or, in the case of the Class A11
Certificates, the Notional Principal Balance) of each Class of Certificates on
the date of issuance of the Certificates, the initial Senior Percentage, the
initial Group II Percentage and the initial Junior Percentage (each as defined
herein), and the Bankruptcy Loss Amount, Fraud Loss Amount and Special Hazard
Loss Amount (each as defined herein), as of the Cut-off Date. The Agreement (as
defined herein) and its exhibits, including the final PAC Balances Table,
Scheduled Balances Table and Aggregate TAC Segment Balance Table, will be filed
as an exhibit to the Detailed Description.
The 'Scheduled Principal Balance' of a Mortgage Loan as of the Cut-off Date
is the then outstanding principal balance thereof, after deducting payments of
principal due on or before such date. The 'Scheduled Principal Balance' of a
Mortgage Loan as of any Distribution Date is the unpaid principal balance of
such Mortgage Loan as specified in the amortization schedule at the time
relating thereto (before any adjustment to such schedule by reason of bankruptcy
or similar proceeding or any moratorium or similar waiver or grace period) as of
the first day of the month preceding the month of such Distribution Date, after
giving effect to any previously applied partial principal prepayments, the
payment of principal due on such first day of the month and Deficient Valuations
occurring after the Bankruptcy Coverage Termination Date (as such terms are
defined herein), irrespective of any delinquency in payment by the related
borrower (the 'Mortgagor'). The 'Pool Scheduled Principal Balance' as of any
Distribution Date is equal to the aggregate Scheduled Principal Balances of all
of the Mortgage Loans that were Outstanding Mortgage Loans on the first day of
the month preceding the month of such Distribution Date (or such other date as
is specified). An 'Outstanding Mortgage Loan' is any Mortgage Loan which has not
been prepaid in full, has not become a Liquidated Mortgage Loan and has not been
repurchased.
It is expected that at least 95% (by Scheduled Principal Balance as of the
Cut-off Date) of the Mortgage Loans (and substantially all of the Mortgage Loans
with loan-to-value ratios in excess of 80%) will have been originated under the
Company's full or alternative documentation program or other full or alternative
documentation programs acceptable to the Company, that no more than 3.50% (by
Scheduled Principal Balance as of the Cut-off Date) of the Mortgage Loans will
have been originated under the Company's 'No Income Verification Program' or
other no income verification programs acceptable to the Company, that no more
than 1.50% of the Mortgage Loans will have been originated under the Company's
'Enhanced Streamlined Refinance Program' or other streamlined refinance programs
acceptable to the Company, that no more than 0.50% of the Mortgage Loans will
have been originated under the Company's 'No Ratio Program' or other no ratio
programs acceptable to the Company and that no more than 0.50% of the Mortgage
Loans will have been originated under the Company's 'No Income, No Asset
Verification Program' or other no income, no asset verification programs
acceptable to the Company. It is expected that no more than 1% (by Scheduled
Principal Balance as of the Cut-off Date) of the Mortgage Loans will have been
acquired under the Company's 'Relocation Loan' program or other relocation
programs acceptable to the Company. See 'The Trust Fund--The Mortgage
Loans--Loan Underwriting Policies' in the Prospectus.
Each Mortgage Loan other than a Cooperative Loan (as defined in the
accompanying Prospectus) is required to be covered by a standard hazard
insurance policy. Each Mortgage Loan which had a loan-to-value ratio at
origination in excess of 80% also will be covered by a private mortgage
insurance policy. See 'Servicing of the Mortgage Loans and Contracts--Hazard
Insurance' and '--Private Mortgage Insurance' in the Prospectus.
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All payments due on each Mortgage Loan on which at least one payment of
principal and interest was due prior to the Cut-off Date will have been paid
through the first day of the month preceding the Cut-off Date.
For a description of the underwriting standards generally applicable to the
Mortgage Loans, see 'The Trust Fund--The Mortgage Loans--Loan Underwriting
Policies' in the Prospectus.
THE MORTGAGE LOANS
The Mortgage Loans will have an aggregate Scheduled Principal Balance as of
the Cut-off Date of approximately $901,613,270. This amount is subject to a
permitted variance such that the aggregate Scheduled Principal Balance thereof
will not be less than $855,000,000 or greater than $945,000,000.
The Mortgage Rates borne by the Mortgage Loans are expected to range from
6.375% to 8.625% per annum, and the weighted average Mortgage Rate as of the
Cut-off Date of the Mortgage Loans is expected to be between 7.33% and 7.37% per
annum. The original principal balances of the Mortgage Loans are expected to
range from $227,200 to $1,447,500 and, as of the Cut-off Date, the average
Scheduled Principal Balance of the Mortgage Loans is not expected to exceed
$335,000 after application of payments due on or before the Cut-off Date. It is
expected that the month and year of the earliest origination date of any
Mortgage Loan will be July 1992 and the month and year of the latest scheduled
maturity date of any Mortgage Loan will be August 2028. All of the Mortgage
Loans will have original terms to maturity of 20 to 30 years, and it is expected
that the weighted average scheduled remaining term to maturity of the Mortgage
Loans will be between 357 and 359 months as of the Cut-off Date.
The Mortgage Loans are expected to have the following additional
characteristics (by Scheduled Principal Balance of all the Mortgage Loans) as of
the Cut-off Date:
No more than 9% of the Mortgage Loans will have a Scheduled Principal
Balance of more than $500,000 and up to and including $750,000. No more
than 3% of the Mortgage Loans will have a Scheduled Principal Balance of
more than $750,000 and up to and including $1,000,000. Less than 1% of the
Mortgage Loans will have a Scheduled Principal Balance of more than
$1,000,000.
No more than 14% of the Mortgage Loans will have a loan-to-value ratio
at origination in excess of 80%, no more than 5% of the Mortgage Loans will
have a loan-to-value ratio at origination in excess of 90%, and none of the
Mortgage Loans will have a loan-to-value ratio at origination in excess of
95%. As of the Cut-off Date, the weighted average loan-to-value ratio at
origination of the Mortgage Loans is expected to be between 74% and 76%.
No more than 1.50% of the Mortgage Loans will have a loan-to-value
ratio at origination calculated on the basis of an appraisal conducted more
than one year before the origination date thereof.
The proceeds of at least 48% of the Mortgage Loans will have been used
to acquire the related Mortgaged Property. The proceeds of the remainder of
the Mortgage Loans will have been used to refinance an existing loan. No
more than 14% of the Mortgage Loans will have been the subject of
'cash-out' refinancings.
No more than 1% of the Mortgage Loans will be temporary buy-down
Mortgage Loans. The portion of the interest rate paid by the related
Mortgagor will not increase by more than one percentage point for each
six-month period. No Mortgage Rate may exceed the 'bought down' rate by
more than three percentage points, and no buy-down period will exceed three
years.
No more than 2% of the Mortgage Loans will be secured by Mortgaged
Properties located in any one postal zip code area.
No more than 50% of the Mortgage Loans will be secured by Mortgaged
Properties located in California. The majority of the Mortgage Loans will
be secured by Mortgaged Properties located in California, Massachusetts and
New Jersey. No more than 4% of the Mortgage Loans will be secured by
Mortgaged Properties located in any one state except the states specified
in the preceding sentence.
At least 96% of the Mortgage Loans will be secured by Mortgaged
Properties determined by the Company to be the primary residence of the
Mortgagor. The basis for such determination will be the making of a
representation by the Mortgagor at origination that the underlying property
will be used as the Mortgagor's primary residence.
At least 89% of the Mortgage Loans will be secured by single-family,
detached residences.
No more than 5% of the Mortgage Loans will be secured by condominiums.
No more than 1% of the Mortgage Loans will be Cooperative Loans
secured by shares of stock in cooperative housing corporations and
assignments of the proprietary leases to cooperative apartment units
therein (see 'The Trust Fund--The Mortgage Loans' in the Prospectus).
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Federal emergency aid has been made available to property owners in several
areas of California and several other states as a result of recent flooding and,
in California, landslides. Approximately 59% (by Scheduled Principal Balance as
of the Cut-off Date) of the Mortgage Loans (80% of which percentage is located
in California) are secured by Mortgaged Properties located in the 87 counties
(27 of which are located in California) known to be affected by such conditions,
and it is unknown whether additional areas may be affected by such conditions.
In addition, due to recent wildfires occurring in widespread areas of Florida,
federal emergency aid will be available to homeowners throughout Florida
affected by such fires. Approximately 3% (by Scheduled Principal Balance as of
the Cut-off Date) of the Mortgage Loans are secured by Mortgaged Properties
located in Florida. The Company has not undertaken the physical inspection of
any such Mortgaged Property and, as a result, there can be no assurance that
material damage to any Mortgaged Property in such affected areas has not
occurred.
Under the Agreement (as defined herein), the Company will represent and
warrant that each Mortgaged Property is free of material damage and in good
repair as of the date of issuance of the Certificates. In the event of an
uncured breach of such representation and warranty that materially and adversely
affects the interests of Certificateholders, the Company will be required to
repurchase the affected Mortgage Loan or substitute another mortgage loan
therefor. If any damage occurs after the Closing Date, the Company will have no
such obligation. In addition, the standard hazard policies covering the
Mortgaged Properties (other than cooperative apartment units in cooperative
housing corporations) generally do not cover damage caused by flooding and
landslides, and flood or landslide insurance may not have been obtained with
respect to such Mortgaged Properties. To the extent that any insurance proceeds
received with respect to any damaged Mortgaged Properties are not applied to the
restoration thereof, such proceeds will be used to prepay the related Mortgage
Loans in whole or in part. Any repurchases or prepayments of the Mortgage Loans
may reduce the weighted average lives of the Certificates offered hereby and
will reduce the yields on the Classes of Certificates purchased at a premium.
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DESCRIPTION OF THE CERTIFICATES
GENERAL
The Certificates will be issued pursuant to a Pooling and Servicing
Agreement to be dated as of the Cut-off Date (the 'Agreement') between the
Company, as seller and servicer, and the Trustee. Reference is made to the
Prospectus for important additional information regarding the terms and
conditions of the Agreement and the Certificates. The Certificates will be
issued in the thirty-one Classes offered hereby, together with the Class PO,
Class B3, Class B4 and Class B5 Certificates, none of which are offered hereby,
and in the aggregate original Certificate Principal Balance of approximately
$901,613,270, subject to a permitted variance such that the aggregate original
Certificate Principal Balance will not be less than $855,000,000 or greater than
$945,000,000. Any such variance will be allocated so as to approximate the
material characteristics of the Classes of Certificates described herein.
As described below, each Class of Certificates offered hereby, other than
the Class R and Class RL Certificates (together, the 'Residual Certificates'),
will be issued in book-entry form, and beneficial interests therein will be held
by investors through the book-entry facilities of the Depository (as defined
below), in minimum denominations in Certificate Principal Balance or Notional
Principal Balance, as the case may be, of $25,000 (in the case of the Senior
Certificates other than the Class A11 Certificates), $417,000 (in the case of
the Class A11 Certificates) or $100,000 (in the case of the Class M, Class B1
and Class B2 Certificates), and, in each case, in integral multiples of $1,000
in excess thereof. The Residual Certificates will each be issued in certificated
form as a single Certificate per Class representing the entire Class Certificate
Principal Balance thereof. Notwithstanding the integral multiple requirements
described above, one Certificate of each Class other than the Residual
Certificates may evidence an additional amount equal to the remaining Class
Certificate Principal Balance (or, in the case of the Class A11 Certificates,
the Notional Principal Balance) thereof.
BOOK-ENTRY CERTIFICATES
Each Class of Certificates offered hereby other than the Residual
Certificates (the 'Book-Entry Certificates') will be registered as a single
certificate held by a nominee of The Depository Trust Company (together with any
successor depository selected by the Company, the 'Depository'). Beneficial
interests in the Book-Entry Certificates will be held by investors through the
book-entry facilities of the Depository, as described herein. The Company has
been informed by the Depository that its nominee will be Cede & Co. ('Cede').
Accordingly, Cede is expected to be the holder of record of the Book-Entry
Certificates. Except as described below, no person acquiring a Book-Entry
Certificate (each, a 'beneficial owner') will be entitled to receive a physical
certificate representing such Certificate (a 'Definitive Certificate').
The beneficial owner's ownership of a Book-Entry Certificate will be
recorded on the records of the brokerage firm, bank, thrift institution or other
financial intermediary (each, a 'Financial Intermediary') that maintains the
beneficial owner's account for such purpose. In turn, the Financial
Intermediary's ownership of such Book-Entry Certificate will be recorded on the
records of the Depository (or of a participating firm (each, a 'Participant')
that acts as agent for the Financial Intermediary, whose interest will in turn
be recorded on the records of the Depository, if the beneficial owner's
Financial Intermediary is not a Participant). Therefore, the beneficial owner
must rely on the foregoing procedures to evidence its beneficial ownership of a
Book-Entry Certificate. Beneficial ownership of a Book-Entry Certificate may
only be transferred by compliance with the procedures of such Financial
Intermediaries and Participants.
The Depository, which is a New York-chartered limited purpose trust
company, performs services for its Participants, some of which (and/or their
representatives) own the Depository. In accordance with its normal procedures,
the Depository is expected to record the positions held by each Participant in
the Book-Entry Certificates, whether held for its own account or as a nominee
for another person. In general, beneficial ownership of Book-Entry Certificates
will be subject to the rules, regulations and procedures governing the
Depository and Participants as in effect from time to time.
Distributions of principal of and interest on the Book-Entry Certificates
will be made on each Distribution Date by the Trustee to the Depository. The
Depository will be responsible for crediting the amount of such payments to the
accounts of the applicable Participants in accordance with the Depository's
normal procedures. Each Participant will be responsible for disbursing such
payments to the beneficial owners of the Book-Entry
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Certificates that it represents and to each Financial Intermediary for which it
acts as agent. Each such Financial Intermediary will be responsible for
disbursing funds to the beneficial owners of the Book-Entry Certificates that it
represents.
AS A RESULT, UNDER A BOOK-ENTRY FORMAT, BENEFICIAL OWNERS OF THE BOOK-ENTRY
CERTIFICATES MAY EXPERIENCE SOME DELAY IN THEIR RECEIPT OF PAYMENTS. BECAUSE THE
DEPOSITORY CAN ONLY ACT ON BEHALF OF FINANCIAL INTERMEDIARIES, THE ABILITY OF A
BENEFICIAL OWNER TO PLEDGE BOOK-ENTRY CERTIFICATES TO PERSONS OR ENTITIES THAT
DO NOT PARTICIPATE IN THE DEPOSITORY SYSTEM, OR OTHERWISE TAKE ACTIONS IN
RESPECT OF SUCH BOOK-ENTRY CERTIFICATES, MAY BE LIMITED DUE TO THE LACK OF
PHYSICAL CERTIFICATES FOR SUCH BOOK-ENTRY CERTIFICATES. IN ADDITION, ISSUANCE OF
THE BOOK-ENTRY CERTIFICATES IN BOOK-ENTRY FORM MAY REDUCE THE LIQUIDITY OF SUCH
CERTIFICATES IN THE SECONDARY MARKET SINCE CERTAIN POTENTIAL INVESTORS MAY BE
UNWILLING TO PURCHASE CERTIFICATES FOR WHICH THEY CANNOT OBTAIN PHYSICAL
CERTIFICATES.
The Depository has advised the Company and the Trustee that, unless and
until Definitive Certificates are issued, the Depository will take any action
permitted to be taken by a Certificateholder under the Agreement only at the
direction of one or more Financial Intermediaries to whose Depository accounts
the Book-Entry Certificates are credited. The Depository may take conflicting
actions with respect to other Book-Entry Certificates to the extent that such
actions are taken on behalf of Financial Intermediaries whose holdings include
such Book-Entry Certificates.
Definitive Certificates will be issued to beneficial owners of the related
Book-Entry Certificates, or their nominees, rather than to the Depository, only
if (a) the Depository or the Company advises the Trustee in writing that the
Depository is no longer willing, qualified or able to discharge properly its
responsibilities as nominee and depository with respect to the Certificates and
the Company or the Trustee is unable to locate a qualified successor; (b) the
Company, at its sole option, elects to terminate the book-entry system through
the Depository; or (c) after the occurrence of an Event of Default (as described
in the accompanying Prospectus) beneficial owners of the Book-Entry Certificates
aggregating not less than 51% of the aggregate voting rights allocated thereto
advise the Trustee and the Depository through the Financial Intermediaries in
writing that the continuation of a book-entry system through the Depository (or
a successor thereto) is no longer in the best interests of beneficial owners of
the Certificates.
Upon the occurrence of any of the events described in the immediately
preceding paragraph, the Trustee will be required to notify all beneficial
owners of the occurrence of such event and the availability through the
Depository of Definitive Certificates. Upon surrender by the Depository of the
global certificate or certificates representing the Certificates and
instructions for re-registration, the Trustee will issue the Definitive
Certificates, and thereafter the Trustee will recognize the holders of such
Definitive Certificates as Certificateholders under the Agreement. Following the
issuance of Definitive Certificates, distribution of principal and interest, if
any, on the Certificates will be made by the Trustee directly to holders of
Definitive Certificates in accordance with the procedures set forth in the
Agreement.
The Agreement will provide that, if Definitive Certificates are issued in
respect of the Class M, Class B1 or Class B2 Certificates, no transfer of a
Class M, Class B1 or Class B2 Certificate may be made unless the Trustee has
received (i) a certificate to the effect that the proposed transferee is not an
ERISA Plan (as defined herein) or that the transferee is an insurance company
investing assets of its general account and the exemption provided by Section
III(a) of the Department of Labor Prohibited Transaction Class Exemption 95-60,
60 Fed. Reg. 35925 (July 12, 1995), applies to such transferee's acquisition and
holding of such Certificate or (ii) an opinion of counsel relating to such
transfer in form and substance satisfactory to the Trustee and the Company. See
'ERISA Considerations' herein.
NON-BOOK-ENTRY CERTIFICATES
The Residual Certificates (the 'Non-Book-Entry Certificates') will be
issued in fully-registered, certificated form. The Non-Book-Entry Certificates
will be transferable and exchangeable on a Certificate Register to be maintained
at the corporate trust office in the city in which the Trustee is located or
such other office or agency maintained for such purposes by the Trustee in New
York City. Under the Agreement, the Trustee will initially be appointed as the
Certificate Registrar. No service charge will be made for any registration of
transfer or exchange of the Non-Book-Entry Certificates, but payment of a sum
sufficient to cover any tax or
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other governmental charge may be required by the Trustee. The Residual
Certificates will be subject to certain restrictions on transfer. See
'--Restrictions on Transfer of the Residual Certificates' herein.
Distributions of principal and interest, if any, on each Distribution Date
on the Non-Book-Entry Certificates will be made to the persons in whose names
such Certificates are registered at the close of business on the last business
day of the month immediately preceding the month of such Distribution Date.
Distributions will be made by check or money order mailed to the person entitled
thereto at the address appearing in the Certificate Register or, upon written
request by the Certificateholder to the Trustee, by wire transfer to a United
States depository institution designated by such Certificateholder and
acceptable to the Trustee or by such other means of payment as such
Certificateholder and the Trustee may agree; provided, however, that the final
distribution in retirement of the Non-Book-Entry Certificates will be made only
upon presentation and surrender of such Certificates at the office or agency of
the Trustee specified in the notice to the holders thereof of such final
distribution.
AVAILABLE FUNDS
The amount of funds ('Available Funds') in respect of the Mortgage Pool
that will be available for distribution to holders of the Certificates on each
Distribution Date is as described in the accompanying Prospectus under
'Servicing of the Mortgage Loans and Contracts--Loan Payment Record.'
DISTRIBUTIONS ON THE CERTIFICATES
Allocation of Available Funds. Interest and principal on the Certificates
will be distributed monthly on each Distribution Date commencing in September
1998 in an aggregate amount equal to the Available Funds for such Distribution
Date.
On each Distribution Date, the Available Funds will be distributed in the
following order of priority among the Certificates:
first, to the Classes of Senior Certificates (other than the Class PO
Certificates), the Accrued Certificate Interest on each such Class for such
Distribution Date, any shortfall in available amounts being allocated among
such Classes in proportion to the amount of Accrued Certificate Interest
otherwise distributable thereon; provided that on each Distribution Date
through the Class A19 Accretion Termination Date (as defined herein), such
amounts with respect to such Class A19 Certificates will not be distributed
on such Certificates under this priority first but will instead be added to
the Class Certificate Principal Balance thereof and distributed in
accordance with the second paragraph following priority eighth below;
second, to the Classes of Senior Certificates (other than the Class PO
Certificates), any Accrued Certificate Interest thereon remaining
undistributed (or not added to the Class Certificate Principal Balance of
the Class A19 Certificates) from previous Distribution Dates, to the extent
of remaining Available Funds, any shortfall in available amounts being
allocated among such Classes in proportion to the amount of such Accrued
Certificate Interest remaining undistributed (or not added to the Class
Certificate Principal Balance of the Class A19 Certificates) for each such
Class for such Distribution Date; provided that such amounts with respect
to the Class A19 Certificates will not be distributed on such Class under
this priority second but will instead be added to the Class Certificate
Principal Balance thereof and distributed in accordance with the second
paragraph following priority eighth below;
third, to the Senior Certificates (other than Class A11 Certificates),
in reduction of the Class Certificate Principal Balances thereof, to the
extent of remaining Available Funds, concurrently as follows:
(a) to the Class Al, Class A2, Class A3, Class A4, Class A5, Class
A6, Class A7, Class A8, Class A9, Class A10, Class A12, Class A13, Class
A14, Class A15, Class A16, Class A17, Class A18, Class A19, Class A20,
Class A21, Class A22, Class A23, Class A24, Class A25, Class A26, Class
R
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and Class RL Certificates, the Senior Optimal Principal Amount for such
Distribution Date, in the following order of priority:
(i) to the Class A22, Class A23, Class A24, Class A25 and Class
A26 Certificates (together, the 'Group II Senior Certificates'), the
Group II Senior Principal Distribution Amount (as defined herein) for
such Distribution Date, in the following order of priority:
(A) concurrently, to the Class A22, Class A23 and Class A24
Certificates, approximately 30.8823533333%, 8.0065355556% and
61.1111111111%, respectively, of the Group II Principal
Distribution Amount for such Distribution Date, until the Class
Certificate Principal Balance of the Class A24 Certificates has
been reduced to zero; and
(B) pro rata, to the Class A22, Class A23, Class A25 and
Class A26 Certificates, until the Class Certificate Principal
Balances thereof have each been reduced to zero; and
(ii) to the Class Al, Class A2, Class A3, Class A4, Class A5,
Class A6, Class A7, Class A8, Class A9, Class A10, Class A12, Class
A13, Class A14, Class A15, Class A16, Class A17, Class A18, Class
A19, Class A20, Class A21, Class R and Class RL Certificates
(together, the 'Group I Senior Certificates'), the Senior Optimal
Principal Amount for such Distribution Date, less the Group II Senior
Principal Distribution Amount for such Distribution Date (such
reduced amount, the 'Group I Senior Principal Distribution Amount'),
in the following order of priority:
(A) pro rata, to the Class R and Class RL Certificates,
until the Class Certificate Principal Balances thereof have each
been reduced to zero;
(B) to the Class A1, Class A2, Class A3, Class A4, Class A5,
Class A6, Class A7, Class A8, Class A9, Class A10, Class A12,
Class A13, Class A14, Class A15, Class A16, Class A17, Class A18
and Class A19 Certificates, concurrently as follows:
(I) to the Class A6, Class A7, Class A8, Class A9, Class
A10, Class A12, Class A13, Class A14, Class A15, Class A16,
Class A17, Class A18 and Class A19 Certificates,
approximately 56.9288430815% of the Group I Senior Principal
Distribution Amount remaining after distribution under clause
(ii)(A) above, for such Distribution Date, in the following
order of priority:
(1) concurrently, to the Class A6 and Class A10
Certificates, approximately 77.7777782672% and
22.2222217328%, respectively, of the amount available
pursuant to clause (I) above, up to the amount necessary
to reduce the Class Certificate Principal Balance of each
such Class to its PAC Balance (as set forth in the PAC
Balances Table attached hereto as Appendix A) for such
Distribution Date;
(2) concurrently, to the Class A7, Class A8, Class
A9 and Class A10 Certificates, approximately
28.1837814858%, 28.2433825545%, 21.3506142269% and
22.2222217328%, respectively, of the remaining amount
available pursuant to clause (I) above, up to the amount
necessary to reduce the Class Certificate Principal
Balance of each such class to its PAC Balance for such
Distribution Date;
(3) pro rata, to the Class A8, Class A9 and Class
A10 Certificates, up to the amount necessary to reduce
the Class Certificate Principal Balance of each such
Class to its PAC Balance for such Distribution Date;
(4) to the Class A12, Class A13, Class A14, Class
A15, Class A16, Class A17 and Class A18 Certificates
(together, the 'Aggregate TAC Segment Certificates'), in
the aggregate, up to the amount necessary to reduce the
aggregate Class Certificate Principal Balance of the
Aggregate TAC Segment Certificates to their Aggregate TAC
Segment Balance (as set forth in the Aggregate TAC
Segment Balances Table attached hereto as Appendix B) for
such Distribution Date, in the following order of
priority:
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(v) concurrently, to the Class A12, Class A13
and Class A14 Certificates, approximately
27.6504277906%, 7.1686295376% and 65.1809426718%,
respectively, of the amount available pursuant to
clause (4) above, up to the amount necessary to
reduce the Class Certificate Principal Balance of the
Class A14 Certificates to its PAC Balance for such
Distribution Date;
(w) concurrently, to the Class A12, Class A13,
Class A15 and Class A16 Certificates, approximately
27.6504277906%, 7.1686295376%, 51.7613368075% and
13.4196058643%, respectively, of the remaining amount
available pursuant to clause (4) above, up to the
amount necessary to reduce the Class Certificate
Principal Balance of the Class A16 Certificates to
its Scheduled Balance (as set forth in the Scheduled
Balances Table attached hereto as Appendix C) for
such Distribution Date;
(x) concurrently, to the Class A12, Class A13,
Class A15, Class A17 and Class A18 Certificates,
approximately 27.6504277906%, 7.1686295376%,
51.7613368075%, 7.8237871701% and 5.5958186942%,
respectively, of the remaining amount available
pursuant to clause (4) above, until the Class
Certificate Principal Balances of the Class A17 and
Class A18 Certificates have each been reduced to
zero;
(y) concurrently, to the Class A12, Class A13,
Class A15 and Class A16 Certificates, approximately
27.6504277906%, 7.1686295376%, 51.7613368075% and
13.4196058643%, respectively, of the remaining amount
available pursuant to clause (4) above, without
regard to the Scheduled Balance of the Class A16
Certificates for such Distribution Date, until the
Class Certificate Principal Balances of the Class A15
and Class A16 Certificates have each been reduced to
zero; and
(z) concurrently, to the Class A12, Class A13
and Class A14 Certificates, approximately
27.6504277906%, 7.1686295376% and 65.1809426718%,
respectively, of the remaining amount available
pursuant to clause (4) above, without regard to the
PAC Balance of the Class A14 Certificates for such
Distribution Date, until the Class Certificate
Principal Balance of each such Class has been reduced
to zero;
(5) to the Class A19 Certificates, until the Class
Certificate Principal Balance thereof has been reduced to
zero;
(6) to the Aggregate TAC Segment Certificates,
without regard to the Aggregate TAC Segment Balance for
such Distribution Date, in the following order of
priority:
(v) concurrently, to the Class A12, Class A13
and Class A14 Certificates, approximately
27.6504277906%, 7.1686295376% and 65.1809426718%,
respectively, of the amount available pursuant to
clause (6) above, up to the amount necessary to
reduce the Class Certificate Principal Balance of the
Class A14 Certificates to its PAC Balance for such
Distribution Date;
(w) concurrently, to the Class A12, Class A13,
Class A15 and Class A16 Certificates, approximately
27.6504277906%, 7.1686295376%, 51.7613368075% and
13.4196058643%, respectively, of the remaining amount
available pursuant to clause (6) above, up to the
amount necessary to reduce the Class Certificate
Principal Balance of the Class A16 Certificates to
its Scheduled Balance for such Distribution Date;
(x) concurrently, to the Class A12, Class A13,
Class A15, Class A17 and Class A18 Certificates,
approximately 27.6504277906%, 7.1686295376%,
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<PAGE>
51.7613368075%, 7.8237871701% and 5.5958186942%,
respectively, of the remaining amount available
pursuant to clause (6) above, until the Class
Certificate Principal Balances of the Class A17 and
Class A18 Certificates have each been reduced to
zero;
(y) concurrently, to the Class A12, Class A13,
Class A15 and Class A16 Certificates, approximately
27.6504277906%, 7.1686295376%, 51.7613368075% and
13.4196058643%, respectively, of the remaining amount
available pursuant to clause (6) above, without
regard to the Scheduled Balance of the Class A16
Certificates for such Distribution Date, until the
Class Certificate Principal Balances of the Class A15
and Class A16 Certificates have each been reduced to
zero; and
(z) concurrently, to the Class A12, Class A13
and Class A14 Certificates, approximately
27.6504277906%, 7.1686295376% and 65.1809426718%,
respectively, of the remaining amount available
pursuant to clause (6) above, without regard to the
PAC Balance of the Class A14 Certificates for such
Distribution Date, until the Class Certificate
Principal Balance of each such Class has been reduced
to zero;
(7) concurrently, to the Class A6 and Class A10
Certificates, approximately 77.7777782672% and
22.2222217328%, respectively, of the remaining amount
available pursuant to clause (I) above, without regard to
their respective PAC Balances for such Distribution Date,
until the Class Certificate Principal Balances thereof
have each been reduced to zero; and
(8) concurrently, to the Class A7, Class A8, Class
A9 and Class A10 Certificates, approximately
28.1837814858%, 28.2433825545%, 21.3506142269% and
22.2222217328%, respectively, of the remaining amount
available pursuant to clause (I) above, without regard to
their respective PAC Balances for such Distribution Date,
until the Class Certificate Principal Balance of the
Class A7 Certificates has been reduced to zero; and
(9) pro rata, to the Class A8, Class A9 and Class
A10 Certificates, without regard to their respective PAC
Balances for such Distribution Date, until the Class
Certificate Principal Balances thereof have each been
reduced to zero; and
(II) to the Class Al, Class A2, Class A3, Class A4 and
Class A5 Certificates, approximately 43.0711569185% of the
Group I Senior Principal Distribution Amount remaining after
distribution under clause (ii)(A) above, for such
Distribution Date, in the following order of priority:
(1) concurrently, to the Class A1, Class A2, Class
A3 and Class A4 Certificates, approximately
19.5141521979%, 16.4670150835%, 35.2043935083% and
28.8144392103%, respectively, of the amount available
pursuant to clause (II) above, until the Class
Certificate Principal Balance of the Class A2
Certificates has been reduced to zero;
(2) concurrently, to the Class A1, Class A3, Class
A4 and Class A5 Certificates, approximately
19.5141521979%, 35.2043935083%, 28.8144392103% and
16.4670150835%, respectively, of the remaining amount
available pursuant to clause (II) above, until the Class
Certificate Principal Balance of the Class A1
Certificates has been reduced to zero; and
(3) pro rata, to the Class A3, Class A4 and Class A5
Certificates, until the Class Certificate Principal
Balances thereof have each been reduced to zero; and
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<PAGE>
(C) pro rata, to the Class A20 and Class A21 Certificates,
until the Class Certificate Principal Balances thereof have each
been reduced to zero; and
(b) to the Class PO Certificates, the Class PO Principal
Distribution Amount for such Distribution Date until the Class
Certificate Principal Balance thereof has been reduced to zero;
fourth, to the Class PO Certificates, to the extent of remaining
Available Funds, the Class PO Deferred Amount for such Distribution Date,
until the Class Certificate Principal Balance thereof has been reduced to
zero; provided that, (i) on any Distribution Date, distributions pursuant
to this priority fourth shall not exceed the Junior Optimal Principal
Amount for such Distribution Date, (ii) such distributions shall not reduce
the Class Certificate Principal Balance of the Class PO Certificates and
(iii) no distribution will be made in respect of the Class PO Deferred
Amount after the Distribution Date on which the respective Class
Certificate Principal Balances of the Junior Certificates have been reduced
to zero (the 'Cross-Over Date');
fifth, to the Class M Certificates, to the extent of remaining
Available Funds, in the following order: (a) the Accrued Certificate
Interest thereon for such Distribution Date, (b) any Accrued Certificate
Interest thereon remaining undistributed from previous Distribution Dates
and (c) such Class's Allocable Share (as defined under '--Principal' below)
for such Distribution Date;
sixth, to the Class B1 Certificates, to the extent of remaining
Available Funds, in the following order: (a) the Accrued Certificate
Interest thereon for such Distribution Date, (b) any Accrued Certificate
Interest thereon remaining undistributed from previous Distribution Dates
and (c) such Class's Allocable Share for such Distribution Date;
seventh, to the Class B2 Certificates, to the extent of remaining
Available Funds, in the following order: (a) the Accrued Certificate
Interest thereon for such Distribution Date, (b) any Accrued Certificate
Interest thereon remaining undistributed from previous Distribution Dates
and (c) such Class's Allocable Share for such Distribution Date; and
eighth, to the Class B3, Class B4 and Class B5 Certificates, to the
extent of remaining Available Funds: (a) the Accrued Certificate Interest
thereon for such Distribution Date, (b) any Accrued Certificate Interest
thereon remaining undistributed from previous Distribution Dates and (c)
such Classes' Allocable Share for such Distribution Date.
The percentages set forth in priority third above and in the following
paragraph were calculated on the basis of the Class Certificate Principal
Balances of the related Certificates set forth on the cover hereof or described
herein. If such Class Certificate Principal Balances are increased or decreased
in accordance with the variance permitted hereby, the applicable percentages
will be increased or decreased substantially correspondingly.
On each Distribution Date through the earlier of (a) the Cross-Over Date
and (b) the Distribution Date on which the Class Certificate Principal Balances
of all the Aggregate TAC Segment Certificates have been reduced to zero (the
'Class A19 Accretion Termination Date'), before distributions have been made
pursuant to priority third above, an amount equal to the Class A19 Accrual
Amount (as defined herein) for such Distribution Date will be distributed to the
Aggregate TAC Segment Certificates and the Class A19 Certificates in the
following order of priority, provided, however, that the amounts distributed
pursuant to priorities first through fifth below will not exceed the amount
necessary to reduce the aggregate Class Certificate Principal Balance of the
Aggregate TAC Segment Certificates to the Aggregate TAC Segment Balance for such
Distribution Date:
first, concurrently, to the Class A12, Class A13 and Class A14
Certificates, approximately 27.6504277906%, 7.1686295376% and
65.1809426718%, respectively, of the Class A19 Accrual Amount, up to the
amount necessary to reduce the Class Certificate Principal Balance of the
Class A14 Certificates to its PAC Balance (as set forth in the PAC Balances
Table) for such Distribution Date;
second, concurrently, to the Class A12, Class A13, Class A15 and Class
A16 Certificates, approximately 27.6504277906%, 7.1686295376%,
51.7613368075% and 13.4196058643%, respectively, of the remaining Class A19
Accrual Amount, up to the amount necessary to reduce the Class Certificate
Principal Balance of the Class A16 Certificates to its Scheduled Balance
for such Distribution Date;
S-25
<PAGE>
third, concurrently, to the Class A12, Class A13, Class A15, Class A17
and Class A18 Certificates, approximately 27.6504277906%, 7.1686295376%,
51.7613368075%, 7.8237871701% and 5.5958186942%, respectively, of the
remaining Class A19 Accrual Amount, until the Class Certificate Principal
Balances of the Class A17 and Class A18 Certificates have each been reduced
to zero;
fourth, concurrently, to the Class A12, Class A13, Class A15 and Class
A16 Certificates, approximately 27.6504277906%, 7.1686295376%,
51.7613368075% and 13.4196058643%, respectively, of the remaining Class A19
Accrual Amount, without regard to the Scheduled Balance of the Class A16
Certificates for such Distribution Date, until the Class Certificate
Principal Balances of Class A15 and Class A16 Certificates have each been
reduced to zero;
fifth, concurrently, to the Class A12, Class A13 and Class A14
Certificates, approximately 27.6504277906%, 7.1686295376% and
65.1809426718%, respectively, of the remaining Class A19 Accrual Amount,
without regard to the PAC Balance of the Class A14 Certificates for such
Distribution Date, until the Class Certificate Principal Balance of each
such Class has been reduced to zero; and
sixth, to the Class A19 Certificates, as Accrued Certificate Interest
thereon.
Any Class A19 Accrual Amount so distributed to the Aggregate TAC Segment
Certificates on a Distribution Date will be added to the Class Certificate
Principal Balance of the Class A19 Certificates on such Distribution Date.
On each Distribution Date after the Cross-Over Date, distributions of
principal on the outstanding Senior Certificates (other than the Class A11 and
Class PO Certificates) will be made pro rata among all such Certificates,
regardless of the allocation, or sequential nature, of principal payments
described in priority third above.
'Pro rata' distributions among Classes of Certificates will be made in
proportion to the then-current Class Certificate Principal Balances of such
Classes.
If, after distributions have been made pursuant to priorities first and
second and the second paragraph following priority eighth above on any
Distribution Date, the remaining Available Funds are less than the sum of the
Senior Optimal Principal Amount and the Class PO Principal Distribution Amount
for such Distribution Date, the amounts distributable under priority third above
shall be proportionately reduced, and such remaining Available Funds will be
distributed on the Senior Certificates in accordance with the applicable clauses
of priority third above on the basis of such reduced amounts. Notwithstanding
such allocation, Realized Losses will be allocated to the Certificates as
described under '--Allocation of Realized Losses on the Certificates' herein.
Interest. Interest will accrue on the Certificates offered hereby entitled
to interest distributions (other than the LIBOR Certificates) at the respective
fixed Certificate Interest Rates set forth on the cover hereof during each
Interest Accrual Period. The 'Interest Accrual Period' for each Class of
Certificates entitled to distributions of interest other than the LIBOR
Certificates will be the one-month period ending on the last day of the month
preceding the month in which a Distribution Date occurs. The 'Interest Accrual
Period' for the LIBOR Certificates will be the one-month period commencing on
the 25th day of the month preceding the month in which a Distribution Date
occurs and ending on the 24th day of the month of such Distribution Date.
Interest will be calculated on the basis of a 360-day year consisting of twelve
30-day months.
Interest will accrue on the Class A10 Certificates at the per annum rate of
5.956250% for the first Interest Accrual Period, and thereafter, with respect to
each Interest Accrual Period, at a per annum rate equal to the lesser of (i)
0.300% plus LIBOR and (ii) 8.500000%, subject to a minimum rate of 0.30%.
Interest will accrue on the Class A11 Certificates at the per annum rate of
2.543750% for the first Interest Accrual Period, and thereafter, with respect to
each Interest Accrual Period, at a per annum rate equal to the lesser of (i)
8.200000% minus LIBOR and (ii) 8.200000%, subject to a minimum rate of 0.00%.
Interest will accrue on the Class A12 Certificates at the per annum rate of
6.056250% for the first Interest Accrual Period, and thereafter, with respect to
each Interest Accrual Period, at a per annum rate equal to the lesser of (i)
0.400% plus LIBOR and (ii) 8.500000%, subject to a minimum rate of 0.40%.
S-26
<PAGE>
Interest will accrue on the Class A13 Certificates at the per annum rate of
9.425892% for the first Interest Accrual Period, and thereafter, with respect to
each Interest Accrual Period, at a per annum rate equal to the lesser of (i)
31.242857% - (3.857143 x LIBOR) and (ii) 31.242857%, subject to a minimum rate
of 0.00%.
Interest will accrue on the Class A15 Certificates at the per annum rate of
6.156250% for the first Interest Accrual Period, and thereafter, with respect to
each Interest Accrual Period, at a per annum rate equal to the lesser of (i)
0.500% plus LIBOR and (ii) 8.500000%, subject to a minimum rate of 0.50%.
Interest will accrue on the Class A16 Certificates at the per annum rate of
9.040178% for the first Interest Accrual Period, and thereafter, with respect to
each Interest Accrual Period, at a per annum rate equal to the lesser of (i)
30.857143% - (3.857143 x LIBOR) and (ii) 30.857143%, subject to a minimum rate
of 0.00%.
Interest will accrue on the Class A17 Certificates at the per annum rate of
8.890105% for the first Interest Accrual Period, and thereafter, with respect to
each Interest Accrual Period, at a per annum rate equal to the lesser of (i)
46.311244% - (6.615892 x LIBOR) and (ii) 46.311244%, subject to a minimum rate
of 0.00%.
Interest will accrue on the Class A18 Certificates at the per annum rate of
9.250000% for the first Interest Accrual Period, and thereafter, with respect to
each Interest Accrual Period, at a per annum rate equal to the lesser of (i)
74.000000% - (9.250 x LIBOR) and (ii) 9.250000%, subject to a minimum rate of
0.00%.
Interest will accrue on the Class A20 Certificates at the per annum rate of
6.456250% for the first Interest Accrual Period, and thereafter, with respect to
each Interest Accrual Period, at a per annum rate equal to the lesser of (i)
0.800% plus LIBOR and (ii) 9.000000%, subject to a minimum rate of 0.80%.
Interest will accrue on the Class A21 Certificates at the per annum rate of
7.631250% for the first Interest Accrual Period, and thereafter, with respect to
each Interest Accrual Period, at a per annum rate equal to the lesser of (i)
24.600000% - (3.000 x LIBOR) and (ii) 24.600000%, subject to a minimum rate of
0.00%.
Interest will accrue on the Class A22 Certificates at the per annum rate of
6.406250% for the first Interest Accrual Period, and thereafter, with respect to
each Interest Accrual Period, at a per annum rate equal to the lesser of (i)
0.750% plus LIBOR and (ii) 8.500000%, subject to a minimum rate of 0.75%.
Interest will accrue on the Class A23 Certificates at the per annum rate of
8.075894% for the first Interest Accrual Period, and thereafter, with respect to
each Interest Accrual Period, at a per annum rate equal to the lesser of (i)
29.892859% - (3.857143 x LIBOR) and (ii) 29.892859%, subject to a minimum rate
of 0.00%.
Interest will accrue on the Class A25 Certificates at the per annum rate of
6.456250% for the first Interest Accrual Period, and thereafter, with respect to
each Interest Accrual Period, at a per annum rate equal to the lesser of (i)
0.800% plus LIBOR and (ii) 9.000000%, subject to a minimum rate of 0.80%.
Interest will accrue on the Class A26 Certificates at the per annum rate of
7.631250% for the first Interest Accrual Period, and thereafter, with respect to
each Interest Accrual Period, at a per annum rate equal to the lesser of (i)
24.600000% - (3.000 x LIBOR) and (ii) 24.600000%, subject to a minimum rate of
0.00%.
The Trustee shall determine LIBOR in accordance with the methods set forth
under '--Determination of LIBOR' below.
Interest will accrue on the Class B3, Class B4 and Class B5 Certificates at
the Certificate Interest Rate of 6.75% per annum during each Interest Accrual
Period.
The Class PO Certificates are principal-only Certificates and will not
accrue interest.
The 'Accrued Certificate Interest' for any Certificate (other than the
Class PO Certificates) for any Distribution Date will equal the interest accrued
during the related Interest Accrual Period at the applicable Certificate
Interest Rate on the Certificate Principal Balance or Notional Principal Balance
of such Certificate immediately prior to such Distribution Date, less such
Certificate's share of any allocable Net Interest Shortfall (as defined below),
the interest portion of any Excess Losses (as defined herein) allocable to
Certificateholders through the Cross-Over Date and, after the Cross-Over Date,
the interest portion of Realized Losses allocable to Certificateholders,
including Excess Losses.
S-27
<PAGE>
The aggregate 'Notional Principal Balance' of the Class A11 Certificates as
of any Distribution Date will equal the Class Certificate Principal Balance of
the Class A10 Certificates as of such date.
On each Distribution Date through the Class A19 Accretion Termination Date,
the Accrued Certificate Interest on the Class A19 Certificates on such
Distribution Date will not be distributed on such Certificates but will instead
be added to the Class Principal Balance thereof, except as described herein. On
each Distribution Date after the Class A19 Accretion Termination Date, interest
for such Distribution Date will be distributable on the Class A19 Certificates
and will not be added to the Class Certificate Principal Balance thereof.
The 'Class A19 Accrual Amount' with respect to each Distribution Date
through the Class A19 Accretion Termination Date will be an amount equal to the
sum of (a) the Accrued Certificate Interest in respect of the Class A19
Certificates in accordance with priority first under '--Allocation of Available
Funds' above and (b) any available amounts allocable to such Class in accordance
with priority second under '--Allocation of Available Funds' above.
The 'Certificate Principal Balance' of any Certificate (other than a Class
A11 Certificate) as of any Distribution Date will equal such Certificate's
Certificate Principal Balance on the Closing Date as (a) reduced by the sum of
(w) all amounts distributed on previous Distribution Dates on such Certificate
on account of principal, (x) the principal portion of all Realized Losses
previously allocated to such Certificate and (y) in the case of a Junior
Certificate, such Certificate's pro rata share, if any, of the Junior
Certificate Writedown Amount and the Class PO Deferred Payment Writedown Amount
for previous Distribution Dates and (b) in the case of the Class A19
Certificates through the Class A19 Accretion Termination Date, increased by all
Accrued Certificate Interest thereon added to the Certificate Principal Balance
thereof on such date or on previous Distribution Dates. As of any Distribution
Date, the 'Junior Certificate Writedown Amount' will equal the amount by which
(a) the sum of the Class Certificate Principal Balances of all of the
Certificates (after giving effect to the distribution of principal and the
application of Realized Losses in reduction of the Certificate Principal
Balances of the Certificates on such Distribution Date) exceeds (b) the Pool
Scheduled Principal Balance on the first day of the month of such Distribution
Date less any Deficient Valuations occurring on or prior to the Bankruptcy
Coverage Termination Date. For any Distribution Date, the 'Class PO Deferred
Payment Writedown Amount' will equal the amount, if any, distributed on such
date in respect of the Class PO Deferred Amount pursuant to priority fourth
under '--Allocation of Available Funds' above. The Junior Certificate Writedown
Amount and the Class PO Deferred Payment Writedown Amount will be allocated to
the Classes of Junior Certificates in inverse order of priority, until the Class
Certificate Principal Balance of each such Class has been reduced to zero.
With respect to any Distribution Date, the 'Net Interest Shortfall'
allocable to Certificateholders will equal the excess of the aggregate Interest
Shortfalls allocable to Certificateholders with respect to such Distribution
Date over the Compensating Interest Payment (as defined under 'The Pooling and
Servicing Agreement-- Servicing Compensation, Compensating Interest and Payment
of Expenses' herein), if any, for such Distribution Date. For purposes of making
the foregoing determinations, any Interest Shortfalls will be allocated on each
Distribution Date between the outstanding Certificates (other than the Class PO
Certificates) and the Company in respect of its Supplemental Servicing Fees (as
defined herein) in proportion to the aggregate amount of Accrued Certificate
Interest and Supplemental Servicing Fees, respectively, that would have been
allocated thereto in the absence of such Interest Shortfalls.
With respect to any Distribution Date, an 'Interest Shortfall' in respect
of a Mortgage Loan will result from (i) any voluntary prepayment of principal in
full on such Mortgage Loan received from the sixteenth day (or, in the case of
the first Distribution Date, from the Cut-off Date) through the last day of the
month preceding such Distribution Date; (ii) any partial prepayment of principal
on such Mortgage Loan by the Mortgagor during the month preceding such
Distribution Date; or (iii) a reduction in the interest rate on such Mortgage
Loan due to the application of the Soldiers' and Sailors' Civil Relief Act of
1940 whereby, in general, members of the Armed Forces who entered into mortgages
prior to the commencement of military service may have the interest rates on
those mortgage loans reduced for the duration of their active military service.
See 'Certain Legal Aspects of the Mortgage Loans and Contracts--The Mortgage
Loans--Soldiers' and Sailors' Civil Relief Act' in the Prospectus. As to any
Distribution Date and any Mortgage Loan with respect to which a prepayment in
full has occurred as described above, the resulting 'Interest Shortfall'
generally will equal the difference between (a) one month's interest at the
Mortgage Rate net of the applicable Base Servicing Fee (as defined herein) (the
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<PAGE>
'Net Mortgage Rate') on the Scheduled Principal Balance of such Mortgage Loan,
and (b) the amount of interest at the Net Mortgage Rate actually received with
respect to such Mortgage Loan. In the case of a partial prepayment, the
resulting 'Interest Shortfall' will equal one month's interest at the applicable
Net Mortgage Rate on the amount of such prepayment.
Any Net Interest Shortfall, the interest portion of any Excess Losses
allocable to Certificateholders through the Cross-Over Date and, after the
Cross-Over Date, the interest portion of any Realized Losses allocable to
Certificateholders (see '--Allocation of Realized Losses on the Certificates')
will, on each Distribution Date, be allocated among all the outstanding
Certificates (other than the Class PO Certificates) in proportion to the amount
of Accrued Certificate Interest that would have been allocated thereto in the
absence of such shortfall and losses. See 'The Pooling and Servicing
Agreement--Servicing Compensation, Compensating Interest and Payment of
Expenses' herein.
The interest portion of any Realized Losses (other than Excess Losses)
occurring prior to the Cross-Over Date will not be allocated among any
Certificates, but will reduce the amount of Available Funds on the related
Distribution Date. As a result of the subordination of the Junior Certificates
in right of distribution, such losses will be borne first by the Junior
Certificates (to the extent then outstanding) in inverse order of priority.
If Available Funds are insufficient on any Distribution Date to distribute
the aggregate Accrued Certificate Interest on the Senior Certificates (other
than the Class PO Certificates) to their Certificateholders, any shortfall in
available amounts will be allocated among such Classes of Senior Certificates in
proportion to the amounts of Accrued Certificate Interest otherwise
distributable thereon or, in the case of the Class A19 Certificates through the
Class A19 Accretion Termination Date, the amount that would otherwise be added
to principal thereof. Such reduction with respect to the Class A19 Certificates
will effect a corresponding reduction in the Class A19 Accrual Amount on such
Distribution Date. The amount of any such undistributed Accrued Certificate
Interest will be added to the amount to be distributed in respect of interest on
the Senior Certificates (other than the Class PO Certificates) on subsequent
Distribution Dates in accordance with priority second under '--Allocation of
Available Funds' above. No interest will accrue on any Accrued Certificate
Interest remaining undistributed from previous Distribution Dates.
Determination of LIBOR. The Trustee shall determine the Certificate
Interest Rate for the LIBOR Certificates for any Interest Accrual Period by
reference to LIBOR. 'LIBOR' will be determined on the second London banking day
(as defined below) immediately preceding the commencement of each Interest
Accrual Period (other than the first Interest Accrual Period) (each, a 'LIBOR
Determination Date'), and will be (1) the rate (expressed as a percentage per
annum) for deposits in U.S. Dollars for a period of one month that appears on
Telerate Page 3750 as of 11:00 a.m., London time, on such LIBOR Determination
Date (such rate, the 'British Bankers' Association Interest Settlement Rate') or
(2) if such rate does not appear on Telerate Page 3750 as of 11:00 a.m., London
time, on the applicable LIBOR Determination Date, the Trustee will request the
principal London office of each of four major reference banks in the London
interbank market selected by the Trustee to provide such banks' respective
offered quotations (expressed as a percentage per annum) to prime banks in the
London interbank market for deposits in U.S. Dollars for a period of one month
as of 11:00 a.m., London time, on such LIBOR Determination Date. If at least two
such offered quotations are so provided, LIBOR will be the arithmetic mean of
such quotations. If fewer than two such quotations are so provided, the Trustee
will request each of three major banks in New York City selected by the Trustee
to provide such banks' respective rates (expressed as a percentage per annum)
for loans in U.S. Dollars to leading European banks for a period of one month as
of approximately 11:00 a.m., New York City time, on the first day of the
Interest Accrual Period. If on any LIBOR Determination Date the Trustee is
required but is unable to determine LIBOR in the manner provided in the
immediately preceding sentence, LIBOR for the related Interest Accrual Period
will be LIBOR as determined on the previous LIBOR Determination Date, or, in the
case of the first LIBOR Determination Date, 5.65625% per annum. As used herein
with respect to a LIBOR Determination Date, 'London banking day' means a day on
which banks are open for dealing in foreign currency and exchange in London.
The establishment of LIBOR by the Trustee and the Trustee's subsequent
calculation of the rates of interest applicable to the LIBOR Certificates for
the relevant Interest Accrual Period, in the absence of manifest error, will be
final and binding. The Certificate Interest Rates on the LIBOR Certificates for
any Interest Accrual Period may be obtained by calling the Trustee at (617)
664-5500.
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<PAGE>
Principal. All payments and other amounts received in respect of principal
of the Mortgage Loans will be allocated between (i) the Senior Certificates
(other than the Class A11 and Class PO Certificates) and the Junior
Certificates, on the one hand, and (ii) the Class PO Certificates, on the other,
in each case based on the applicable Non-PO Percentage and the applicable PO
Percentage, respectively, of such amounts.
The 'Non-PO Percentage' with respect to any Mortgage Loan with a Net
Mortgage Rate ('NMR') less than 6.75% per annum (each such Mortgage Loan, a
'Discount Mortgage Loan') will be the fraction, expressed as a percentage, equal
to NMR divided by 6.75%. The 'Non-PO Percentage' with respect to any Mortgage
Loan with a Net Mortgage Rate equal to or greater than 6.75% (each such Mortgage
Loan, a 'Non-Discount Mortgage Loan') will be 100%. The 'PO Percentage' with
respect to any Discount Mortgage Loan will be the fraction, expressed as a
percentage, equal to (6.75% - NMR) divided by 6.75%. The 'PO Percentage' with
respect of any Non-Discount Mortgage Loan will be 0%.
The initial Class Certificate Principal Balance of the Class PO
Certificates, which are not offered hereby, will be approximately $1,238,414,
subject to the variance described herein.
Distributions in reduction of the Class Certificate Principal Balance of
each Class of Senior Certificates entitled to principal distributions will be
made on each Distribution Date pursuant to priority third and the second
paragraph following priority eighth under '--Allocation of Available Funds'
above. In accordance with priority third, the Available Funds remaining after
the distribution of interest and the Class A19 Accrual Amount will be allocated
to such Senior Certificates in an aggregate amount not to exceed the sum of the
Senior Optimal Principal Amount and the Class PO Principal Distribution Amount
for such Distribution Date. Distributions in reduction of the Class Certificate
Principal Balances of the Class M, Class B1 and Class B2 Certificates will be
made pursuant to priorities fifth, sixth and seventh, respectively, under
'--Allocation of Available Funds' above. In accordance with each such priority,
the Available Funds, if any, remaining after distributions of principal and
interest on the Senior Certificates and payments in respect of the Class PO
Deferred Amount on such Distribution Date will be allocated to the Class M,
Class B1 and Class B2 Certificates in an amount equal to each such Class's
Allocable Share for such Distribution Date, provided that no distribution of
principal will be made on any such Class until any Class ranking prior thereto
has received distributions of interest and principal, and such Class has
received distributions of interest, on such Distribution Date. The Group II
Senior Certificates will not receive any distributions in respect of scheduled
payments, prepayments or other unscheduled recoveries of principal on the
Mortgage Loans during the first five years after the Cut-off Date, except as
otherwise described herein on or following the earlier of the Group I Final
Distribution Date and the Cross-Over Date.
The 'Senior Optimal Principal Amount' with respect to each Distribution
Date will be an amount equal to the sum of (i) the Senior Percentage (as defined
herein) of the applicable Non-PO Percentage of all scheduled payments of
principal due on each Mortgage Loan on the first day of the month in which the
Distribution Date occurs, as specified in the amortization schedule at the time
applicable thereto (after adjustment for previous principal prepayments and the
principal portion of Debt Service Reductions after the Bankruptcy Coverage
Termination Date, but before any adjustment to such amortization schedule by
reason of any other bankruptcy or similar proceeding or any moratorium or
similar waiver or grace period), (ii) the Senior Prepayment Percentage (as
defined herein) of the applicable Non-PO Percentage of the Scheduled Principal
Balance of each Mortgage Loan which was the subject of a prepayment in full
received by the Company (or, in the case of a Mortgage Loan master-serviced by
the Company, of which the Company receives notice) during the applicable
Prepayment Period (as defined below), (iii) the Senior Prepayment Percentage of
the applicable Non-PO Percentage of all partial prepayments of principal
received during the applicable Prepayment Period, (iv) the lesser of (a) the
Senior Prepayment Percentage of the applicable Non-PO Percentage of the sum of
(w) the net liquidation proceeds allocable to principal on each Mortgage Loan
which became a Liquidated Mortgage Loan during the related Prepayment Period
(other than Mortgage Loans described in clause (x)) and (x) the principal
balance of each Mortgage Loan that was purchased by a private mortgage insurer
during the related Prepayment Period as an alternative to paying a claim under
the related insurance policy, and (b) the Senior Percentage of the applicable
Non-PO Percentage of the sum of (w) the Scheduled Principal Balance of each
Mortgage Loan which became a Liquidated Mortgage Loan during the related
Prepayment Period (other than Mortgage Loans described in clause (x)) and (x)
the Scheduled Principal Balance of each Mortgage Loan that was purchased by a
private mortgage insurer during the related Prepayment Period as an alternative
to paying a claim under the related insurance policy less (y) in the case of
clause (b), the Senior Percentage of the applicable Non-PO Percentage of
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<PAGE>
the principal portion of Excess Losses (other than Debt Service Reductions)
during the related Prepayment Period, and (v) the Senior Prepayment Percentage
of the applicable Non-PO Percentage of the sum of (a) the Scheduled Principal
Balance of each Mortgage Loan which was repurchased by the Company in connection
with such Distribution Date and (b) the difference, if any, between the
Scheduled Principal Balance of a Mortgage Loan that has been replaced by the
Company with a substitute Mortgage Loan pursuant to the Agreement in connection
with such Distribution Date and the Scheduled Principal Balance of such
substitute Mortgage Loan.
With respect to any Mortgage Loan that was the subject of a voluntary
prepayment in full and any Distribution Date, the 'Prepayment Period' is the
period from the sixteenth day of the month preceding the month of such
Distribution Date (or, in the case of the first Distribution Date, from the
Cut-off Date) through the fifteenth day of the month of such Distribution Date.
With respect to any other unscheduled prepayment of principal of any Mortgage
Loan and any Distribution Date, the 'Prepayment Period' is the month preceding
the month of such Distribution Date.
The 'Group II Senior Principal Distribution Amount' for any Distribution
Date will equal the sum of (a) the total of the amounts described in clauses (i)
and (iv) of the definition of Senior Optimal Principal Amount (without
application of the Senior Percentage or Senior Prepayment Percentage) for such
date multiplied by the Group II Senior Scheduled Distribution Percentage for
such date, and (b) the total of the amounts described in clauses (ii), (iii) and
(v) of the definition of Senior Optimal Principal Amount (without application of
the Senior Prepayment Percentage) for such date multiplied by the product of (x)
the Group II Senior Percentage for such date and (y) the Group II Senior
Prepayment Distribution Percentage for such date. Notwithstanding the foregoing,
(i) on the Group I Final Distribution Date, the Group II Senior Principal
Distribution Amount will be increased by any Senior Optimal Principal Amount
remaining after distributions of principal have been made on the Group I Senior
Certificates, and (ii) following the Group I Final Distribution Date, the Group
II Senior Principal Distribution Amount will equal the Senior Optimal Principal
Amount.
The 'Group II Senior Scheduled Distribution Percentage' for any
Distribution Date through the Distribution Date in August 2003 will equal 0%.
The Group II Senior Scheduled Distribution Percentage on any Distribution Date
after the Distribution Date in August 2003 will equal the Group II Senior
Percentage for such Distribution Date. Notwithstanding the foregoing, on any
Distribution Date after the Group I Final Distribution Date, the Group II Senior
Scheduled Distribution Percentage will equal the Senior Percentage for such
Distribution Date.
The 'Group II Senior Percentage' for any Distribution Date will equal the
percentage obtained by dividing (x) the aggregate Certificate Principal Balance
of the Group II Senior Certificates immediately preceding such Distribution Date
by (y) the aggregate Certificate Principal Balance of all the Certificates (less
the Class Certificate Principal Balance of the Class PO Certificates)
immediately preceding such Distribution Date. The initial Group II Senior
Percentage is expected to be approximately 10.00%.
The 'Group II Senior Prepayment Distribution Percentage' for any
Distribution Date will equal 0% through the Distribution Date in August 2003;
30% thereafter through the Distribution Date in August 2004; 40% thereafter
through the Distribution Date in August 2005; 60% thereafter through the
Distribution Date in August 2006; 80% thereafter through the Distribution Date
in August 2007; and 100% thereafter.
The 'Senior Percentage' on any Distribution Date will equal the lesser of
(i) 100% and (ii) the percentage (carried to six places rounded up) obtained by
dividing the aggregate Certificate Principal Balances of all the Senior
Certificates (less the Class Certificate Principal Balance of the Class PO
Certificates) immediately preceding such Distribution Date by the aggregate
Certificate Principal Balances of all the Certificates (less the Class
Certificate Principal Balance of the Class PO Certificates) immediately
preceding such Distribution Date. The initial Senior Percentage is expected to
be approximately 95.99%.
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<PAGE>
The 'Senior Prepayment Percentage' on any Distribution Date occurring
during the periods set forth below will be as follows:
<TABLE>
<CAPTION>
PERIOD (DATES INCLUSIVE) SENIOR PREPAYMENT PERCENTAGE
- ----------------------------- -------------------------------------------------
<S> <C>
September 1998 - August 2003 100%
September 2003 - August 2004 Senior Percentage plus 70% of the Junior
Percentage
September 2004 - August 2005 Senior Percentage plus 60% of the Junior
Percentage
September 2005 - August 2006 Senior Percentage plus 40% of the Junior
Percentage
September 2006 - August 2007 Senior Percentage plus 20% of the Junior
Percentage
September 2007 and thereafter Senior Percentage
</TABLE>
Notwithstanding the foregoing, if the Senior Percentage on any Distribution
Date exceeds the initial Senior Percentage, the Senior Prepayment Percentage for
such Distribution Date will equal 100%.
In addition, no reduction of the Senior Prepayment Percentage below the
level in effect for the most recent prior period specified in the table above
shall be effective on any Distribution Date (such limitation being the 'Senior
Prepayment Percentage Stepdown Limitation') unless, as of the last day of the
month preceding such Distribution Date, either:
(A) (i) the aggregate Scheduled Principal Balance of Mortgage Loans
delinquent 60 days or more (including for this purpose any Mortgage Loans
in foreclosure and Mortgage Loans with respect to which the related
Mortgaged Property has been acquired by the Trust Fund) does not exceed 50%
of the aggregate Class Certificate Principal Balance of the Junior
Certificates as of such date and (ii) cumulative Realized Losses do not
exceed (a) 30% of the aggregate Class Certificate Principal Balance of the
Junior Certificates as of the date of issuance of the Certificates (the
'Original Junior Principal Balance') if such Distribution Date occurs
between and including September 2003 and August 2004, (b) 35% of the
Original Junior Principal Balance if such Distribution Date occurs between
and including September 2004 and August 2005, (c) 40% of the Original
Junior Principal Balance if such Distribution Date occurs between and
including September 2005 and August 2006, (d) 45% of the Original Junior
Principal Balance if such Distribution Date occurs between and including
September 2006 and August 2007, and (e) 50% of the Original Junior
Principal Balance if such Distribution Date occurs during or after
September 2007; or
(B) (i) the aggregate Scheduled Principal Balance of Mortgage Loans
delinquent 60 days or more (including for this purpose any Mortgage Loans
in foreclosure and Mortgage Loans with respect to which the related
Mortgaged Property has been acquired by the Trust Fund), averaged over the
last three months, as a percentage of the aggregate Scheduled Principal
Balance of all Mortgage Loans averaged over the last three months, does not
exceed 4%, and (ii) cumulative Realized Losses do not exceed (a) 10% of the
Original Junior Principal Balance if such Distribution Date occurs between
and including September 2003 and August 2004, (b) 15% of the Original
Junior Principal Balance if such Distribution Date occurs between and
including September 2004 and August 2005, (c) 20% of the Original Junior
Principal Balance if such Distribution Date occurs between and including
September 2005 and August 2006, (d) 25% of the Original Junior Principal
Balance if such Distribution Date occurs between and including September
2006 and August 2007, and (e) 30% of the Original Junior Principal Balance
if such Distribution Date occurs during or after September 2007.
The 'Class PO Principal Distribution Amount' with respect to each
Distribution Date will be an amount equal to the sum of (i) the applicable PO
Percentage of all scheduled payments of principal due on each Mortgage Loan on
the first day of the month in which the Distribution Date occurs, as specified
in the amortization schedule at the time applicable thereto (after adjustment
for previous principal prepayments and the principal portion of Debt Service
Reductions after the Bankruptcy Coverage Termination Date, but before any
adjustment to such amortization schedule by reason of any other bankruptcy or
similar proceeding or any moratorium or similar waiver or grace period), (ii)
the applicable PO Percentage of the Scheduled Principal Balance of each Mortgage
Loan which was the subject of a prepayment in full received by the Company (or,
in the case of a Mortgage Loan master-serviced by the Company, of which the
Company receives notice) during the related Prepayment Period, (iii) the
applicable PO Percentage of all partial prepayments of principal received during
the related Prepayment Period, (iv) the applicable PO Percentage of the sum of
(w) the net liquidation proceeds allocable to principal on each Mortgage Loan
which became a Liquidated Mortgage Loan during the related
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Prepayment Period (other than Mortgage Loans described in clause (x)) and (x)
the principal balance of each Mortgage Loan that was purchased by a private
mortgage insurer during the related Prepayment Period as an alternative to
paying a claim under the related insurance policy, and (v) the applicable PO
Percentage of the sum of (a) the Scheduled Principal Balance of each Mortgage
Loan which was repurchased by the Company in connection with such Distribution
Date and (b) the difference, if any, between the Scheduled Principal Balance of
a Mortgage Loan that has been replaced by the Company with a substitute Mortgage
Loan pursuant to the Agreement in connection with such Distribution Date and the
Scheduled Principal Balance of such substitute Mortgage Loan. For purposes of
clauses (ii) and (v) above, the Scheduled Principal Balance of a Mortgage Loan
will be reduced by the amount of any Deficient Valuation that occurred on or
before the Bankruptcy Coverage Termination Date.
The 'Group I Final Distribution Date' is the Distribution Date on which the
Class Certificate Principal Balance of each of the Group I Senior Certificates
has been reduced to zero.
The 'Junior Percentage' on any Distribution Date will equal 100% minus the
Senior Percentage. The 'Junior Prepayment Percentage' will equal 100% minus the
Senior Prepayment Percentage, except that on any Distribution Date after the
respective Class Certificate Principal Balances of the Senior Certificates
(other than the Class PO Certificates) have each been reduced to zero (the
'Senior Final Distribution Date'), the Junior Prepayment Percentage will equal
100%. The initial Junior Percentage is expected to be approximately 4.01%.
The 'Junior Optimal Principal Amount' with respect to each Distribution
Date will be an amount equal to the sum of the following (but in no event
greater than the aggregate Class Certificate Principal Balances of the Junior
Certificates immediately prior to such Distribution Date): (i) the Junior
Percentage of the applicable Non-PO Percentage of all scheduled payments of
principal due on each outstanding Mortgage Loan on the first day of the month in
which the Distribution Date occurs, as specified in the amortization schedule at
the time applicable thereto (after adjustment for previous principal prepayments
and the principal portion of Debt Service Reductions after the Bankruptcy
Coverage Termination Date, but before any adjustment to such amortization
schedule by reason of any other bankruptcy or similar proceeding or any
moratorium or similar waiver or grace period), (ii) the Junior Prepayment
Percentage of the applicable Non-PO Percentage of the Scheduled Principal
Balance of each Mortgage Loan which was the subject of a prepayment in full
received by the Company (or, in the case of a Mortgage Loan master-serviced by
the Company, of which the Company receives notice) during the related Prepayment
Period, (iii) the Junior Prepayment Percentage of the applicable Non-PO
Percentage of all partial prepayments of principal received during the related
Prepayment Period (plus, on the Senior Final Distribution Date, 100% of any
Senior Optimal Principal Amount remaining undistributed on such date), (iv) the
excess, if any, of the sum of (a) the applicable Non-PO Percentage of the net
liquidation proceeds allocable to principal received during the related
Prepayment Period in respect of each Liquidated Mortgage Loan (other than
Mortgage Loans described in clause (b)) and (b) the applicable Non-PO Percentage
of the principal balance of each Mortgage Loan that was purchased by a private
mortgage insurer during the related Prepayment Period as an alternative to
paying a claim under the related insurance policy over (c) the sum of the
amounts distributable to Senior Certificateholders (other than the holders of
the Class PO Certificates) pursuant to clause (iv) of the definition of Senior
Optimal Principal Amount on such Distribution Date, and (v) the Junior
Prepayment Percentage of the applicable Non-PO Percentage of the sum of (a) the
Scheduled Principal Balance of each Mortgage Loan which was repurchased by the
Company in connection with such Distribution Date and (b) the difference, if
any, between the Scheduled Principal Balance of a Mortgage Loan that has been
replaced by the Company with a substitute Mortgage Loan pursuant to the
Agreement in connection with such Distribution Date and the Scheduled Principal
Balance of such substitute Mortgage Loan.
The 'Allocable Share' with respect to any Class of Junior Certificates on
any Distribution Date will generally equal such Class's pro rata share (based on
the Class Certificate Principal Balance of each Class entitled thereto) of each
of the components of the Junior Optimal Principal Amount described above;
provided, that, except as described in the second succeeding sentence, no Class
B Certificate shall be entitled on any Distribution Date to receive
distributions pursuant to clauses (ii), (iii) and (v) of the definition of
Junior Optimal Principal Amount unless the Class Prepayment Distribution Trigger
for the related Class is satisfied for such Distribution Date. The 'Class
Prepayment Distribution Trigger' for a Class of Class B Certificates for any
Distribution Date is satisfied if the fraction (expressed as a percentage), the
numerator of which is the aggregate Class Certificate Principal Balance of such
Class and each Class subordinate thereto, if any, and the denominator
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of which is the Pool Scheduled Principal Balance with respect to such
Distribution Date, equals or exceeds such percentage calculated as of the
Closing Date. If, on any Distribution Date, the Class Certificate Principal
Balance of the Class M Certificates or of any Class of Class B Certificates for
which the related Class Prepayment Distribution Trigger was satisfied on such
Distribution Date is reduced to zero, any amounts distributable to such Class
pursuant to clauses (ii), (iii) and (v) of the definition of Junior Optimal
Principal Amount, to the extent of such Class's remaining Allocable Share, shall
be distributed to the remaining Classes of Junior Certificates in reduction of
their respective Class Certificate Principal Balances in order of priority. If
the Class Prepayment Distribution Trigger is not satisfied for any Class of
Class B Certificates on any Distribution Date, this may have the effect of
accelerating the amortization of more senior ranking Classes of Junior
Certificates because the amount otherwise distributable to such Class pursuant
to clauses (ii), (iii) and (v) of the definition of Junior Optimal Principal
Amount will be distributable among the outstanding Class M Certificates and each
Class of the Class B Certificates as to which the related Class Prepayment
Distribution Trigger has been satisfied on a pro rata basis subject to the
priority of payments described herein. On any Distribution Date, any reduction
in funds available for distribution to the Classes of Junior Certificates
resulting from a distribution of the Class PO Deferred Amount to the Class PO
Certificates will be allocated to the Classes of Junior Certificates, in
reduction of the Allocable Shares thereof, in inverse order of priority.
Example of Distributions. For an example of hypothetical distributions on
the Certificates for a particular Distribution Date, see 'Description of the
Certificates--Example of Distributions' in the accompanying Prospectus.
ALLOCATION OF REALIZED LOSSES ON THE CERTIFICATES
A 'Realized Loss' with respect to a Mortgage Loan is (i) a Bankruptcy Loss
(as defined below) or (ii) as to any Liquidated Mortgage Loan, the unpaid
principal balance thereof plus accrued and unpaid interest thereon at the Net
Mortgage Rate through the last day of the month of liquidation less the net
proceeds from the liquidation of, and any insurance proceeds from, such Mortgage
Loan and the related Mortgaged Property. A 'Liquidated Mortgage Loan' is any
defaulted Mortgage Loan as to which the Company has determined that all amounts
which it expects to recover from or on account of such Mortgage Loan have been
recovered.
In the event of a personal bankruptcy of a Mortgagor, the bankruptcy court
may establish the value of the Mortgaged Property at an amount less than the
then outstanding principal balance of the Mortgage Loan secured by such
Mortgaged Property and could reduce the secured debt to such value. In such
case, the holder of such Mortgage Loan would become an unsecured creditor to the
extent of the difference between the outstanding principal balance of such
Mortgage Loan and such reduced secured debt (such difference, a 'Deficient
Valuation'). In addition, certain other modifications of the terms of a Mortgage
Loan can result from a bankruptcy proceeding, including the reduction of the
amount of the monthly payment on the related Mortgage Loan (a 'Debt Service
Reduction').
A 'Bankruptcy Loss' with respect to any Mortgage Loan is a Deficient
Valuation or Debt Service Reduction.
A 'Fraud Loss' is any Realized Loss attributable to fraud in the
origination of the related Mortgage Loan.
A 'Special Hazard Loss' is a Realized Loss attributable to damage or a
direct physical loss suffered by a Mortgaged Property (including any Realized
Loss due to the presence or suspected presence of hazardous wastes or substances
on a Mortgaged Property) other than any such damage or loss covered by a hazard
policy or a flood insurance policy required to be maintained in respect of such
Mortgaged Property under the Agreement or any loss due to normal wear and tear
or certain other causes.
On each Distribution Date, the applicable PO Percentage of the principal
portion of any Realized Loss (including any Excess Loss, but not including any
Debt Service Reduction) on a Discount Mortgage Loan will be allocated to the
Class PO Certificates until the Class Certificate Principal Balance thereof is
reduced to zero. With respect to any Distribution Date through the Cross-Over
Date, the aggregate of all amounts so allocable to the Class PO Certificates on
such date in respect of Realized Losses other than Excess Losses in respect of
the Discount Mortgage Loans and all amounts previously allocated in respect of
such losses to the Class PO Certificates and not distributed on prior
Distribution Dates will be the 'Class PO Deferred Amount.' To the extent funds
are available therefor on any Distribution Date through the Cross-Over Date,
distributions in respect
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<PAGE>
of the Class PO Deferred Amount will be made on the Class PO Certificates in
accordance with priority fourth under '--Distributions on the
Certificates--Allocation of Available Funds' above. Any distribution of
Available Funds in respect of the Class PO Deferred Amount will not reduce the
Class Certificate Principal Balance of the Class PO Certificates. No interest
will accrue on the Class PO Deferred Amount. On each Distribution Date through
the Cross-Over Date, the Class Certificate Principal Balance of the lowest
ranking Class of Junior Certificates then outstanding will be reduced by the
amount of any distributions in respect of the Class PO Deferred Amount on such
Distribution Date, through the operation of the Class PO Deferred Payment
Writedown Amount. After the Cross-Over Date, no distributions will be made in
respect of, and losses allocated to the Class PO Certificates will not be added
to, the Class PO Deferred Amount. Any distribution of Unanticipated Recoveries
(as defined in the accompanying Prospectus) on the Class PO Certificates will be
adjusted to take into account the Class PO Deferred Amount previously paid to
such Class as specified in the Agreement. See 'Servicing of the Mortgage Loans
and Contracts--Unanticipated Recoveries of Losses on the Mortgage Loans' in the
accompanying Prospectus.
The applicable Non-PO Percentage of the principal portion of any Realized
Loss (other than an Excess Loss or a Debt Service Reduction) on a Mortgage Loan
for any Distribution Date will not be allocated to any Senior Certificates until
the Cross-Over Date. Prior to the Cross-Over Date (and on such date under
certain circumstances), the applicable Non-PO Percentage of the principal
portion of any such Realized Loss will be allocated among the outstanding
Classes of Junior Certificates, in inverse order of priority, until the Class
Certificate Principal Balance of each such Class has been reduced to zero (i.e.,
such Realized Losses will be allocated first to the Class B5 Certificates while
such Certificates are outstanding, second to the Class B4 Certificates, and so
on). The applicable Non-PO Percentage of the principal portion of any Excess
Loss (other than a Debt Service Reduction) on a Mortgage Loan for any
Distribution Date will be allocated pro rata among all outstanding Classes of
Certificates entitled to principal distributions (other than the Class PO
Certificates) based on their Class Certificate Principal Balances. An 'Excess
Loss' is any Bankruptcy Loss, Fraud Loss and Special Hazard Loss (each a type of
Realized Loss) occurring after the Bankruptcy Coverage Termination Date, Fraud
Coverage Termination Date and Special Hazard Termination Date, respectively, as
described more fully below. Commencing on the Cross-Over Date, the applicable
Non-PO Percentage of the principal portion of any Realized Loss (other than a
Debt Service Reduction) will be allocated among the outstanding Classes of
Senior Certificates entitled to principal distributions (other than the Class PO
Certificates) pro rata based upon their Class Certificate Principal Balances.
No reduction of the Class Certificate Principal Balance of any Class shall
be made on any Distribution Date on account of any Realized Loss to the extent
that such reduction would have the effect of reducing the aggregate Certificate
Principal Balance of all of the Certificates as of such Distribution Date to an
amount less than the Pool Scheduled Principal Balance as of the first day of the
month of such Distribution Date, less any Deficient Valuations occurring on or
prior to the Bankruptcy Coverage Termination Date (such limitation being the
'Loss Allocation Limitation').
Because the aggregate Notional Principal Balance of the Class A11
Certificates will be equal to the Class Certificate Principal Balance from time
to time of the Class A10 Certificates, any Realized Losses that are applied to
reduce the Class Certificate Principal Balance of the Class A10 Certificates
will also reduce by an equivalent amount the Notional Principal Balance of the
Class A11 Certificates. As a result, the amount of interest distributable on the
Class A11 Certificates would be reduced.
The principal portion of Debt Service Reductions will not be allocated in
reduction of the Certificate Principal Balance of any the amounts distributable
under clause (i) of the definitions of Senior Optimal Principal Amount, Class PO
Principal Distribution Amount and Junior Optimal Principal Amount will be
reduced by the amount of any Debt Service Reductions. Regardless of when they
occur, Debt Service Reductions may reduce the amount of Available Funds
otherwise available for distribution on a Distribution Date. As a result of the
subordination of the Junior Certificates in right of distribution, any Debt
Service Reductions prior to the Bankruptcy Coverage Termination Date will be
borne by the Junior Certificates (to the extent then outstanding) in inverse
order of priority. All allocations of Realized Losses to a Class of Certificates
will be accomplished on a Distribution Date by reducing the applicable Class
Certificate Principal Balance by the appropriate pro rata share of any such
losses occurring during the month preceding the month of such Distribution Date
and, accordingly, will be taken into account in determining the distributions of
principal and interest on the Certificates (or the
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<PAGE>
calculation of the Class A19 Accrual Amount) commencing on the following
Distribution Date, except that the aggregate amount of the principal portion of
any Realized Losses (other than Excess Losses and Debt Service Reductions) to be
allocated to the Class PO Certificates on any Distribution Date through the
Cross-Over Date will also be taken into account in determining distributions in
respect of the Class PO Deferred Amount for such Distribution Date. For purposes
of allocating the principal portion of Realized Losses (including Excess
Losses), the Class Certificate Principal Balance of the Class A19 Certificates
will be deemed to equal the lesser of (i) the original Class Certificate
Principal Balance of such Certificate (reduced by any Realized Losses previously
allocated to such Class) and (ii) the outstanding Class Certificate Principal
Balance of such Certificate.
The interest portion of all Realized Losses will be allocated among the
outstanding Classes of Certificates offered hereby entitled to interest
distributions to the extent described under '--Distributions on the
Certificates--Interest' above. For purposes of making certain calculations under
the Agreement, the interest portion of any Realized Loss in respect of a
Mortgage Loan will be allocated among the Base Servicing Fee, the Supplemental
Servicing Fee and interest at the excess of the Mortgage Rate over the sum of
the Base Servicing Fee and the Supplemental Servicing Fee (as defined herein) in
proportion to the amount of accrued interest in respect of such Mortgage Loan
that would have been so allocated in the absence of any such shortfall.
The applicable Non-PO Percentage of any Deficient Valuation will on each
Distribution Date be allocated solely to the outstanding Junior Certificates
until the Bankruptcy Coverage Termination Date. The 'Bankruptcy Coverage
Termination Date' is the Distribution Date upon which the Bankruptcy Loss Amount
has been reduced to zero or a negative number (or the Cross-Over Date, if
earlier). On each Distribution Date, the 'Bankruptcy Loss Amount' will equal
approximately $319,370 (approximately 0.04% of the aggregate Scheduled Principal
Balances of the Mortgage Loans as of the Cut-off Date), subject to reduction as
described in the Agreement, minus the aggregate amount of previous Bankruptcy
Losses. The Bankruptcy Loss Amount and the manner of reduction thereof described
in the Agreement may be reduced or modified upon written confirmation from Fitch
and S&P (each as defined herein) that such reduction or modification will not
adversely affect the then current ratings of the Senior Certificates by Fitch
and S&P. Such reduction may adversely affect the coverage provided by
subordination with respect to Bankruptcy Losses.
The applicable Non-PO Percentage of any Fraud Loss will on each
Distribution Date be allocated solely to the outstanding Junior Certificates
until the Fraud Coverage Termination Date. The 'Fraud Coverage Termination Date'
is the Distribution Date upon which the Fraud Loss Amount has been reduced to
zero or a negative number (or the Cross-Over Date, if earlier). Upon the initial
issuance of the Certificates, the 'Fraud Loss Amount' will equal approximately
$9,016,133 (approximately 1.00% of the aggregate Scheduled Principal Balances of
the Mortgage Loans as of the Cut-off Date). As of any Distribution Date prior to
the first anniversary of the Cut-off Date, the Fraud Loss Amount will equal
approximately $9,016,133, minus the aggregate amount of Fraud Losses that would
have been allocated to the Junior Certificates in the absence of the Loss
Allocation Limitation since the Cut-off Date. As of any Distribution Date from
the first to the fifth anniversaries of the Cut-off Date, the Fraud Loss Amount
will equal (1) the lesser of (a) the Fraud Loss Amount as of the most recent
anniversary of the Cut-off Date and (b) 1% (from the first to but excluding the
third anniversaries of the Cut-off Date) or 0.5% (from and including the third
to but excluding the fifth anniversaries of the Cut-off Date) of the aggregate
outstanding principal balance of all of the Mortgage Loans as of the most recent
anniversary of the Cut-off Date minus (2) the Fraud Losses that would have been
allocated to the Junior Certificates in the absence of the Loss Allocation
Limitation since the most recent anniversary of the Cut-off Date. As of any
Distribution Date on or after the fifth anniversary of the Cut-off Date, the
Fraud Loss Amount shall be zero.
The applicable Non-PO Percentage of any Special Hazard Loss will on each
Distribution Date be allocated solely to the outstanding Junior Certificates
until the Special Hazard Termination Date. The 'Special Hazard Termination Date'
is the Distribution Date upon which the Special Hazard Loss Amount has been
reduced to zero or a negative number (or the Cross-Over Date, if earlier). Upon
the initial issuance of the Certificates, the 'Special Hazard Loss Amount' will
equal approximately $9,016,133 (approximately 1.00% of the aggregate Scheduled
Principal Balances of the Mortgage Loans as of the Cut-off Date). As of any
Distribution Date, the Special Hazard Loss Amount will equal approximately
$9,016,133 minus the sum of (i) the aggregate amount of Special Hazard Losses
that would have been previously allocated to the Junior Certificates in the
absence of the Loss Allocation Limitation and (ii) the Adjustment Amount. For
each anniversary of the Cut-off Date, the 'Adjustment Amount' shall be equal to
the amount, if any, by which the Special Hazard Loss Amount (without giving
effect to the deduction of the Adjustment Amount for such anniversary) exceeds
the lesser of (A) an
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amount calculated by the Company and approved by each of Fitch and S&P, which
amount shall not be less than $500,000, and (B) the greater of (x) 1% (or if
greater than 1%, the highest percentage of Mortgage Loans by principal balance
secured by Mortgaged Properties in any California zip code) of the outstanding
principal balance of all the Mortgage Loans on the Distribution Date immediately
preceding such anniversary and (y) twice the outstanding principal balance of
the Mortgage Loan which has the largest outstanding principal balance on the
Distribution Date immediately preceding such anniversary.
ADDITIONAL RIGHTS OF THE RESIDUAL CERTIFICATEHOLDERS
In addition to distributions of principal and interest, (a) the holders of
the Class R Certificates will be entitled to receive (i) the amount, if any, of
Available Funds remaining in the Upper-Tier REMIC on any Distribution Date after
distributions of interest and principal are made on the Certificates on such
date and (ii) the proceeds, if any, of the assets of the Trust Fund remaining in
the Upper-Tier REMIC after the Class Certificate Principal Balances of all
Classes of Certificates (other than the Class RL Certificates) have each been
reduced to zero, and (b) the holders of the Class RL Certificates will be
entitled to receive (i) the amount, if any, of Available Funds remaining in the
Lower-Tier REMIC on any Distribution Date after distributions of principal and
interest on the Lower-Tier regular interests and the Class RL Certificates are
made on such date and (ii) the proceeds, if any, of the assets of the Trust Fund
remaining in the Lower-Tier REMIC after the regular interests in the Lower-Tier
REMIC and the Class Certificate Principal Balance of the Class RL Certificates
have been reduced to zero. It is not anticipated that any material assets will
be remaining for such distributions at any such time. See 'Certain Federal
Income Tax Consequences--Residual Certificates' herein.
SUBORDINATION
Priority of Senior Certificates. As of the date of the initial issuance of
the Certificates, the aggregate Certificate Principal Balance of the Junior
Certificates will equal approximately 4.00% of the aggregate Certificate
Principal Balance of all the Classes of Certificates. The rights of the holders
of the Junior Certificates to receive distributions with respect to the Mortgage
Loans will be subordinate to such rights of the holders of the Senior
Certificates, to the extent described above. The subordination of the Junior
Certificates is intended (a) to enhance the likelihood of timely receipt by the
holders of the Senior Certificates (to the extent of the subordination of the
Junior Certificates) of the full amount of the scheduled monthly distributions
of principal and interest allocable to the Senior Certificates and (b) to afford
the holders of the Senior Certificates (to the extent of the subordination of
the Junior Certificates) protection against Realized Losses, to the extent
described above. If Realized Losses exceed the credit support provided to the
Senior Certificates through subordination, or if Excess Losses occur, all or a
portion of such losses will be borne by the Senior Certificates.
The protection afforded to the holders of Senior Certificates by means of
the subordination feature will be accomplished by (i) the preferential right of
such holders to receive, prior to any distribution being made on a Distribution
Date in respect of the Junior Certificates, in accordance with the paydown rules
specified above under '--Distributions on the Certificates--Allocation of
Available Funds,' the amounts due to the Senior Certificateholders on each
Distribution Date out of the Available Funds with respect to such date and, if
necessary, by the right of such holders to receive future distributions on the
Mortgage Loans that would otherwise have been payable to the holders of the
Junior Certificates, (ii) the allocation to the Junior Certificates of the
principal portion of the applicable Non-PO Percentage of any Realized Loss
(other than an Excess Loss or a Debt Service Reduction) to the extent set forth
herein and (iii) the allocation to the Junior Certificates of the applicable PO
Percentage of the principal portion of any Realized Loss (other than an Excess
Loss or a Debt Service Reduction) to the extent set forth herein through the
operation of the Class PO Deferred Payment Writedown Amount. The allocation of
the principal portion of Realized Losses (as set forth herein) to the Junior
Certificates on any Distribution Date will decrease the protection provided to
the Senior Certificates then outstanding on future Distribution Dates by
reducing the aggregate Certificate Principal Balance of the Junior Certificates
then outstanding.
In addition, in order to extend the period during which the Junior
Certificates remain available as credit enhancement for the Senior Certificates,
the entire amount of the applicable Non-PO Percentage of any prepayment or other
unscheduled recovery of principal with respect to a Mortgage Loan will be
allocated to the Senior Certificates entitled to principal distributions (other
than the Class PO Certificates) during the first five years after the Cut-off
Date with such allocation being subject to reduction thereafter as described
herein. This
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allocation has the effect of accelerating the amortization of such Senior
Certificates as a group while, in the absence of losses in respect of the
Mortgage Loans, increasing the percentage interest in the principal balance of
the Mortgage Loans evidenced by the Junior Certificates. Among such Senior
Certificates, such amounts will be allocated to the outstanding Group I Senior
Certificates during the first five years after the Cut-off Date (except as
otherwise described herein on or following the Group I Final Distribution Date)
with such allocation being subject to reduction thereafter as described herein,
except that such amounts will be allocated pro rata among all of the outstanding
Senior Certificates (other than the Class A11 and Class PO Certificates) on each
Distribution Date after the Cross-Over Date.
After the payment of amounts distributable in respect of the Senior
Certificates on each Distribution Date, the Junior Certificates will be entitled
on such date to the remaining portion, if any, of the Available Funds in an
aggregate amount equal to the Accrued Certificate Interest on the Junior
Certificates for such date, any remaining undistributed Accrued Certificate
Interest thereon from previous Distribution Dates and the sum of the Allocable
Shares of the Classes of Junior Certificates. Amounts so distributed to Junior
Certificateholders will not be available to cover any delinquencies or any
Realized Losses in respect of subsequent Distribution Dates.
Priority Among Junior Certificates. As of the date of the initial issuance
of the Certificates, the aggregate Certificate Principal Balance of the Class
B3, Class B4 and Class B5 Certificates, all of which are subordinate in right of
distribution to the Junior Certificates offered hereby, will equal approximately
0.90% of the initial aggregate Certificate Principal Balance of all of the
Certificates and approximately 22.50% of the initial aggregate Certificate
Principal Balance of all of the Junior Certificates. On each Distribution Date,
the holders of any particular Class of Junior Certificates, other than the Class
B5 Certificates, will have a preferential right to receive the amounts due them
on such Distribution Date out of Available Funds, prior to any distribution
being made on such date on each Class of Certificates ranking junior to such
Class. In addition, except as described herein, the applicable Non-PO Percentage
of the principal portion of any Realized Loss with respect to a Mortgage Loan
(other than a Debt Service Reduction or an Excess Loss) and any Class PO
Deferred Payment Writedown Amount will be allocated, to the extent set forth
herein, in reduction of the Class Certificate Principal Balances of the Junior
Certificates in inverse order of priority of such Certificates. The effect of
the allocation of such Realized Losses and of the Class PO Deferred Payment
Writedown Amount to a Class of Junior Certificates will be to reduce future
distributions allocable to such Class and increase the relative portion of
distributions allocable to more senior Classes of Certificates.
In order to maintain the relative levels of subordination among the Junior
Certificates, the applicable Non-PO Percentage of prepayments and certain other
unscheduled recoveries of principal in respect of the Mortgage Loans (which will
not be distributable to such Certificates for at least the first five years
after the Cut-off Date, except as otherwise described herein on or following the
Senior Final Distribution Date) will not be distributable to the holders of any
Class of Class B Certificates on any Distribution Date for which the related
Class Prepayment Distribution Trigger is not satisfied, except as described
above. See '--Distributions on the Certificates--Principal.' If the Class
Prepayment Distribution Trigger is not satisfied with respect to any Class of
Class B Certificates, the amortization of more senior ranking Classes of Junior
Certificates may occur more rapidly than would otherwise have been the case and,
in the absence of losses in respect of the Mortgage Loans, the percentage
interest in the principal balance of the Mortgage Loans evidenced by such Class
B Certificates may increase.
As a result of the subordination of any Class of Certificates, such Class
of Certificates will be more sensitive than more senior ranking Classes of
Certificates to the rate of delinquencies and defaults on the Mortgage Loans,
and under certain circumstances investors in such Certificates may not recover
their initial investment.
RESTRICTIONS ON TRANSFER OF THE RESIDUAL CERTIFICATES
The Residual Certificates will be subject to the restrictions on transfer
described in the Prospectus under 'Certain Federal Income Tax
Consequences--REMIC Certificates--Transfers of Residual Certificates--
Disqualified Organizations,' '--Foreign Investors' and '--Noneconomic Residual
Interests.' In addition, the Agreement provides that the Residual Certificates
may not be acquired by an ERISA Plan. The Residual Certificates will contain a
legend describing the foregoing restrictions.
S-38
<PAGE>
YIELD AND WEIGHTED AVERAGE LIFE CONSIDERATIONS
YIELD
The effective yield on the Certificates will depend upon, among other
things, the price at which the Certificates are purchased and the rate and
timing of payments of principal (including both scheduled and unscheduled
payments) of the Mortgage Loans underlying the Certificates.
The yields to investors will be sensitive in varying degrees to the rate of
prepayments on the Mortgage Loans. The extent to which the yield to maturity of
a Certificate is sensitive to prepayments will depend upon the degree to which
it is purchased at a discount or premium. In the case of Certificates purchased
at a premium, and especially in the case of the Class A11 Certificates, faster
than anticipated rates of principal payments on the Mortgage Loans could result
in actual yields to investors that are lower than the anticipated yields. In the
case of Certificates purchased at a discount, slower than anticipated rates of
principal payments on the Mortgage Loans could result in actual yields to
investors that are lower than the anticipated yields and could result in an
extension of the weighted average lives of such Certificates.
Rapid rates of prepayments on the Mortgage Loans are likely to coincide
with periods of low prevailing interest rates. During such periods, the yields
at which an investor in the Certificates may be able to reinvest amounts
received as payments on the investor's Certificates may be lower than the yield
on such Certificates. Conversely, slow rates of prepayments on the Mortgage
Loans are likely to coincide with periods of high rates. During such periods,
the amount of payments available to an investor for reinvestment at such high
rates may be relatively low.
The Mortgage Loans will not prepay at any constant rate, nor will all of
the Mortgage Loans prepay at the same rate at any one time. The timing of
changes in the rate of prepayments may affect the actual yield to an investor,
even if the average rate of principal prepayments is consistent with the
investor's expectation. In general, the earlier a prepayment of principal on a
Mortgage Loan, the greater the effect on the yield to an investor in the
Certificates. As a result, the effect on the yield of principal prepayments on
the Mortgage Loans occurring at a rate higher (or lower) than the rate
anticipated by the investor during the period immediately following the issuance
of the Certificates is not likely to be offset by a later equivalent reduction
(or increase) in the rate of principal prepayments.
The Mortgage Loans will bear interest at fixed Mortgage Rates, payable in
arrears. Each monthly interest payment on a Mortgage Loan is calculated as
1/12th of the applicable Mortgage Rate times the outstanding principal balance
of such Mortgage Loan on the first day of the month.
The effective yield to holders of Certificates other than the LIBOR
Certificates entitled to interest distributions will be lower than the yield
otherwise produced by the applicable Certificate Interest Rate and the
applicable purchase prices thereof because, while interest will accrue from the
first day of each month, the distribution of such interest will not be made
until the 25th day (or if such day is not a business day, the immediately
following business day) of the month following the month of accrual. In
addition, the effective yield on the Certificates will be affected by any Net
Interest Shortfall and the interest portion of certain losses. See 'Description
of the Certificates' herein.
PREPAYMENTS
The rate of distribution of principal of the Certificates (and the
aggregate amount of interest payable on the Class A11 Certificates) will be
affected primarily by the amount and timing of principal payments received on or
in respect of the Mortgage Loans. Such principal payments will include scheduled
payments as well as voluntary prepayments by borrowers (such as, for example,
prepayments in full due to refinancings, including refinancings made by the
Company in the ordinary course of conducting its mortgage banking business, some
of which refinancings may be solicited by the Company, or prepayments in
connection with biweekly payment programs, participation in which may be
solicited by the Company) and prepayments resulting from foreclosure,
condemnation and other dispositions of the Mortgaged Properties, from repurchase
by the Company of any Mortgage Loan as to which there has been a material breach
of warranty or defect in documentation (or deposit of certain amounts in respect
of delivery of a substitute Mortgage Loan therefor) and from an exercise by the
Company of its option to repurchase a Defaulted Mortgage Loan. See 'Yield,
Maturity and Weighted Average Life Considerations' in the Prospectus. Mortgagors
are permitted to prepay the Mortgage Loans, in whole or in part, at any time
without penalty. In addition, as a result of the fact that Certificateholders
(other than holders of
S-39
<PAGE>
the Class A11 Certificates) will generally be entitled on any Distribution Date
to receive from Available Funds distributions of amounts based on clause (iv) of
each of the definitions of Senior Optimal Principal Amount, Class PO Principal
Distribution Amount or Junior Optimal Principal Amount, as the case may be, the
occurrence of defaults on the Mortgage Loans may produce the same effect on the
Certificates receiving such distributions as an early receipt of principal.
A number of social, economic, tax, geographic, demographic, legal and other
factors may influence prepayments of the Mortgage Loans. These factors may
include the age of such Mortgage Loans, the geographic distribution of the
Mortgaged Properties, the payment terms of such Mortgage Loans, the
characteristics of the borrowers, homeowner mobility, economic conditions
generally and in the geographic area in which the Mortgaged Properties are
located, enforceability of due-on-sale clauses, prevailing interest rates in
relation to the interest rates on such Mortgage Loans, the availability of
mortgage funds, the use of second or 'home equity' mortgage loans by mortgagors,
the use of the properties as second or vacation homes, the extent of the
mortgagors' net equity in the Mortgaged Properties, tax-related considerations
and, where investment properties are securing such Mortgage Loans, the
availability of other investments. The rate of principal payment may also be
subject to seasonal variations.
The rate of principal prepayments on pools of conventional mortgage loans
has fluctuated significantly in recent years. Generally, if prevailing interest
rates were to fall significantly below the interest rates on the Mortgage Loans,
the Mortgage Loans would be expected to prepay at higher rates than if
prevailing rates were to remain at or above the interest rates on the Mortgage
Loans. Conversely, if interest rates were to rise significantly above the
interest rates on the Mortgage Loans, the Mortgage Loans would be expected to
prepay at lower rates than if prevailing rates were to remain at or below the
interest rates on the Mortgage Loans.
Voluntary prepayments in full of principal on the Mortgage Loans received
by the Company (or, in the case of Mortgage Loans master-serviced by the
Company, of which the Company receives notice) from the first day through the
fifteenth day of each month (other than the month of the Cut-off Date) are
passed through to the Certificateholders in the month of receipt or payment.
Voluntary prepayments of principal in full received from the sixteenth day (or,
in the case of the month of the Cut-off Date, from the Cut-off Date) through the
last day of each month, and all voluntary partial prepayments of principal on
the Mortgage Loans are passed through to the Certificateholders in the month
following the month of receipt or payment. Any prepayment of a Mortgage Loan or
liquidation of a Mortgage Loan (by foreclosure proceedings or by virtue of the
purchase of a Mortgage Loan in advance of its stated maturity as required or
permitted by the Agreement) will generally have the effect of passing through to
the Certificateholders principal amounts (or, in the case of the Class A11
Certificates, reducing the Notional Principal Balance thereof) which would
otherwise be passed through (or reduced) in amortized increments over the
remaining term of such Mortgage Loan.
The entire amount of the applicable Non-PO Percentage of any prepayments
and other unscheduled recoveries of principal with respect to a Mortgage Loan
will be allocated solely to the outstanding Senior Certificates (other than the
Class A11 and Class PO Certificates) during the first five years after the
Cut-off Date, with such allocation being subject to reduction thereafter as
described herein. Among such Senior Certificates, such amounts will be allocated
solely to the outstanding Group I Senior Certificates during the first five
years after the Cut-off Date (except as otherwise described herein on or
following the Group I Final Distribution Date), with such allocation being
subject to reduction thereafter as described herein, provided that such amounts
will be allocated pro rata among all the outstanding Senior Certificates (other
than the Class A11 and Class PO Certificates) on each Distribution Date after
the Cross-Over Date. This allocation between the Group I Senior Certificates and
the Group II Senior Certificates is designed to accelerate the allocation of
principal prepayments and certain other unscheduled recoveries of principal on
the Mortgage Loans to holders of the Group I Senior Certificates relative to the
Group II Senior Certificates through the Cross-Over Date. In addition, the Group
II Senior Certificates will not receive any distributions of scheduled principal
payments during the first five years after the Cut-off Date, except as otherwise
described herein on or following the earlier of the Group I Final Distribution
Date and the Cross-Over Date. Notwithstanding the foregoing, all distributions
of principal on the outstanding Senior Certificates (other than the Class A11
and Class PO Certificates) will be made pro rata among such Certificates on each
Distribution Date after the Cross-Over Date. See 'Description of the
Certificates-- Distributions on the Certificates--Principal' herein.
S-40
<PAGE>
When a full prepayment is made on a Mortgage Loan, the Mortgagor is charged
interest ('Prepayment Interest') on the days in the month actually elapsed up to
the date of such prepayment, at a daily interest rate (determined by dividing
the Mortgage Rate by 360) which is applied to the principal amount of the loan
so prepaid. When such a prepayment is made during the period from the sixteenth
day through the last day of any month (and from the Cut-off Date through the
fifteenth day of the month of the Cut-off Date), such Prepayment Interest is
passed through to the Certificateholders in the month following its receipt and
the amount of interest thus distributed to Certificateholders, to the extent not
supplemented by a Compensating Interest Payment (as defined herein), will be
less than the amount which would have been distributed (or added to the Class
Certificate Principal Balance of the Class A19 Certificates) in the absence of
such prepayment. The payment of a claim under certain insurance policies or the
purchase of a defaulted Mortgage Loan by a private mortgage insurer may also
cause a reduction in the amount of interest passed through. Shortfalls described
in this paragraph will be borne by Certificateholders to the extent described
herein. See 'Description of the Certificates--Distributions on the
Certificates--Interest' herein.
Any partial prepayment will be applied to the balance of the related
Mortgage Loan as of the first day of the month of receipt, will be passed
through to the Certificateholders in the following month and, to the extent not
supplemented by a Compensating Interest Payment, will reduce the aggregate
amount of interest distributable to the Certificateholders in such month in an
amount equal to 30 days of interest at the related Net Mortgage Rate on the
amount of such prepayment.
The yield on certain Classes of the Certificates also may be affected by
any repurchase by the Company of the Mortgage Loans as described under 'The
Pooling and Servicing Agreement--Termination' herein.
SENSITIVITY OF THE LIBOR CERTIFICATES
The yield to investors in the LIBOR Certificates will be highly sensitive
to the level of LIBOR. Investors in the Class A10, Class A12, Class A15, Class
A20, Class A22 and Class A25 Certificates should consider (i) the risk that
lower than anticipated levels of LIBOR could result in actual yields that are
lower than anticipated yields on such Certificates and (ii) the fact that the
Certificate Interest Rate on the Class A10, Class A12, Class A15, Class A20,
Class A22 and Class A25 Certificates cannot exceed 8.50%, 8.50%, 8.50%, 9.00%,
8.50% and 9.00%, respectively (which would occur whenever LIBOR equals or
exceeds 8.20%, 8.10%, 8.00%, 8.20%, 7.75% and 8.20%, respectively, for any
relevant Interest Accrual Period other than the first such period). Conversely,
investors in the Class A11, Class A13, Class A16, Class A17, Class A18, Class
A21, Class A23 and Class A26 Certificates (together, the 'Inverse Floating Rate
Certificates') should consider (i) the risk that higher than anticipated levels
of LIBOR could result in actual yields that are lower than anticipated yields on
such Certificates and (ii) the fact that the rate of interest on the Class A11,
Class A13, Class A16, Class A17, Class A18, Class A21, Class A23 and Class A26
Certificates can fall as low as 0.0% (which will occur whenever LIBOR equals or
exceeds 8.20%, 8.10%, 8.00%, 7.00%, 8.00%, 8.20%, 7.75% and 8.20%, respectively,
for any relevant Interest Accrual Period other than the first such period).
Investors in the Class A18 Certificates should also consider the fact that the
Certificate Interest Rate on such Certificates cannot exceed 9.25%, which would
occur whenever LIBOR equals or is less than 7.00%.
Levels of LIBOR may have little or no correlation to levels of prevailing
mortgage interest rates. It is possible that lower prevailing mortgage interest
rates, which might be expected to result in faster prepayments, could occur
concurrently with an increased level of LIBOR. Conversely, higher prevailing
mortgage interest rates, which might be expected to result in slower
prepayments, could occur concurrently with a decreased level of LIBOR. In
addition, the timing of changes in the level of LIBOR may affect the actual
yield to maturity to an investor in the LIBOR Certificates even if the average
level is consistent with such investor's expectation. In general, the earlier a
change in the level of LIBOR, the greater the effect on such investor's yield to
maturity. As a result, the effect on such investor's yield to maturity of a
level of LIBOR that is higher (or lower) than the rate anticipated by such
investor during the period immediately following the issuance of the
Certificates is not likely to be offset by a subsequent like reduction (or
increase) in the level of LIBOR. Investors in the Class A11 Certificates should
also consider the risk that rapid rates of principal payments could result in
the failure of such investors to fully recover their investment.
To illustrate the significance of prepayments and changes in LIBOR on the
distributions on the Inverse Floating Rate Certificates, the following tables
indicate the pre-tax yields to maturity (on a corporate bond-equivalent basis)
under the specified assumptions at the different constant percentages of the
Prepayment
S-41
<PAGE>
Assumption (as defined herein) and the different levels of LIBOR indicated. The
yields were calculated by determining the applicable monthly discount rate
which, when applied to the related assumed stream of cash flows to be paid on
the Inverse Floating Rate Certificates, would cause the discounted present value
of such cash flows to equal the assumed purchase price for such Certificates
stated in such table and converting the applicable monthly discount rate to a
corporate bond-equivalent rate. Implicit in the use of any discounted present
value or internal rate of return calculations such as these is the assumption
that intermediate cash flows are reinvested at the discount rate or internal
rate of return. Thus, these calculations do not take into account the different
interest rates at which investors may be able to reinvest funds received by them
as distributions on the Inverse Floating Rate Certificates, and, consequently,
do not reflect the return on any investment when such reinvestment rates are
considered. It is unlikely that the Mortgage Loans will prepay at a constant
level of the Prepayment Assumption until maturity, that all of the Mortgage
Loans will prepay at the same rate or that LIBOR will not vary. The timing of
changes in the rate of the prepayments may significantly affect the total
distributions received, the date of receipt of such distributions and the actual
yield to maturity to any investor, even if the average rate of principal
prepayments is consistent with an investor's expectation. In general, the
earlier the payment of principal of the Mortgage Loans, the greater the effect
on an investor's yield to maturity. As a result, the effect on an investor's
yield of principal prepayments occurring at a rate higher (or lower) than the
rate anticipated by the investor during the period immediately following the
issuance of the Certificates will not be equally offset by a subsequent like
reduction (or increase) in the rate of principal prepayments. Moreover, as noted
above, the timing of changes in the level of LIBOR may affect the actual yield
to maturity to an investor in an Inverse Floating Rate Certificate.
The following tables have been prepared based on the Modeling Assumptions
and the additional assumptions that: (i) the applicable assumed purchase price
of an Inverse Floating Rate Certificate is the sum of (x) the product of the
assumed purchase price percentage specified below (which does not include
accrued interest) and the initial Class Certificate Principal Balance (or
Notional Principal Balance) thereof and (y) the accrued interest on such
Certificate from August 25, 1998 to the Closing Date; (ii) on the LIBOR
Determination Date occurring in September 1998 and on each LIBOR Determination
Date thereafter, LIBOR is the level specified; and (iii) such purchase price is
paid on the Closing Date.
PRE-TAX YIELD* TO MATURITY OF THE CLASS A11 CERTIFICATES
(ASSUMED PURCHASE PRICE PERCENTAGE = 6.00%)
<TABLE>
<CAPTION>
PREPAYMENT ASSUMPTION
--------------------------------------------
LEVELS OF LIBOR 0% 100% 275% 450% 500%
- ----------------------------------------------------------------------- ---- ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
4.65625%............................................................... 63.1% 48.5% 48.5% 48.5% 47.8%
5.65625%............................................................... 43.1% 24.9% 24.9% 24.9% 23.7%
6.65625%............................................................... 23.3% (0.9)% (0.9)% (0.9)% (2.9)%
7.65625%............................................................... 1.0% (35.1)% (35.1)% (35.1)% (38.8)%
8.2000% and above...................................................... ** ** ** ** **
</TABLE>
- ------------------
*Corporate bond equivalent basis
**Indicates that investors will suffer a loss of virtually all their investment.
PRE-TAX YIELD* TO MATURITY OF THE CLASS A13 CERTIFICATES
(ASSUMED PURCHASE PRICE PERCENTAGE = 99.75%)
<TABLE>
<CAPTION>
PREPAYMENT ASSUMPTION
--------------------------------------------
LEVELS OF LIBOR 0% 100% 200% 275% 400% 500%
- ------------------------------------------------------------------- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
4.65625%........................................................... 13.6% 13.6% 13.6% 13.6% 13.6% 13.6%
5.65625%........................................................... 9.6% 9.7 % 9.7 % 9.7 % 9.7 % 9.7 %
6.65625%........................................................... 5.7% 5.7 % 5.8 % 5.8 % 5.8 % 5.9 %
7.65625%........................................................... 1.8% 1.8 % 1.9 % 1.9 % 2.0 % 2.1 %
8.10000% and above................................................. 0.1% 0.1 % 0.2 % 0.2 % 0.3 % 0.4 %
</TABLE>
- ------------------
*Corporate bond equivalent basis
S-42
<PAGE>
PRE-TAX YIELD* TO MATURITY OF THE CLASS A16 CERTIFICATES
(ASSUMED PURCHASE PRICE PERCENTAGE = 98.00%)
<TABLE>
<CAPTION>
PREPAYMENT ASSUMPTION
--------------------------------------------
LEVELS OF LIBOR 0% 100% 200% 275% 400% 500%
- ------------------------------------------------------------------- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
4.65625%........................................................... 13.5% 13.6% 13.8% 13.8% 14.0% 14.2%
5.65625%........................................................... 9.4% 9.5 % 9.8 % 9.8 % 10.0% 10.2%
6.65625%........................................................... 5.4% 5.5 % 5.8 % 5.8 % 6.1 % 6.3 %
7.65625%........................................................... 1.5% 1.6 % 1.9 % 1.9 % 2.2 % 2.5 %
8.00000% and above................................................. 0.1% 0.2 % 0.6 % 0.6 % 0.9 % 1.2 %
</TABLE>
- ------------------
*Corporate bond equivalent basis
PRE-TAX YIELD* TO MATURITY OF THE CLASS A17 CERTIFICATES
(ASSUMED PURCHASE PRICE PERCENTAGE = 97.00%)
<TABLE>
<CAPTION>
PREPAYMENT ASSUMPTION
--------------------------------------------
LEVELS OF LIBOR 0% 100% 200% 275% 400% 500%
- ------------------------------------------------------------------- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
4.65625%........................................................... 16.4% 16.5% 16.6% 16.7% 17.6% 17.9%
5.65625%........................................................... 9.4% 9.4 % 9.5 % 9.7 % 10.8% 11.2%
6.65625%........................................................... 2.5% 2.6 % 2.7 % 2.8 % 4.1 % 4.6 %
7.00000% and above................................................. 0.2% 0.2 % 0.4 % 0.5 % 1.8 % 2.4 %
</TABLE>
- ------------------
*Corporate bond equivalent basis
PRE-TAX YIELD* TO MATURITY OF THE CLASS A18 CERTIFICATES
(ASSUMED PURCHASE PRICE PERCENTAGE = 97.00%)
<TABLE>
<CAPTION>
PREPAYMENT ASSUMPTION
--------------------------------------------
LEVELS OF LIBOR 0% 100% 200% 275% 400% 500%
- ------------------------------------------------------------------- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
4.65625%........................................................... 9.8% 9.8 % 9.9 % 10.1% 11.2% 11.6%
5.65625%........................................................... 9.8% 9.8 % 9.9 % 10.1% 11.2% 11.6%
6.65625%........................................................... 9.8% 9.8 % 9.9 % 10.1% 11.2% 11.6%
7.65625%........................................................... 3.4% 3.5 % 3.6 % 3.8 % 5.0 % 5.5 %
8.00000% and above................................................. 0.2% 0.2 % 0.4 % 0.5 % 1.9 % 2.4 %
</TABLE>
- ------------------
*Corporate bond equivalent basis
PRE-TAX YIELD* TO MATURITY OF THE CLASS A21 CERTIFICATES
(ASSUMED PURCHASE PRICE PERCENTAGE = 92.00%)
<TABLE>
<CAPTION>
PREPAYMENT ASSUMPTION
------------------------------------
LEVELS OF LIBOR 0% 100% 275% 400% 500%
- --------------------------------------------------------------------------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
4.65625%................................................................... 11.8% 11.9% 12.0% 12.3% 12.7%
5.65625%................................................................... 8.5% 8.5 % 8.7 % 9.0 % 9.4 %
6.65625%................................................................... 5.2% 5.3 % 5.4 % 5.8 % 6.2 %
7.65625%................................................................... 2.0% 2.0 % 2.2 % 2.6 % 3.1 %
8.20000% and above......................................................... 0.3% 0.3 % 0.5 % 0.8 % 1.4 %
</TABLE>
- ------------------
*Corporate bond equivalent basis
S-43
<PAGE>
PRE-TAX YIELD* TO MATURITY OF THE CLASS A23 CERTIFICATES
(ASSUMED PURCHASE PRICE PERCENTAGE = 98.00%)
<TABLE>
<CAPTION>
PREPAYMENT ASSUMPTION
------------------------------------
LEVELS OF LIBOR 0% 100% 275% 400% 500%
- --------------------------------------------------------------------------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
4.65625%................................................................... 12.5% 12.5% 12.5% 12.6% 12.6%
5.65625%................................................................... 8.4% 8.5 % 8.5 % 8.5 % 8.6 %
6.65625%................................................................... 4.4% 4.5 % 4.5 % 4.6 % 4.6 %
7.65625%................................................................... 0.5% 0.5 % 0.6 % 0.6 % 0.7 %
7.75000% and above......................................................... 0.1% 0.2 % 0.2 % 0.3 % 0.3 %
</TABLE>
- ------------------
*Corporate bond equivalent basis
PRE-TAX YIELD* TO MATURITY OF THE CLASS A26 CERTIFICATES
(ASSUMED PURCHASE PRICE PERCENTAGE = 96.00%)
<TABLE>
<CAPTION>
PREPAYMENT ASSUMPTION
------------------------------------
LEVELS OF LIBOR 0% 100% 275% 400% 500%
- --------------------------------------------------------------------------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
4.65625%................................................................... 11.3% 11.3% 11.4% 11.4% 11.5%
5.65625%................................................................... 8.1% 8.1 % 8.2 % 8.3 % 8.3 %
6.65625%................................................................... 5.0% 5.0 % 5.1 % 5.1 % 5.2 %
7.65625%................................................................... 1.8% 1.9 % 1.9 % 2.0 % 2.1 %
8.20000% and above......................................................... 0.2% 0.2 % 0.3 % 0.3 % 0.4 %
</TABLE>
- ------------------
*Corporate bond equivalent basis
The preceding tables do not take into account the effect of Interest
Shortfalls in respect of the Mortgage Loans. The Mortgage Loans may not have all
of the characteristics assumed and there can be no assurance (i) that the
Mortgage Loans will prepay at any of the constant rates shown in the tables or
at any particular rate, (ii) that the pre-tax yields to maturity on the Inverse
Floating Rate Certificates will correspond to any of the amounts shown herein,
(iii) that the levels of LIBOR will correspond to the levels shown herein or
(iv) that the purchase price of an Inverse Floater Rate Certificate will be as
assumed. The tables do not constitute a representation as to the correlation of
any level of LIBOR and the rate of prepayments on the Mortgage Loans. Each
investor must make its own decision as to the appropriate prepayment assumptions
to be used and the appropriate levels of LIBOR to be assumed in deciding whether
or not to purchase an Inverse Floater Rate Certificate.
THE CLASS M, CLASS B1 AND CLASS B2 CERTIFICATES
The rate of payment of principal, the aggregate amount of distributions and
the yield to maturity of the Class M, Class B1 and Class B2 Certificates will be
affected by the rate of prepayments on the Mortgage Loans, as well as the rate
of mortgagor defaults resulting in Realized Losses, by the severity of those
losses and by the timing thereof. See 'Description of the
Certificates--Allocation of Realized Losses on the Certificates' herein for a
description of the manner in which such losses are borne by the holders of the
Certificates. If the purchaser of a Class M, Class B1 or Class B2 Certificate
calculates its anticipated yield based on an assumed rate of default and amount
of Realized Losses that is lower than the default rate and the amount of losses
actually incurred, its actual yield to maturity may be lower than that so
calculated and could be negative. The timing of defaults and losses will also
affect an investor's actual yield to maturity, even if the average rate of
defaults and severity of losses are consistent with an investor's expectations.
In general, the earlier a loss occurs, the greater the effect on an investor's
yield to maturity.
The yields to maturity on the Classes of Class B Certificates with higher
numerical designations will be more sensitive to losses due to liquidations of
defaulted Mortgage Loans than will the yields on such Classes with lower
numerical designations, and the yields to maturity on all of the Class B
Certificates will be more sensitive to such losses than will the yields on the
other Classes of Certificates. The yields to maturity on the Class M
Certificates will be more sensitive to such losses than will the yields on the
Senior Certificates and less sensitive than the yields on the Class B
Certificates. The Junior Certificates will be more sensitive to losses due to
liquidations of defaulted Mortgage Loans because the entire amount of such
losses will be allocable to such
S-44
<PAGE>
Certificates in inverse order of priority, either directly or through the
allocation of the Class PO Deferred Payment Writedown Amount, except as provided
herein. To the extent not covered by the Company's advances of delinquent
monthly payments of principal and interest, delinquencies on the Mortgage Loans
may also have a relatively greater effect (i) on the yields to investors in the
Class B Certificates with higher numerical designations than on the yields to
investors in those Class B Certificates with lower numerical designations, (ii)
on the yields to investors in the Class B Certificates than on the yields to
investors in the other Classes of the Certificates, and (iii) on the yields to
investors in the Class M Certificates than on the yields to investors in the
Senior Certificates. As described above under 'Description of the
Certificates--Distributions on the Certificates--Interest' and '--Principal,'
'--Allocation of Realized Losses on the Certificates' and
'--Subordination,' amounts otherwise distributable to holders of any Class of
Class B Certificates will be made available to protect the holders of the more
senior ranking Classes of the Certificates against interruptions in
distributions due to certain mortgagor delinquencies. Amounts otherwise
distributable to holders of the Class M Certificates will be made available to
protect the holders of the Senior Certificates against interruptions in
distributions due to certain mortgagor delinquencies. Such delinquencies, even
if subsequently cured, may affect the timing of the receipt of distributions by
the holders of the Junior Certificates.
To the extent that the Class M, Class B1 or Class B2 Certificates are being
purchased at discounts from their initial Class Certificate Principal Balances,
if the purchaser of such a Certificate calculates its yield to maturity based on
an assumed rate of payment of principal faster than that actually received on
such Certificate, its actual yield to maturity may be lower than that so
calculated.
FINAL PAYMENT CONSIDERATIONS
The rate of payment of principal of the Certificates will depend on the
rate of payment of principal of the Mortgage Loans (including prepayments,
defaults, delinquencies and liquidations) which, in turn, will depend on the
characteristics of the Mortgage Loans, the level of prevailing interest rates
and other economic, geographic, social and other factors, and no assurance can
be given as to the actual payment experience. As of the Cut-off Date, the month
and year of the latest scheduled maturity of a Mortgage Loan is expected to be
August 2028. In addition, to the extent delinquencies and defaults are not
covered by advances made by the Company or offset by the effect of the
subordination of the Junior Certificates, delinquencies and defaults could
affect the actual maturity of the Certificates offered hereby.
WEIGHTED AVERAGE LIVES OF THE CERTIFICATES
The weighted average life of a Certificate is determined by (a) multiplying
the reduction, if any, in the Certificate Principal Balance thereof on each
Distribution Date by the number of years from the date of issuance to such
Distribution Date, (b) summing the results and (c) dividing the sum by the
aggregate reductions in the Certificate Principal Balance of such Certificate.
The weighted average lives of the Certificates will be affected, to varying
degrees, by the rate of principal payments on the Mortgage Loans, the timing of
changes in such rate of payments and the priority sequence of distributions of
principal of such Certificates. The interaction of the foregoing factors may
have different effects on the various Classes of the Certificates and the
effects on any Class may vary at different times during the life of such Class.
Further, to the extent the prices of Classes of Certificates represent discounts
or premiums to their respective original Class Certificate Principal Balances,
variability in the weighted average lives of such Classes of Certificates could
result in variability in the related yields to maturity.
Prepayments on mortgage loans are commonly measured relative to a
prepayment standard or model. The model used in this Prospectus Supplement (the
'Prepayment Assumption') represents an assumed rate of prepayment each month
relative to the then outstanding principal balance of a pool of mortgage loans.
The Prepayment Assumption does not purport to be either a historical description
of the prepayment experience of any pool of mortgage loans or a prediction of
the anticipated rate of prepayment of any pool of mortgage loans, including the
Mortgage Loans in the Mortgage Pool. A prepayment assumption of 100% of the
Prepayment Assumption assumes prepayment rates of 0.2% per annum of the then
outstanding principal balance of such mortgage loans in the first month of the
life of the mortgage loans and increasing by 0.2% per annum in each month
thereafter until the thirtieth month. Beginning in the thirtieth month and in
each month thereafter during the life of the mortgage loans, 100% of the
Prepayment Assumption assumes a constant prepayment rate of 6.0% per annum.
S-45
<PAGE>
PAC Certificates. The PAC Balances Table (set forth in Appendix A hereto)
for the Class A6, Class A7, Class A8, Class A9, Class A10 and Class A14
Certificates (together, the 'PAC Certificates') was prepared by calculating the
amounts that would be available for payments on the PAC Certificates, using,
among other things, the Modeling Assumptions and a range of constant Mortgage
prepayment rates (the 'Structuring Range'), expressed as a percentage of the
Prepayment Assumption, and on the basis of the actual characteristics of the
Mortgage Loans expected to be included in the Mortgage Pool. The Structuring
Range for the Class A6, Class A7, Class A8, Class A9 and Class A10 Certificates
is 100% through 450% of the Prepayment Assumption. The Structuring Range for the
Class A14 Certificates is 140% through 250% of the Prepayment Assumption.
However, because the actual characteristics of the Mortgage Loans included in
the Mortgage Pool may differ from those expected, and because the Mortgage Loans
may not prepay within any Structuring Range or at any other given range of
constant prepayment rates, it is not likely that the PAC Certificates will
consistently pay down in accordance with their PAC Balances Table.
Principal distributions on the PAC Certificates are likely to be relatively
stable and in accordance with their respective schedules shown in the PAC
Balances Table so long as Mortgage Loan prepayments are neither too fast nor too
slow to support such schedules. Moreover, if the PAC Certificates fall behind
their respective schedules, they will have cumulative priority for future
principal distributions from amounts available for distribution of principal.
For the PAC Certificates, there is a range of constant Mortgage prepayment rates
(an 'Effective Range') at which such Certificates would pay down in accordance
with their schedules shown in the PAC Balances Table. The initial Effective
Range for the PAC Certificates may be wider than the corresponding Structuring
Range described above.
The Effective Range for the PAC Certificates offered hereby can narrow or
'shift' upward or downward over time as a result of the rates of principal
payments actually experienced on the Mortgage Loans. Moreover, the Mortgage
Loans will not prepay at any constant rate, and there can be no assurance that
the amount available for principal distributions on the PAC Certificates on any
Distribution Date will be sufficient to reduce the Certificate Principal
Balances thereof to their respective schedules. Non-constant prepayment rates
can cause any Class of PAC Certificates not to pay down in accordance with its
PAC Balances schedule, even if such rates remain within the initial Effective
Range for such Certificates.
If the Mortgage Loans prepay at rates that are generally below the
applicable Effective Range for the PAC Certificates, the amount available for
principal distributions on any Class thereof on any Distribution Date may be
insufficient to reduce the Class Certificate Principal Balance thereof to its
PAC Balance, and the weighted average life of such Certificates may be extended,
perhaps significantly. Conversely, if the Mortgage Loans prepay at rates that
are generally above the applicable Effective Range for the PAC Certificates, the
weighted average life of any Class thereof may be shortened, perhaps
significantly.
The principal payment stability of the PAC Certificates will be supported
by the Class A12, Class A13, Class A15, Class A16, Class A17, Class A18 and
Class A19 Certificates. As a result, the PAC Certificates will be less sensitive
to Mortgage Loan prepayment rates than such Certificates. When the Class
Certificate Principal Balances of such Certificates have been reduced to zero,
the PAC Certificates will become more sensitive to Mortgage Loan prepayments.
Scheduled Certificates. Principal distributions on the Class A16
Certificates (the 'Scheduled Certificates') are likely to be relatively stable
so long as the Mortgage Loan prepayments are neither too fast nor too slow to
support the Scheduled Balance schedule.
The Scheduled Balances Table (set forth in Appendix C hereto) for the
Scheduled Certificates was prepared by calculating the amounts that would be
available for payment on the Scheduled Certificates using, among other things,
the Modeling Assumptions and a range of constant Mortgage Loan prepayment rates
expressed as a percentage of the Prepayment Assumption. The structuring range
results in an initial Effective Range for the Scheduled Balances schedule of
260% through 300% of the Prepayment Assumption.
However, because the actual characteristics of the Mortgage Loans included
in the Mortgage Pool may differ from those expected, and because the Mortgage
Loans may not prepay within the foregoing Effective Range or at any other given
range of constant prepayment rates, it is not likely that the Scheduled
Certificates will consistently pay down in accordance with their Scheduled
Balances Table.
S-46
<PAGE>
Although the Scheduled Certificates receive some protection from fast or
slow prepayment rates through the operation of the Scheduled Balances schedule,
the range of constant Mortgage Loan prepayment rates at which the weighted
average lives of the Scheduled Certificates would be shielded from sensitivity
to Mortgage Loan prepayments is narrower than the Structuring Ranges for the PAC
Certificates.
Aggregate TAC Segment Certificates. Distributions of principal on the
Class A12, Class A13, Class A14, Class A15, Class A16, Class A17 and Class A18
Certificates, in the aggregate, will be made in respect of the Aggregate TAC
Segment. The Aggregate TAC Segment is not a Certificate. The principal balance
of the Aggregate TAC Segment at any time will be equal to the sum of the
Certificate Principal Balances of each of the Aggregate TAC Segment
Certificates. Based on the Modeling Assumptions, the Aggregate TAC Segment would
pay down in accordance with the Aggregate TAC Segment Balances schedule if the
Mortgage Loans were to prepay at a constant rate of 200% of the Prepayment
Assumption until the Class Certificate Principal Balances of the Aggregate TAC
Segment Certificates have each been reduced to zero. However, if the Mortgage
Loans prepay at rates that are generally below 200% of the Prepayment
Assumption, the Aggregate TAC Segment will not be reduced to its Aggregate TAC
Segment Balance and the weighted average life of the Aggregate TAC Segment may
be extended, perhaps significantly. If the Mortgage Loans prepay at rates that
are generally above 200% of the Prepayment Assumption, the weighted average life
of the Aggregate TAC Segment may be shortened, perhaps significantly. The Class
A19 Certificates support the principal payment stability of the Aggregate TAC
Segment.
Support Certificates. The Class A19 Certificates (the 'Support
Certificates') will support the principal payment stability of the PAC
Certificates, the Scheduled Certificates and the Aggregate TAC Segment
Certificates. As a result, the weighted average life of the Support Certificates
will be more sensitive to Mortgage Loan prepayments than those of such other
Certificates. The Support Certificates may receive no principal payments for
extended periods of time or may receive principal payments that vary widely from
period to period. To the extent that a low rate of principal payments on the
Mortgage Loans results in Available Funds on any Distribution Date being equal
to or less than the amount required to be distributed as principal on the PAC
Certificates, the Scheduled Certificates and the Aggregate TAC Segment
Certificates in accordance with their respective PAC Balances, Scheduled
Balances or Aggregate TAC Segment Balances schedules, the Support Certificates
will receive no principal payments on such Distribution Date. Conversely, to the
extent that a high rate of prepayments results in Available Funds being in
excess of such amount, such excess will be applied, to the extent of the Group I
Senior Principal Distribution Amount, to the Support Certificates until the
Class Certificate Principal Balance thereof has been reduced to zero. Thus, a
relatively rapid rate of prepayments in respect of the Mortgage Loans may
significantly shorten the weighted average life of the Support Certificates, and
a relatively slow rate of prepayments on such Mortgage Loans may significantly
extend the weighted average life of the Support Certificates.
Tables of Class Certificate Principal Balances. The following tables set
forth the percentages of the initial Class Certificate Principal Balance of each
Class of Certificates offered hereby that would be outstanding after each of the
dates shown at the specified constant percentages of the Prepayment Assumption
and the corresponding weighted average life of each such Class of Certificates.
For purposes of calculations under the columns at the indicated percentages of
the Prepayment Assumption set forth in the tables, it is assumed with respect to
the Mortgage Loans (the 'Modeling Assumptions') that (i) the distributions in
respect of the Certificates are made and received in cash on the 25th day of
each month commencing in September 1998, (ii) the Mortgage Loans prepay at the
specified constant percentages of the Prepayment Assumption, (iii) the aggregate
outstanding principal balance of the Mortgage Loans as of the Cut-off Date is
$901,613,270, (iv) no defaults or delinquencies in the payment by Mortgagors of
principal of and interest on the Mortgage Loans are experienced and the Company
does not repurchase any of the Mortgage Loans as permitted or required by the
Agreement, (v) the Company does not exercise its option to repurchase all the
Mortgage Loans in the Trust Fund as described under the caption 'The Pooling and
Servicing Agreement--Termination' herein, (vi) scheduled monthly payments on the
Mortgage Loans are received on the first day of each month commencing in
September 1998, and are computed prior to giving effect to prepayments received
in the prior month, (vii) prepayments representing payment in full of individual
Mortgage Loans are received on the last day of each month (commencing August
1998) and include 30 days' interest thereon, and no Interest Shortfalls occur in
respect of the Mortgage Loans, (viii) the scheduled monthly payment for each
Mortgage Loan has been calculated based on
S-47
<PAGE>
its outstanding balance, interest rate and remaining term to maturity such that
the Mortgage Loan will amortize in amounts sufficient to repay the remaining
balance of the Mortgage Loan by its remaining term to maturity, (ix) the initial
Class Certificate Principal Balance and Certificate Interest Rate for each Class
of Certificates offered hereby are as indicated on the cover page hereof, (x)
the date of the initial issuance of the Certificates is August 27, 1998, (xi)
the amount distributable to Certificateholders is not reduced by the incurrence
of any expenses by the Trust Fund and (xii) the Mortgage Loans are divided into
two groups (each, a 'Mortgage Loan Group') and the Mortgage Loans in each
Mortgage Loan Group have the respective characteristics described below:
<TABLE>
<CAPTION>
AGGREGATE STATED
SCHEDULED REMAINING
PRINCIPAL TERM TO
BALANCE AS OF MORTGAGE NET MORTGAGE AGE MATURITY
MORTGAGE LOAN GROUP THE CUT-OFF DATE RATE RATE (MONTHS) (MONTHS)
- ------------------------------ ---------------- ------------ ------------ ------------ ---------
<S> <C> <C> <C> <C> <C>
Discount...................... $ 56,870,153 6.8160084755% 6.6030108620% 1 359
Non-Discount.................. 844,743,117 7.3864579915 7.1341450124 1 358
</TABLE>
It is not likely that the Mortgage Loans will prepay at a constant level of
the Prepayment Assumption. In addition, because certain of the Mortgage Loans
may have remaining terms to maturity and may bear interest at rates that are
different from those assumed, the actual Class Certificate Principal Balance of
each Class of Certificates outstanding at any time and the actual weighted
average life of each Class of Certificates may differ from the corresponding
information in the table for each indicated percentage of the Prepayment
Assumption. Furthermore, even if all the Mortgage Loans prepay at the indicated
percentages of the Prepayment Assumption and the weighted average mortgage
interest rate and weighted average stated remaining term to maturity of the
Mortgage Loans were to equal the weighted average mortgage interest rate and
weighted average stated remaining term to maturity of the assumed Mortgage
Loans, due to the actual distribution of remaining terms to maturity and
interest rates among the Mortgage Loans, the actual Class Certificate Principal
Balance of each Class of Certificates outstanding at any time and the actual
weighted average life of each Class of Certificates would differ (which
difference could be material) from the corresponding information in the tables
for each indicated percentage of the Prepayment Assumption.
S-48
<PAGE>
PERCENT OF ORIGINAL CLASS CERTIFICATE PRINCIPAL BALANCE
OUTSTANDING OF THE CERTIFICATES
<TABLE>
<CAPTION>
CLASS A1 CLASS A2 CLASS A3
-------------------------------- -------------------------------- --------------------------------
DISTRIBUTION DATE 0% 100% 275% 400% 500% 0% 100% 275% 400% 500% 0% 100% 275% 400% 500%
- --------------------- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Initial Percentage... 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100
August 1999.......... 99 96 93 90 88 98 95 89 85 82 99 97 94 91 90
August 2000.......... 97 89 76 67 60 96 85 65 52 42 98 91 80 72 66
August 2001.......... 96 80 55 39 28 94 71 35 11 0 96 83 62 49 39
August 2002.......... 94 71 37 17 4 91 58 8 0 0 95 76 47 31 20
August 2003.......... 92 62 22 1 0 88 45 0 0 0 93 68 35 17 6
August 2004.......... 90 55 11 0 0 86 34 0 0 0 92 62 26 9 0
August 2005.......... 88 48 2 0 0 83 24 0 0 0 90 56 18 3 0
August 2006.......... 86 42 0 0 0 80 15 0 0 0 89 51 13 0 0
August 2007.......... 84 36 0 0 0 77 7 0 0 0 87 47 9 0 0
August 2008.......... 82 31 0 0 0 73 0 0 0 0 85 42 6 0 0
August 2009.......... 79 26 0 0 0 70 0 0 0 0 83 38 4 0 0
August 2010.......... 77 22 0 0 0 66 0 0 0 0 80 34 2 0 0
August 2011.......... 74 17 0 0 0 62 0 0 0 0 78 31 * 0 0
August 2012.......... 70 13 0 0 0 57 0 0 0 0 75 28 0 0 0
August 2013.......... 67 10 0 0 0 52 0 0 0 0 72 24 0 0 0
August 2014.......... 63 6 0 0 0 47 0 0 0 0 69 21 0 0 0
August 2015.......... 59 3 0 0 0 41 0 0 0 0 66 19 0 0 0
August 2016.......... 55 0 0 0 0 35 0 0 0 0 63 16 0 0 0
August 2017.......... 51 0 0 0 0 28 0 0 0 0 59 13 0 0 0
August 2018.......... 46 0 0 0 0 21 0 0 0 0 55 11 0 0 0
August 2019.......... 40 0 0 0 0 13 0 0 0 0 50 9 0 0 0
August 2020.......... 35 0 0 0 0 5 0 0 0 0 45 7 0 0 0
August 2021.......... 29 0 0 0 0 0 0 0 0 0 40 5 0 0 0
August 2022.......... 22 0 0 0 0 0 0 0 0 0 35 3 0 0 0
August 2023.......... 15 0 0 0 0 0 0 0 0 0 29 1 0 0 0
August 2024.......... 7 0 0 0 0 0 0 0 0 0 23 0 0 0 0
August 2025.......... 0 0 0 0 0 0 0 0 0 0 16 0 0 0 0
August 2026.......... 0 0 0 0 0 0 0 0 0 0 8 0 0 0 0
August 2027.......... 0 0 0 0 0 0 0 0 0 0 * 0 0 0 0
August 2028.......... 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Weighted Average Life
(in years)(1)....... 17.5 7.6 3.5 2.7 2.3 14.2 4.9 2.5 2.0 1.8 19.2 9.9 4.5 3.3 2.8
</TABLE>
- ------------------
* Indicates an amount above zero and less than 0.5% of the original Class
Certificate Principal Balance is outstanding.
(1) The weighted average life of a Certificate is determined by (a) multiplying
the reduction, if any, in the Certificate Principal Balance thereof on each
Distribution Date by the number of years from the date of issuance to such
Distribution Date, (b) summing the results and (c) dividing the sum by the
aggregate reductions in the Certificate Principal Balance of such
Certificate.
S-49
<PAGE>
PERCENT OF ORIGINAL CLASS CERTIFICATE PRINCIPAL BALANCE
OUTSTANDING OF THE CERTIFICATES
<TABLE>
<CAPTION>
CLASS A4 CLASS A5 CLASS A6
-------------------------------- -------------------------------- --------------------------------
DISTRIBUTION DATE 0% 100% 275% 400% 500% 0% 100% 275% 400% 500% 0% 100% 275% 450% 500%
- --------------------- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Initial Percentage... 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100
August 1999.......... 99 97 94 92 91 100 100 100 100 100 99 97 97 97 97
August 2000.......... 98 92 82 75 70 100 100 100 100 100 90 51 51 51 51
August 2001.......... 97 85 66 54 45 100 100 100 100 92 79 0 0 0 0
August 2002.......... 95 78 53 38 28 100 100 100 73 47 68 0 0 0 0
August 2003.......... 94 72 41 26 10 100 100 82 41 15 56 0 0 0 0
August 2004.......... 93 66 33 13 0 100 100 60 20 0 44 0 0 0 0
August 2005.......... 91 61 26 4 0 100 100 43 6 0 32 0 0 0 0
August 2006.......... 90 56 19 0 0 100 100 30 0 0 19 0 0 0 0
August 2007.......... 88 52 14 0 0 100 100 21 0 0 4 0 0 0 0
August 2008.......... 86 48 9 0 0 100 99 14 0 0 0 0 0 0 0
August 2009.......... 84 44 6 0 0 100 90 9 0 0 0 0 0 0 0
August 2010.......... 82 41 3 0 0 100 81 4 0 0 0 0 0 0 0
August 2011.......... 80 38 * 0 0 100 73 * 0 0 0 0 0 0 0
August 2012.......... 78 35 0 0 0 100 65 0 0 0 0 0 0 0 0
August 2013.......... 75 32 0 0 0 100 57 0 0 0 0 0 0 0 0
August 2014.......... 72 29 0 0 0 100 50 0 0 0 0 0 0 0 0
August 2015.......... 69 27 0 0 0 100 44 0 0 0 0 0 0 0 0
August 2016.......... 66 24 0 0 0 100 37 0 0 0 0 0 0 0 0
August 2017.......... 63 20 0 0 0 100 31 0 0 0 0 0 0 0 0
August 2018.......... 59 17 0 0 0 100 26 0 0 0 0 0 0 0 0
August 2019.......... 55 13 0 0 0 100 20 0 0 0 0 0 0 0 0
August 2020.......... 51 10 0 0 0 100 15 0 0 0 0 0 0 0 0
August 2021.......... 46 7 0 0 0 95 11 0 0 0 0 0 0 0 0
August 2022.......... 41 4 0 0 0 82 6 0 0 0 0 0 0 0 0
August 2023.......... 36 1 0 0 0 68 2 0 0 0 0 0 0 0 0
August 2024.......... 30 0 0 0 0 53 0 0 0 0 0 0 0 0 0
August 2025.......... 24 0 0 0 0 37 0 0 0 0 0 0 0 0 0
August 2026.......... 13 0 0 0 0 20 0 0 0 0 0 0 0 0 0
August 2027.......... 1 0 0 0 0 1 0 0 0 0 0 0 0 0 0
August 2028.......... 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Weighted Average Life
(in years)(1)....... 20.1 11.0 5.0 3.5 3.0 26.1 16.6 7.2 4.9 4.1 5.4 2.0 2.0 2.0 2.0
</TABLE>
- ------------------
* Indicates an amount above zero and less than 0.5% of the original Class
Certificate Principal Balance is outstanding.
(1) The weighted average life of a Certificate is determined by (a) multiplying
the reduction, if any, in the Certificate Principal Balance thereof on each
Distribution Date by the number of years from the date of issuance to such
Distribution Date, (b) summing the results and (c) dividing the sum by the
aggregate reductions in the Certificate Principal Balance of such
Certificate.
S-50
<PAGE>
PERCENT OF ORIGINAL CLASS CERTIFICATE PRINCIPAL BALANCE
OUTSTANDING OF THE CERTIFICATES
<TABLE>
<CAPTION>
CLASS A7 CLASS A8 CLASS A9
-------------------------------- -------------------------------- --------------------------------
PREPAYMENT ASSUMPTION PREPAYMENT ASSUMPTION PREPAYMENT ASSUMPTION
-------------------------------- -------------------------------- --------------------------------
DISTRIBUTION DATE 0% 100% 275% 450% 500% 0% 100% 275% 450% 500% 0% 100% 275% 450% 500%
- --------------------- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Initial Percentage... 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100
August 1999.......... 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100
August 2000.......... 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100
August 2001.......... 100 92 92 92 92 100 95 95 95 95 100 96 96 96 96
August 2002.......... 100 48 48 48 48 100 65 65 65 65 100 76 76 76 76
August 2003.......... 100 6 6 6 0 100 37 37 37 25 100 56 56 56 40
August 2004.......... 100 0 0 0 0 100 13 13 13 0 100 21 21 21 0
August 2005.......... 100 0 0 0 0 100 0 0 0 0 100 0 0 0 0
August 2006.......... 100 0 0 0 0 100 0 0 0 0 100 0 0 0 0
August 2007.......... 100 0 0 0 0 100 0 0 0 0 100 0 0 0 0
August 2008.......... 92 0 0 0 0 94 0 0 0 0 96 0 0 0 0
August 2009.......... 79 0 0 0 0 86 0 0 0 0 90 0 0 0 0
August 2010.......... 66 0 0 0 0 77 0 0 0 0 84 0 0 0 0
August 2011.......... 52 0 0 0 0 68 0 0 0 0 78 0 0 0 0
August 2012.......... 36 0 0 0 0 58 0 0 0 0 70 0 0 0 0
August 2013.......... 20 0 0 0 0 46 0 0 0 0 63 0 0 0 0
August 2014.......... 2 0 0 0 0 35 0 0 0 0 55 0 0 0 0
August 2015.......... 0 0 0 0 0 22 0 0 0 0 35 0 0 0 0
August 2016.......... 0 0 0 0 0 8 0 0 0 0 13 0 0 0 0
August 2017.......... 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
August 2018.......... 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
August 2019.......... 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
August 2020.......... 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
August 2021.......... 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
August 2022.......... 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
August 2023.......... 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
August 2024.......... 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
August 2025.......... 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
August 2026.......... 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
August 2027.......... 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
August 2028.......... 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Weighted Average Life
(in years)(1)....... 13.0 4.0 4.0 4.0 3.9 14.5 4.6 4.6 4.6 4.4 15.4 5.0 5.0 5.0 4.7
</TABLE>
- ------------------
(1) The weighted average life of a Certificate is determined by (a) multiplying
the reduction, if any, in the Certificate Principal Balance thereof on each
Distribution Date by the number of years from the date of issuance to such
Distribution Date, (b) summing the results and (c) dividing the sum by the
aggregate reductions in the Certificate Principal Balance of such
Certificate.
S-51
<PAGE>
PERCENT OF ORIGINAL CLASS CERTIFICATE PRINCIPAL BALANCE
OUTSTANDING OF THE CERTIFICATES
<TABLE>
<CAPTION>
CLASS A10 AND CLASS A11+ CLASS A12 AND CLASS A13
---------------------------------------- -------------------------------------------------
PREPAYMENT ASSUMPTION PREPAYMENT ASSUMPTION
---------------------------------------- -------------------------------------------------
DISTRIBUTION DATE 0% 100% 275% 450% 500% 0% 100% 200% 275% 400% 500%
- --------------------- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Initial Percentage... 100 100 100 100 100 100 100 100 100 100 100
August 1999.......... 100 99 99 99 99 98 95 92 92 92 90
August 2000.......... 97 84 84 84 84 97 94 83 83 71 60
August 2001.......... 93 63 63 63 63 96 94 72 67 43 26
August 2002.......... 89 44 44 44 44 96 93 63 54 25 5
August 2003.......... 85 25 25 25 17 95 92 56 44 14 0
August 2004.......... 82 9 9 9 0 94 91 51 39 9 0
August 2005.......... 77 0 0 0 0 93 86 43 32 5 0
August 2006.......... 73 0 0 0 0 92 76 32 23 0 0
August 2007.......... 68 0 0 0 0 91 67 22 16 0 0
August 2008.......... 63 0 0 0 0 90 58 14 11 0 0
August 2009.......... 58 0 0 0 0 89 50 7 7 0 0
August 2010.......... 52 0 0 0 0 88 42 1 3 0 0
August 2011.......... 45 0 0 0 0 87 35 0 * 0 0
August 2012.......... 38 0 0 0 0 85 28 0 0 0 0
August 2013.......... 31 0 0 0 0 84 21 0 0 0 0
August 2014.......... 23 0 0 0 0 82 14 0 0 0 0
August 2015.......... 15 0 0 0 0 81 7 0 0 0 0
August 2016.......... 5 0 0 0 0 79 1 0 0 0 0
August 2017.......... 0 0 0 0 0 74 0 0 0 0 0
August 2018.......... 0 0 0 0 0 65 0 0 0 0 0
August 2019.......... 0 0 0 0 0 55 0 0 0 0 0
August 2020.......... 0 0 0 0 0 44 0 0 0 0 0
August 2021.......... 0 0 0 0 0 33 0 0 0 0 0
August 2022.......... 0 0 0 0 0 20 0 0 0 0 0
August 2023.......... 0 0 0 0 0 7 0 0 0 0 0
August 2024.......... 0 0 0 0 0 0 0 0 0 0 0
August 2025.......... 0 0 0 0 0 0 0 0 0 0 0
August 2026.......... 0 0 0 0 0 0 0 0 0 0 0
August 2027.......... 0 0 0 0 0 0 0 0 0 0 0
August 2028.......... 0 0 0 0 0 0 0 0 0 0 0
Weighted Average Life
(in years)(1)....... 11.5 3.8 3.8 3.8 3.6 19.7 11.0 5.9 5.2 3.1 2.3
<CAPTION>
CLASS
A14
----
PREPAYMENT
ASSUMPTION
----------
DISTRIBUTION DATE 0% 140% 200% 250% 275% 400% 500%
- --------------------- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Initial Percentage... 100 100 100 100 100 100 100
August 1999.......... 94 83 83 83 83 83 83
August 2000.......... 92 73 73 73 73 73 73
August 2001.......... 90 60 60 60 60 60 60
August 2002.......... 89 49 49 49 49 49 15
August 2003.......... 87 39 39 39 39 36 0
August 2004.......... 84 31 31 31 31 24 0
August 2005.......... 82 14 14 14 14 12 0
August 2006.......... 80 0 0 0 0 0 0
August 2007.......... 77 0 0 0 0 0 0
August 2008.......... 74 0 0 0 0 0 0
August 2009.......... 72 0 0 0 0 0 0
August 2010.......... 68 0 0 0 0 0 0
August 2011.......... 65 0 0 0 0 0 0
August 2012.......... 61 0 0 0 0 0 0
August 2013.......... 58 0 0 0 0 0 0
August 2014.......... 53 0 0 0 0 0 0
August 2015.......... 49 0 0 0 0 0 0
August 2016.......... 44 0 0 0 0 0 0
August 2017.......... 31 0 0 0 0 0 0
August 2018.......... 7 0 0 0 0 0 0
August 2019.......... 0 0 0 0 0 0 0
August 2020.......... 0 0 0 0 0 0 0
August 2021.......... 0 0 0 0 0 0 0
August 2022.......... 0 0 0 0 0 0 0
August 2023.......... 0 0 0 0 0 0 0
August 2024.......... 0 0 0 0 0 0 0
August 2025.......... 0 0 0 0 0 0 0
August 2026.......... 0 0 0 0 0 0 0
August 2027.......... 0 0 0 0 0 0 0
August 2028.......... 0 0 0 0 0 0 0
Weighted Average Life
(in years)(1)....... 14.1 4.0 4.0 4.0 4.0 3.9 2.8
</TABLE>
- ------------------
* Indicates an amount above zero and less than 0.5% of the original Class
Certificate Principal Balance is outstanding.
+ The information shown for the Class A11 Certificates is for illustrative
purposes only, as the Class A11 Certificates are not entitled to
distributions of principal and have no weighted average life. Because the
Notional Principal Balance of the Class A11 Certificates will be determined
by reference to the Class Certificate Principal Balance of the Class A10
Certificates, reductions in the aggregate Notional Principal Balance of the
Class A11 Certificates will occur concurrently with the reduction in the
Class Certificate Principal Balance of the Class A10 Certificates as
described herein. The weighted average lives shown for the Class A11
Certificates have been calculated on the assumption that a reduction in the
Notional Principal Balance thereof is a distribution of principal.
(1) The weighted average life of a Certificate is determined by (a) multiplying
the reduction, if any, in the Certificate Principal Balance thereof on each
Distribution Date by the number of years from the date of issuance to such
Distribution Date, (b) summing the results and (c) dividing the sum by the
aggregate reductions in the Certificate Principal Balance of such
Certificate.
S-52
<PAGE>
PERCENT OF ORIGINAL CLASS CERTIFICATE PRINCIPAL BALANCE
OUTSTANDING OF THE CERTIFICATES
<TABLE>
<CAPTION>
CLASS A15 CLASS A16
----------------------------------------- ------------------------------------------
PREPAYMENT ASSUMPTION PREPAYMENT ASSUMPTION
----------------------------------------- ------------------------------------------
DISTRIBUTION DATE 0% 100% 200% 275% 400% 500% 0% 100% 200% 275% 400% 500%
- --------------------- ----- ----- ---- ---- ---- ---- ----- ----- ---- ----- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Initial Percentage... 100 100 100 100 100 100 100 100 100 100 100 100
August 1999.......... 100 100 97 97 97 95 100 100 94 94 94 94
August 2000.......... 100 100 89 89 69 52 100 100 81 81 81 81
August 2001.......... 100 100 79 71 33 6 100 100 65 65 57 10
August 2002.......... 100 100 72 57 11 0 100 100 52 52 18 0
August 2003.......... 100 100 66 48 0 0 100 100 43 43 0 0
August 2004.......... 100 100 63 44 0 0 100 100 37 37 0 0
August 2005.......... 100 100 61 43 0 0 100 100 37 37 0 0
August 2006.......... 100 100 51 36 0 0 100 100 27 27 0 0
August 2007.......... 100 100 36 25 0 0 100 100 10 10 0 0
August 2008.......... 100 94 23 17 0 0 100 90 0 0 0 0
August 2009.......... 100 81 12 11 0 0 100 67 0 0 0 0
August 2010.......... 100 68 2 5 0 0 100 46 0 0 0 0
August 2011.......... 100 56 0 * 0 0 100 25 0 0 0 0
August 2012.......... 100 44 0 0 0 0 100 5 0 0 0 0
August 2013.......... 100 33 0 0 0 0 100 0 0 0 0 0
August 2014.......... 100 22 0 0 0 0 100 0 0 0 0 0
August 2015.......... 100 11 0 0 0 0 100 0 0 0 0 0
August 2016.......... 100 1 0 0 0 0 100 0 0 0 0 0
August 2017.......... 100 0 0 0 0 0 100 0 0 0 0 0
August 2018.......... 100 0 0 0 0 0 100 0 0 0 0 0
August 2019.......... 88 0 0 0 0 0 80 0 0 0 0 0
August 2020.......... 71 0 0 0 0 0 50 0 0 0 0 0
August 2021.......... 52 0 0 0 0 0 19 0 0 0 0 0
August 2022.......... 33 0 0 0 0 0 0 0 0 0 0 0
August 2023.......... 11 0 0 0 0 0 0 0 0 0 0 0
August 2024.......... 0 0 0 0 0 0 0 0 0 0 0 0
August 2025.......... 0 0 0 0 0 0 0 0 0 0 0 0
August 2026.......... 0 0 0 0 0 0 0 0 0 0 0 0
August 2027.......... 0 0 0 0 0 0 0 0 0 0 0 0
August 2028.......... 0 0 0 0 0 0 0 0 0 0 0 0
Weighted Average
Life (in
years)(1)........... 23.1 13.6 7.1 6.0 2.6 2.1 22.0 11.8 5.0 5.0 3.0 2.4
<CAPTION>
CLASS A17 AND
CLASS A18
------------------
PREPAYMENT
ASSUMPTION
------------------
DISTRIBUTION DATE 0% 100% 200% 275% 400% 500%
- --------------------- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Initial Percentage... 100 100 100 100 100 100
August 1999.......... 100 100 100 100 100 96
August 2000.......... 100 100 100 100 52 11
August 2001.......... 100 100 100 80 0 0
August 2002.......... 100 100 100 64 0 0
August 2003.......... 100 100 100 55 0 0
August 2004.......... 100 100 99 54 0 0
August 2005.......... 100 100 96 53 0 0
August 2006.......... 100 100 86 50 0 0
August 2007.......... 100 100 73 48 0 0
August 2008.......... 100 100 56 42 0 0
August 2009.......... 100 100 29 26 0 0
August 2010.......... 100 100 4 12 0 0
August 2011.......... 100 100 0 1 0 0
August 2012.......... 100 100 0 0 0 0
August 2013.......... 100 80 0 0 0 0
August 2014.......... 100 53 0 0 0 0
August 2015.......... 100 27 0 0 0 0
August 2016.......... 100 2 0 0 0 0
August 2017.......... 100 0 0 0 0 0
August 2018.......... 100 0 0 0 0 0
August 2019.......... 100 0 0 0 0 0
August 2020.......... 100 0 0 0 0 0
August 2021.......... 100 0 0 0 0 0
August 2022.......... 79 0 0 0 0 0
August 2023.......... 27 0 0 0 0 0
August 2024.......... 0 0 0 0 0 0
August 2025.......... 0 0 0 0 0 0
August 2026.......... 0 0 0 0 0 0
August 2027.......... 0 0 0 0 0 0
August 2028.......... 0 0 0 0 0 0
Weighted Average
Life (in
years)(1)........... 24.6 16.2 10.0 7.4 2.0 1.6
</TABLE>
- ------------------
* Indicates an amount above zero and less than 0.5% of the original Class
Certificate Principal Balance is outstanding.
(1) The weighted average life of a Certificate is determined by (a) multiplying
the reduction, if any, in the Certificate Principal Balance thereof on each
Distribution Date by the number of years from the date of issuance to such
Distribution Date, (b) summing the results and (c) dividing the sum by the
aggregate reductions in the Certificate Principal Balance of such
Certificate.
S-53
<PAGE>
PERCENT OF ORIGINAL CLASS CERTIFICATE PRINCIPAL BALANCE
OUTSTANDING OF THE CERTIFICATES
<TABLE>
<CAPTION>
CLASS A19 CLASS A20 AND CLASS A21
-------------------------------- ----------------------------------
PREPAYMENT ASSUMPTION PREPAYMENT ASSUMPTION
-------------------------------- ----------------------------------
DISTRIBUTION DATE 0% 100% 275% 400% 500% 0% 100% 275% 400% 500%
- --------------------- ---- ---- ---- ---- ---- ----- ---- ----- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Initial Percentage... 100 100 100 100 100 100 100 100 100 100
August 1999.......... 107 107 77 27 0 100 100 100 100 100
August 2000.......... 114 114 13 0 0 100 100 100 100 100
August 2001.......... 122 122 0 0 0 100 100 100 100 100
August 2002.......... 131 131 0 0 0 100 100 100 100 100
August 2003.......... 140 140 0 0 0 100 100 100 100 100
August 2004.......... 150 150 0 0 0 100 100 100 100 85
August 2005.......... 160 160 0 0 0 100 100 100 100 21
August 2006.......... 171 171 0 0 0 100 100 100 86 0
August 2007.......... 183 183 0 0 0 100 100 100 57 0
August 2008.......... 196 196 0 0 0 100 100 100 42 0
August 2009.......... 210 210 0 0 0 100 100 100 31 0
August 2010.......... 224 224 0 0 0 100 100 100 23 0
August 2011.......... 240 240 0 0 0 100 100 100 17 0
August 2012.......... 257 257 0 0 0 100 100 83 13 0
August 2013.......... 274 274 0 0 0 100 100 67 9 0
August 2014.......... 294 294 0 0 0 100 100 54 7 0
August 2015.......... 314 314 0 0 0 100 100 43 5 0
August 2016.......... 336 336 0 0 0 100 100 34 4 0
August 2017.......... 359 288 0 0 0 100 100 27 3 0
August 2018.......... 384 237 0 0 0 100 100 21 2 0
August 2019.......... 411 188 0 0 0 100 100 16 1 0
August 2020.......... 440 142 0 0 0 100 100 12 1 0
August 2021.......... 470 98 0 0 0 100 100 9 1 0
August 2022.......... 503 57 0 0 0 100 100 7 * 0
August 2023.......... 538 18 0 0 0 100 100 5 * 0
August 2024.......... 487 0 0 0 0 100 87 3 * 0
August 2025.......... 339 0 0 0 0 100 62 2 * 0
August 2026.......... 179 0 0 0 0 100 39 1 * 0
August 2027.......... 8 0 0 0 0 100 17 * * 0
August 2028.......... 0 0 0 0 0 0 0 0 0 0
Weighted Average Life
(in years)(1)....... 27.4 21.6 1.4 0.8 0.6 29.5 27.6 17.4 10.6 6.6
<CAPTION>
CLASS A22 AND CLASS A23
----------------------------
PREPAYMENT ASSUMPTION
----------------------------
DISTRIBUTION DATE 0% 100% 275% 400% 500%
- --------------------- ----- ----- ----- ---- ----
<S> <C> <C> <C> <C> <C>
Initial Percentage... 100 100 100 100 100
August 1999.......... 100 100 100 100 100
August 2000.......... 100 100 100 100 100
August 2001.......... 100 100 100 100 100
August 2002.......... 100 100 100 100 100
August 2003.......... 100 100 100 100 100
August 2004.......... 99 97 93 91 89
August 2005.......... 97 93 86 80 76
August 2006.......... 95 88 75 67 57
August 2007.......... 93 82 64 53 38
August 2008.......... 91 75 52 39 26
August 2009.......... 89 69 43 29 18
August 2010.......... 87 63 35 22 12
August 2011.......... 85 58 28 16 8
August 2012.......... 82 53 23 12 6
August 2013.......... 79 48 18 9 4
August 2014.......... 76 43 15 6 3
August 2015.......... 73 39 12 5 2
August 2016.......... 69 35 9 3 1
August 2017.......... 65 31 7 2 1
August 2018.......... 61 27 6 2 *
August 2019.......... 57 24 4 1 *
August 2020.......... 52 20 3 1 *
August 2021.......... 47 17 3 1 *
August 2022.......... 42 14 2 * *
August 2023.......... 36 12 1 * *
August 2024.......... 29 9 1 * *
August 2025.......... 22 6 1 * *
August 2026.......... 15 4 * * *
August 2027.......... 7 2 * * *
August 2028.......... 0 0 0 0 0
Weighted Average Life
(in years)(1)....... 21.0 15.6 11.3 9.9 8.9
</TABLE>
- ------------------
* Indicates an amount above zero and less than 0.5% of the original Class
Certificate Principal Balance is outstanding.
(1) The weighted average life of a Certificate is determined by (a) multiplying
the reduction, if any, in the Certificate Principal Balance thereof on each
Distribution Date by the number of years from the date of issuance to such
Distribution Date, (b) summing the results and (c) dividing the sum by the
aggregate reductions in the Certificate Principal Balance of such
Certificate.
S-54
<PAGE>
PERCENT OF ORIGINAL CLASS CERTIFICATE PRINCIPAL BALANCE
OUTSTANDING OF THE CERTIFICATES
<TABLE>
<CAPTION>
CLASS A24 CLASS A25 AND CLASS A26
-------------------------------- --------------------------------
PREPAYMENT ASSUMPTION PREPAYMENT ASSUMPTION
-------------------------------- --------------------------------
DISTRIBUTION DATE 0% 100% 275% 400% 500% 0% 100% 275% 400% 500%
- --------------------- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Initial Percentage... 100 100 100 100 100 100 100 100 100 100
August 1999.......... 100 100 100 100 100 100 100 100 100 100
August 2000.......... 100 100 100 100 100 100 100 100 100 100
August 2001.......... 100 100 100 100 100 100 100 100 100 100
August 2002.......... 100 100 100 100 100 100 100 100 100 100
August 2003.......... 100 100 100 100 100 100 100 100 100 100
August 2004.......... 98 95 90 87 84 100 100 100 100 100
August 2005.......... 96 90 79 72 65 100 100 100 100 100
August 2006.......... 93 83 65 52 38 100 100 100 100 100
August 2007.......... 91 74 48 32 11 100 100 100 100 100
August 2008.......... 88 65 32 13 0 100 100 100 100 86
August 2009.......... 85 56 18 0 0 100 100 100 96 59
August 2010.......... 81 48 7 0 0 100 100 100 71 40
August 2011.......... 78 40 0 0 0 100 100 93 53 27
August 2012.......... 74 32 0 0 0 100 100 76 39 18
August 2013.......... 70 25 0 0 0 100 100 61 28 12
August 2014.......... 66 19 0 0 0 100 100 49 21 8
August 2015.......... 61 13 0 0 0 100 100 39 15 6
August 2016.......... 56 7 0 0 0 100 100 31 11 4
August 2017.......... 50 1 0 0 0 100 100 24 8 2
August 2018.......... 45 0 0 0 0 100 90 19 6 2
August 2019.......... 38 0 0 0 0 100 79 15 4 1
August 2020.......... 31 0 0 0 0 100 68 11 3 1
August 2021.......... 24 0 0 0 0 100 58 9 2 *
August 2022.......... 16 0 0 0 0 100 48 6 1 *
August 2023.......... 8 0 0 0 0 100 39 5 1 *
August 2024.......... 0 0 0 0 0 97 30 3 1 *
August 2025.......... 0 0 0 0 0 74 21 2 * *
August 2026.......... 0 0 0 0 0 50 14 1 * *
August 2027.......... 0 0 0 0 0 24 6 * * *
August 2028.......... 0 0 0 0 0 0 0 0 0 0
Weighted Average
Life (in
years)(1)........... 18.0 12.0 8.9 8.1 7.5 28.0 24.1 17.0 14.1 12.2
</TABLE>
- ------------------
* Indicates an amount above zero and less than 0.5% of the original Class
Certificate Principal Balance is outstanding.
(1) The weighted average life of a Certificate is determined by (a) multiplying
the reduction, if any, in the Certificate Principal Balance thereof on each
Distribution Date by the number of years from the date of issuance to such
Distribution Date, (b) summing the results and (c) dividing the sum by the
aggregate reductions in the Certificate Principal Balance of such
Certificate.
S-55
<PAGE>
PERCENT OF ORIGINAL CLASS CERTIFICATE PRINCIPAL BALANCE
OUTSTANDING OF THE CERTIFICATES
<TABLE>
<CAPTION>
CLASS M, CLASS B1 AND CLASS B2 CLASS R AND CLASS RL
-------------------------------- --------------------------------
PREPAYMENT ASSUMPTION PREPAYMENT ASSUMPTION
-------------------------------- --------------------------------
DISTRIBUTION DATE 0% 100% 275% 400% 500% 0% 100% 275% 400% 500%
- --------------------- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Initial Percentage... 100 100 100 100 100 100 100 100 100 100
August 1999.......... 99 99 99 99 99 0 0 0 0 0
August 2000.......... 98 98 98 98 98 0 0 0 0 0
August 2001.......... 97 97 97 97 97 0 0 0 0 0
August 2002.......... 96 96 96 96 96 0 0 0 0 0
August 2003.......... 94 94 94 94 94 0 0 0 0 0
August 2004.......... 93 91 88 86 84 0 0 0 0 0
August 2005.......... 92 88 81 76 71 0 0 0 0 0
August 2006.......... 90 83 71 63 57 0 0 0 0 0
August 2007.......... 88 77 60 50 42 0 0 0 0 0
August 2008.......... 86 71 49 37 29 0 0 0 0 0
August 2009.......... 84 65 40 27 20 0 0 0 0 0
August 2010.......... 82 60 33 20 13 0 0 0 0 0
August 2011.......... 80 55 27 15 9 0 0 0 0 0
August 2012.......... 77 50 22 11 6 0 0 0 0 0
August 2013.......... 75 45 17 8 4 0 0 0 0 0
August 2014.......... 72 41 14 6 3 0 0 0 0 0
August 2015.......... 69 37 11 4 2 0 0 0 0 0
August 2016.......... 65 33 9 3 1 0 0 0 0 0
August 2017.......... 62 29 7 2 1 0 0 0 0 0
August 2018.......... 58 26 5 2 1 0 0 0 0 0
August 2019.......... 54 22 4 1 * 0 0 0 0 0
August 2020.......... 49 19 3 1 * 0 0 0 0 0
August 2021.......... 44 16 2 1 * 0 0 0 0 0
August 2022.......... 39 14 2 * * 0 0 0 0 0
August 2023.......... 34 11 1 * * 0 0 0 0 0
August 2024.......... 28 8 1 * * 0 0 0 0 0
August 2025.......... 21 6 1 * * 0 0 0 0 0
August 2026.......... 14 4 * * * 0 0 0 0 0
August 2027.......... 7 2 * * * 0 0 0 0 0
August 2028.......... 0 0 0 0 0 0 0 0 0 0
Weighted Average Life
(in years)(1)....... 20.0 14.9 10.9 9.5 8.8 0.1 0.1 0.1 0.1 0.1
</TABLE>
- ------------------
* Indicates an amount above zero and less than 0.5% of the original Class
Certificate Principal Balance is outstanding.
(1) The weighted average life of a Certificate is determined by (a) multiplying
the reduction, if any, in the Certificate Principal Balance thereof on each
Distribution Date by the number of years from the date of issuance to such
Distribution Date, (b) summing the results and (c) dividing the sum by the
aggregate reductions in the Certificate Principal Balance of such
Certificate.
S-56
<PAGE>
GE CAPITAL MORTGAGE SERVICES, INC.
The Company, a wholly-owned subsidiary of GE Capital Mortgage Corporation,
is a New Jersey corporation originally incorporated in 1949. The principal
executive office of the Company is located at Three Executive Campus, Cherry
Hill, New Jersey 08002, telephone (609) 661-6100. For a general description of
the Company and its activities, see 'GE Capital Mortgage Services, Inc.' in the
accompanying Prospectus.
DELINQUENCY AND FORECLOSURE EXPERIENCE OF THE COMPANY
The following delinquency tables set forth certain information concerning
the delinquency and foreclosure experience on one- to four-family conventional
residential mortgage loans serviced directly by the Company, excluding Home
Equity Loans (as defined in the Prospectus) and special loan portfolios which,
upon the Company's commencement of servicing responsibilities, consisted of
significant numbers of mortgage loans that were seriously delinquent or in
foreclosure (the 'Servicing Portfolio'). The Servicing Portfolio does not
include mortgage loans that were serviced or sub-serviced by others.
<TABLE>
<CAPTION>
AS OF DECEMBER 31, AS OF DECEMBER 31, AS OF DECEMBER 31,
1995 1996 1997
------------------------ ------------------------ ------------------------
BY NO. BY DOLLAR BY NO. BY DOLLAR BY NO. BY DOLLAR
OF AMOUNT OF OF AMOUNT OF OF AMOUNT OF
LOANS LOANS LOANS LOANS LOANS LOANS
--------- ------------- --------- ------------- --------- -------------
(DOLLAR AMOUNTS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Total portfolio............. 821,839 $ 91,977,411 785,928 $ 88,188,662 726,869 $ 83,535,531
--------- ------------- --------- ------------- --------- -------------
--------- ------------- --------- ------------- --------- -------------
Period of delinquency(1)
30 to 59 days.......... 3,813 $ 408,131 3,362 $ 353,209 2,687 $ 281,657
60 to 89 days.......... 1,788 202,503 1,177 135,668 632 71,245
90 days or more(2)..... 6,437 919,526 6,867 892,643 5,442 662,342
--------- ------------- --------- ------------- --------- -------------
Total delinquent loans...... 12,038 $ 1,530,160 11,406 $ 1,381,520 8,761 $ 1,015,244
--------- ------------- --------- ------------- --------- -------------
--------- ------------- --------- ------------- --------- -------------
Percent of portfolio........ 1.46% 1.66% 1.45% 1.57% 1.21% 1.22%
</TABLE>
<TABLE>
<CAPTION>
AS OF JUNE 30, AS OF JUNE 30,
1997 1998
------------------------ ------------------------
BY NO. BY DOLLAR BY NO. BY DOLLAR
OF AMOUNT OF OF AMOUNT OF
LOANS LOANS LOANS LOANS
--------- ------------- --------- -------------
(DOLLAR AMOUNTS IN THOUSANDS)
<S> <C> <C> <C> <C>
Total portfolio............. 754,107 $ 85,304,716 685,103 $ 80,711,917
--------- ------------- --------- -------------
--------- ------------- --------- -------------
Period of delinquency(1)
30 to 59 days.......... 2,486 $ 268,325 2,184 $ 232,258
60 to 89 days.......... 590 65,331 509 55,582
90 days or more(2)..... 6,130 789,337 4,505 528,054
--------- ------------- --------- -------------
Total delinquent loans...... 9,206 $ 1,122,993 7,198 $ 815,894
--------- ------------- --------- -------------
--------- ------------- --------- -------------
Percent of portfolio........ 1.22% 1.32% 1.05% 1.01%
</TABLE>
- ------------------
(1) The indicated periods of delinquency are based on the number of days past
due on a contractual basis, based on a 30-day month. No mortgage loan is
considered delinquent for these purposes until the monthly anniversary of
its contractual due date (e.g., a mortgage loan with a payment due on
January 1 would first be considered delinquent on February 1). The
delinquencies reported above were determined as of the dates indicated.
(2) Includes pending foreclosures.
S-57
<PAGE>
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
-------------------------------------------
1995 1996 1997
------------- ------------- -------------
(DOLLAR AMOUNTS IN THOUSANDS)
<S> <C> <C> <C>
Total portfolio......... $ 91,977,411 $ 88,188,662 $ 83,535,531
Foreclosures(1)......... 268,478 372,800 271,046
Foreclosure ratio....... 0.29% 0.42% 0.32%
</TABLE>
<TABLE>
<CAPTION>
AS OF JUNE 30,
----------------------------
1997 1998
------------- -------------
(DOLLAR AMOUNTS IN
THOUSANDS)
<S> <C> <C>
Total portfolio......... $ 85,304,716 $ 80,711,917
Foreclosures(1)......... 285,523 233,932
Foreclosure ratio....... 0.33% 0.29%
</TABLE>
- ------------------
(1) Foreclosures represent the principal balance of mortgage loans secured by
mortgaged properties, the title to which has been acquired by the Company,
by investors or by an insurer following foreclosure or delivery of a deed in
lieu of foreclosure and which had not been liquidated at the end of the
period indicated. The length of time necessary to complete the liquidation
of such mortgaged properties may be affected by prevailing economic
conditions and the marketability of the mortgaged properties.
The delinquency and foreclosure experience set forth above is historical
and is based on the servicing of mortgage loans that may not be representative
of the Mortgage Loans in the Mortgage Pool. Consequently, there can be no
assurance that the delinquency and foreclosure experience on the Mortgage Loans
in the Mortgage Pool will be consistent with the data set forth above. The
Servicing Portfolio, for example, includes mortgage loans having a wide variety
of payment characteristics (e.g., fixed-rate mortgage loans, adjustable rate
mortgage loans and graduated payment mortgage loans) and mortgage loans secured
by mortgaged properties in geographic locations that may not be representative
of the geographic locations of the Mortgage Loans in the Mortgage Pool. The
Servicing Portfolio also includes mortgage loans originated in accordance with
the Company's then applicable underwriting policies as well as mortgage loans
not originated in accordance with such policies but as to which the Company had
acquired the related servicing rights.
The Servicing Portfolio includes many mortgage loans which have not been
outstanding long enough to have seasoned to a point where delinquencies would be
fully reflected. In the absence of substantial continuous additions of servicing
for recently originated mortgage loans to the Servicing Portfolio, it is
possible that the delinquency and foreclosure percentages experienced in the
future could be significantly higher than those indicated in the tables above.
THE POOLING AND SERVICING AGREEMENT
The Certificates will be issued pursuant to the Agreement. The following
summaries describe certain provisions of the Agreement. See 'The Pooling and
Servicing Agreement' in the accompanying Prospectus for summaries of certain
other provisions of the Agreement. The summaries below do not purport to be
complete and are subject to, and qualified in their entirety by reference to,
the provisions of the Agreement. Where particular provisions or terms used in
the Agreement are referred to, such provisions or terms are as specified in the
Agreement.
ASSIGNMENT OF MORTGAGE LOANS
At the time of issuance of the Certificates, the Company will assign the
Mortgage Loans to the Trustee, together with all principal and interest received
by the Company on or with respect to the Mortgage Loans on or after the Cut-off
Date other than principal and interest due and payable on or before the Cut-off
Date. The Trustee will, concurrently with such assignment, execute, countersign
and deliver the Certificates to the Company in exchange for the Mortgage Loans.
Each Mortgage Loan will be identified in a schedule appearing as an exhibit to
the Agreement. Any substitute Mortgage Loan will be identified in an amended
schedule maintained by the Trustee. See 'The Pooling and Servicing
Agreement--Repurchase or Substitution' in the Prospectus.
S-58
<PAGE>
In addition, at the time of issuance of the Certificates the Company will
deliver to the Trustee, as to each Mortgage Loan other than a Cooperative Loan,
the related Mortgage Note (or a lost-note affidavit), any related assumption and
modification agreement and an assignment of Mortgage to the Trustee in
recordable form (other than in respect of unavailable recording information).
Except in the case of a Cooperative Loan, the Company will also deliver
originals of the recorded Mortgages, any intervening assignments of the
Mortgages and title insurance policies with respect to the Mortgage Loans, as
promptly as practicable, and in any case within thirty days, after receiving all
such documents from the applicable recording offices and title insurance
companies. Pending such delivery, the Company will retain and furnish to the
Trustee upon request copies of the Mortgages and intervening assignments of
Mortgage delivered for recording and the evidence of title insurance issued at
origination of the Mortgage Loans. The Company will retain and furnish to the
Trustee upon request any applicable evidence of primary mortgage insurance (any
policy with respect to such insurance being referred to herein as a 'Primary
Mortgage Insurance Policy') so long as such insurance remains in force. With
respect to any Mortgage Loans which are Cooperative Loans, the Company, as
seller, will cause to be delivered to the Trustee the related original
promissory note endorsed to the order of the Trustee (or a lost-note affidavit),
the original security agreement, the proprietary lease or occupancy agreement,
the recognition agreement, an executed financing statement by the Mortgagor and
the relevant stock certificate and related blank stock powers. The Company will
deliver to the Trustee a financing statement in fileable form evidencing the
assignment of the Company's security interest in the collateral securing each
Cooperative Loan to the Trustee. In the case of a Cooperative Loan the Company
will deliver any intervening assignments of the financing statement executed by
the Mortgagor as promptly as practicable, and in any event within thirty days
after receiving such documents from the applicable filing offices. See 'The
Pooling and Servicing Agreement--Assignment of Assets' in the Prospectus.
The Company may refrain from recording the assignments of Mortgage to the
Trustee and filing the financing statements with respect to any Cooperative Loan
in favor of the Trustee unless the Company or the Trustee obtains actual notice
or knowledge of the occurrence of any one or more of the following: (i) the
Company is not a wholly-owned direct or indirect subsidiary of General Electric
Company or General Electric Capital Corporation ('GE Capital') does not own
(directly or indirectly) at least two-thirds of the voting shares of the capital
stock of the Company, (ii) the long-term senior unsecured rating of GE Capital
is downgraded by Fitch IBCA, Inc. ('Fitch') or Standard & Poor's Rating
Services, a division of The McGraw-Hill Companies, Inc. ('S&P'), below their two
highest long-term rating categories or such rating is withdrawn, (iii) GE
Capital is no longer obligated pursuant to the terms of a support agreement to
maintain the Company's net worth or liquidity (as such terms are defined in such
support agreement) at the levels specified therein, or that such support
agreement, including any amendment thereto, has been breached, terminated or
otherwise held to be unenforceable or (iv) such support agreement, including any
amendment thereto, is amended or modified (each such event described in (i),
(ii), (iii) and (iv) is referred to herein as a 'Trigger Event'); provided,
however, that such recording will not be required if the Company delivers to the
Trustee a letter from each rating agency which originally rated the Certificates
to the effect that the failure to take such action would not cause such rating
agency to withdraw or reduce its then current ratings of such Certificates. For
purposes of the foregoing, the Company will be deemed to have knowledge of any
such downgrading if, in the exercise of reasonable diligence, the Company has or
should have had knowledge thereof. If a Trigger Event occurs, the Company will
also promptly furnish to the Trustee the documents retained by the Company as
described in the preceding paragraph.
Although the recordation of the assignments of Mortgage to the Trustee or
the filing of financing statements relating to the Cooperative Loans is not
necessary to make the assignment of the Mortgage Loans to the Trustee effective,
if the Company were to make a sale, assignment, satisfaction or discharge of any
Mortgage Loan prior to recording the assignments to the Trustee or filing the
financing statements in favor of the Trustee, the other parties to such sale,
assignment, satisfaction or discharge might have rights superior to those of the
Trustee. If the Company were to do so without authority under the Agreement, it
would be liable to the Certificateholders. Moreover, if insolvency proceedings
relating to the Company were commenced prior to such recording or filing,
creditors or the trustee-in-bankruptcy may be able to assert rights in the
affected Mortgage Loans superior to those of the Trustee.
S-59
<PAGE>
SERVICING ARRANGEMENT WITH RESPECT TO THE MORTGAGE LOANS
It is expected that the Company will directly service at least 90% (by
aggregate Scheduled Principal Balance as of the Cut-off Date) of the Mortgage
Loans and will function as master servicer with respect to the remaining
Mortgage Loans pursuant to a Direct Master Servicing Arrangement. Such
master-serviced loans will be directly serviced by entities which originated or
acquired those loans and sold them to the Company. The Agreement permits the
Company to use other primary servicing agents from time to time. See 'Servicing
of the Mortgage Loans and Contracts' in the accompanying Prospectus.
The Agreement may permit the Company, at its option, to grant certain
rights in connection with the foreclosure of defaulted Mortgage Loans to the
holders of the Class B5 Certificates and, when such Certificates are no longer
outstanding, to the holders of the Class B4 Certificates. See 'Servicing of the
Mortgage Loans and Contracts--Collection and Other Servicing Procedures' in the
Prospectus.
COLLECTION ACCOUNT
The Agreement provides that if the Company or the Trustee obtains actual
notice or knowledge of the occurrence of a Trigger Event or the downgrade by S&P
of GE Capital's short-term senior unsecured rating below A-1+, the Company will,
in lieu of the Loan Payment Record described under the caption 'Servicing of the
Mortgage Loans and Contracts--Loan Payment Record' in the accompanying
Prospectus, establish and maintain or cause to be established and maintained a
separate account (the 'Collection Account') for the Certificates for the
collection of payments on the Mortgage Loans; provided, however, that such
action will not be required if the Company delivers to the Trustee a letter from
each rating agency which originally rated the Certificates to the effect that
the failure to take such action would not cause such rating agency to withdraw
or reduce its then current rating of such Certificates. If established, the
Collection Account would be (i) maintained with a depository institution the
debt obligations of which are, at the time of any deposit therein, rated by each
of Fitch and S&P in one of its two highest long-term rating categories and by
S&P in its highest short-term rating category, (ii) an account or accounts the
deposits in which are fully insured by either the Bank Insurance Fund (the
'BIF') of the Federal Deposit Insurance Corporation (the 'FDIC') or the Savings
Association Insurance Fund (as successor to the Federal Savings and Loan
Insurance Corporation) of the FDIC (the 'SAIF'), (iii) an account or accounts
with a depository institution, which accounts are insured by the BIF or SAIF (to
the limits established by the FDIC), and which uninsured deposits are invested
in United States government securities or other high quality investments, or are
otherwise secured to the extent required by Fitch and S&P such that, as
evidenced by an opinion of counsel, the holders of the Certificates have a claim
with respect to the funds in the account or a perfected first security interest
against any collateral securing such funds that is superior to claims of any
other depositors or creditors of the depository institution with which the
account is maintained, (iv) a trust account maintained with the corporate trust
department of a federal or state chartered depository institution or of a trust
company with trust powers and acting in its fiduciary capacity for the benefit
of the Trustee or (v) an account as will not cause either Fitch or S&P to
downgrade or withdraw its then current ratings assigned to the Certificates. If
a Collection Account is established for the Certificates, all amounts credited
or debited to the Loan Payment Record in the manner described under the caption
'Servicing of the Mortgage Loans and Contracts-- Loan Payment Record' will
instead be deposited or withdrawn from the Collection Account. See 'Servicing of
the Mortgage Loans and Contracts--Loan Payment Record' in the accompanying
Prospectus.
Prior to the occurrence of a Trigger Event, the Company will transfer to
the Certificate Account, in next day funds, the Available Funds for the related
Distribution Date on the business day immediately preceding such Distribution
Date.
ADVANCES
In the event that any Mortgagor fails to make any payment of principal or
interest required under the terms of a Mortgage Loan, the Company will advance
the entire amount of such payment, net of the applicable Servicing Fee, less the
amount of any such payment that the Company reasonably believes will not be
recoverable out of liquidation proceeds or otherwise. The amount of any
scheduled payment required to be advanced by the Company will not be affected by
any agreement between the Company and a Mortgagor providing for the postponement
or modification of the due date or amount of such scheduled payment. The
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Company will be entitled to reimbursement for any such advance from related late
payments on the Mortgage Loan as to which such advance was made. Furthermore, in
the event that any Mortgage Loan as to which such an advance has been made is
foreclosed while in the Trust Fund, the Company will be entitled to
reimbursement for such advance from related liquidation proceeds or insurance
proceeds prior to payment to Certificateholders of the Scheduled Principal
Balance of such Mortgage Loan plus accrued interest at the Mortgage Rate, net of
the Servicing Fee.
If the Company makes a good faith judgment that all or any portion of any
advance of delinquent principal and interest made by it with respect to any
Mortgage Loan may not ultimately be recoverable from related liquidation or
insurance proceeds or other collections on such Mortgage Loan (a 'Nonrecoverable
Advance'), the Company will so notify the Trustee and the Company will be
entitled to reimbursement for such Nonrecoverable Advance from recoveries on all
other unrelated Mortgage Loans. The Company's judgment that it has made a
Nonrecoverable Advance with respect to any Mortgage Loan will be based upon its
assessment of the value of the related Mortgaged Property and such other facts
and circumstances as it may deem appropriate in evaluating the likelihood of
receiving liquidation proceeds, net of expenses, equal to or greater than the
aggregate amount of unreimbursed advances made with respect to such Mortgage
Loan.
As a result of the subordination of the Junior Certificates, the effect of
reimbursements to the Company of previous advances from liquidation or insurance
proceeds and of Nonrecoverable Advances will generally be borne by the holders
of the Junior Certificates (to the extent then outstanding) in inverse order of
priority before they are borne by holders of the Senior Certificates.
The Trustee will make advances of delinquent principal and interest
payments in the event of a failure by the Company to perform its obligation to
do so, provided that the Trustee will not make such advance to the extent that
it reasonably believes the payment will not be recoverable to it out of related
liquidation or insurance proceeds or otherwise. The Trustee will be entitled to
reimbursement for advances in a manner similar to the Company's entitlement.
PURCHASES OF DEFAULTED MORTGAGE LOANS
Under the Agreement, the Company will have the option (but not the
obligation) to purchase any Mortgage Loan as to which the Mortgagor has failed
to make unexcused payment in full of three or more scheduled payments of
principal and interest (a 'Defaulted Mortgage Loan'). Any such purchase will be
for a price equal to 100% of the outstanding principal balance of such Mortgage
Loan, plus accrued and unpaid interest thereon at the Net Mortgage Rate minus
the Supplemental Servicing Fee Rate (as defined below) less any amounts
representing previously unreimbursed advances. The purchase price for any
Defaulted Mortgage Loan will be deposited in the Certificate Account on the
business day prior to the Distribution Date on which the proceeds of such
purchase are to be distributed to the Certificateholders.
SERVICING COMPENSATION, COMPENSATING INTEREST AND PAYMENT OF EXPENSES
The Company's primary compensation for its servicing activities will come
from the payment to it, with respect to each interest payment on any Mortgage
Loan, of a servicing fee (the 'Servicing Fee') equal to the sum of a base fee
(the 'Base Servicing Fee') and a supplemental fee, if any (the 'Supplemental
Servicing Fee'). As to each Mortgage Loan, the rate at which the Base Servicing
Fee is payable (the 'Base Servicing Fee Rate') will be a fixed rate per annum of
the outstanding principal balance of such Mortgage Loan, expected to range from
approximately 0.20% to 0.29%, with an anticipated initial weighted average rate
of between approximately 0.23% and 0.27%. As to each Mortgage Loan, the rate at
which the Supplemental Servicing Fee is payable (the 'Supplemental Servicing Fee
Rate') will be a fixed rate per annum of the outstanding principal balance of
the Mortgage Loan equal to the excess, if any, of the Net Mortgage Rate over
6.75%. The Supplemental Servicing Fee Rate is expected to range from 0% to
approximately 1.62%, with an anticipated initial weighted average rate of
between 0.33% and 0.37%. The aggregate servicing compensation to the Company
could vary depending on the prepayment experience of the Mortgage Loans. The
servicing compensation of any direct servicer of any Mortgage Loan will be paid
out of the related Base Servicing Fee, and the Company will retain the balance
as part of its servicing compensation (subject to its obligation to make
Compensating Interest Payments, as described below).
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To the extent any voluntary prepayment results in an Interest Shortfall (as
described in clauses (i) and (ii) of the definition thereof) allocable to
Certificateholders with respect to any Distribution Date, the Company will be
obligated to remit an amount (such amount, a 'Compensating Interest Payment')
sufficient to pass through to Certificateholders the full amount of interest to
which they would have been entitled in the absence of such prepayments, but in
no event greater than the lesser of (a) 1/12th of 0.125% of the Pool Scheduled
Principal Balance for such Distribution Date and (b) the aggregate amount
received by the Company on account of its Base Servicing Fees (net of any
servicing compensation paid to any direct servicer) in connection with such
Distribution Date. Because the net amount received by the Company on account of
its Base Servicing Fee is generally less in the case of Mortgage Loans
master-serviced by the Company than in the case of Mortgage Loans the Company
services directly, the amounts available for any Compensating Interest Payment
with respect to any Distribution Date will generally decrease to the extent the
proportion of Outstanding Mortgage Loans master-serviced by the Company
increases, and increase to the extent the proportion of such Mortgage Loans
decreases. It is expected that no more than 10% of the Mortgage Loans (by
aggregate Scheduled Principal Balance as of the Cut-off Date) will be
master-serviced by the Company. This percentage could vary over time, however,
if Mortgage Loans directly serviced by the Company experience a
disproportionately high or low level of prepayments or defaults relative to
Mortgage Loans master-serviced by the Company. In addition, the proportion of
master-serviced Mortgage Loans could be affected as a result of (i) the exercise
by the Company of its right under the Agreement to contract with third parties
to directly service Mortgage Loans, with the Company becoming the master
servicer of such Mortgage Loans, or (ii) the substitution of any Mortgage Loans
under the Agreement.
The Company will retain, as additional servicing compensation, amounts in
respect of interest paid by borrowers in connection with any principal
prepayment in full received by the Company (or, with respect to Mortgage Loans
master-serviced by the Company, of which the Company receives notice) from the
first day through the fifteenth day of each month, other than the month of the
Cut-off Date.
The Company will pay expenses incurred in connection with its
responsibilities under the Agreement, subject to limited reimbursement as
described herein and in the accompanying Prospectus. See 'Servicing of the
Mortgage Loans and Contracts--Servicing and Other Compensation and Payment of
Expenses' in the accompanying Prospectus for information regarding other
possible compensation to the Company.
TRUSTEE
The Trustee for the Certificates offered hereby will be State Street Bank
and Trust Company, a Massachusetts banking corporation organized and existing
under the laws of the Commonwealth of Massachusetts. The Corporate Trust Office
of the Trustee is located at 225 Franklin Street, Boston, Massachusetts.
TERMINATION
The Company may, at its option, repurchase all of the Mortgage Loans
underlying the Certificates and thereby effect the early retirement of the
Certificates and cause the termination of the Trust Fund and the REMIC
constituted by the Trust Fund, on any Distribution Date after the aggregate
Scheduled Principal Balance of the Mortgage Loans is less than 10% of the
aggregate Scheduled Principal Balance thereof as of the Cut-off Date, provided
that the Trustee has received an opinion of counsel that the exercise of such
option will not subject the Trust Fund to a tax on prohibited transactions or
result in the failure of the Trust Fund to qualify as a REMIC.
Any such repurchase by the Company of the assets included in the Trust Fund
will be at a price equal to the sum of (a) 100% of the unpaid principal balance
of each Mortgage Loan in the Trust Fund (other than a Mortgage Loan described in
clause (b)) as of such date, plus accrued and unpaid interest thereon at the
related Net Mortgage Rate minus the Supplemental Servicing Fee Rate (less any
amounts representing previously unreimbursed advances), and (b) the appraised
value of any property acquired in respect of a related Mortgage Loan (less any
amounts representing previously unreimbursed advances in respect thereof and a
good faith estimate of liquidation expenses). The Available Funds on the final
Distribution Date will be allocated to each Class of Certificates in accordance
with the priorities described under 'Description of the Certificates--
Distributions on the Certificates--Allocation of Available Funds.' Accordingly,
if the Available Funds on the
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final Distribution Date are less than the aggregate Certificate Principal
Balance of all outstanding Certificates plus accrued and unpaid interest
thereon, then in the event that such Distribution Date occurs (x) prior to the
Cross-Over Date, the resulting shortfall will be borne by the Certificates in
inverse order of their related payment priorities, and (y) on or after the
Cross-Over Date, such shortfall will be borne pro rata among such Certificates.
In no event will the Trust Fund created by the Agreement continue beyond
the expiration of 21 years from the death of the last survivor of a certain
person named in such Agreement.
VOTING RIGHTS
The Class A11 Certificates will be allocated 1% of the votes and the other
Classes of Certificates in the aggregate will be allocated 99% of the votes,
eligible to be cast in connection with any vote of all Certificateholders under
the Agreement. Votes allocated to the Certificates other than the Class A11
Certificates will be allocated among such Classes (and among the Certificates
within each such Class) in proportion to their Class Certificate Principal
Balances or Certificate Principal Balances, as the case may be.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
An election will be made to treat each of the Upper-Tier REMIC and the
Lower-Tier REMIC as a REMIC for federal income tax purposes.
The Certificates other than the Class RL Certificates will represent
interests in the Upper-Tier REMIC, the assets of which will consist of all the
'regular interests' in the Lower-Tier REMIC. The Lower-Tier REMIC will consist
of the Mortgage Loans and related Trust Fund assets described herein. The
Regular Certificates will be designated as 'regular interests' and the Class R
Certificates will be designated as the 'residual interest' in the Upper-Tier
REMIC. The Class RL Certificates will be designated as the 'residual interest'
in the Lower-Tier REMIC.
Regular Certificates. The Regular Certificates generally will be treated
as debt instruments issued by the Upper-Tier REMIC for federal income tax
purposes. Income on Regular Certificates must be reported under an accrual
method of accounting. Certain Classes of Regular Certificates may be issued with
original issue discount in an amount equal to the excess of their initial
respective Class Certificate Principal Balances (plus accrued interest from the
last day preceding the issue date corresponding to a Distribution Date through
the issue date), over their issue prices (including all accrued interest). The
Class A19 Certificates will be issued, and the Class A11 Certificates will
likely be treated as being issued, with original issue discount in an amount
equal to the excess of (i) the sum of all payments thereon determined under the
Prepayment Assumption described below, over (ii) their issue price (including
accrued interest). The prepayment assumption that is to be used in determining
the rate of accrual of original issue discount and whether the original issue
discount is considered de minimis, and that may be used by a holder of a Regular
Certificate to amortize premium, will be 275% of the Prepayment Assumption. No
representation is made as to the actual rate at which the Mortgage Loans will
prepay. See 'Certain Federal Income Tax Consequences--REMIC Certificates--Income
from Regular Certificates' in the accompanying Prospectus.
The requirement to report income on a Regular Certificate under an accrual
method may result in the inclusion of amounts in income that are not currently
distributed in cash. In the case of a Junior Certificate, accrued income may
exceed cash distributions as a result of the preferential right of Classes of
Senior Certificates to receive cash distributions in the event of losses or
delinquencies on Mortgage Loans. Prospective purchasers of Junior Certificates
should consult their tax advisors regarding the timing of income from those
Certificates and the timing and character of any deductions that may be
available with respect to principal or accrued interest that is not paid. See
'Certain Federal Income Tax Consequences--REMIC Certificates--Income from
Regular Certificates' in the accompanying Prospectus.
Residual Certificates. The holders of the Class R and Class RL
Certificates must include the taxable income of the Upper-Tier REMIC and
Lower-Tier REMIC, respectively, in their federal taxable income. The resulting
tax liability of the holders may exceed cash distributions to such holders
during certain periods. All or a portion of the taxable income from a Residual
Certificate recognized by a holder may be treated as 'excess inclusion' income,
which with limited exceptions is subject to U.S. federal income tax in all
events.
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Under Treasury regulations, each Class of the Residual Certificates may be
considered to be 'noneconomic residual interests' at the time they are issued,
in which event certain transfers thereof would be disregarded for federal income
tax purposes.
Prospective purchasers of a Residual Certificate should consider carefully
the tax consequences of an investment in Residual Certificates discussed in the
Prospectus and should consult their own tax advisors with respect to those
consequences. See 'Certain Federal Income Tax Consequences--REMIC
Certificates--Income from Residual Certificates;--Taxation of Certain Foreign
Investors;--Servicing Compensation and Other REMIC Pool Expense;--Transfers of
Residual Certificates.'
ERISA CONSIDERATIONS
As described in the Prospectus under 'ERISA Considerations,' the Employee
Retirement Income Security Act of 1974, as amended ('ERISA'), and the Code
impose certain duties and restrictions on any person which is an employee
benefit plan within the meaning of Section 3(3) of ERISA or a plan subject to
Section 4975 of the Code or any person utilizing the assets of such employee
benefit plan or other plan (an 'ERISA Plan') and certain persons who perform
services for ERISA Plans. For example, unless exempted, an investment by an
ERISA Plan in the Certificates offered hereby may constitute or give rise to a
prohibited transaction under ERISA or Section 4975 of the Code.
The United States Department of Labor (the 'DOL') has issued to PaineWebber
an individual administrative exemption, Prohibited Transaction Exemption 90-36
(55 Fed. Reg. 25903, June 25, 1990), as amended (the 'Exemption'), from certain
of the prohibited transaction provisions of ERISA with respect to the initial
purchase, the holding, and the subsequent resale by an ERISA Plan of
certificates in pass-through trusts that meet the conditions and requirements of
the Exemption. The Exemption might apply to the acquisition, holding and resale
of the Senior Certificates offered hereby by an ERISA Plan, provided that
specified conditions are met.
Among the conditions which would have to be satisfied for the Exemption to
apply to the acquisition by an ERISA Plan of such Senior Certificates are the
following: (i) PaineWebber is the sole underwriter or the manager or co-manager
of the underwriting syndicate, for such Certificates, (ii) such Certificates are
rated in one of the three highest generic rating categories by Fitch, Moody's
Investors Service, Inc., S&P or Duff & Phelps Credit Rating Co. at the time of
the acquisition of such Certificates by the ERISA Plan, (iii) such Certificates
represent a beneficial ownership interest in, among other things, obligations
that bear interest or are purchased at a discount and which are secured by
single-family residential, multifamily residential or commercial real property
(including obligations secured by lease-hold interests on commercial real
property), or fractional undivided interests in such obligations, (iv) such
Certificates are not subordinated to other certificates issued by the Trust
Fund, (v) the ERISA Plan investing in such 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, (vi) the acquisition of
such Certificates is on terms that are at least as favorable to the ERISA Plan
as they would be in an arm's length transaction with an unrelated third party,
(vii) the Trustee is not an affiliate of any member of the 'Restricted Group'
(as defined below) and (viii) the compensation to PaineWebber represents not
more than reasonable compensation for underwriting such Certificates, the
proceeds to the Company pursuant to the assignment of the Mortgage Loans (or
interests therein) to the Trustee represent not more than the fair market value
of such Mortgage Loans (or interests) and the sum of all payments made to and
retained by the Company represents not more than reasonable compensation for the
Company's services under the Agreement and reimbursement of the Company's
reasonable expenses in connection therewith.
In addition, if certain additional conditions specified in the Exemption
are satisfied, the Exemption may provide an exemption from the prohibited
transaction provisions of ERISA relating to possible self-dealing transactions
by fiduciaries who have discretionary authority, or render investment advice,
with respect to ERISA Plan assets used to purchase the Senior Certificates
offered hereby if the fiduciary (or its affiliate) is an obligor on any of the
Mortgage Loans.
The Exemption would not be available with respect to ERISA Plans sponsored
by any of the following entities (or any affiliate of any such entity): (i) the
Company, (ii) PaineWebber (iii) the Trustee, (iv) any entity
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that provides insurance or other credit support to the Trust Fund or (v) any
obligor with respect to Mortgage Loans constituting more than five percent of
the aggregate unamortized principal balance of the assets in the Mortgage Pool
(the 'Restricted Group'). Before purchasing any Certificate offered hereby, a
fiduciary of an ERISA Plan should make its own determination as to the
availability of the exemptive relief provided in the Exemption or the
availability of any other prohibited transaction exemptions, and whether the
conditions of any such exemption will be applicable to such Certificate.
The exemption does not apply to the initial purchase, the holding or the
subsequent resale of the Class M, Class B1 and Class B2 Certificates because
such Certificates are subordinate to certain other Classes of Certificates.
ACCORDINGLY, ERISA PLANS MAY NOT PURCHASE THE CLASS M, CLASS B1 OR CLASS B2
CERTIFICATES, except that any insurance company may purchase such Certificates
with assets of its general account if the exemptive relief granted by the DOL
for transactions involving insurance company general accounts in Prohibited
Transaction Exemption 95-60, 60 Fed. Reg. 35925 (July 12, 1995) is available
with respect to such investment. Any insurance company proposing to purchase
such Certificates for its general account should consider whether such relief
would be available.
Any fiduciary of an ERISA Plan considering whether to purchase any
Certificate offered hereby should not only consider the applicability of
exemptive relief, but should also carefully review with its own legal advisors
the applicability of the fiduciary duty and prohibited transaction provisions of
ERISA and the Code to such investment. See 'ERISA Considerations' in the
accompanying Prospectus.
A qualified pension plan or other entity that is exempt from federal income
taxation pursuant to Section 501 of the Code (a 'Tax-Exempt Investor')
nonetheless will be subject to federal income taxation to the extent that its
income is 'unrelated business taxable income' within the meaning of Section 512
of the Code. The Residual Certificates constitute the residual interest in the
REMIC constituted by the Trust Fund and all 'excess inclusions' allocated to the
Residual Certificates, if held by a Tax-Exempt Investor, will be considered
'unrelated business taxable income' and thus will be subject to federal income
tax. See 'Certain Federal Income Tax Consequences--Residual Certificates' herein
and 'Certain Federal Income Tax Consequences-- Federal Income Tax Consequences
for REMIC Certificates--Taxation of Residual Certificates' in the Prospectus.
The Agreement will contain certain restrictions on the transferability of
the Class M, Class B1 and Class B2 Certificates. See 'Description of the
Certificates--Book-Entry Certificates' herein. In addition, the Agreement
provides that the Residual Certificates may not be acquired by or transferred to
an ERISA Plan. See 'Description of the Certificates--Restrictions on Transfer of
the Residual Certificates' herein.
LEGAL INVESTMENT MATTERS
The Senior Certificates offered hereby and the Class M Certificates will
constitute 'mortgage related securities' for purposes of the Secondary Mortgage
Market Enhancement Act of 1984 ('SMMEA'), and, as such, are legal investments
for certain entities to the extent provided in SMMEA. However, institutions
subject to the jurisdiction of the Office of the Comptroller of the Currency,
the Board of Governors of the Federal Reserve System, the Federal Deposit
Insurance Corporation, the Office of Thrift Supervision, the National Credit
Union Administration or state banking or insurance authorities should review
applicable rules, supervisory policies and guidelines of these agencies before
purchasing any of the Certificates, as certain Classes may be deemed to be
unsuitable investments under one or more of these rules, policies and guidelines
and certain restrictions may apply to investments in other Classes. It should
also be noted that certain states have enacted legislation limiting to varying
extents the ability of certain entities (in particular insurance companies) to
invest in mortgage related securities. Investors should consult with their own
legal advisors in determining whether and to what extent the Certificates
constitute legal investments for such investors. See 'Legal Investment Matters'
in the accompanying Prospectus.
The Class B1 and Class B2 Certificates will not constitute 'mortgage
related securities' under SMMEA. The appropriate characterization of the Class
B1 and Class B2 Certificates under various legal investment restrictions, and
thus the ability of investors subject to these restrictions to purchase Class B1
or Class B2 Certificates, may be subject to significant interpretive
uncertainties. All investors whose investment authority is
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subject to legal restrictions should consult their own legal advisors to
determine whether, and to what extent, the Class B1 or Class B2 Certificates
will constitute legal investments for them.
The Company makes no representation as to the proper characterization of
the Class B1 or Class B2 Certificates for legal investment of financial
institution regulatory purposes, or as to the ability of particular investors to
purchase the Class B1 or Class B2 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 Class B1 or Class B2 Certificates) may adversely affect
the liquidity of the Class B1 and Class B2 Certificates.
PLAN OF DISTRIBUTION
Subject to the terms and conditions set forth in the Underwriting Agreement
between the Company and the Underwriter, the Certificates offered hereby are
being purchased from the Company by the Underwriter upon issuance. Distribution
of the Certificates offered hereby will be made by the Underwriter from time to
time in negotiated transactions or otherwise at varying prices to be determined
at the time of sale. Proceeds to the Company from the sale of the Certificates
offered hereby will be approximately 99.501861% of the aggregate initial Class
Certificate Principal Balance of the Certificates offered hereby, plus accrued
interest thereon from the Cut-off Date to the Closing Date, but before deducting
issuance expenses payable by the Company. In connection with the purchase and
sale of the Certificates offered hereby, the Underwriter may be deemed to have
received compensation from the Company in the form of underwriting discounts.
The Company has agreed to indemnify the Underwriter against, or make
contributions to the Underwriter with respect to, certain liabilities, including
liabilities under the Securities Act of 1933, as amended.
The Underwriter has entered into an agreement with the Company to purchase
the Class B3, Class B4 and Class B5 Certificates simultaneously with the
purchase of the Certificates offered hereby, subject to certain conditions.
CERTIFICATE RATINGS
It is a condition of issuance of the Certificates that the Senior
Certificates (other than the Class A11, Class A13, Class A16, Class A17, Class
A18, Class A21, Class A23 and Class A26 Certificates) offered hereby be rated
'AAA' by each of Fitch and S&P, that the Class A11, Class A13, Class A16, Class
A17, Class A18, Class A21, Class A23 and Class A26 Certificates be rated 'AAA'
by Fitch and 'AAAr' by S&P, and that the Class M, Class B1 and Class B2
Certificates be rated 'AA,' 'A' and 'BBB,' respectively, by Fitch.
The ratings assigned by Fitch to mortgage pass-through certificates address
the likelihood of the receipt by Certificateholders of all distributions to
which such Certificateholders are entitled. Fitch's ratings address the
structural and legal aspects associated with the Certificates, including the
nature of the underlying mortgage loans. Fitch's ratings on mortgage
pass-through certificates do not represent any assessment of the likelihood or
rate of principal prepayments. The ratings do not address the possibility that
Certificateholders might suffer a lower than anticipated yield.
S&P's ratings on mortgage pass-through certificates address the likelihood
of receipt by Certificateholders of payments required under the operative
agreements. S&P's ratings take into consideration the credit quality of the
mortgage pool including any credit support providers, structural and legal
aspects associated with the certificates, and the extent to which the payment
stream of the mortgage pool is adequate to make payment required under the
certificates. S&P's ratings on the certificates do not, however, constitute a
statement regarding the frequency of prepayments on the mortgage loans. S&P's
rating does not address the possibility that investors may suffer a lower than
anticipated yield. The 'r' symbol is appended to the rating by S&P of those
Certificates that S&P believes may experience high volatility or high
variability in expected returns due to non-credit risks. The absence of the 'r'
symbol in the ratings of other Certificates offered hereby should not be taken
as an indication that such Certificates will exhibit no volatility or
variability in return.
The ratings of the 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 Company has not requested a rating of the Certificates offered hereby
by any rating agency other than Fitch and S&P and the Company has not provided
information relating to the Certificates offered hereby or the
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Mortgage Loans to any rating agency other than Fitch and S&P. However, there can
be no assurance as to whether any other rating agency will rate the Certificates
offered hereby or, if another rating agency rates such Certificates, what rating
would be assigned to such Certificates by such rating agency. Any such
unsolicited rating assigned by another rating agency to the Certificates offered
hereby may be lower than the rating assigned to such Certificates by either, or
both, of Fitch and S&P.
LEGAL MATTERS
Certain legal matters in respect of the Certificates will be passed upon
for the Company by Cleary, Gottlieb, Steen & Hamilton, New York, New York, and
for the Underwriters by Brown & Wood LLP, Washington, D.C.
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APPENDIX A
PAC BALANCES TABLE
The PAC Balances set forth in the table below were calculated on the basis
of the Class Certificate Principal Balances of the PAC Certificates set forth on
the cover hereof, and the other assumptions described in 'Yield and Weighted
Average Life Considerations--Weighted Average Lives of the Certificates--PAC
Certificates' herein. If such Class Certificate Principal Balances are increased
or decreased in accordance with the variance permitted hereby, the applicable
balances set forth in the table below will be increased or decreased
substantially correspondingly. In such event, the final PAC Balances Table will
be calculated on or about the Closing Date on the basis of such revised Class
Certificate Principal Balances and on the basis of (1) the applicable
Structuring Range of the PAC Certificates, (2) the assumptions set forth in
clauses (i), (iv) through (viii), (x) and (xi) of the Modeling Assumptions and
(3) the characteristics of the Mortgage Loans included in the Mortgage Pool on
the Closing Date. The final PAC Balances Table will be set forth in the
Agreement, which will be filed as an exhibit to the Detailed Description.
<TABLE>
<CAPTION>
PAC BALANCES
-----------------------------------------------------------------------------------------------------
DISTRIBUTION DATE CLASS A6 CLASS A7 CLASS A8 CLASS A9 CLASS A10 CLASS A14
- ------------------------ -------------- -------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Initial Balance......... $40,997,000.00 $20,000,000.00 $30,000,000.00 $32,615,223.00 $35,317,777.00 $57,922,000.00
September 1998.......... 40,997,000.00 20,000,000.00 30,000,000.00 32,615,223.00 35,317,777.00 57,628,462.15
October 1998............ 40,997,000.00 20,000,000.00 30,000,000.00 32,615,223.00 35,317,777.00 57,073,649.39
November 1998........... 40,997,000.00 20,000,000.00 30,000,000.00 32,615,223.00 35,317,777.00 56,439,054.21
December 1998........... 40,997,000.00 20,000,000.00 30,000,000.00 32,615,223.00 35,317,777.00 55,724,852.57
January 1999............ 40,997,000.00 20,000,000.00 30,000,000.00 32,615,223.00 35,317,777.00 54,931,277.43
February 1999........... 40,997,000.00 20,000,000.00 30,000,000.00 32,615,223.00 35,317,777.00 54,058,618.76
March 1999.............. 40,997,000.00 20,000,000.00 30,000,000.00 32,615,223.00 35,317,777.00 53,107,223.47
April 1999.............. 40,997,000.00 20,000,000.00 30,000,000.00 32,615,223.00 35,317,777.00 52,077,495.29
May 1999................ 40,997,000.00 20,000,000.00 30,000,000.00 32,615,223.00 35,317,777.00 50,969,894.52
June 1999............... 40,997,000.00 20,000,000.00 30,000,000.00 32,615,223.00 35,317,777.00 49,784,937.80
July 1999............... 40,997,000.00 20,000,000.00 30,000,000.00 32,615,223.00 35,317,777.00 48,523,197.77
August 1999............. 39,918,773.67 20,000,000.00 30,000,000.00 32,615,223.00 35,009,712.34 48,088,900.16
September 1999.......... 38,686,105.85 20,000,000.00 30,000,000.00 32,615,223.00 34,657,521.55 47,708,558.96
October 1999............ 37,388,921.95 20,000,000.00 30,000,000.00 32,615,223.00 34,286,897.59 47,307,550.87
November 1999........... 36,027,751.25 20,000,000.00 30,000,000.00 32,615,223.00 33,897,991.68 46,886,224.11
December 1999........... 34,603,156.20 20,000,000.00 30,000,000.00 32,615,223.00 33,490,964.54 46,444,952.33
January 2000............ 33,115,732.08 20,000,000.00 30,000,000.00 32,615,223.00 33,065,986.23 45,984,134.21
February 2000........... 31,566,106.61 20,000,000.00 30,000,000.00 32,615,223.00 32,623,236.11 45,504,192.93
March 2000.............. 29,954,939.54 20,000,000.00 30,000,000.00 32,615,223.00 32,162,902.67 45,005,575.65
April 2000.............. 28,282,922.16 20,000,000.00 30,000,000.00 32,615,223.00 31,685,183.44 44,488,752.96
May 2000................ 26,550,776.91 20,000,000.00 30,000,000.00 32,615,223.00 31,190,284.81 43,954,218.26
June 2000............... 24,759,256.80 20,000,000.00 30,000,000.00 32,615,223.00 30,678,421.93 43,402,487.14
July 2000............... 22,909,144.94 20,000,000.00 30,000,000.00 32,615,223.00 30,149,818.56 42,834,096.67
August 2000............. 21,001,253.93 20,000,000.00 30,000,000.00 32,615,223.00 29,604,706.86 42,249,604.69
September 2000.......... 19,036,425.33 20,000,000.00 30,000,000.00 32,615,223.00 29,043,327.27 41,649,589.11
October 2000............ 17,015,529.05 20,000,000.00 30,000,000.00 32,615,223.00 28,465,928.35 41,034,647.03
November 2000........... 14,939,462.68 20,000,000.00 30,000,000.00 32,615,223.00 27,872,766.55 40,405,394.04
December 2000........... 12,809,150.88 20,000,000.00 30,000,000.00 32,615,223.00 27,264,106.05 39,762,463.27
January 2001............ 10,625,544.66 20,000,000.00 30,000,000.00 32,615,223.00 26,640,218.58 39,106,504.57
February 2001........... 8,453,012.77 20,000,000.00 30,000,000.00 32,615,223.00 26,019,495.20 38,458,811.50
March 2001.............. 6,291,498.95 20,000,000.00 30,000,000.00 32,615,223.00 25,401,919.84 37,819,298.03
April 2001.............. 4,140,947.25 20,000,000.00 30,000,000.00 32,615,223.00 24,787,476.51 37,187,878.82
May 2001................ 2,001,302.00 20,000,000.00 30,000,000.00 32,615,223.00 24,176,149.31 36,564,469.21
June 2001............... 0.00 19,953,801.57 29,953,703.87 32,580,225.39 23,567,922.43 35,948,985.23
July 2001............... 0.00 19,186,317.60 29,184,596.89 31,998,818.17 22,962,780.11 35,341,343.61
August 2001............. 0.00 18,422,725.86 28,419,390.35 31,420,359.50 22,360,706.71 34,741,461.73
September 2001.......... 0.00 17,663,006.58 27,658,064.47 30,844,834.42 21,761,686.66 34,149,257.64
October 2001............ 0.00 16,907,140.12 26,900,599.56 30,272,228.03 21,165,704.46 33,564,650.05
November 2001........... 0.00 16,155,106.94 26,146,976.03 29,702,525.55 20,572,744.71 32,987,558.35
December 2001........... 0.00 15,406,887.60 25,397,174.41 29,135,712.24 19,982,792.07 32,417,902.54
January 2002............ 0.00 14,662,462.75 24,651,175.31 28,571,773.45 19,395,831.31 31,855,603.31
February 2002........... 0.00 13,921,813.18 23,908,959.46 28,010,694.61 18,811,847.25 31,300,581.95
March 2002.............. 0.00 13,184,919.73 23,170,507.68 27,452,461.22 18,230,824.81 30,752,760.42
April 2002.............. 0.00 12,451,763.38 22,435,800.90 26,897,058.87 17,652,748.97 30,212,061.28
May 2002................ 0.00 11,722,325.19 21,704,820.15 26,344,473.22 17,077,604.82 29,678,407.72
June 2002............... 0.00 10,996,586.32 20,977,546.54 25,794,689.99 16,505,377.49 29,151,723.58
July 2002............... 0.00 10,274,528.06 20,253,961.32 25,247,694.99 15,936,052.22 28,631,933.26
August 2002............. 0.00 9,556,131.74 19,534,045.79 24,703,474.10 15,369,614.32 28,118,961.82
September 2002.......... 0.00 8,841,378.85 18,817,781.39 24,162,013.28 14,806,049.16 27,612,734.89
</TABLE>
S-68
<PAGE>
<TABLE>
<CAPTION>
PAC BALANCES
-----------------------------------------------------------------------------------------------------
DISTRIBUTION DATE CLASS A6 CLASS A7 CLASS A8 CLASS A9 CLASS A10 CLASS A14
- ------------------------ -------------- -------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
October 2002............ $ 0.00 $ 8,130,250.94 18,105,149.63 $23,623,298.57 $14,245,342.21 $27,113,178.71
November 2002........... 0.00 7,422,729.66 17,396,132.14 23,087,316.06 13,687,479.00 26,620,220.11
December 2002........... 0.00 6,718,796.77 16,690,710.62 22,554,051.94 13,132,445.15 26,133,786.52
January 2003............ 0.00 6,018,434.12 15,988,866.89 22,023,492.45 12,580,226.35 25,653,805.93
February 2003........... 0.00 5,321,623.66 15,290,582.87 21,495,623.92 12,030,808.36 25,180,206.93
March 2003.............. 0.00 4,628,347.42 14,595,840.54 20,970,432.74 11,484,177.02 24,712,918.68
April 2003.............. 0.00 3,938,587.55 13,904,622.01 20,447,905.38 10,940,318.24 24,251,870.90
May 2003................ 0.00 3,252,326.27 13,216,909.48 19,928,028.38 10,399,218.03 23,796,993.87
June 2003............... 0.00 2,569,545.91 12,532,685.22 19,410,788.34 9,860,862.43 23,348,218.45
July 2003............... 0.00 1,890,228.89 11,851,931.62 18,896,171.96 9,325,237.58 22,905,476.04
August 2003............. 0.00 1,214,357.71 11,174,631.16 18,384,165.97 8,792,329.71 22,468,698.58
September 2003.......... 0.00 589,686.26 10,548,638.70 17,910,946.32 8,299,791.56 22,067,360.53
October 2003............ 0.00 0.00 9,926,048.83 17,408,709.09 7,809,930.62 21,671,672.49
November 2003........... 0.00 0.00 9,306,844.54 16,322,723.35 7,322,733.48 21,281,568.07
December 2003........... 0.00 0.00 8,691,008.86 15,242,645.64 6,838,186.81 20,896,981.44
January 2004............ 0.00 0.00 8,078,524.95 14,168,446.39 6,356,277.34 20,517,847.28
February 2004........... 0.00 0.00 7,469,376.04 13,100,096.20 5,876,991.90 20,144,100.79
March 2004.............. 0.00 0.00 6,863,545.47 12,037,565.84 5,400,317.36 19,775,677.69
April 2004.............. 0.00 0.00 6,261,016.63 10,980,826.21 4,926,240.67 19,412,514.21
May 2004................ 0.00 0.00 5,661,773.06 9,929,848.40 4,454,748.86 19,054,547.07
June 2004............... 0.00 0.00 5,065,798.32 8,884,603.61 3,985,829.01 18,701,713.52
July 2004............... 0.00 0.00 4,473,076.12 7,845,063.25 3,519,468.29 18,353,951.28
August 2004............. 0.00 0.00 3,883,590.21 6,811,198.83 3,055,653.92 18,011,198.58
September 2004.......... 0.00 0.00 3,307,232.95 5,800,359.97 2,602,169.33 17,682,668.28
October 2004............ 0.00 0.00 2,734,018.34 4,795,032.83 2,151,157.42 17,358,919.80
November 2004........... 0.00 0.00 2,175,205.55 3,814,964.17 1,711,477.01 17,013,872.25
December 2004........... 0.00 0.00 1,634,639.03 2,866,896.57 1,286,152.99 16,638,557.25
January 2005............ 0.00 0.00 1,111,798.38 1,949,917.32 874,775.89 16,234,080.48
February 2005........... 0.00 0.00 606,177.31 1,063,138.48 476,947.35 15,801,515.67
March 2005.............. 0.00 0.00 117,283.28 205,696.19 92,279.85 15,341,905.53
April 2005.............. 0.00 0.00 0.00 0.00 0.00 14,036,145.19
May 2005................ 0.00 0.00 0.00 0.00 0.00 12,471,086.65
June 2005............... 0.00 0.00 0.00 0.00 0.00 10,917,307.77
July 2005............... 0.00 0.00 0.00 0.00 0.00 9,382,140.73
August 2005............. 0.00 0.00 0.00 0.00 0.00 7,871,112.58
September 2005.......... 0.00 0.00 0.00 0.00 0.00 6,490,927.14
October 2005............ 0.00 0.00 0.00 0.00 0.00 5,132,451.45
November 2005........... 0.00 0.00 0.00 0.00 0.00 3,795,367.61
December 2005........... 0.00 0.00 0.00 0.00 0.00 2,479,362.24
January 2006............ 0.00 0.00 0.00 0.00 0.00 1,184,126.35
February 2006........... 0.00 0.00 0.00 0.00 0.00 0.00
</TABLE>
S-69
<PAGE>
APPENDIX B
AGGREGATE TAC SEGMENT BALANCES TABLE
The Aggregate TAC Segment Balances set forth in the table below were
calculated on the basis of the Class Certificate Principal Balances of the
Aggregate TAC Segment Certificates set forth on the cover hereof and a constant
prepayment rate of 200% of the Prepayment Assumption. If such Class Certificate
Principal Balances are increased or decreased in accordance with the variance
permitted hereby, the applicable balances set forth in the table below will be
increased or decreased substantially correspondingly. In such event, the final
Aggregate TAC Segment Balances Table will be calculated on or about the Closing
Date on the basis of such revised Class Certificate Principal Balances of the
Aggregate TAC Segment Certificates and on the basis of (1) the characteristics
of the Mortgage Loans included in the Mortgage Pool on the Closing Date, and (2)
the assumptions set forth in clauses (i), (iv) through (viii), (x) and (xi) of
the Modeling Assumptions. The final Aggregate TAC Segment Balances Table will be
set forth in the Agreement, which will be filed as an exhibit to the Detailed
Description.
<TABLE>
<CAPTION>
DISTRIBUTION DATE AGGREGATE TAC SEGMENT BALANCES
- ---------------------------------------------------------------------------------- ------------------------------
<S> <C>
Initial Balance................................................................... $ 234,928,000.00
September 1998.................................................................... 234,096,431.35
October 1998...................................................................... 233,090,516.59
November 1998..................................................................... 231,910,583.87
December 1998..................................................................... 230,557,023.99
January 1999...................................................................... 229,030,404.79
February 1999..................................................................... 227,331,471.37
March 1999........................................................................ 225,461,146.05
April 1999........................................................................ 223,420,528.01
May 1999.......................................................................... 221,210,892.65
June 1999......................................................................... 218,833,690.60
July 1999......................................................................... 216,290,546.50
August 1999....................................................................... 214,969,548.37
September 1999.................................................................... 213,684,940.47
October 1999...................................................................... 212,323,240.41
November 1999..................................................................... 210,886,069.61
December 1999..................................................................... 209,375,169.99
January 2000...................................................................... 207,792,401.40
February 2000..................................................................... 206,139,738.71
March 2000........................................................................ 204,419,268.81
April 2000........................................................................ 202,633,187.21
May 2000.......................................................................... 200,783,794.51
June 2000......................................................................... 198,873,492.63
July 2000......................................................................... 196,904,780.76
August 2000....................................................................... 194,880,251.17
September 2000.................................................................... 192,802,584.78
October 2000...................................................................... 190,674,546.55
November 2000..................................................................... 188,498,980.66
December 2000..................................................................... 186,278,805.56
January 2001...................................................................... 184,017,008.80
February 2001..................................................................... 181,794,781.84
March 2001........................................................................ 179,611,609.03
April 2001........................................................................ 177,466,980.52
May 2001.......................................................................... 175,360,392.28
June 2001......................................................................... 173,291,345.94
July 2001......................................................................... 171,259,348.81
August 2001....................................................................... 169,263,913.77
September 2001.................................................................... 167,304,559.20
October 2001...................................................................... 165,380,808.98
November 2001..................................................................... 163,492,192.35
</TABLE>
S-70
<PAGE>
<TABLE>
<CAPTION>
DISTRIBUTION DATE AGGREGATE TAC SEGMENT BALANCES
- ---------------------------------------------------------------------------------- ------------------------------
<S> <C>
December 2001..................................................................... $ 161,638,243.92
January 2002...................................................................... 159,818,503.56
February 2002..................................................................... 158,032,516.37
March 2002........................................................................ 156,279,832.62
April 2002........................................................................ 154,560,007.66
May 2002.......................................................................... 152,872,601.92
June 2002......................................................................... 151,217,180.82
July 2002......................................................................... 149,593,314.70
August 2002....................................................................... 148,000,578.81
September 2002.................................................................... 146,438,553.20
October 2002...................................................................... 144,906,822.73
November 2002..................................................................... 143,404,976.95
December 2002..................................................................... 141,932,610.10
January 2003...................................................................... 140,489,321.04
February 2003..................................................................... 139,074,713.19
March 2003........................................................................ 137,688,394.48
April 2003........................................................................ 136,329,977.33
May 2003.......................................................................... 134,999,078.56
June 2003......................................................................... 133,695,319.35
July 2003......................................................................... 132,418,325.22
August 2003....................................................................... 131,167,725.94
September 2003.................................................................... 130,058,546.93
October 2003...................................................................... 128,974,215.47
November 2003..................................................................... 127,914,375.30
December 2003..................................................................... 126,878,674.24
January 2004...................................................................... 125,866,764.11
February 2004..................................................................... 124,878,300.75
March 2004........................................................................ 123,912,943.91
April 2004........................................................................ 122,970,357.22
May 2004.......................................................................... 122,050,208.18
June 2004......................................................................... 121,152,168.08
July 2004......................................................................... 120,275,911.99
August 2004....................................................................... 119,421,118.67
September 2004.................................................................... 118,623,260.76
October 2004...................................................................... 117,845,742.04
November 2004..................................................................... 117,048,334.23
December 2004..................................................................... 116,217,065.71
January 2005...................................................................... 115,353,423.14
February 2005..................................................................... 114,458,846.94
March 2005........................................................................ 113,534,732.63
April 2005........................................................................ 111,324,215.55
May 2005.......................................................................... 108,727,439.80
June 2005......................................................................... 106,159,327.15
July 2005......................................................................... 103,619,543.66
August 2005....................................................................... 101,107,758.88
September 2005.................................................................... 98,756,169.25
October 2005...................................................................... 96,430,147.95
November 2005..................................................................... 94,129,388.74
December 2005..................................................................... 91,853,588.63
January 2006...................................................................... 89,602,447.85
February 2006..................................................................... 87,375,669.86
March 2006........................................................................ 85,172,961.26
April 2006........................................................................ 82,994,031.80
May 2006.......................................................................... 80,838,594.30
June 2006......................................................................... 78,706,364.65
</TABLE>
S-71
<PAGE>
<TABLE>
<CAPTION>
DISTRIBUTION DATE AGGREGATE TAC SEGMENT BALANCES
- ---------------------------------------------------------------------------------- ------------------------------
<S> <C>
July 2006......................................................................... $ 76,597,061.78
August 2006....................................................................... 74,510,407.59
September 2006.................................................................... 72,566,714.78
October 2006...................................................................... 70,642,960.81
November 2006..................................................................... 68,738,901.33
December 2006..................................................................... 66,854,294.60
January 2007...................................................................... 64,988,901.44
February 2007..................................................................... 63,142,485.26
March 2007........................................................................ 61,314,811.98
April 2007........................................................................ 59,505,650.02
May 2007.......................................................................... 57,714,770.26
June 2007......................................................................... 55,941,946.05
July 2007......................................................................... 54,186,953.11
August 2007....................................................................... 52,449,569.60
September 2007.................................................................... 50,836,343.88
October 2007...................................................................... 49,237,892.30
November 2007..................................................................... 47,654,036.29
December 2007..................................................................... 46,084,599.13
January 2008...................................................................... 44,529,405.88
February 2008..................................................................... 42,988,283.35
March 2008........................................................................ 41,461,060.13
April 2008........................................................................ 39,947,566.52
May 2008.......................................................................... 38,447,634.53
June 2008......................................................................... 36,961,097.89
July 2008......................................................................... 35,487,791.96
August 2008....................................................................... 34,027,553.81
September 2008.................................................................... 32,580,222.09
October 2008...................................................................... 31,145,637.12
November 2008..................................................................... 29,723,640.78
December 2008..................................................................... 28,314,076.58
January 2009...................................................................... 26,916,789.54
February 2009..................................................................... 25,531,626.29
March 2009........................................................................ 24,158,434.94
April 2009........................................................................ 22,797,065.15
May 2009.......................................................................... 21,447,368.06
June 2009......................................................................... 20,109,196.30
July 2009......................................................................... 18,782,403.97
August 2009....................................................................... 17,466,846.61
September 2009.................................................................... 16,162,381.19
October 2009...................................................................... 14,868,866.11
November 2009..................................................................... 13,586,161.17
December 2009..................................................................... 12,314,127.54
January 2010...................................................................... 11,052,627.79
February 2010..................................................................... 9,801,525.81
March 2010........................................................................ 8,560,686.85
April 2010........................................................................ 7,329,977.50
May 2010.......................................................................... 6,109,265.62
June 2010......................................................................... 4,898,420.41
July 2010......................................................................... 3,697,312.33
August 2010....................................................................... 2,505,813.09
September 2010.................................................................... 1,323,795.70
October 2010...................................................................... 151,134.35
November 2010..................................................................... 0.00
</TABLE>
S-72
<PAGE>
APPENDIX C
SCHEDULED BALANCES TABLE
The Scheduled Balances set forth in the table below were calculated on the
basis of the Class Certificate Principal Balances of the Scheduled Certificates
set forth on the cover hereof, and the other assumptions described in 'Yield and
Weighted Average Life Considerations--Weighted Average Lives of the
Certificates-- Scheduled Certificates' herein. If such Class Certificate
Principal Balances are increased or decreased in accordance with the variance
permitted hereby, the applicable balances set forth in the table below will be
increased or decreased substantially correspondingly. In such event, the final
Scheduled Balances Table will be calculated on or about the Closing Date on the
basis of such revised Class Certificate Principal Balances and on the basis of
(1) a structuring range for the Scheduled Certificates, such that the initial
Effective Range of the Scheduled Certificates will be 260% through 300% of the
Prepayment Assumption, (2) the assumptions set forth in clauses (i), (iv)
through (viii), (x) and (xi) of the Modeling Assumptions and (3) the
characteristics of the Mortgage Loans included in the Mortgage Pool on the
Closing Date. The final Scheduled Balances Table will be set forth in the
Agreement, which will be filed as an exhibit to the Detailed Description.
<TABLE>
<CAPTION>
SCHEDULED BALANCES
------------------
DISTRIBUTION DATE CLASS A16
- ---------------------------------------------------------------------------------------------- ------------------
<S> <C>
Initial Balance............................................................................... $11,513,000.00
September 1998................................................................................ 11,462,108.61
October 1998.................................................................................. 11,441,453.57
November 1998................................................................................. 11,413,908.03
December 1998................................................................................. 11,379,488.12
January 1999.................................................................................. 11,338,221.93
February 1999................................................................................. 11,290,149.54
March 1999.................................................................................... 11,235,323.02
April 1999.................................................................................... 11,173,806.44
May 1999...................................................................................... 11,105,675.76
June 1999..................................................................................... 11,031,018.82
July 1999..................................................................................... 10,949,935.24
August 1999................................................................................... 10,862,536.25
September 1999................................................................................ 10,768,944.57
October 1999.................................................................................. 10,669,294.22
November 1999................................................................................. 10,563,730.35
December 1999................................................................................. 10,452,408.97
January 2000.................................................................................. 10,335,496.69
February 2000................................................................................. 10,213,170.49
March 2000.................................................................................... 10,085,617.37
April 2000.................................................................................... 9,953,034.03
May 2000...................................................................................... 9,815,626.55
June 2000..................................................................................... 9,673,609.98
July 2000..................................................................................... 9,527,207.94
August 2000................................................................................... 9,376,652.23
September 2000................................................................................ 9,222,182.40
October 2000.................................................................................. 9,064,045.24
November 2000................................................................................. 8,902,494.37
December 2000................................................................................. 8,737,789.72
January 2001.................................................................................. 8,570,197.01
February 2001................................................................................. 8,406,193.80
March 2001.................................................................................... 8,245,728.85
April 2001.................................................................................... 8,088,751.60
May 2001...................................................................................... 7,935,212.09
June 2001..................................................................................... 7,785,060.99
July 2001..................................................................................... 7,638,249.59
August 2001................................................................................... 7,494,729.78
September 2001................................................................................ 7,354,454.04
October 2001.................................................................................. 7,217,375.47
November 2001................................................................................. 7,083,447.74
December 2001................................................................................. 6,952,625.09
January 2002.................................................................................. 6,824,862.36
February 2002................................................................................. 6,700,114.93
March 2002.................................................................................... 6,578,338.74
April 2002.................................................................................... 6,459,490.32
May 2002...................................................................................... 6,343,526.69
June 2002..................................................................................... 6,230,405.45
July 2002..................................................................................... 6,120,084.72
August 2002................................................................................... 6,012,523.16
</TABLE>
S-73
<PAGE>
<TABLE>
<CAPTION>
SCHEDULED BALANCES
------------------
DISTRIBUTION DATE CLASS A16
- ---------------------------------------------------------------------------------------------- ------------------
<S> <C>
September 2002................................................................................ $ 5,907,679.92
October 2002.................................................................................. 5,805,514.70
November 2002................................................................................. 5,705,987.70
December 2002................................................................................. 5,609,059.60
January 2003.................................................................................. 5,514,691.60
February 2003................................................................................. 5,422,845.40
March 2003.................................................................................... 5,333,483.15
April 2003.................................................................................... 5,246,567.52
May 2003...................................................................................... 5,162,061.62
June 2003..................................................................................... 5,079,929.06
July 2003..................................................................................... 5,000,133.88
August 2003................................................................................... 4,922,640.61
September 2003................................................................................ 4,856,767.93
October 2003.................................................................................. 4,793,055.10
November 2003................................................................................. 4,731,468.16
December 2003................................................................................. 4,671,973.57
January 2004.................................................................................. 4,614,538.25
February 2004................................................................................. 4,559,129.50
March 2004.................................................................................... 4,505,715.07
April 2004.................................................................................... 4,454,263.14
May 2004...................................................................................... 4,404,742.25
June 2004..................................................................................... 4,359,628.18
July 2004..................................................................................... 4,319,461.74
August 2004................................................................................... 4,284,133.46
September 2004................................................................................ 4,261,293.63
October 2004.................................................................................. 4,242,927.98
November 2004................................................................................. 4,228,934.68
December 2004................................................................................. 4,219,213.80
January 2005.................................................................................. 4,213,667.33
February 2005................................................................................. 4,212,199.09
March 2005.................................................................................... 4,212,199.09
April 2005.................................................................................... 4,212,199.09
May 2005...................................................................................... 4,212,199.09
June 2005..................................................................................... 4,212,199.09
July 2005..................................................................................... 4,212,199.09
August 2005................................................................................... 4,212,199.09
September 2005................................................................................ 4,212,199.09
October 2005.................................................................................. 4,212,199.09
November 2005................................................................................. 4,212,199.09
December 2005................................................................................. 4,212,199.09
January 2006.................................................................................. 4,212,199.09
February 2006................................................................................. 4,212,199.09
March 2006.................................................................................... 4,168,702.07
April 2006.................................................................................... 3,941,764.70
May 2006...................................................................................... 3,719,318.55
June 2006..................................................................................... 3,501,281.74
July 2006..................................................................................... 3,287,573.78
August 2006................................................................................... 3,078,115.64
September 2006................................................................................ 2,895,576.28
October 2006.................................................................................. 2,716,540.22
November 2006................................................................................. 2,540,943.29
December 2006................................................................................. 2,368,722.49
January 2007.................................................................................. 2,199,815.92
February 2007................................................................................. 2,034,162.76
March 2007.................................................................................... 1,871,703.31
April 2007.................................................................................... 1,712,378.89
May 2007...................................................................................... 1,556,131.90
June 2007..................................................................................... 1,402,905.74
July 2007..................................................................................... 1,252,644.82
August 2007................................................................................... 1,105,294.55
September 2007................................................................................ 979,837.78
October 2007.................................................................................. 856,559.10
November 2007................................................................................. 735,421.55
December 2007................................................................................. 616,388.76
January 2008.................................................................................. 499,425.00
February 2008................................................................................. 384,495.11
March 2008.................................................................................... 271,564.53
April 2008.................................................................................... 160,599.30
May 2008...................................................................................... 51,566.00
June 2008..................................................................................... 0.00
</TABLE>
S-74
<PAGE>
INDEX OF CERTAIN PROSPECTUS SUPPLEMENT DEFINITIONS
<TABLE>
<CAPTION>
DEFINED TERM PAGE
- ------------------------------------------------------------ ----------
<S> <C>
Accrued Certificate Interest................................ S-6
Adjustment Amount........................................... S-36
Agreement................................................... S-4
Aggregate TAC Segment Certificates.......................... S-22
Allocable Share............................................. S-33
Available Funds............................................. S-21
Bankruptcy Coverage Termination Date........................ S-36
Bankruptcy Loss............................................. S-34
Bankruptcy Loss Amount...................................... S-36
Base Servicing Fee.......................................... S-61
Base Servicing Fee Rate..................................... S-61
beneficial owner............................................ S-19
BIF......................................................... S-60
Book-Entry Certificates..................................... S-19
British Bankers' Association Interest Settlement Rate....... S-29
Bulletin Board.............................................. S-15
Cede........................................................ S-19
Certificate Principal Balance............................... S-28
Certificates................................................ Cover
Class....................................................... S-3
Class A19 Accretion Termination Date........................ S-25
Class A19 Accrual Amount.................................... S-28
Class B Certificates........................................ S-3
Class Certificate Principal Balance......................... S-3
Class PO Deferred Amount.................................... S-8
Class PO Deferred Payment Writedown Amount.................. S-28
Class PO Principal Distribution Amount...................... S-32
Class Prepayment Distribution Trigger....................... S-33
Code........................................................ S-14
Collection Account.......................................... S-60
Company..................................................... Cover
Compensating Interest Payment............................... S-62
Cross-Over Date............................................. S-7
Debt Service Reduction...................................... S-34
Defaulted Mortgage Loan..................................... S-63
Deficient Valuation......................................... S-34
Definitive Certificate...................................... S-19
Depository.................................................. S-3
Detailed Description........................................ S-16
Discount Mortgage Loan...................................... S-30
Distribution Date........................................... S-4
DOL......................................................... S-64
Effective Range............................................. S-46
ERISA....................................................... S-14
ERISA Plan.................................................. S-64
Excess Loss................................................. S-35
Exemption................................................... S-64
FDIC........................................................ S-60
Financial Intermediary...................................... S-19
Fitch....................................................... S-14
Fraud Coverage Termination Date............................. S-36
</TABLE>
S-75
<PAGE>
<TABLE>
<CAPTION>
DEFINED TERM PAGE
- ------------------------------------------------------------ ----------
<S> <C>
Fraud Loss.................................................. S-34
Fraud Loss Amount........................................... S-36
GE Capital.................................................. S-59
Group I Final Distribution Date............................. S-33
Group I Senior Certificates................................. S-10
Group I Senior Principal Distribution Amount................ S-22
Group II Senior Percentage.................................. S-31
Group II Senior Prepayment Distribution Percentage.......... S-31
Group II Senior Principal Distribution Amount............... S-31
Group II Senior Schedule Distribution Percentage............ S-31
Group II Senior Certificates................................ S-10
Interest Accrual Period..................................... S-6
Interest Shortfall.......................................... S-28
Inverse Floating Rate Certificates.......................... S-12
Junior Certificate Writedown Amount......................... S-28
Junior Certificates......................................... S-3
Junior Optimal Principal Amount............................. S-33
Junior Percentage........................................... S-33
Junior Prepayment Percentage................................ S-33
LIBOR....................................................... S-29
LIBOR Certificates.......................................... S-5
LIBOR Determination Date.................................... S-29
Liquidated Mortgage Loan.................................... S-34
London banking day.......................................... S-29
Loss Allocation Limitation.................................. S-35
Lower-Tier REMIC............................................ S-2
Modeling Assumptions........................................ S-47
Mortgage.................................................... S-16
Mortgage Loans.............................................. Cover
Mortgage Loan Group......................................... S-48
Mortgage Pool............................................... Cover
Mortgage Rates.............................................. S-16
mortgage related securities................................. S-14
Mortgaged Properties........................................ S-4
Mortgagor................................................... S-8
Net Interest Shortfall...................................... S-28
Net Mortgage Rate........................................... S-29
NMR......................................................... S-30
Non-Book-Entry Certificates................................. S-20
Non-Discount Mortgage Loan.................................. S-30
Non-PO Percentage........................................... S-30
Nonrecoverable Advance...................................... S-61
Notional Principal Balance.................................. S-6
Original Junior Principal Balance........................... S-32
Outstanding Mortgage Loan................................... S-16
PAC Certificates............................................ S-46
PaineWebber................................................. Cover
Participant................................................. S-19
PO Percentage............................................... S-30
Pool Scheduled Principal Balance............................ S-16
Prepayment Assumption....................................... S-45
Prepayment Interest......................................... S-41
Prepayment Period........................................... S-31
</TABLE>
S-76
<PAGE>
<TABLE>
<CAPTION>
DEFINED TERM PAGE
- ------------------------------------------------------------ ----------
<S> <C>
Primary Mortgage Insurance Policy........................... S-59
Realized Loss............................................... S-34
Record Date................................................. S-4
Regular Certificates........................................ S-13
regular interests........................................... S-4
REMIC....................................................... S-2
Residual Certificates....................................... Cover
residual interest........................................... S-4
Restricted Group............................................ S-65
SAIF........................................................ S-60
S&P......................................................... S-14
Scheduled Certificates...................................... S-46
Scheduled Principal Balance................................. S-16
Senior Certificates......................................... S-3
Senior Final Distribution Date.............................. S-33
Senior Optimal Principal Amount............................. S-30
Senior Percentage........................................... S-31
Senior Prepayment Percentage................................ S-32
Senior Prepayment Percentage Stepdown Limitation............ S-32
Servicing Fee............................................... S-61
Servicing Portfolio......................................... S-57
SMMEA....................................................... S-14
Special Hazard Loss......................................... S-34
Special Hazard Loss Amount.................................. S-36
Special Hazard Termination Date............................. S-36
Structuring Range........................................... S-46
Supplemental Servicing Fee.................................. S-61
Supplemental Servicing Fee Rate............................. S-61
Support Certificates........................................ S-47
Tax-Exempt Investor......................................... S-65
Trigger Event............................................... S-59
Trust Fund.................................................. Cover
Trustee..................................................... S-4
Underwriter................................................. Cover
Upper-Tier REMIC............................................ S-2
</TABLE>
S-77
<PAGE>
[This page intentionally left blank]
<PAGE>
------------------------------------------------------------
------------------------------------------------------------
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS SUPPLEMENT OR THE
PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED. THIS PROSPECTUS SUPPLEMENT AND THE
PROSPECTUS DO NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO
BUY ANY SECURITIES OTHER THAN THE SECURITIES DESCRIBED IN THIS PROSPECTUS
SUPPLEMENT OR AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY SUCH
SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS UNLAWFUL.
NEITHER THE DELIVERY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS NOR ANY
SALE MADE THEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT
THE INFORMATION CONTAINED HEREIN OR THEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT
TO THE DATE OF SUCH INFORMATION.
------------------------
TABLE OF CONTENTS
Page
PROSPECTUS SUPPLEMENT ----
Summary of Terms....................................... S-3
Description of the Mortgage Pool and the Mortgaged
Properties............................................ S-16
Description of the Certificates........................ S-19
Yield and Weighted Average Life Considerations......... S-39
GE Capital Mortgage Services, Inc...................... S-57
Delinquency and Foreclosure Experience of the
Company............................................... S-57
The Pooling and Servicing Agreement.................... S-58
Certain Federal Income Tax Consequences................ S-63
ERISA Considerations................................... S-64
Legal Investment Matters............................... S-65
Plan of Distribution................................... S-66
Certificate Ratings.................................... S-66
Legal Matters.......................................... S-67
Appendix A--PAC Balances Table......................... S-68
Appendix B--Aggregate TAC Segment Balances Table....... S-70
Appendix C--Scheduled Balances Table................... S-73
Index of Certain Prospectus Supplement Definitions..... S-75
PROSPECTUS
Available Information.................................. 2
Incorporation of Certain Documents by Reference........ 3
Reports to Certificateholders.......................... 3
Prospectus Summary..................................... 6
Description of the Certificates........................ 14
The Trust Fund......................................... 19
Credit Support......................................... 30
Yield, Maturity and Weighted Average Life
Considerations........................................ 36
Servicing of the Mortgage Loans and Contracts.......... 38
The Pooling and Servicing Agreement.................... 49
GE Capital Mortgage Services, Inc...................... 56
The Guarantor.......................................... 57
Certain Legal Aspects of the Mortgage Loans and
Contracts............................................. 57
Legal Investment Matters............................... 67
ERISA Considerations................................... 68
Certain Federal Income Tax Consequences................ 70
Plan of Distribution................................... 83
Use of Proceeds........................................ 84
Legal Matters.......................................... 84
Financial Information.................................. 84
------------------------
UNTIL 90 DAYS AFTER THE DATE OF THIS PROSPECTUS SUPPLEMENT,
ALL DEALERS EFFECTING TRANSACTIONS IN THE CERTIFICATES OFFERED HEREBY, WHETHER
OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A
PROSPECTUS SUPPLEMENT AND PROSPECTUS TO WHICH IT RELATES. THIS IS IN ADDITION TO
THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS SUPPLEMENT AND PROSPECTUS WHEN
ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
$892,260,200
(APPROXIMATE)
GE CAPITAL MORTGAGE
SERVICES, INC.
(SELLER AND SERVICER)
REMIC MULTI-CLASS
PASS-THROUGH CERTIFICATES,
SERIES 1998-13
------------------
PROSPECTUS SUPPLEMENT
------------------
PAINEWEBBER INCORPORATED
------------------
August 24, 1998
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