<PAGE> 1
Filed pursuant to Rule 424(b)(5)
Registration No. 333-68951
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED JULY 22, 1999)
GE CAPITAL MORTGAGE SERVICES, INC. 1999-15 TRUST
ISSUER
GE CAPITAL MORTGAGE SERVICES, INC.
DEPOSITOR AND SERVICER
$990,640,144
(APPROXIMATE)
REMIC MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 1999-15
PRINCIPAL AND INTEREST PAYABLE MONTHLY, BEGINNING AUGUST 25, 1999
THE TRUST WILL ISSUE:
- 37 classes of senior certificates; and
- 6 classes of junior certificates.
For a description of the classes of certificates offered by this prospectus
supplement, see "Securities Offered" on page S-4.
The assets of the trust will include two pools of conventional, fixed-rate,
first-lien, fully-amortizing, one-to four-family residential mortgage loans. The
stated maturities of the mortgage loans will range from 20 to 30 years.
------------------------------
CONSIDER CAREFULLY THE RISK FACTORS BEGINNING ON PAGE S-11 OF THIS PROSPECTUS
SUPPLEMENT.
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NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS PROSPECTUS SUPPLEMENT. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
------------------------------
Bear, Stearns & Co. Inc. will purchase the senior certificates and Merrill
Lynch, Pierce, Fenner & Smith Incorporated will purchase the junior certificates
offered by this prospectus supplement. These underwriters will sell the
certificates to investors at varying prices determined at the time of sale. The
proceeds to the depositor from the sale of the offered certificates will be
approximately 96.584941% of the total principal balance of those certificates
plus accrued interest, before deducting expenses. Each underwriter's commission
will be the difference between the price it pays for the certificates and the
amount it receives from their sale to the public. The certificates will be
available for delivery to investors on or about July 29, 1999.
------------------------------
BEAR, STEARNS & CO. INC. MERRILL LYNCH & CO.
THE DATE OF THIS PROSPECTUS SUPPLEMENT IS JULY 28, 1999.
<PAGE> 2
IMPORTANT NOTICE ABOUT INFORMATION PRESENTED IN THIS PROSPECTUS SUPPLEMENT AND
THE ACCOMPANYING PROSPECTUS
We provide information to you about the certificates offered by this
prospectus supplement and the underlying trust in two separate documents: (1)
the accompanying prospectus, which provides general information, some of which
may not apply to your certificates or trust, and (2) this prospectus supplement,
which describes the specific terms of your certificates and the assets in your
trust. You should read both of these documents together.
This prospectus supplement will supplement and enhance the disclosure in
the prospectus for purposes of your certificates.
S-2
<PAGE> 3
SUMMARY OF TERMS
This summary highlights selected information from this document and does
not contain all of the information that you need to consider in making your
investment decision. This summary contains an overview of certain concepts and
other information to aid your understanding. All of the information contained in
this summary is qualified by the more detailed explanation described in other
parts of this prospectus supplement and the accompanying prospectus.
THE ISSUER
The issuer of the certificates will be GE Capital Mortgage Services, Inc.
1999-15 Trust. The trust was created for the sole purpose of issuing the
certificates.
We will sell the mortgage loans underlying the certificates to the trust.
SECURITIES OFFERED
The trust will issue two groups of Class A senior certificates.
Distributions on each certificate group will be determined primarily by
reference to collections received on one of two separate pools of mortgage loans
in the trust. Except under the limited circumstances described under
"Description of the Certificates -- Cross-Support" in this prospectus
supplement, distributions on the Pool 1 senior certificates will come only from
amounts received on the Pool 1 mortgage loans, and distributions on the Pool 2
senior certificates will come only from amounts received on the Pool 2 mortgage
loans. When the junior certificates are no longer outstanding, and prior to that
time in certain cases, losses on the mortgage loans occurring in either mortgage
pool will be borne pro rata by all senior certificates, without regard to their
certificate group.
The trust will also issue one group of junior certificates representing
interests in both mortgage pools. The rights of holders of the junior
certificates to distributions will be based on collections from both mortgage
pools and will be subordinate to the rights of the holders of both the Pool 1
and the Pool 2 senior certificates.
For convenience, in this prospectus supplement we sometimes refer to a
senior certificate group as being "backed" by a particular mortgage pool even
though this certificate group may receive distributions from the other mortgage
pool through the cross-support feature described herein or may bear some losses
incurred in the other mortgage pool.
The total original principal balance of the Pool 1 senior certificates,
excluding the Class 1-PO Certificates, will be approximately $888,216,533, the
total original principal balance of the Pool 2 senior certificates will be
approximately $69,274,612, and the total original principal balance of the
junior certificate will be approximately $42,693,844, in each case subject to a
variance of plus or minus 5%. The total original principal balance of the Class
1-PO Certificates will be approximately $4,376,027, subject to the same
variance. The following table shows the approximate initial principal balance,
annual certificate
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<PAGE> 4
interest rate and minimum denomination of each class of certificates offered by
this prospectus supplement:
<TABLE>
<CAPTION>
CLASS CERTIFICATE CERTIFICATE MINIMUM
PRINCIPAL BALANCE(1) INTEREST RATE DENOMINATION
-------------------- ------------- ------------
<S> <C> <C> <C>
POOL 1 SENIOR CERTIFICATES
A1......................... $ 81,010,950 6.75% $ 25,000
A2......................... 43,000,000 6.75 25,000
A3......................... 50,000,000 6.75 25,000
A4......................... 25,578,787 7.00 1,000
A5......................... 5,000,000 6.75 25,000
A6......................... 1,200,000 7.00 1,000
A7......................... 300,000 7.00 1,000
A8......................... 300,000 7.00 1,000
A9......................... 300,000 7.00 1,000
A10........................ 900,000 7.00 1,000
A11........................ 3,750,000 7.00 1,000
A12........................ 37,265,800 7.00 1,000
A13........................ 100,000,000 6.75 25,000
A14........................ 8,297,969 (2) 25,000
A15........................ 1,461,646 7.25 25,000
A16........................ 127,348,000 6.75 25,000
A17........................ 64,991,384 7.00 1,000
A18........................ 5,000,000 7.25 1,000
A19........................ 10,000,000 7.25 1,000
A20........................ 5,000,000 7.25 1,000
A21........................ 23,267,941 7.25 1,000
A22........................ 22,081,150 6.75 25,000
A23........................ 30,725,150 6.75 1,000
A24........................ 40,414,700 6.75(3) 25,000
A25........................ 92,616,155 6.75 25,000
A26........................ 605,000 6.75 25,000
A27........................ 55,411,500 6.75 25,000
A28........................ 52,390,300 6.75 25,000
R.......................... 100 6.75 (4)
POOL 2 SENIOR CERTIFICATES
2-A1....................... $ 42,000,000 6.75% $ 25,000
2-A2....................... 9,018,000 7.50 1,000
2-A3....................... 2,003,967 (2) 25,000
2-A4....................... 9,017,699 7.50 1,000
2-A5....................... 7,234,946 6.75 25,000
JUNIOR CERTIFICATES
M.......................... $ 21,095,000 6.75% $100,000
B1......................... 7,534,000 6.75 100,000
B2......................... 4,520,000 6.75 100,000
</TABLE>
- ---------------
(1) Approximate, subject to adjustment as described in this prospectus
supplement.
(2) This class of certificates pays only principal and will not accrue interest.
(3) The amount of interest accruing on these certificates will not be payable to
holders of these certificates until the time described in this prospectus
supplement but will instead be added to the certificate principal balance of
this class.
(4) This class of certificates will be issued as a single certificate in
definitive physical form, and will be included in Pool 1 as a Pool 1 senior
certificate.
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The Class A1 through Class A28, Class R, Class 1-PO and Class 1-S
Certificates are the Pool 1 senior certificates. The Class 2-A1 through Class
2-A5 and Class 2-S Certificates are the Pool 2 senior certificates. The Class R
Certificates are the residual certificates. The Class M and the Class B1 through
Class B5 Certificates are the junior certificates.
The Class 1-PO, Class 1-S, Class 2-S, Class B3, Class B4 and Class B5
Certificates are not offered by this prospectus supplement. We will initially
retain the Class 1-PO, Class 1-S and Class 2-S Certificates but may transfer
them later.
Depending on the final composition of each pool of mortgage loans sold to
the trust, the principal balance of each class of certificates may increase or
decrease from the amount listed above. The total original principal balance of
the certificates will not be less than $950,000,000 or greater than
$1,050,000,000, and the total original principal balance of the Pool 1 senior
certificates, excluding the Class 1-PO Certificates, is expected to be
approximately $888,216,533 and the total original principal balance of the Pool
2 senior certificates is expected to be approximately $69,274,612. The total
original principal balance of the junior certificates will not be less than
$40,559,193 or greater than $44,828,581.
Certificates with principal balances in excess of the minimum denominations
shown above will be issued in multiples of $1,000 above the minimum
denomination. The Class R Certificates will be issued as a single certificate.
THE MORTGAGE LOANS
We originated or acquired all of the mortgage loans in both pools. The
mortgage loans expected to be sold to the trust have the following
characteristics as of July 1, 1999:
Pool 1 Mortgage Loans
<TABLE>
<S> <C>
- - Total outstanding principal balance(1): $932,211,550
- - Original terms to maturity: 20 to 30 years
- - Weighted average maturity: between 356 and 358 months
- - Weighted average annual interest rate: between 7.23% and 7.27%
- - Largest geographic concentration: No more than 48% of the mortgage
loans are secured by properties
located in California
</TABLE>
- -------------------------
(1) Approximate, after deducting payments of principal due or received on or
before July 1, 1999, and subject to the variance described in this
prospectus supplement.
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Pool 2 Mortgage Loans
<TABLE>
<S> <C>
- - Total outstanding principal balance(1): $72,349,463
- - Original terms to maturity: 20 to 30 years
- - Weighted average maturity: between 356 and 358 months
- - Weighted average annual interest rate: between 7.35% and 7.39%
- - Largest geographic concentration: no more than 40% of the mortgage
loans are secured by properties
located in California
</TABLE>
- -------------------------
(1) Approximate, after deducting payments of principal due or received on or
before July 1, 1999, and subject to the variance described in this
prospectus supplement.
THE SERVICER
We will directly service approximately 81% of the Pool 1 mortgage loans and
approximately 73% of the Pool 2 mortgage loans. We will supervise the servicing
of the remainder of the mortgage loans by third party servicers.
As servicer, we must make reasonable efforts to collect payments due on the
mortgage loans. In addition, we must advance delinquent payments on mortgage
loans to the extent described in this prospectus supplement and will reduce our
servicing compensation, to the extent described in this prospectus supplement,
to reimburse certificateholders for shortfalls of interest payments.
You should refer to "GE Capital Mortgage Services, Inc." and "The Pooling
and Servicing Agreement -- Servicing Arrangement with Respect to the Mortgage
Loans" and "-- Servicing Compensation, Compensating Interest and Payment of
Expenses" in this prospectus supplement.
DISTRIBUTIONS ON THE CERTIFICATES
The trustee will make distributions on the certificates on the 25th day of
each month. If the 25th is not a business day, the trustee will make
distributions on the next business day. The first distribution date will be
August 25, 1999.
On each distribution date, the trustee will first pay to each group of
senior certificates the amounts of interest and principal distributable to them
from available funds collected on the related mortgage pool, or in certain
limited circumstances from funds collected on the other mortgage pool. The
trustee will then pay interest and principal to the junior certificates from the
aggregate remaining available funds collected from both mortgage pools.
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Interest Payments
- The actual amount of interest you receive on your certificates on each
distribution date, if your certificates are entitled to interest, will
depend on:
-- the amount of interest accrued on your certificates;
-- the total amount of funds available for distribution from the mortgage
pool relating to your certificates, or in certain limited
circumstances available for distribution from collections on the other
mortgage pool; and
-- the amount of any accrued interest not paid on your certificates on
earlier distribution dates.
- If you are a holder of the Class A24 Certificates, the interest accrued
on your certificates will initially not be distributed to you. This
accrued interest will instead be added to the principal amount of your
certificates until the time described in "Distributions on the Pool 1
Senior Certificates" in Annex 1 of this prospectus supplement.
- If you are a holder of a senior certificate entitled to interest
payments, the amount of interest payable to you will be in proportion to
the interest payable on all of the senior certificates together that are
backed by the same mortgage pool backing your certificates. All of the
senior certificates entitled to interest payments will receive these
payments at the same time.
- The Class A14 and Class 2-A3 Certificates are principal-only certificates
and will receive no payments of interest. As a result, the yield on these
certificates will be particularly sensitive to the rate of prepayments on
the mortgage loans. See the risk factor relating to these certificates on
page S-13.
- If you are a holder of a junior certificate, you will receive interest
payments only after the trustee has paid interest and principal to:
-- all of the senior certificates; and
-- each class of junior certificates that ranks higher than your
certificates.
- The trustee will calculate interest on the basis of a 360-day year
consisting of twelve 30-day months.
Principal Payments
- After interest payments have been made on all senior certificates
entitled to interest backed by a particular mortgage pool, each class of
senior certificates entitled to principal distributions -- and backed by
the same pool -- will also receive a payment of principal. If you are a
holder of junior certificates, your certificates will receive principal
payments after (1) interest and principal have been paid on all the
senior certificates and higher-ranking junior certificates and (2)
interest has been paid on your certificates. You should refer to
"Distributions on the Pool 1 Senior Certificates" in Annex 1,
"Distributions on the Pool 2 Senior Certificates" in Annex 2 or
"Distributions on the Junior Certificates" in Annex 3 for a description
of the amount of principal payable to you and the priority in which it
will be paid.
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- The amount and timing of principal you receive on your certificates will
depend on:
-- the various priorities and formulas described in this prospectus
supplement that determine the allocation of principal payments to your
certificates; and
-- the amounts actually available for distribution as principal from the
mortgage pool relating to your certificates or, in certain limited
circumstances, available for distributions from the other mortgage
pool.
- Because of the principal allocation formulas described in this prospectus
supplement, the senior certificates entitled to principal
distributions -- other than the Class 1-PO Certificates -- will receive
principal payments at a faster rate than the junior certificates for at
least the first nine years after the issuance of the certificates. The
Class A25, Class A26 and Class 2-A5 Certificates will not benefit to the
same extent from this accelerated repayment. You should refer to
"Distributions on the Pool 1 Senior Certificates" in Annex 1,
"Distributions on the Pool 2 Senior Certificates" in Annex 2 or
"Distributions on the Junior Certificates" in Annex 3.
- If you are the holder of a Class A19 Certificate, you will have the
option to request redemption of all or any part of your certificate, in
any amount that is a multiple of $1,000, out of funds available to pay
principal on this class. In addition, you may receive principal payments
by random lottery. Accordingly, the timing of the principal payments you
receive will be determined by whether your redemption request is honored
and whether your certificate is selected for payment. You should refer to
"Principal Distributions on the Class A19 Certificates" in Annex 1 for a
description of how principal payments will be made on these certificates.
You should also see the risk factor relating to these certificates on
page S-14.
OPTIONAL TERMINATION
We will have the option to repurchase all the mortgage loans in the trust
and thereby effect the early retirement of all of the certificates when the
aggregate principal balance of the mortgage loans in both pools is less than 10%
of the aggregate principal balance of the mortgage loans in both pools as of
July 1, 1999. See "The Pooling and Servicing Agreement -- Termination" in this
prospectus supplement.
CREDIT ENHANCEMENT
If you are a holder of Pool 1 or Pool 2 senior certificates, your
certificates will benefit from the credit enhancement provided by the
subordination of the junior certificates.
This subordination will benefit the senior certificates in two ways:
- The senior certificates backed by a particular mortgage pool will have a
preferential right over the junior certificates to receive funds
available for interest and principal distributions that are collected in
respect of such mortgage pool or in certain limited circumstances, the
other mortgage pool.
- The junior certificates will absorb all losses on the mortgage loans in
both pools up to the levels described in this prospectus supplement.
Furthermore, as described in greater detail in this prospectus supplement,
in certain cases, amounts from one mortgage pool will be applied to the payment
of senior certificates in the other pool.
S-8
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If you are a holder of a senior certificate, you should keep in mind,
however, that the subordination of the junior certificates offers only limited
protection against the loss of your investment. THE JUNIOR CERTIFICATES ALSO
REPRESENT INTERESTS IN BOTH MORTGAGE POOLS, RESULTING IN THE POSSIBILITY THAT
DISPROPORTIONATE LOSSES IN ONE MORTGAGE POOL MAY REDUCE, AND POTENTIALLY
ELIMINATE, THE CREDIT SUPPORT AVAILABLE FOR THE SENIOR CERTIFICATES IN THE OTHER
MORTGAGE POOL. In addition, if you are a holder of the Class A26 Certificates,
you will bear certain losses that would otherwise have been allocated to the
Class A24 Certificates. See the risk factor concerning subordination on page
S-12.
FEDERAL INCOME TAX CONSEQUENCES
The trust will be treated as a single REMIC for federal income tax
purposes. As a result, the certificates other than the Class R Certificates will
be treated as regular interests in the REMIC, and the Class R Certificates will
be treated as the residual interest in the REMIC. All of the regular interest
certificates will be treated as debt for tax purposes. In addition, unless you
are the holder of the Class R Certificates, you will be required to report
income on your certificates under the accrual method of accounting. Under the
accrual method of accounting, you may be required to report income for federal
income tax purposes in advance of receiving a corresponding cash distribution.
The particular federal income tax consequences of your investment will
depend upon the class of certificates you buy. You should consider carefully the
tax consequences of an investment in the following classes of certificates:
- the Class A14, Class A24 and Class 2-A3 Certificates, which will be, and
certain other classes of certificates, which may be, issued with original
issue discount;
- the Class R Certificates, which will be subject to special rules that
could significantly reduce their after-tax yield; and
- the junior certificates, whose reported income may exceed the amount of
cash actually received.
You should refer to "Federal Income Tax Consequences" in this prospectus
supplement and "Federal Income Tax Consequences -- REMIC Certificates" in the
accompanying prospectus to determine the tax consequences to you of an
investment in the certificates.
LEGAL INVESTMENT
The senior certificates offered hereby and the Class M Certificates will be
"mortgage related securities" for purposes of the Secondary Mortgage Market
Enhancement Act of 1984 for so long as they satisfy the criteria described in
"Legal Investment Matters" in this prospectus supplement. No other certificates
will be mortgage related securities. You should consult your own legal advisors
to determine whether, and to what extent, you can invest in the certificates
offered hereby. See "Legal Investment Matters" in this prospectus supplement and
in the accompanying prospectus for important information concerning possible
restrictions on the ownership of the certificates by regulated institutions.
ERISA CONSIDERATIONS
If you are investing the assets of an employee benefit plan that is subject
to ERISA or to Section 4975 of the federal income tax code, you may not acquire
the Class A26, Class M, Class B1 or Class B2 Certificates or the residual
certificates. In addition, you
S-9
<PAGE> 10
should consider carefully the information presented in "ERISA Considerations" in
this prospectus supplement and in the accompanying prospectus.
CERTIFICATE RATINGS
The certificates must receive the ratings indicated under "Certificate
Ratings" from Fitch IBCA, Inc. and/or Standard & Poor's Ratings Services, a
division of The McGraw-Hill Companies, Inc., at the time of their initial
issuance. You should refer to "Certificate Ratings" in this prospectus
supplement to learn more about the significance and limitation of ratings.
S-10
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RISK FACTORS
AN INVESTMENT IN THE
CERTIFICATES MAY
NOT BE SUITABLE FOR YOU The certificates are not suitable
investments for all investors. In
particular, you should not purchase any
class of offered certificates unless you
understand the prepayment, credit, liquidity
and market risks associated with that class.
The certificates are complex securities. You
should possess, either alone or together
with an investment advisor, the expertise
necessary to evaluate the information
contained in this prospectus supplement and
the accompanying prospectus in the context
of your financial situation and tolerance
for risk.
You should carefully consider, among other
things, the factors described below before
purchasing the certificates.
LOSSES AND DELINQUENT PAYMENTS
ON THE MORTGAGE LOANS MAY REDUCE
THE YIELD ON YOUR CERTIFICATES Payments on the mortgage loans will not be
insured by the government or any other
person. Moreover, we, as servicer, have a
limited obligation to make advances for
delinquent installments of principal or
interest, as described in "The Pooling and
Servicing Agreement -- Advances."
Consequently, the certificates will absorb
the losses resulting from delinquent
payments, and the yield on your certificates
could be lower than you expect.
If you are buying the Class A26
Certificates, the yield on your certificates
could be lower than expected because your
certificates will bear certain losses that
would otherwise have been allocated to the
Class A24 Certificates. See "Allocation of
Realized Losses on the Pool 1 Senior
Certificates" in Annex 1.
In addition, if you are buying a class of
certificates that ranks junior to another
class of certificates, you may be more
likely than the holder of a certificate
senior to yours to experience losses as a
result of payment defaults or liquidation
losses on the underlying mortgage loans.
This is because payment defaults and
liquidation losses on each mortgage pool are
first allocated to the junior certificates,
as described in "Allocation of Realized
Losses on the Pool 1 Senior Certificates"
and "Distributions on the Pool 1 Senior
Certificates --
S-11
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Allocation of Pool 1 Available Funds" in
Annex 1 and "Allocation of Realized Losses
on the Pool 2 Senior Certificates" and
"Distributions on the Pool 2 Senior
Certificates -- Allocation of Pool 2
Available Funds" in Annex 2 of this
prospectus supplement.
THE SUBORDINATION PROVIDED BY THE
JUNIOR CERTIFICATES MAY NOT BE
ADEQUATE TO PROTECT THE SENIOR
CERTIFICATES FROM ALL LOSSES As described in the annex of this prospectus
supplement applicable to your certificates,
losses in each mortgage pool will first be
allocated to the junior certificates, in
inverse order of priority.
Losses may be severe enough, however, to
reduce the aggregate principal balance of
the junior certificates to zero. If that
occurs, all of the senior certificates will
bear their share of losses in either pool
thereafter. Because the junior certificates
will be allocated losses that occur in
either pool, a disproportionately high level
of losses on the mortgage pool that does not
back your senior certificates may result in
the elimination of the credit enhancement
provided to your certificates by the junior
certificates. Consequently, even if the
losses on the mortgage loans backing your
certificates are relatively low, you might
bear losses sooner, and to a greater extent,
than otherwise might have been the case had
disproportionately high losses not occurred
on the other mortgage pool.
In addition, certain types of
losses -- referred to in this prospectus
supplement as "Excess Losses" -- occurring
in either mortgage pool will be borne pro
rata by all senior certificates and the
junior certificates after a specified amount
of these losses, whether such losses occur
in Pool 1 or Pool 2, are borne solely by the
junior certificates. Furthermore, if you are
a holder of the Class A26 Certificates, you
will bear certain specified losses otherwise
allocable to the Class A24 Certificates.
For a more detailed discussion of the
effects and limitations of the credit
enhancement provided by subordination, see
"Subordination of the Junior Certificates"
in Annex 3 of this prospectus supplement.
THE PERFORMANCE OF THE MORTGAGE
POOL THAT DOES NOT DIRECTLY
RELATE TO YOUR CERTIFICATES
COULD NONETHELESS AFFECT THE
RATING ASSIGNED TO YOUR
CERTIFICATES As described above, losses on either pool of
mortgage loans will reduce the credit
support provided by the junior certificates
for both groups
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<PAGE> 13
of senior certificates, and Excess Losses in
respect of either pool of mortgage loans
will be borne pro rata by both groups of
senior certificates and the junior
certificates. As a result, the ratings
assigned to both groups of senior
certificates by Fitch and Standard & Poor's
are linked to each other, and a downgrade of
the ratings assigned to one group of senior
certificates could result in a downgrade of
the other group. In other words, downgrades
of the ratings on both groups of senior
certificates could result if delinquencies,
losses or other factors relating solely to
one mortgage pool are sufficiently high. A
downgrade of the rating on your certificates
could adversely affect their value and
marketability. See "Certificate Ratings" in
this prospectus supplement for more
information about ratings.
WE CANNOT GUARANTEE YOU REGULAR
PAYMENTS ON YOUR CERTIFICATES The amounts you receive on your certificates
will depend on the amount of the payments
borrowers make on the mortgage loans.
Because we cannot predict the rate at which
borrowers will repay their loans, you may
receive distributions on your certificates
in amounts that are larger or smaller than
you expect. In addition, the life of your
certificates may be longer or shorter than
anticipated. Because of this, we cannot
guarantee that you will receive
distributions at any specific future date or
in any specific amount. Holders of the Class
A19 Certificates should be aware of the
special payment rules for these certificates
that may make these payments especially
unpredictable.
PREPAYMENT RATES THAT ARE FASTER
OR SLOWER THAN YOU EXPECT ON
THE MORTGAGE POOL BACKING YOUR
CERTIFICATES MAY REDUCE THE
YIELD ON YOUR CERTIFICATES The yield to maturity on your certificates
will depend primarily on the purchase price
of your certificates and the rate of
principal payments on the mortgage loans in
the mortgage pool relating to your
certificates (or, in the case of the junior
certificates, both mortgage pools).
Unexpected changes in prepayment rates could
have the following negative effects:
- If you bought your certificates for
more than their face amount, the
yield on your certificates will drop
if principal payments occur at a rate
faster than you expect.
- If you bought your certificates for
less than their face amount, the
yield on your
S-13
<PAGE> 14
certificates will drop if principal
payments occur at a rate slower than
you expect.
- If you are the holder of a Class A14
or Class 2-A3 Certificate, you will
receive only distributions of
principal. If prepayments occur at a
rate slower than expected, the
payments on your certificates will
likewise occur at a rate slower than
expected. Consequently, the yield on
your certificates could drop
significantly.
For a more detailed discussion of the
sensitivity of certain classes to prepayment
rates and a description of the factors that
may influence prepayments, see "Yield and
Weighted Average Life Considerations" in the
annex applicable to your certificates in
this prospectus supplement and "Yield,
Maturity and Weighted Average Life
Considerations" in the prospectus.
PRINCIPAL PAYMENTS ON THE CLASS
A1 9 CERTIFICATES MAY BE LESS
PREDICTABLE THAN ON OTHER
CLASSES BECAUSE OF SPECIAL RULES
FOR DISTRIBUTING PRINCIPAL As described in this prospectus supplement,
special rules apply to determining which
holders receive principal distributions on
this class and when these distributions are
made. Amounts available for principal on
this class will first be paid to holders who
have submitted requests for principal
payments in the order submitted and with
certain priorities given to holders who have
died. Any amounts not paid to these
requesting holders will be paid by random
lot to other holders of this class.
If you submitted a request for principal
payments, you may not receive the amount
requested, either because other requests had
priority over yours or because the amount
available for principal payments on this
class was insufficient to honor your
request. If the amount available for
principal distributions on this class
exceeds the amount requested by all holders,
you may receive distributions in excess of
the amount you requested or, even if you did
not make a request, you may receive
distributions.
As a result, holders may not receive
principal payments when they are expecting
them, and may receive principal payments
when they are not expecting them. In
addition to making distributions on this
class somewhat unpredictable, your yield
S-14
<PAGE> 15
may be affected by the timing of these
payments, as described in some of the other
risk factors in this prospectus supplement.
Investors in these certificates should pay
particular attention to the risk that they
may be less likely to receive principal
payments when prevailing interest rates
available for reinvestment are high, and may
be more likely to receive principal payments
when prevailing interest rates available for
reinvestment are low. See "Principal
Distributions on the Class A19 Certificates"
in Annex 1 of this prospectus supplement.
YOU MAY BE UNABLE TO REINVEST
DISTRIBUTIONS FROM THE
CERTIFICATES IN COMPARABLE
INVESTMENTS Rapid prepayment rates on the mortgage loans
are likely to coincide with periods of low
prevailing interest rates. During these
periods, the yield at which you may be able
to reinvest amounts received as payments on
your certificates may be lower than the
yield on your certificates. Conversely, slow
prepayment rates on the mortgage loans are
likely to coincide with periods of high
interest rates. During these periods, the
amount of payments available to you for
reinvestment at high rates may be relatively
low.
See "Yield and Weighted Average Life
Considerations" in the applicable annex of
this prospectus supplement and "Yield,
Maturity and Weighted Average Life
Considerations" in the prospectus for more
discussion of the effect of prepayments.
PREPAYMENTS MAY CAUSE REDUCTIONS
IN INTEREST DISTRIBUTIONS ON
YOUR CERTIFICATES The actual interest rate on your
certificates, if entitled to distributions
of interest, may be less than the interest
rate stated in this prospectus supplement.
Unless you are the holder of the Class A14
or Class 2-A3 Certificates, which pay only
principal, your certificates will be
allocated any interest shortfalls that we do
not compensate for as described in this
prospectus supplement. The circumstances
under which these interest shortfalls will
occur are described in "Distributions on the
Pool 1 Senior Certificates" in Annex 1,
"Distributions on the Pool 2 Senior
Certificates" in Annex 2 and "Distributions
on the Junior Certificates" in Annex 3.
S-15
<PAGE> 16
THE CONCENTRATION OF MORTGAGE
LOANS IN SPECIFIC GEOGRAPHIC
AREAS MAY INCREASE THE RISK
OF LOSS ON THOSE MORTGAGE
LOANS AND REDUCE THE YIELD ON
YOUR CERTIFICATES If your certificates are backed by the Pool
1 mortgage loans, you should be aware that
approximately 48% of the Pool 1 mortgage
loans are secured by properties located in
California. If your certificates are backed
by the Pool 2 mortgage loans, you should be
aware that approximately 40% of the Pool 2
mortgage loans are secured by properties
located in California.
Any deterioration in the real estate market
or economy in California could result in
higher rates of loss and delinquency than
expected on the mortgage loans. In addition,
California may experience natural disasters,
such as earthquakes, fires, floods and
hurricanes, which may not be fully insured
against and which may result in property
damage and losses on the mortgage loans.
These events may adversely affect the funds
available to make payments on your
certificates which may in turn reduce the
yield on your certificates.
See "The Pool 1 Mortgage Loans and the Pool
1 Senior Certificates" in Annex 1 or "The
Pool 2 Mortgage Loans and the Pool 2 Senior
Certificates" in Annex 2 of this prospectus
supplement for more information on the
location of the properties securing the
mortgage loans backing your certificates.
LOSSES ON THE MORTGAGE LOANS MAY
BE HIGHER THAN EXPECTED, WHICH
MAY LOWER THE YIELD ON YOUR
CERTIFICATES A decline in real estate values or in
economic conditions generally could increase
the rates of delinquencies, foreclosures and
losses on the mortgage loans to a level that
is significantly higher than those
experienced currently. This in turn will
reduce the yield on your certificates, if
the credit enhancement described in this
prospectus supplement is not enough to
protect your certificates from these losses.
IF WE EXERCISE OUR OPTION TO
TERMINATE THE TRUST, THE YIELD
ON YOUR CERTIFICATES COULD BE
LOWER THAN EXPECTED We may, at our option, terminate the trust
under the circumstances described in "The
Pooling and Servicing Agreement -- Optional
Termination" in this prospectus supplement.
Because our option to terminate depends on
the outstanding aggregate principal balance
of all of the mortgage loans in the trust,
your certificates may be retired even if the
aggregate principal balance of the mortgage
loans in the pool backing your certificates
is above the threshold for termination, if
the pools had been considered separately. If
the proceeds realized
S-16
<PAGE> 17
upon termination are less than the
outstanding principal balance on the
certificates and accrued interest thereon,
your certificates may bear their share of
the resulting shortfall. As a result, you
may not fully recover your investment and
could potentially suffer losses. In
addition, termination of the trust will
result in the early retirement of your
certificates, which will shorten the average
life of the certificates and potentially
lower their yield.
You should refer to "The Pooling and
Servicing Agreement -- Optional Termination"
for a discussion of additional consequences
of the trust's early termination.
YOU MAY NOT BE ABLE TO RESELL
YOUR CERTIFICATES The certificates will not be listed on any
securities exchange, and a resale market for
the certificates may not develop. Although
the underwriters of this offering intend to
create a resale market for the certificates
they are offering, they have no obligation
to do so. If a market for the certificates
does develop, it may not continue. Moreover,
this market may not be liquid enough to
allow you to resell your certificates or to
resell them at the price you desire.
YOU WILL NOT RECEIVE PHYSICAL
CERTIFICATES, WHICH CAN CAUSE
DELAYS IN DISTRIBUTIONS AND
HAMPER YOUR ABILITY TO PLEDGE
OR RESELL YOUR CERTIFICATES Unless you are a purchaser of the residual
certificates, your ownership of the
certificates will be registered
electronically with DTC. The lack of
physical certificates could:
- result in payment delays on the
certificates because the trustee will
be sending distributions on the
certificates to DTC instead of
directly to you;
- make it difficult for you to pledge
your certificates if physical
certificates are required by the
party demanding the pledge; and
- hinder your ability to resell the
certificates because some investors
may be unwilling to buy certificates
that are not in physical form.
OUR FAILURE OR THE FAILURE OF
THIRD PARTIES TO BE YEAR 2000
COMPUTER READY COULD DISRUPT
THE DISTRIBUTIONS ON YOUR
CERTIFICATES Many computer systems and microprocessors
with data functions, including those in
non-information technology equipment and
systems, use only two digits to identify a
year in the date field with the
S-17
<PAGE> 18
assumption that the first two digits of the
year are always "19." Consequently, on
January 1, 2000, computers that are not year
2000 compliant may read the year as 1900 and
malfunction.
We have completed implementation of a plan,
which is described in "Year 2000 Computer
Readiness" in the prospectus, to become year
2000 compliant. We cannot guarantee,
however, that our efforts to achieve year
2000 readiness will be fully effective.
Moreover, we cannot guarantee that any of
our third-party service providers, such as
trustees, borrowers' banks, loan servicers
and DTC, or companies that insure the
mortgage loans or mortgaged properties, will
be year 2000 ready. We also cannot assure
you that any future developments in
connection with our year 2000 readiness or
the readiness of third parties will be those
that we have anticipated.
Our failure, or the failure of our
third-party servicers or insurers, to become
fully year 2000 ready could disrupt, at
least temporarily, our ability to carry out
the servicing duties described in this
prospectus supplement, including the
calculation of amounts distributable to you
and the timely transfer of funds to the
trustee for your benefit. Your investment in
the certificates could consequently suffer.
S-18
<PAGE> 19
INDEX OF DEFINITIONS
You can find a list of capitalized terms used in this prospectus
supplement, including the annexes hereto, and the pages on which they are
defined, under the caption "Index of Certain Prospectus Supplement Definitions"
beginning on page S-40 of this prospectus supplement. Any capitalized terms that
are not defined in the prospectus supplement are defined in the accompanying
prospectus. See "Index of Certain Prospectus Definitions" on page 92 of the
accompanying prospectus.
DESCRIPTION OF THE MORTGAGE POOLS AND THE MORTGAGED PROPERTIES
GENERAL
The certificates described in this prospectus supplement will represent the
entire beneficial ownership interest in the trust that is issuing these
certificates. The assets of the trust will consist primarily of two pools of
conventional, fixed-rate, fully-amortizing mortgage loans. The mortgage loans
are secured by mortgages, deeds of trust or other security instruments creating
first liens on one- to four-family residential properties or first liens on
rights to own and occupy apartments in cooperative buildings. GE Capital
Mortgage Services, Inc. ("GECMSI") is depositing the mortgage loans in the
trust.
Certain data with respect to the mortgage loans expected to be included in
each of Pool 1 and Pool 2 are set forth in Annex 1 and Annex 2, respectively,
attached to this prospectus supplement. A description of the final mortgage
pools on a Current Report on Form 8-K will be available to purchasers of the
certificates at or before, and will be filed by GECMSI with the SEC within
fifteen days after, the initial delivery of the certificates. This definitive
description will specify the precise aggregate Scheduled Principal Balance (as
defined in this prospectus supplement) of the mortgage loans in each pool as of
the first day of the month of creation of the trust (the "Cut-off Date") and
will also include statistical data relating to the final mortgage loans in each
pool comparable in scope to that set forth with respect to the expected mortgage
pools on pages A1-3 through A1-8 of Annex 1 and pages A2-3 through A2-7 of Annex
2. It will also specify the original principal balance of each class of
certificates (or in the case of the Class 1-S and Class 2-S Certificates, the
notional principal balance) on the date of issuance of the certificates, the
initial Pool 1 Senior Percentage, the initial Pool 2 Senior Percentage, the
initial Pool 1 Group II Senior Percentage, the initial Class 2-A5 Percentage,
the initial Aggregate Junior Percentage, the initial Pool 1 Apportioned Junior
Percentage, the initial Pool 2 Apportioned Junior Percentage, the Bankruptcy
Loss Amount, the Fraud Loss Amount, and the Special Hazard Loss Amount, each as
defined herein. The Pooling and Servicing Agreement under which the certificates
are issued and its exhibits will be filed as an exhibit to the definitive
description of the final mortgage pools.
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 received 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
S-19
<PAGE> 20
Valuations occurring after the Bankruptcy Coverage Termination Date, as such
term is defined herein, irrespective of any delinquency in payment by the
related borrower.
The "Pool 1 Scheduled Principal Balance" and the "Pool 2 Scheduled
Principal Balance" as of any Distribution Date are equal to the aggregate
Scheduled Principal Balances of all of the mortgage loans in Pool 1 and Pool 2,
respectively, 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.
Each mortgage loan other than a Cooperative Loan, as defined in Annex 1, 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 -- Hazard Insurance" and "-- Private Mortgage Insurance" in the
prospectus.
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. Each mortgage
pool will include a substantial number of recently originated loans on which the
first monthly payments are not due until the Cut-off Date or on a date
subsequent to the initial issuance of the certificates.
For a description of the underwriting standards generally applicable to the
mortgage loans, see "The Trusts -- The Mortgage Loans -- Loan Underwriting
Policies" in the prospectus.
DESCRIPTION OF THE CERTIFICATES
GENERAL
The certificates will be issued pursuant to a Pooling and Servicing
Agreement (the "Agreement") to be dated as of the Cut-off Date between GECMSI,
as depositor of the mortgage loans and servicer, and State Street Bank and Trust
Company, as trustee (the "Trustee"). See the prospectus for important additional
information regarding the terms and conditions of the Agreement and the
certificates. The certificates will be issued in the classes offered by this
prospectus supplement, together with the Class 1-PO, Class 1-S, Class 2-S, Class
B3, Class B4, Class B5 Certificates, none of which are offered hereby. The Pool
1 senior certificates, excluding the Class 1-PO Certificates, will have an
aggregate original principal balance of approximately $888,216,533, the Pool 2
senior certificates will have an aggregate original principal balance of
approximately $69,274,612 and the junior certificates will have an aggregate
original principal balance of approximately $42,693,844, in each case subject to
a variance of plus or minus 5%. The total original principal balance of the
Class 1-PO Certificates will be approximately $4,376,027, subject to the
variance described in the preceding sentence. Any 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 Certificates, which are referred to as the "residual certificates,"
will be issued in book-entry form. Beneficial interests in these certificates
will be held by investors through the book-entry facilities of The Depository
Trust Company, as described below, in the
S-20
<PAGE> 21
minimum denominations described in the summary of this prospectus supplement.
Notwithstanding the integral multiple requirements described in the summary, one
certificate of each class other than the residual certificates may evidence an
additional amount equal to the remaining Class Certificate Principal Balance
thereof.
BOOK-ENTRY CERTIFICATES
Each class of the 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, which is known as
DTC. For purposes of this discussion, the term DTC also refers to any successor
depository selected by DTC. GECMSI has been informed by DTC that its nominee
will be Cede & Co. Accordingly, Cede & Co. 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 definitive physical certificate representing such 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 DTC (or of a participating firm that acts as agent for the Financial
Intermediary, whose interest will in turn be recorded on the records of DTC, if
the beneficial owner's Financial Intermediary is not a DTC 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.
DTC, which is a New York-chartered limited purpose trust company, performs
services for its participants, some of which (and/or their representatives) own
DTC. In accordance with its normal procedures, DTC is expected to record the
positions held by each of its participants 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 DTC and its 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 DTC. DTC will be
responsible for crediting the amount of such payments to the accounts of the
applicable participants in accordance with DTC's normal procedures. Each DTC
participant will be responsible for disbursing such payments to the beneficial
owners of the Book-Entry 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 DTC
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 DTC 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
S-21
<PAGE> 22
IN THE SECONDARY MARKET SINCE CERTAIN POTENTIAL INVESTORS MAY BE UNWILLING TO
PURCHASE CERTIFICATES FOR WHICH THEY CANNOT OBTAIN PHYSICAL CERTIFICATES.
DTC has advised GECMSI and the Trustee that, unless and until definitive
physical certificates are issued, DTC will take any action permitted to be taken
by a holder of a certificate under the Agreement only at the direction of one or
more Financial Intermediaries to whose DTC accounts the Book-Entry Certificates
are credited. DTC 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 physical certificates will be issued to beneficial owners of the
related Book-Entry Certificates, or their nominees, rather than to DTC, only if
(a) DTC or GECMSI advises the Trustee in writing that DTC is no longer willing,
qualified or able to discharge properly its responsibilities as nominee and
depository with respect to the certificates and GECMSI or the Trustee is unable
to locate a qualified successor, (b) GECMSI, at its sole option, elects to
terminate the book-entry system through DTC, 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 DTC through the Financial
Intermediaries in writing that the continuation of a book-entry system through
DTC (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 DTC of
definitive physical certificates. Upon surrender by DTC of the global
certificate or certificates representing the certificates and instructions for
re-registration, the Trustee will issue definitive physical certificates, and
thereafter the Trustee will recognize the holders of such certificates as
certificateholders under the Agreement. Following the issuance of definitive
physical certificates, distribution of principal and interest on the
certificates will be made by the Trustee directly to holders of these
certificates in accordance with the procedures set forth in the Agreement.
The Agreement will provide that, if definitive physical certificates are
issued in respect of the Class A26, Class M, Class B1 or Class B2 Certificates,
no transfer of such a certificate may be made unless the Trustee has received
(1) 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 (2) an opinion of counsel relating to such
transfer in form and substance satisfactory to the Trustee and GECMSI. 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
S-22
<PAGE> 23
registration of transfer or exchange of the residual certificates, but payment
of a sum sufficient to cover any tax or 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 (the
"Record 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") that will be available for
distribution from a particular mortgage pool on each Distribution Date is
described in the accompanying prospectus under "Servicing of the Mortgage
Loans -- Loan Payment Record." The Available Funds in respect of Pool 1 are
referred to herein as the "Pool 1 Available Funds," and the Available Funds in
respect of Pool 2 are referred to herein as the "Pool 2 Available Funds."
The junior certificates may receive distributions from either Pool 1
Available Funds or Pool 2 Available Funds. Under certain limited circumstances
described in "Cross-Support" below, senior certificates relating to a particular
mortgage pool may receive distributions from Available Funds in respect of the
other pool.
See "Distributions on the Pool 1 Senior Certificates" in Annex 1,
"Distributions on the Pool 2 Senior Certificates" in Annex 2 or "Distributions
on the Junior Certificates" in Annex 3 for a description of how the Pool 1
Available Funds or Pool 2 Available Funds, as applicable, will be allocated to
your certificates.
CROSS-SUPPORT
In addition to the subordination provided by the junior certificates, the
senior certificates will benefit from the credit enhancement provided by a
cross-support feature. Under this cross-support feature, collections received on
the mortgage loans in one pool may be distributed to holders of senior
certificates backed by the mortgage loans in the other pool under certain
limited circumstances. As described in greater detail in this prospectus
supplement, this cross-support may occur in the following instances:
- If the aggregate certificate principal balance of the senior certificates
backed by one mortgage pool (other than, if such pool is Pool 1, the
Class 1-PO Certificates) has been reduced to zero, but any senior
certificates backed by the other mortgage pool are still outstanding, and
the mortgage loans in either pool are performing below certain standards,
collections on mortgage loans backing the first pool will be distributed
to the outstanding senior certificates backed by the other mortgage pool
S-23
<PAGE> 24
(other than the Class 1-PO Certificates) before being distributed as
principal to the junior certificates.
- If the aggregate certificate principal balance of the Pool 1 Senior
Certificates (other than the Class 1-PO Certificates) exceeds the
aggregate Non-PO Percentage (as defined herein) of the aggregate
principal balance of the Pool 1 mortgage loans, or if the aggregate
certificate principal balance of the Pool 2 Senior Certificates exceeds
the aggregate principal balance of the Pool 2 mortgage loans, the senior
certificate group as to which such excess exists may be entitled to
receive distributions based on collections received on the mortgage loans
in the other pool. Such distributions will be made from certain amounts
otherwise distributable as principal to the junior certificates so long
as any junior certificates remain outstanding. If the junior certificates
are no longer outstanding, such distributions will be made from Available
Funds in respect of such other mortgage pool remaining after
distributions have been made on the senior certificates backed by such
other mortgage pool (other than, if such pool is Pool 1, the Class 1-PO
Certificates).
- Amounts distributable to the Class 1-PO Certificates to cover certain
deferred payments in respect of prior losses allocated to such
certificates will be made from amounts otherwise distributable as
principal on the junior certificates, regardless of which mortgage pool
is the source of such payments.
You should see "Distributions on the Pool 1 Senior
Certificates -- Cross-Support" in Annex 1 or "Distributions on the Pool 2 Senior
Certificates -- Cross-Support" in Annex 2, as applicable, for a more detailed
discussion of the effects and limitations of the cross-support available to the
senior certificates.
ADDITIONAL RIGHTS OF THE RESIDUAL CERTIFICATEHOLDERS
In addition to principal and interest distributable to the holders of the
residual certificates as described under "Distributions on the Pool 1 Senior
Certificates" in Annex 1, the holders of the Class R Certificates will be
entitled to receive:
(1) the amount, if any, of Pool 1 Available Funds and Pool 2
Available Funds remaining in the REMIC on any Distribution Date after
distributions of principal and interest and in respect of any Class 1-PO
Deferred Amount are made on the senior certificates of the related pool
and the junior certificates on such date;
(2) the amount in the Class A19 Rounding Account upon the earlier
of (a) the Cross-Over Date and (b) the next Distribution Date after the
Class Certificate Principal Balance of the Class A19 Certificates is
reduced to zero, as described herein;
(3) the amount of any Unanticipated Recoveries received by GECMSI
in the calendar month preceding the month of a Distribution Date and not
otherwise allocated to other classes of certificates as described in
"Servicing of the Mortgage Loans -- Unanticipated Recoveries of Losses
on the Mortgage Loans" in the accompanying prospectus; and
S-24
<PAGE> 25
(4) the proceeds, if any, of the assets of the trust remaining in
the REMIC after the Class Certificate Principal Balances of all classes
of certificates have each been reduced to zero.
It is not anticipated that any material assets will be remaining for such
distributions on the Class R Certificates at any such time. See "Federal Income
Tax Consequences -- Residual Certificates" herein.
RESTRICTIONS ON TRANSFER OF THE RESIDUAL CERTIFICATES
The residual certificates will be subject to the restrictions on transfer
described in the prospectus under "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.
GE CAPITAL MORTGAGE SERVICES, INC.
GECMSI, a wholly-owned subsidiary of GE Capital Mortgage Corporation, is a
New Jersey corporation originally incorporated in 1949. The principal executive
office of GECMSI is located at Three Executive Campus, Cherry Hill, New Jersey
08002, telephone (609) 661-6100. For a general description of GECMSI and its
activities, see "GE Capital Mortgage Services, Inc." in the accompanying
prospectus.
GECMSI currently maintains an electronic bulletin board, accessible by
computer modem, which provides certain information about loans included in
various series of mortgage pass-through securities that GECMSI has publicly
offered. GECMSI makes no representation or warranty that such information will
be suitable for any particular purpose and GECMSI assumes no responsibility for
the accuracy or completeness of any information that is generated by others
using such information. GECMSI has no obligation to maintain the bulletin board
and may stop maintaining it any time. For further information concerning the
bulletin board, you should call 800-544-3466, extension 5515.
DELINQUENCY AND FORECLOSURE EXPERIENCE OF GECMSI
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 GECMSI, excluding Home Equity
Loans (as defined in the prospectus) and special loan portfolios which, upon the
GECMSI's commencement of servicing responsibilities, consisted of significant
numbers of mortgage loans that were seriously delinquent or in foreclosure. The
servicing portfolio does not include mortgage loans that were serviced or
sub-serviced by others.
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<PAGE> 26
<TABLE>
<CAPTION>
AS OF DECEMBER 31, AS OF DECEMBER 31, AS OF DECEMBER 31,
1996 1997 1998
--------------------- ---------------------- ----------------------
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........... 785,928 $88,188,662 726,869 $83,535,531 622,179 $75,039,774
======= =========== ======= =========== ======= ===========
Period of delinquency(1)
30 to 59 days........... 3,362 $ 353,209 2,687 $ 281,657 2,314 $ 242,342
60 to 89 days........... 1,177 135,668 632 71,245 526 56,889
90 days or more(2)...... 6,867 892,643 5,442 662,342 4,561 512,734
------- ----------- ------- ----------- ------- -----------
Total delinquent loans.... 11,406 $ 1,381,520 8,761 $ 1,051,244 7,401 $ 811,965
======= =========== ======= =========== ======= ===========
Percent of portfolio...... 1.45% 1.57% 1.21% 1.22% 1.19% 1.08%
</TABLE>
<TABLE>
<CAPTION>
AS OF MARCH 31, 1998 AS OF MARCH 31, 1999
---------------------- ----------------------
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............................. 704,085 $81,644,151 598,583 $72,701,241
======= =========== ======= ===========
Period of delinquency(1)
30 to 59 days............................. 2,347 $ 248,451 1,669 178,506
60 to 89 days............................. 562 60,476 353 36,246
90 days or more(2)........................ 5,140 617,229 4,223 482,267
------- ----------- ------- -----------
Total delinquent loans...................... 8,049 926,156 6,245 697,019
======= =========== ======= ===========
Percent of portfolio........................ 1.14% 1.13% 1.04% 0.96%
</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.
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
-----------------------------------------
1996 1997 1998
----------- ----------- -----------
(DOLLAR AMOUNTS IN THOUSANDS)
<S> <C> <C> <C>
Total portfolio................... $88,188,662 $83,535,531 $75,039,774
Foreclosures(1)................... 372,800 271,046 189,421
Foreclosure ratio................. 0.42% 0.32% 0.25%
</TABLE>
<TABLE>
<CAPTION>
AS OF MARCH 31,
------------------------------
1998 1999
------------- -------------
(DOLLAR AMOUNTS IN THOUSANDS)
<S> <C> <C>
Total portfolio................................. $81,644,151 $72,701,241
Foreclosures(1)................................. 233,929 203,664
Foreclosure ratio............................... 0.29% 0.28%
</TABLE>
- -------------------------
(1) Foreclosures represent the principal balance of mortgage loans secured by
mortgaged properties, the title to which has been acquired by GECMSI, 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.
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<PAGE> 27
We are not currently aware of specific trends that have affected our recent
delinquency and loss experience, nor are we currently aware of any trends that
are likely to affect the future performance of our servicing portfolio.
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 trust. Consequently, there can be no assurance that
the delinquency and foreclosure experience on the mortgage loans in the trust
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 trust. The servicing portfolio
also includes mortgage loans originated in accordance with GECMSI's
then-applicable underwriting policies as well as mortgage loans not originated
in accordance with such policies but as to which GECMSI 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 such 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.
Investors should further note that a number of social, economic, tax,
geographic, demographic, legal and other factors may adversely affect the timely
payment by borrowers of scheduled payments of principal and interest on the
mortgage loans in the servicing portfolio, which could, in turn, cause an
increase in delinquency and foreclosure rates. These factors include economic
conditions, either nationally or in geographic areas where GECMSI's servicing
portfolio tends to be concentrated, the age of the mortgage loans in the trust,
the geographic distribution of the mortgaged properties, the payment terms of
the mortgages, the characteristics of the mortgagors, enforceability of
due-on-sale clauses and servicing decisions.
USE OF PROCEEDS
The net proceeds from the sale of the certificates offered hereby will be
general funds used by GECMSI for general corporate purposes, including the
acquisition of residential mortgage loans and servicing rights.
THE POOLING AND SERVICING AGREEMENT
The certificates will be issued pursuant to the Agreement. The following
summaries describe the material provisions of the Agreement that are unique to
this offering of certificates. See "The Pooling and Servicing Agreement" in the
accompanying prospectus for summaries of the other material 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, those provisions or terms are as specified in the Agreement.
S-27
<PAGE> 28
SERVICING ARRANGEMENT WITH RESPECT TO THE MORTGAGE LOANS
It is expected that GECMSI will directly service approximately 81% (by
aggregate Scheduled Principal Balance as of the Cut-off Date) of the mortgage
loans in Pool 1 and 73% (by aggregate Scheduled Principal Balance as of the
Cut-off Date) of the mortgage loans in Pool 2. It will function as master
servicer with respect to the remaining mortgage loans in each pool pursuant to a
Direct Master Servicing Arrangement (as defined in the accompanying prospectus).
Such master-serviced loans will be directly serviced by the entities which
originated or acquired those loans and sold them to GECMSI. The Agreement
permits GECMSI to use other primary servicing agents from time to time. See
"Servicing of the Mortgage Loans" in the accompanying prospectus.
COLLECTION ACCOUNT
The Agreement provides that if GECMSI or the Trustee obtains actual notice
or knowledge of the occurrence of a Trigger Event or the downgrade of GE
Capital's short term unsecured rating below A-1+ by Standard & Poor's Rating
Services, a division of The McGraw-Hill Companies, Inc. ("S&P"), GECMSI will, in
lieu of the Loan Payment Record described under the caption "Servicing of the
Mortgage Loans -- 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
GECMSI 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, such Collection Account would be:
-- maintained with a depository institution the debt obligations of
which are, at the time of any deposit therein, rated by each of Fitch
IBCA, Inc. ("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;
-- 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");
-- 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;
-- a trust account maintained with the corporate trust department of a
federal or state chartered depository institution or trust company
with trust powers and acting in its fiduciary capacity for the
benefit of the Trustee; or
-- an account as will not cause either Fitch or S&P to downgrade or
withdraw its then-current ratings assigned to the certificates.
S-28
<PAGE> 29
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 -- Loan Payment Record" will instead be
deposited or withdrawn from the Collection Account. See "Servicing of the
Mortgage Loans -- Loan Payment Record" in the accompanying prospectus.
Prior to the occurrence of a Trigger Event, GECMSI will transfer to the
Certificate Account, in next day funds, the Pool 1 Available Funds and Pool 2
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, GECMSI will advance the
entire amount of such payment, net of the applicable servicing fee, less the
amount of any such payment that GECMSI reasonably believes will not be
recoverable out of liquidation proceeds or otherwise. See "Servicing of the
Mortgage Loans -- Advances" in the accompanying prospectus for more information.
GECMSI will be entitled to reimbursement for any such advance from late
payments on the related mortgage loan as to which such advance was made.
Furthermore, in the event that any mortgage loan in Pool 1 or Pool 2 as to which
such an advance has been made is foreclosed while in such pool, GECMSI will be
entitled to reimbursement for such advance from related liquidation proceeds or
insurance proceeds prior to payment to the related Pool 1 or Pool 2
certificateholders, as applicable, of the Scheduled Principal Balance of such
mortgage loan plus accrued interest at the mortgage rate, net of the applicable
servicing fee.
If GECMSI makes a good faith judgment that all or any portion of any
advance of delinquent principal and interest is a Nonrecoverable Advance, as
defined in the prospectus, GECMSI will so notify the Trustee, and GECMSI will be
entitled to reimbursement for such Nonrecoverable Advance from recoveries on all
other mortgage loans in the related mortgage pool. The factors that GECMSI will
take into consideration in determining whether an advance is recoverable are
described in the accompanying prospectus.
The Trustee will make advances of delinquent principal and interest
payments in the event of a failure by GECMSI 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 GECMSI's entitlement as
described in the accompanying prospectus and in the preceding paragraphs.
As a result of the subordination of the junior certificates, the effect of
reimbursements to GECMSI or the Trustee of previous advances from liquidation or
insurance proceeds and of nonrecoverable advances will generally be borne by
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.
S-29
<PAGE> 30
PURCHASES OF DEFAULTED MORTGAGE LOANS
Under the Agreement, GECMSI 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, 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 related certificateholders.
SERVICING COMPENSATION, COMPENSATING INTEREST AND PAYMENT OF EXPENSES
GECMSI'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 the servicing fee at the rate described below. As to each mortgage loan, the
servicing fee rate will be a fixed rate per annum of the outstanding principal
balance of such mortgage loan. For Pool 1, this rate is expected to range from
approximately .20% to .29%, with an anticipated initial weighted average rate of
between approximately .22% and .26%. For Pool 2, this rate is expected to range
from approximately .20% to .29%, with an anticipated initial weighted average
rate of between approximately .23% and .27%. The aggregate servicing
compensation to GECMSI 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 servicing fee, and GECMSI will
retain the balance of the servicing fee as part of its servicing compensation,
(subject to its obligation to make Compensating Interest Payments, as described
below).
To the extent any voluntary prepayment results in an Interest Shortfall (as
described in clauses (1) and (2) of the definition thereof) with respect to any
Pool 1 mortgage loan or Pool 2 mortgage loan on any Distribution Date, GECMSI
will be obligated to remit an amount (such amount, a "Compensating Interest
Payment") sufficient to pass through to the Pool 1 senior certificateholders or
Pool 2 senior certificateholders, as applicable, and the junior
certificateholders in respect of the portion of the junior certificates
attributable to Pool 1 or Pool 2, as applicable, 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 1 Scheduled
Principal Balance or Pool 2 Scheduled Principal Balance, as applicable, for such
Distribution Date and (b) the aggregate amount received by GECMSI on account of
its servicing fees for Pool 1 or Pool 2, as applicable, (net of any servicing
compensation paid to any direct servicer) in connection with such Distribution
Date. Because the net amount received by GECMSI on account of its servicing fee
is generally less in the case of mortgage loans master-serviced by GECMSI than
in the case of mortgage loans GECMSI services directly, the amounts available
for any Compensating Interest Payment with respect to either mortgage pool and
any Distribution Date will generally decrease to the extent the proportion of
Outstanding Mortgage Loans in such pool master-serviced by GECMSI increases, and
increase to the extent the proportion of such mortgage loans decreases. It is
expected that no more than 19% of the mortgage loans in Pool 1 and 27% of the
mortgage loans in Pool 2 (by aggregate Scheduled Principal Balance as of the
Cut-off Date) will be master-serviced by GECMSI. This percentage could vary over
time, however, if mortgage loans directly serviced by GECMSI experience a
disproportionately high or low level of prepayments or
S-30
<PAGE> 31
defaults relative to mortgage loans master-serviced by GECMSI. In addition, the
proportion of master-serviced mortgage loans could be affected as a result of
(1) the exercise by GECMSI of its right under the Agreement to contract with
third parties to directly service mortgage loans, with GECMSI becoming the
master servicer of such mortgage loans, or (2) the substitution of any mortgage
loans under the Agreement.
GECMSI will retain, as additional servicing compensation, amounts in
respect of interest paid by borrowers in connection with any principal
prepayment in full received by GECMSI (or, with respect to mortgage loans
master-serviced by GECMSI, of which GECMSI receives notice) from the first day
through the fifteenth day of each month, other than the month of the Cut-off
Date.
GECMSI 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 -- Servicing
and Other Compensation and Payment of Expenses" in the accompanying prospectus
for information regarding other possible compensation to GECMSI.
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 02110.
OPTIONAL TERMINATION
GECMSI 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 and the REMIC constituted by the trust on any
Distribution Date after the aggregate Scheduled Principal Balance of the
mortgage loans in both pools combined is less than 10% of the aggregate
Scheduled Principal Balance thereof as of the Cut-off Date. Under the Agreement,
the Trustee will provide notice to certificateholders of this final
distribution. This notice will state:
(1) the Distribution Date on which the final distribution will be made;
(2) the amount of the final distribution; and
(3) that the final distribution on each certificate will be paid only upon
surrender of such certificate.
GECMSI may not exercise the foregoing option unless the Trustee has
received an opinion of counsel that the exercise of such option will not subject
the trust to a tax on prohibited transactions or result in the failure of the
trust to qualify as a REMIC.
In accordance with the Agreement, any such repurchase by GECMSI of the
assets included in the trust will be at a price equal to the sum of:
(1) 100% of the unpaid principal balance of each mortgage loan in the trust
other than a mortgage loan described in clause (2) below, as of the
first day of the month of such repurchase, plus accrued and unpaid
interest thereon to the first
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<PAGE> 32
day of the month of such repurchase at the related Net Mortgage Rate,
less any amounts representing previously unreimbursed advances; and
(2) 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 Pool 1 Available Funds and Pool 2 Available Funds on the final
Distribution Date will be allocated to each class of certificates in accordance
with the priorities described under "Distributions on the Pool 1 Senior
Certificates -- Allocation of Pool 1 Available Funds" in Annex 1, "Distributions
on the Pool 2 Senior Certificates -- Allocation of Pool 2 Available Funds" in
Annex 2 and "The Junior Certificates -- Distributions on the Junior
Certificates -- Allocation of Junior Available Funds" in Annex 3. Accordingly,
if the Pool 1 Available Funds or Pool 2 Available Funds, as applicable, on the
final Distribution Date are less than the aggregate principal balance of all
outstanding certificates, plus accrued and unpaid interest thereon, then in the
event that such Distribution Date occurs:
- prior to the Cross-Over Date, the resulting shortfall will be borne first
by the junior certificates, and then pro rata by the Pool 1 or Pool 2
senior certificates, as applicable; and
- on or after the Cross-Over Date, such shortfall will be borne pro rata
among the Pool 1 senior certificates or Pool 2 senior certificates, as
applicable.
No holder of any certificates will be entitled to any Unanticipated
Recoveries received with respect to any mortgage loan after the termination of
the trust. See "Servicing of the Mortgage Loans -- Unanticipated Recoveries of
Losses on the Mortgage Loans" in the prospectus.
VOTING RIGHTS
The Class 1-S and Class 2-S Certificates together will not be allocated any
of the votes whereas the other classes of certificates in the aggregate will be
allocated 100% of the votes eligible to be cast in connection with any vote of
all certificateholders under the Agreement.
Votes allocated to the certificates under the Agreement will be allocated
among the 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. With respect to any matters relating
exclusively to the senior certificates backed by a particular mortgage pool
(i.e. matters relating only to the Pool 1 senior certificates or only to the
Pool 2 senior certificates and not adversely affecting the junior certificates
or the senior certificates backed by the other pool), the only
certificateholders entitled to vote will be the holders of the senior
certificates backed by the affected mortgage pool. Votes allocated to the senior
certificates backed by a particular mortgage pool in such a circumstance will be
allocated in proportion to the Pool 1 Scheduled Principal Balance or the Pool 2
Scheduled Principal Balance, as applicable.
S-32
<PAGE> 33
FEDERAL INCOME TAX CONSEQUENCES
The following discussion, insofar as it states conclusions of law,
represents the opinion of Cleary, Gottlieb, Steen & Hamilton, special counsel to
GECMSI.
An election will be made to treat the trust as a REMIC for federal income
tax purposes.
The certificates other than the residual certificates (the "Regular
Certificates") will be designated as "regular interests" in the REMIC, and the
residual certificates will be designated as the "residual interest" in the
REMIC.
Regular Certificates
The Regular Certificates generally will be treated as debt instruments
issued by the REMIC for federal income tax purposes. Income on Regular
Certificates must be reported under an accrual method of accounting. Certain
classes of Regular Certificates (other than the Class A14, Class A24 and Class
2-A3 Certificates) may be issued with original issue discount in an amount equal
to the excess of their initial respective Class Certificate Principal Balances
over their issue price. The Class A14, Class A24 and Class 2-A3 Certificates
will be issued with original issue discount in an amount equal to the excess of
(1) the sum of all payments thereon determined under the Prepayment Assumption
described below, over (2) their issue price. 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 250% of
the Prepayment Assumption. No representation is made as to the actual rate at
which the mortgage loans will prepay. See "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 the other
classes of 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
"Federal Income Tax Consequences -- REMIC Certificates -- Income from Regular
Certificates" in the accompanying prospectus.
Residual Certificates
The holders of the residual certificates must include the taxable income of
the REMIC 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 the residual certificates 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.
S-33
<PAGE> 34
Under Treasury regulations, 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 the residual certificates 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 "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 Internal
Revenue Code of 1986, as amended (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 subject to 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 certain such exemptions from these
prohibitions which might be applicable in connection with an ERISA Plan's
purchase of certain of the certificates offered hereby, including Prohibited
Transaction Class Exemption 83-1 ("PTE 83-1"). In particular, the exemptive
relief provided by PTE 83-1 may be available with respect to the initial
acquisition and holding of certain classes of certificates offered hereby,
provided that the conditions specified in PTE 83-1 are satisfied. See "ERISA
Considerations" in the accompanying prospectus.
The United States Department of Labor (the "DOL") has issued to Bear,
Stearns & Co. Inc. ("Bear Stearns") an individual administrative exemption,
Prohibited Transaction Exemption 90-30 (55 Fed. Reg. 21461, May 24, 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 Pool 1 and Pool 2 senior certificates
offered hereby (other than the Class A26 Certificates) 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 the Pool 1 and Pool 2 senior
certificates offered hereby (other than the Class A26 Certificates) are the
following:
- Bear Stearns is the sole underwriter or the manager or co-manager of the
underwriting syndicate for the certificates;
- the 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;
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<PAGE> 35
- the 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 leasehold interests on residential or commercial real property), or
fractional undivided interests in such obligations;
- the certificates are not subordinated to other certificates issued by
the trust in respect of the mortgage pools;
- 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;
- the acquisition of the 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;
- the Trustee is not an affiliate of any member of the "Restricted Group"
(as defined below); and
- the compensation to Bear Stearns represents not more than reasonable
compensation for underwriting the certificates, the proceeds to GECMSI
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 GECMSI represents not more than reasonable compensation for
GECMSI's services under the Agreement and reimbursement of GECMSI'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 Pool 1 and Pool 2 senior
certificates offered hereby (other than the Class A26 Certificates) if the
fiduciary (or its affiliate) is an obligor on any of the Pool 1 or Pool 2
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):
- GECMSI;
- Bear Stearns or Merrill Lynch, Pierce, Fenner & Smith Incorporated
("Merrill Lynch");
- the Trustee;
- any entity that provides insurance or other credit enhancement to the
trust in respect of the mortgage pools; or
- any obligor with respect to mortgage loans included in the mortgage
pools constituting more than five percent of the aggregate unamortized
principal balance of the assets in such mortgage loan pools (the
"Restricted Group").
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<PAGE> 36
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.
A substantially identical administrative exemption has been issued by the
DOL to Merrill Lynch. However, the Exemption does not apply to the initial
purchase, the holding or the subsequent resale of the Class A26, 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 A26, 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 Section III(a) of 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, 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 "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 A26, Class M, Class B1 and Class B2 Certificates. See "Description of
the Certificates -- Book-Entry Certificates" herein. 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") so long as such certificates are rated
in one of the two highest rating categories by at least one nationally
recognized rating agency. As such, such certificates 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
S-36
<PAGE> 37
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 offered hereby
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 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.
GECMSI 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 respective
Underwriting Agreements between GECMSI and Bear Stearns and GECMSI and Merrill
Lynch, the senior certificates offered hereby are being purchased from GECMSI by
Bear, Stearns, and the junior certificates offered hereby are being purchased
from GECMSI by Merrill Lynch 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 GECMSI from the sale of the certificates offered hereby will be
approximately 96.584941% of the aggregate initial Class Certificate Principal
Balance of the certificates offered hereby, plus accrued interest thereon from
the Cut-off Date to but excluding the date of initial issuance of the
certificates, but before deducting issuance expenses payable by GECMSI. In
connection with the purchase and sale of the certificates offered hereby, the
underwriters may be deemed to have received compensation from GECMSI in the form
of underwriting discounts. The commission received by the underwriters will be
the difference between the price paid by them for the certificates and the
amount they receive from the sale of the certificates to the public.
GECMSI has agreed to indemnify the underwriters against, or make
contributions to the underwriters with respect to, certain liabilities,
including liabilities under the Securities Act of 1933, as amended.
Merrill Lynch has entered into an agreement with GECMSI to purchase the
Class B3, Class B4 and Class B5 Certificates simultaneously with the purchase of
the certificates offered hereby, subject to certain conditions.
S-37
<PAGE> 38
CERTIFICATE RATINGS
It is a condition of issuance of the certificates that the senior
certificates offered hereby other than the Class A14 and Class 2-A3 Certificates
be rated "AAA" by each of Fitch and S&P, that the Class A14 and Class 2-A3
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.
Prospective investors in the senior certificates offered by this prospectus
supplement should refer to the risk factor entitled "The performance of the
mortgage pool that does not directly relate to your certificates could
nonetheless affect the rating assigned to your certificates" on page S-12 of
this prospectus supplement.
GECMSI has not requested a rating of the certificates offered hereby by any
rating agency other than Fitch and S&P and GECMSI has not provided information
relating to the certificates offered hereby or the 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.
S-38
<PAGE> 39
LEGAL MATTERS
Certain legal matters in respect of the certificates will be passed upon
for GECMSI by Cleary, Gottlieb, Steen & Hamilton, New York, New York, and for
the underwriters by Brown & Wood LLP, Washington, D.C.
S-39
<PAGE> 40
INDEX OF CERTAIN PROSPECTUS SUPPLEMENT DEFINITIONS
<TABLE>
<CAPTION>
DEFINED TERM PAGE
- ------------ ------
<S> <C>
Accrued Certificate Interest.... A1-15
Adjustment Amount............... A1-31
Aggregate Junior Percentage..... A1-24
Agreement....................... S-20
Allocable Share................. A3-3
Available Funds................. S-23
Bankruptcy Coverage Termination
Date.......................... A1-32
Bankruptcy Loss Amount.......... A1-32
Bear Stearns.................... S-34
beneficial owner................ S-21
BIF............................. S-28
Book-Entry Certificates......... S-21
Certificate Principal Balance... A1-15
Class A19 Rounding Account...... A1-25
Class A24 Accretion Termination
Date.......................... A1-14
Class A24 Accrual Amount........ A1-14
Class 1-PO Deferred Amount...... A1-30
Class 1-PO Principal
Distribution Amount........... A1-21
Class 2-A5 Distribution
Percentage.................... A2-11
Class 2-A5 Percentage........... A2-11
Class 2-A5 Principal
Distribution Amount........... A2-11
Class Certificate Principal
Balance....................... A1-8
Class PO Deferred Prepayment
Writedown Amount.............. A3-2
Class Prepayment Distribution
Trigger....................... A3-5
Code............................ S-34
Collection Account.............. S-28
Compensating Interest Payment... S-30
Cooperative Loan................ A1-3
Cross-Over Date................. A1-13
Cut-off Date.................... S-19
Debt Service Reduction.......... A1-32
</TABLE>
<TABLE>
<CAPTION>
DEFINED TERM PAGE
- ------------ ------
<S> <C>
Deceased Holder................. A1-28
Defaulted Mortgage Loan......... S-30
Deficient Valuation............. A1-29
Distribution Date............... A1-8
DOL............................. S-34
ERISA........................... S-34
ERISA Plan...................... S-34
Excess Loss..................... A1-29
Exemption....................... S-34
FDIC............................ S-28
Financial Intermediary.......... S-21
Fitch........................... S-28
Fraud Coverage Termination
Date.......................... A1-31
Fraud Loss...................... A1-29
Fraud Loss Amount............... A1-31
GECMSI.......................... S-19
Interest Accrual Period......... A1-15
Interest Shortfall.............. A1-16
Junior Available Funds.......... A1-13
Junior Certificate Writedown
Amount........................ A3-2
Junior Optimal Principal
Amount........................ A3-3
Liquidated Mortgage Loan........ A1-29
Living Holders.................. A1-25
Loss Allocation Limitation...... A1-33
Merrill Lynch................... S-36
Mortgage Loan Group............. A1-39
mortgage related securities..... S-9
Net Interest Shortfall.......... A1-16
Net Mortgage Rate............... A1-16
NMR............................. A1-17
Non-Book-Entry Certificates..... S-22
noneconomic residual
interests..................... S-33
Non-Excess Realized Loss........ A1-29
Non-PO Percentage............... A1-17
Notional Principal Balance...... A1-15
</TABLE>
S-40
<PAGE> 41
<TABLE>
<CAPTION>
DEFINED TERM PAGE
- ------------ ------
<S> <C>
Original Pool 1 Apportioned
Junior Principal Balance...... A1-21
Original Pool 2 Apportioned
Junior Principal Balance...... A2-13
Outstanding Mortgage Loan....... S-20
PO Percentage................... A1-17
Pool 1 Apportioned Junior
Percentage.................... A1-22
Pool 1 Apportioned Junior
Prepayment Percentage......... A1-22
Pool 1 Apportioned Junior
Principal Balance............. A1-22
Pool 1 Available Funds.......... S-23
Pool 1 Group I Final
Distribution Date............. A1-19
Pool 1 Group I Senior
Certificates.................. A1-9
Pool 1 Group I Senior Principal
Distribution Amount........... A1-9
Pool 1 Group II Senior
Distribution Percentage....... A1-19
Pool 1 Group II Senior
Percentage.................... A1-19
Pool 1 Group II Senior Principal
Distribution Amount........... A1-19
Pool 1 Junior Available Funds... A1-13
Pool 1 Modeling Assumptions..... A1-38
Pool 1 Non-discount Mortgage
Loan.......................... A1-17
Pool 1 Scheduled Principal
Balance....................... S-20
Pool 1 Senior Optimal Principal
Amount........................ A1-18
Pool 1 Senior Percentage........ A1-19
Pool 1 Senior Prepayment
Percentage.................... A1-20
Pool 1 Senior Prepayment
Percentage Stepdown
Limitation.................... A1-20
Pool 2 Apportioned Junior
Percentage.................... A2-14
Pool 2 Apportioned Junior
Prepayment Percentage......... A2-14
Pool 2 Apportioned Junior
Principal Balance............. A2-14
</TABLE>
<TABLE>
<CAPTION>
DEFINED TERM PAGE
- ------------ ------
<S> <C>
Pool 2 Group I Final
Distribution Date............. A2-12
Pool 2 Group I Senior
Certificates.................. A2-8
Pool 2 Junior Available Funds... A2-8
Pool 2 Senior Optimal Principal
Amount........................ A2-10
Pool 2 Senior Percentage........ A2-12
Pool 2 Senior Prepayment
Percentage.................... A2-12
Pool 2 Senior Prepayment
Percentage Stepdown
Limitation.................... A2-13
Pool Balance Shortfall
Distribution.................. A1-23
Pool Balance Shortfall Group.... A1-23
Prepayment Assumption........... A2-21
Prepayment Interest............. A1-34
Prepayment Period............... A1-19
Principal Distribution
Request....................... A1-26
PTE 83-1........................ S-39
Realized Loss................... A1-29
Record Date..................... S-23
Regular Certificates............ S-32
Regular Interests............... S-33
Residual Certificates........... S-20
Residual interest............... S-33
Restricted Group................ S-35
S&P............................. S-28
SAIF............................ S-28
Scheduled Principal Balance..... S-19
SMMEA........................... S-36
Special Event Loss.............. A1-31
Special Hazard Loss............. A1-29
Special Hazard Loss Amount...... A1-31
Special Hazard Termination
Date.......................... A1-31
Tax Exempt Investor............. S-36
Trustee......................... S-20
Withdrawal...................... A1-27
</TABLE>
S-41
<PAGE> 42
ANNEX 1
THE POOL 1 MORTGAGE LOANS AND THE POOL 1 SENIOR CERTIFICATES
Except in the limited circumstances described under "-- Cross-Support" in
this Annex 1, interest and principal will be distributable on the Pool 1 senior
certificates solely out of the Pool 1 Available Funds received in respect of the
Pool 1 mortgage loans. This annex sets forth certain data with respect to the
Pool 1 mortgage loans and describes the manner in which interest and principal
will be distributable on the Pool 1 senior certificates. This annex also
discusses the yield and weighted average life considerations relevant to an
investment in the Pool 1 senior certificates.
THE POOL 1 MORTGAGE LOANS
We expect that the following percentages of the Pool 1 mortgage loans (by
Scheduled Principal Balance as of the Cut-off Date) will have been originated
under the following documentation programs:
- At least 86% of such mortgage loans and substantially all of the mortgage
loans with loan-to-value ratios in excess of 80% will have been
originated under GECMSI's full or alternative documentation program or
other full or alternative documentation programs acceptable to GECMSI.
- No more than 9.50% of such mortgage loans will have been originated under
GECMSI's no income verification programs or other no income verification
programs acceptable to GECMSI.
- No more than 4.50% of such mortgage loans will have been originated under
GECMSI's "Enhanced Streamlined Refinance Program" or other streamlined
refinance programs acceptable to GECMSI.
- No more than 0.50% of such mortgage loans will have been originated under
GECMSI's "No Ratio Program" or other no ratio programs acceptable to
GECMSI.
- No more than 0.50% of such mortgage loans will have been originated under
GECMSI's "No Income, No Asset Verification Program" or other no income,
no asset verification programs acceptable to GECMSI.
- No more than 0.66% of such mortgage loans will have been acquired under
GECMSI's "Relocation Loan" program or other relocation programs
acceptable to GECMSI.
See "The Trusts -- The Mortgage Loans -- Loan Underwriting Policies" in the
accompanying prospectus for a description of these documentation programs.
The Pool 1 mortgage loans will have an aggregate Scheduled Principal
Balance as of the Cut-off Date, after deducting payments of principal due or
received on or before such date, of approximately $932,211,550. This amount is
subject to a permitted variance such that the aggregate Scheduled Principal
Balance thereof will not be less than $885,600,973 or greater than $978,822,127.
Prior to issuance of the certificates, we will not remove from the expected
Pool 1 mortgage pool more than 5% of the Pool 1 mortgage loans, measured by
Scheduled Principal Balance as of the Cut-off Date, unless a revised prospectus
supplement is
A1-1
<PAGE> 43
delivered to prospective investors. In addition, prior to issuance of the
certificates, we will not add mortgage loans to the Pool 1 mortgage pool if this
would result in more than a 5% increase in the size of the Pool 1 mortgage pool,
measured by Scheduled Principal Balance as of the Cut-off Date, unless a revised
prospectus supplement is delivered to prospective investors.
The interest rates borne by the Pool 1 mortgage loans are expected to range
from 6.25% to 9.00% per annum, and the weighted average mortgage interest rate
as of the Cut-off Date of such mortgage loans is expected to be between 7.23%
and 7.27% per annum. The original principal balances of the Pool 1 mortgage
loans are expected to range from $26,500 to $1,476,000 and, as of the Cut-off
Date, the average Scheduled Principal Balance of the Pool 1 mortgage loans is
not expected to exceed $329,000 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 Pool 1 mortgage loan will be August 1987, and the month
and year of the latest scheduled maturity date of any such mortgage loan will be
July 2029. All of the Pool 1 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 Pool 1 mortgage loans will be between 356 and
358 months as of the Cut-off Date.
The Pool 1 mortgage loans are expected to have the following additional
characteristics (by Scheduled Principal Balance of all the Pool 1 mortgage
loans) as of the Cut-off Date:
- No more than 13% of the Pool 1 mortgage loans will have a Scheduled
Principal Balance of more than $500,000 and up to and including $750,000.
No more than 2% of the Pool 1 mortgage loans will have a Scheduled
Principal Balance of more than $750,000 and up to and including
$1,000,000. No more than 1% of the mortgage loans will have a Scheduled
Principal Balance of more than $1,000,000.
- No more than 13% of the Pool 1 mortgage loans will have a loan-to-value
ratio at origination in excess of 80%, no more than 5% of the Pool 1
mortgage loans will have a loan-to-value ratio at origination in excess
of 90%, and no more than 1% 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 Pool
1 mortgage loans is expected to be between 74% and 76%.
- No more than 4.50% of the Pool 1 mortgage loans had a loan-to-value ratio
at origination calculated based on an appraisal conducted more than one
year before the origination date thereof.
- The proceeds of at least 62% of the Pool 1 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 5% of the Pool 1 mortgage loans will have
been the subject of "cash-out" refinancings.
- None of the Pool 1 mortgage loans will be temporary buy-down mortgage
loans.
- No more than 2% of the Pool 1 mortgage loans will be secured by mortgaged
properties located in any one postal zip code area.
- No more than 48% of the Pool 1 mortgage loans will be secured by
mortgaged properties located in California. The majority of the Pool 1
mortgage loans will be secured by mortgaged properties located in
California, Massachusetts, New Jersey and Virginia.
A1-2
<PAGE> 44
- No more than 4% of the Pool 1 mortgage loans will be secured by mortgaged
properties located in any one state except the states specified in the
preceding sentence.
- At least 95% of the Pool 1 mortgage loans will be secured by mortgaged
properties determined by GECMSI 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 Pool 1 mortgage loans will be secured by
single-family, detached residences.
- No more than 6% of the Pool 1 mortgage loans will be secured by
condominiums.
- No more than 1% of the Pool 1 mortgage loans will be secured by shares of
stock in cooperative housing corporations and assignments of the
proprietary leases to occupy cooperative apartment units therein (each, a
"Cooperative Loan").
Set forth below is a description of certain characteristics of Pool 1 and
the mortgage loans expected to be included therein, subject to the variance
described herein relating to Pool 1. The sum of the percentages may not equal
100% due to rounding.
ORIGINAL PRINCIPAL BALANCES AS OF THE CUT-OFF DATE
<TABLE>
<CAPTION>
AGGREGATE SCHEDULED PERCENTAGE OF POOL BY
PRINCIPAL AGGREGATE SCHEDULED
RANGE OF ORIGINAL NUMBER OF BALANCE AS OF PRINCIPAL BALANCE AS
PRINCIPAL BALANCE MORTGAGE LOANS THE CUT-OFF DATE OF THE CUT-OFF DATE
----------------- -------------- ------------------- ---------------------
<S> <C> <C> <C>
$ 0 - 227,150........... 329 $ 44,024,469.83 4.72%
227,151 - 250,000........... 111 27,051,044.60 2.90
250,001 - 300,000........... 941 260,373,211.67 27.93
300,001 - 350,000........... 569 184,322,479.62 19.77
350,001 - 400,000........... 347 130,735,592.53 14.02
400,001 - 450,000........... 202 86,238,587.86 9.25
450,001 - 600,000........... 262 134,472,345.08 14.43
600,001 - 650,000........... 67 42,874,064.90 4.60
650,001 - 1,500,000.......... 25 22,119,754.70 2.37
----- --------------- ------
Total.................... 2,853 $932,211,550.79 100.00%
===== =============== ======
</TABLE>
A1-3
<PAGE> 45
MORTGAGE INTEREST RATES AS OF THE CUT-OFF DATE
<TABLE>
<CAPTION>
AGGREGATE SCHEDULED PERCENTAGE OF POOL BY
PRINCIPAL AGGREGATE SCHEDULED
NUMBER OF BALANCE AS OF PRINCIPAL BALANCE AS
MORTGAGE INTEREST RATE MORTGAGE LOANS THE CUT-OFF DATE OF THE CUT-OFF DATE
---------------------- -------------- ------------------- ---------------------
<S> <C> <C> <C>
6.250%........................ 1 $ 374,286.51 0.04%
6.375......................... 9 2,659,174.49 0.29
6.500......................... 36 11,658,481.81 1.25
6.625......................... 49 17,238,655.68 1.85
6.750......................... 127 44,569,226.56 4.78
6.875......................... 288 98,248,177.59 10.54
6.950......................... 4 1,200,552.35 0.13
7.000......................... 330 113,365,975.64 12.16
7.125......................... 367 127,428,249.55 13.67
7.250......................... 486 161,639,172.38 17.34
7.300......................... 1 200,390.69 0.02
7.375......................... 364 119,014,716.17 12.77
7.500......................... 309 92,421,785.50 9.91
7.625......................... 151 46,568,969.10 5.00
7.650......................... 1 79,221.60 0.01
7.750......................... 114 31,898,456.56 3.42
7.875......................... 90 27,066,112.70 2.90
8.000......................... 29 8,044,321.95 0.86
8.125......................... 16 4,647,180.49 0.50
8.250......................... 28 8,041,816.73 0.86
8.375......................... 21 5,214,959.84 0.56
8.500......................... 5 1,764,042.08 0.19
8.625......................... 7 2,564,570.70 0.28
8.750......................... 11 3,627,053.18 0.39
8.875......................... 6 1,732,076.19 0.19
9.000......................... 3 943,924.75 0.10
----- --------------- ------
Total.................... 2,853 $932,211,550.79 100.00%
===== =============== ======
</TABLE>
A1-4
<PAGE> 46
GEOGRAPHIC DISTRIBUTION OF MORTGAGED PROPERTIES AS OF THE CUT-OFF DATE
<TABLE>
<CAPTION>
AGGREGATE SCHEDULED PERCENTAGE OF POOL BY
PRINCIPAL AGGREGATE SCHEDULED
NUMBER OF BALANCE AS OF PRINCIPAL BALANCE AS
STATE MORTGAGE LOANS THE CUT-OFF DATE OF THE CUT-OFF DATE
----- -------------- ------------------- ---------------------
<S> <C> <C> <C>
Alabama....................... 4 $ 1,401,615.30 0.15%
Arizona....................... 61 18,518,879.13 1.99
Arkansas...................... 2 755,783.54 0.08
California.................... 1,290 440,524,237.38 47.26
Colorado...................... 82 22,858,720.34 2.45
Connecticut................... 42 15,501,043.96 1.66
Delaware...................... 6 1,503,702.64 0.16
District Of Columbia.......... 13 4,380,148.10 0.47
Florida....................... 45 12,120,493.65 1.30
Georgia....................... 32 9,503,142.62 1.02
Hawaii........................ 3 1,319,814.46 0.14
Idaho......................... 4 763,210.73 0.08
Illinois...................... 87 29,320,208.12 3.15
Indiana....................... 4 1,218,863.75 0.13
Iowa.......................... 3 988,849.11 0.11
Kansas........................ 3 641,023.34 0.07
Kentucky...................... 6 1,963,617.22 0.21
Louisiana..................... 2 409,192.04 0.04
Maine......................... 5 1,331,209.44 0.14
Maryland...................... 81 26,354,128.29 2.83
Massachusetts................. 189 63,781,571.79 6.84
Michigan...................... 53 18,485,083.74 1.98
Minnesota..................... 40 13,062,894.92 1.40
Mississippi................... 1 341,409.75 0.04
Missouri...................... 11 3,362,050.53 0.36
Montana....................... 6 1,350,812.87 0.14
Nebraska...................... 3 960,968.94 0.10
Nevada........................ 21 5,931,992.25 0.64
New Hampshire................. 3 793,356.59 0.09
New Jersey.................... 122 39,155,958.10 4.20
New Mexico.................... 7 1,718,219.59 0.18
New York...................... 90 28,373,994.51 3.04
North Carolina................ 42 13,704,949.97 1.47
Ohio.......................... 43 14,301,704.29 1.53
Oklahoma...................... 2 393,670.12 0.04
Oregon........................ 34 7,637,682.27 0.82
Pennsylvania.................. 64 21,980,247.00 2.36
Rhode Island.................. 3 705,281.47 0.08
South Carolina................ 16 4,311,905.33 0.46
South Dakota.................. 2 97,419.42 0.01
Tennessee..................... 6 1,673,617.91 0.18
Texas......................... 57 18,180,451.52 1.95
Utah.......................... 24 5,168,954.79 0.55
</TABLE>
A1-5
<PAGE> 47
GEOGRAPHIC DISTRIBUTION OF MORTGAGED PROPERTIES AS OF THE CUT-OFF DATE
(continued)
<TABLE>
<CAPTION>
AGGREGATE SCHEDULED PERCENTAGE OF POOL BY
PRINCIPAL AGGREGATE SCHEDULED
NUMBER OF BALANCE AS OF PRINCIPAL BALANCE AS
STATE MORTGAGE LOANS THE CUT-OFF DATE OF THE CUT-OFF DATE
----- -------------- ------------------- ---------------------
<S> <C> <C> <C>
Vermont....................... 3 728,357.58 0.08
Virginia...................... 120 37,934,020.42 4.07
Washington.................... 84 25,762,917.41 2.76
West Virginia................. 1 116,309.20 0.01
Wisconsin..................... 30 10,493,399.70 1.13
Wyoming....................... 1 324,465.65 0.03
----- --------------- ------
Total.................... 2,853 $932,211,550.79 100.00%
===== =============== ======
</TABLE>
YEAR OF ORIGINATION AS OF THE CUT-OFF DATE
<TABLE>
<CAPTION>
AGGREGATE SCHEDULED PERCENTAGE OF POOL BY
PRINCIPAL AGGREGATE SCHEDULED
NUMBER OF BALANCE AS OF PRINCIPAL BALANCE AS
YEAR OF ORIGINATION MORTGAGE LOANS THE CUT-OFF DATE OF THE CUT-OFF DATE
- ------------------- -------------- ------------------- ---------------------
<S> <C> <C> <C>
1987.......................... 1 $ 262,649.14 0.03%
1988.......................... 1 387,669.97 0.04
1992.......................... 1 374,721.69 0.04
1993.......................... 1 375,000.00 0.04
1994.......................... 1 464,297.77 0.05
1997.......................... 5 1,573,257.88 0.17
1998.......................... 167 35,320,975.09 3.79
1999.......................... 2,676 893,452,979.25 95.84
----- --------------- -------
Total.................... 2,853 $932,211,550.79 100.00%
===== =============== =======
</TABLE>
YEAR OF MATURITY AS OF THE CUT-OFF DATE
<TABLE>
<CAPTION>
AGGREGATE SCHEDULED PERCENTAGE OF POOL BY
PRINCIPAL AGGREGATE SCHEDULED
NUMBER OF BALANCE AS OF PRINCIPAL BALANCE AS
YEAR OF MATURITY MORTGAGE LOANS THE CUT-OFF DATE OF THE CUT-OFF DATE
- ---------------- -------------- ------------------- ---------------------
<S> <C> <C> <C>
2018.......................... 2 $ 256,595.30 0.03%
2019.......................... 23 6,224,597.55 0.67
2023.......................... 1 195,828.48 0.02
2024.......................... 12 3,700,179.15 0.40
2026.......................... 2 494,429.18 0.05
2027.......................... 6 1,810,925.90 0.19
2028.......................... 130 24,697,208.22 2.65
2029.......................... 2,677 894,831,787.01 95.99
----- --------------- ------
Total......................... 2,853 $932,211,550.79 100.00%
===== =============== ======
</TABLE>
A1-6
<PAGE> 48
TYPES OF MORTGAGED PROPERTIES
<TABLE>
<CAPTION>
AGGREGATE SCHEDULED PERCENTAGE OF POOL BY
PRINCIPAL AGGREGATE SCHEDULED
NUMBER OF BALANCE AS OF PRINCIPAL BALANCE AS
TYPE OF DWELLING MORTGAGE LOANS THE CUT-OFF DATE OF THE CUT-OFF DATE
---------------- -------------- ------------------- ---------------------
<S> <C> <C> <C>
Single-family detached........ 2,582 $854,159,788.30 91.63
Single-family attached........ 66 16,889,085.78 1.81
Condominium................... 133 39,782,132.17 4.27
2-4 family units.............. 70 20,178,904.28 2.16
Cooperative................... 2 1,201,640.26 0.13
----- --------------- ------
Total.................... 2,853 $932,211,550.79 100.00%
===== =============== ======
</TABLE>
OCCUPANCY STATUS OF MORTGAGED PROPERTIES(1)
<TABLE>
<CAPTION>
AGGREGATE SCHEDULED PERCENTAGE OF POOL BY
PRINCIPAL AGGREGATE SCHEDULED
NUMBER OF BALANCE AS OF PRINCIPAL BALANCE AS
OCCUPANCY MORTGAGE LOANS THE CUT-OFF DATE OF THE CUT-OFF DATE
- --------- -------------- ------------------- ---------------------
<S> <C> <C> <C>
Owner Occupied................ 2,747 $902,005,475.47 96.76%
Vacation...................... 60 20,311,991.22 2.18
Investment.................... 46 9,894,084.10 1.06
----- --------------- ------
Total.................... 2,853 $932,211,550.79 100.00%
===== =============== ======
</TABLE>
- ---------------
(1) Based on information supplied by the mortgagor in the loan application.
PURPOSE OF THE MORTGAGE LOANS
<TABLE>
<CAPTION>
AGGREGATE SCHEDULED PERCENTAGE OF POOL BY
PRINCIPAL AGGREGATE SCHEDULED
NUMBER OF BALANCE AS OF PRINCIPAL BALANCE AS
PURPOSE OF THE LOAN MORTGAGE LOANS THE CUT-OFF DATE OF THE CUT-OFF DATE
------------------- -------------- ------------------- ---------------------
<S> <C> <C> <C>
Purchase...................... 1,791 $588,264,238.61 63.10%
Rate Term/Refinance........... 941 304,979,752.75 32.72
Cash-out Refinance............ 121 38,967,559.43 4.18
----- --------------- ------
Total.................... 2,853 $932,211,550.79 100.00%
===== =============== ======
</TABLE>
A1-7
<PAGE> 49
LOAN-TO-VALUE RATIOS AT ORIGINATION
<TABLE>
<CAPTION>
AGGREGATE SCHEDULED PERCENTAGE OF POOL BY
RANGE OF PRINCIPAL AGGREGATE SCHEDULED
LOAN-TO-VALUE RATIO NUMBER OF BALANCE AS OF PRINCIPAL BALANCE AS
AT ORIGINATION MORTGAGE LOANS THE CUT-OFF DATE OF THE CUT-OFF DATE
------------------- -------------- ------------------- ---------------------
<S> <C> <C> <C>
00.000- 50.00%................ 107 $ 32,158,099.75 3.45%
50.001- 60.00................. 193 65,894,261.88 7.07
60.001- 70.00................. 416 146,387,552.47 15.70
70.001- 75.00................. 391 136,251,170.31 14.62
75.001- 80.00................. 1,328 435,562,199.38 46.72
80.001- 85.00................. 51 14,876,386.04 1.60
85.001- 90.00................. 219 65,523,742.66 7.03
90.001- 95.00................. 147 35,295,140.39 3.79
95.001-100.00................. 1 262,997.91 0.03
----- --------------- ------
Total.................... 2,853 $932,211,550.79 100.00%
===== =============== ======
</TABLE>
DISTRIBUTIONS ON THE POOL 1 SENIOR CERTIFICATES
Allocation of Pool 1 Available Funds
Interest and principal on the Pool 1 senior certificates will be
distributed monthly 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 August 1999. These distributions, together with certain
distributions to the junior certificates, will be in an aggregate amount equal
to the Pool 1 Available Funds for the related Distribution Date. In certain
limited circumstances, the Pool 1 senior certificates may receive distributions
in respect of Pool 2 Available Funds, and the Pool 2 senior certificates may
receive distributions in respect of Pool 1 Available Funds. See
"-- Cross-Support" in this Annex 1. Distributions will be made to holders of
record at the close of business on the related Record Date.
On each Distribution Date, the Pool 1 Available Funds will be distributed
in the following order of priority among the Pool 1 senior certificates:
first, to the classes of Pool 1 senior certificates entitled to
distributions of interest, 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, however,
that on each Distribution Date through the Class A24 Accretion Termination
Date (as defined below), such amounts with respect to the Class A24
Certificates will not be distributed on such certificates under this
priority first but will instead be added to the class certificate principal
balance (the "Class Certificate Principal Balance") thereof and distributed
in accordance with the third paragraph following priority fourth below;
second, to the classes of Pool 1 senior certificates entitled to
distributions of interest, any Accrued Certificate Interest thereon
remaining undistributed (or not added to the Class Certificate Principal
Balance of the Class A24 Certificates) from previous Distribution Dates, to
the extent of remaining Pool 1 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 A24 Certificates) for
each such
A1-8
<PAGE> 50
class for such Distribution Date; provided, however, that on each
Distribution Date through the Class A24 Accretion Termination Date, such
amounts with respect to the Class A24 Certificates will not be distributed
under this priority second but will instead be added to the Class
Certificate Principal Balance thereof and distributed in accordance with
the third paragraph following priority fourth below;
third, to the classes of Pool 1 senior certificates entitled to
principal distributions, in reduction of the Class Certificate Principal
Balances thereof, to the extent of remaining Pool 1 Available Funds,
concurrently, as follows:
(1) to the Class A1 through Class A28 Certificates and the Class R
Certificates, the Senior Optimal Principal Amount for such Distribution
Date, in the following order of priority:
(a) pro rata, to the Class A25 and Class A26 Certificates, the
Pool 1 Group II Senior Principal Distribution Amount (as defined
herein) for such Distribution Date, until the Class Certificate
Principal Balances thereof have each been reduced to zero; and
(b) to the Class A1 through Class A24 Certificates, the Class
A27, Class A28 and Class R Certificates (together, the "Pool 1
Group I Senior Certificates"), the Senior Optimal Principal Amount
for such Distribution Date, less the Pool 1 Group II Senior
Principal Distribution Amount for such Distribution Date (such
reduced amount, the "Pool 1 Group I Senior Principal Distribution
Amount"), in the following order of priority:
(I) to the Class R, Class A1, Class A2, Class A3, Class
A13, Class A16 and Class A27 Certificates, until the Class
Certificate Principal Balance of the Class A16 Certificates
has been reduced to zero, concurrently, as follows:
(A) approximately 15.5891276% of the amount
distributable under clause (1)(b)(I) to the Class A1
Certificates;
(B) approximately 4.073985313% of the amount
distributable under clause (1)(b)(I) to the Class A2
Certificates;
(C) approximately 10.688847393% of the amount
distributable under clause (1)(b)(I) to the Class A3
Certificates;
(D) approximately 38.861328507% of the amount
distributable under clause (1)(b)(I) to the Class A16
Certificates;
(E) approximately 15.589127600% of the amount
distributable under clause (1)(b)(I) to the Class A27
Certificates; and
(F) approximately 15.197583587% of the amount
distributable under clause (1)(b)(I), sequentially, to the
Class R Certificates, until the Class Certificate
Principal Balance thereof has been reduced to zero, and
then to the Class A13 Certificates, in that order;
(II) to the Class A1, Class A2, Class A3, Class A5, Class
A13, Class A27 and Class A28 Certificates, until the Class
Certificate
A1-9
<PAGE> 51
Principal Balance of the Class A27 Certificates has been
reduced to zero, concurrently, as follows:
(A) approximately 15.589127600% of the amount
distributable under clause (1)(b)(II) to the Class A1
Certificates;
(B) approximately 15.445351800% of the amount
distributable under clause (1)(b)(II) to the Class A2
Certificates;
(C) approximately 10.688847393% of the amount
distributable under clause (1)(b)(II) to the Class A3
Certificates;
(D) approximately 2.604646683% of the amount
distributable under clause (1)(b)(II) to the Class A5
Certificates;
(E) approximately 15.197583587% of the amount
distributable under clause (1)(b)(II) to the Class A13
Certificates;
(F) approximately 15.589127600% of the amount
distributable under clause (1)(b)(II) to the Class A27
Certificates; and
(G) approximately 24.885315337% of the amount
distributable under clause (1)(b)(II) to the Class A28
Certificates;
(III) to the Class A1, Class A2, Class A3, Class A4,
Class A5, Class A13, Class A14 and Class A28 Certificates,
until the Class Certificate Principal Balances of the Class
A1, Class A2, Class A3, Class A4, Class A5 and Class A28
Certificates have each been reduced to zero, concurrently, as
follows:
(A) approximately 15.589127600% of the amount
distributable under clause (1)(b)(III) to the Class A1
Certificates;
(B) approximately 15.445351800% of the amount
distributable under clause (1)(b)(III) to the Class A2
Certificates;
(C) approximately 10.688847393% of the amount
distributable under clause (1)(b)(III) to the Class A3,
Class A4 and Class A14 Certificates, in the following
order of priority:
(i) to the Class A3 Certificates, until the Class
Certificate Principal Balance thereof has been reduced
to zero; and
(ii) to the Class A4 and Class A14 Certificates,
concurrently as follows:
(x) approximately 96.428571429% of the
amount distributable under clause
(1)(b)(III)(C)(ii) to the Class A4 Certificates;
and
(y) approximately 3.571428571% of the amount
distributable under clause (1)(b)(III)(C)(ii) to
the Class A14 Certificates;
A1-10
<PAGE> 52
(D) approximately 40.474442937% of the amount
distributable under clause (1)(b)(III) to the Class A4,
Class A14 and Class A28 Certificates, in the following
order of priority:
(i) to the Class A28 Certificates, until the
Class Certificate Principal Balance thereof has been
reduced to zero;
(ii) to the Class A4 and Class A14 Certificates,
concurrently as follows:
(x) approximately 96.428571429% of the
amount distributable under
Clause (1)(b)(III)(D)(ii) to the Class A4
Certificates; and
(y) approximately 3.571428571% of the amount
distributable under Clause (1)(b)(III)(D)(ii) to
the Class A14 Certificates;
(E) approximately 2.604646683% of the amount
distributable under clause (1)(b)(III) to the Class A5
Certificates; and
(F) approximately 15.197583587% of the amount
distributable under clause (1)(b)(III) to the Class A13
Certificates;
(IV) to the Class A6 through Class A15 Certificates, and
the Class A17 and Class A20 Certificates, until the Class
Certificate Principal Balances thereof (other than the Class
A14 and Class A20 Certificates) have each been reduced to
zero, concurrently, as follows:
(A) approximately 15.197583857% of the amount
distributable under clause (1)(b)(IV) to the Class A13
Certificates;
(B) approximately 3.028657729% of the amount
distributable under clause (1)(b)(IV) to the Class A14
Certificates; and
(C) approximately 81.773758684% of the amount
distributable under clause (1)(b)(IV) to the Class A6,
Class A7, Class A8, Class A9, Class A10, Class A11, Class
A12, Class A14, Class A15, Class A17 and Class A20
Certificates in the following order of priority:
(i) to the Class A12 Certificates, until the
Class Certificate Principal Balance thereof has been
reduced to zero;
(ii) to the Class A6, Class A7, Class A8, Class
A9, Class A10, Class A11, Class A14, Class A15, Class
A17 and Class A20 Certificates, concurrently as
follows:
(x) approximately 43.502648718% of the
amount distributable under clause
(1)(b)(IV)(C)(ii) to the Class A6, Class A7,
Class A8, Class A9, Class A10, Class A11, Class
A14, Class A15, Class A17 and Class A20
Certificates, in the following order of priority:
first, sequentially, to the Class A6,
Class A7, Class A8, Class A9, Class A10 and
Class A11 Certificates, in that order, until
the Class Certificate
A1-11
<PAGE> 53
Principal Balances thereof have each been
reduced to zero; and
second, to the Class A14, Class A15,
Class A17 and Class A20 Certificates,
concurrently as follows:
(aa) approximately 0.205380622% of
the amount distributable under clause
(1)(b)(IV)(C)(ii)(x)(second) to the Class
A14 Certificates; and
(bb) approximately 94.043961975% of
the amount distributable under clause
(1)(b)(IV)(C)(ii)(x)(second) to the Class
A17 Certificates; and
(cc) approximately 5.750657403% of
the amount distributable under clause
(1)(b)(IV)(C)(ii)(x)(second),
sequentially, to the Class A15 and Class
A20 Certificates, in that order;
(y) approximately 56.497351282% of the
amount distributable under clause
(1)(b)(IV)(C)(ii) to the Class A14, Class A15,
Class A17 and Class A20 Certificates,
concurrently as follows:
first, approximately 0.205380622% of the
amount distributable under clause
(1)(b)(IV)(C)(ii)(y) to the Class A14
Certificates;
second, approximately 94.043961975% of
the amount distributable under clause
(1)(b)(IV)(C)(ii)(y) to the Class A17
Certificates; and
third, approximately 5.750657403% of the
amount distributable under clause
(1)(b)(IV)(C)(ii)(y), sequentially, to the
Class A15 and Class A20 Certificates, in that
order;
(V) to the Class A14, Class A18, Class A19, Class A20 and
Class A21 Certificates, until the Class Certificate Principal
Balances thereof have each been reduced to zero, concurrently,
as follows:
(A) approximately 6.896551724% of the amount
distributable pursuant to clause (1)(b)(V) to the Class
A14 Certificates;
(B) approximately 93.103448276% of the amount
distributable pursuant to clause (1)(b)(V) to the Class
A18, Class A19, Class A20 and Class A21 Certificates,
concurrently, as follows:
(i) approximately 12.268296521% of the amount
distributable pursuant to clause (1)(b)(V) (B) to the
Class A18 Certificates;
A1-12
<PAGE> 54
(ii) approximately 24.536593041% of the amount
distributable pursuant to clause (1)(b)(V) (B) to the
Class A19 Certificates; and
(iii) approximately 63.195110438% of the amount
distributable pursuant to clause (1)(b)(V)(B) to the
Class A20 and Class A21 Certificates, concurrently, as
follows:
(x) approximately 9.658200570% of the amount
distributable pursuant to clause
(1)(b)(V)(B)(iii) to the Class A20 Certificates;
and
(y) approximately 90.341799430% of the
amount distributable pursuant to clause
(1)(b)(V)(B)(iii) to the Class A21 Certificates;
and
(VI) to the Class A22, Class A23 and Class A24
Certificates, in that order, until the Class Certificate
Principal Balances thereof have each been reduced to zero; and
(2) to the Class 1-PO Certificates, the Class 1-PO Principal
Distribution Amount for such Distribution Date, until the Class
Certificate Principal Balance thereof has been reduced to zero; and
fourth, to the Class 1-PO Certificates, the Class 1-PO Deferred Amount
for such Distribution Date, to the extent of the Junior Optimal Principal
Amount payable from Pool 1 Available Funds and Pool 2 Available Funds for
such Distribution Date, provided that (1) such distributions to the Class
1-PO Certificates shall not reduce the Class Certificate Principal Balance
of the Class 1-PO Certificates and (2) no distribution will be made in
respect of the Class 1-PO Deferred Amount after the Distribution Date on
which the Class Certificate Principal Balances of the junior certificates
have all been reduced to zero (the "Cross-Over Date").
Except in the limited circumstances described under "-- Cross-Support"
below, any Pool 1 Available Funds remaining after distributions pursuant to
priority fourth above (the "Pool 1 Junior Available Funds") will be combined
with the Pool 2 Junior Available Funds (as defined in Annex 2 below) for such
Distribution Date (such combined amount, the "Junior Available Funds") and
distributed to the junior certificates in accordance with the priorities set
forth in the second paragraph under "-- Distributions on the Junior
Certificates -- Allocation of Junior Available Funds" in Annex 3 of this
prospectus supplement.
The percentages set forth in priority third above were calculated on the
basis of the Class Certificate Principal Balances of the related certificates
described herein. If these 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, before distributions have been made pursuant to
priority third above, an amount equal to the Class A24 Accrual Amount (as
defined below) for such Distribution Date will be distributed in the following
order of priority in reduction of the Class Certificate Principal Balances of
the following classes of certificates:
first, to the Class A22 Certificates, until the Class Certificate
Principal Balance thereof has been reduced to zero;
A1-13
<PAGE> 55
second, to the Class A23 Certificates, until the Class Certificate
Principal Balance thereof has been reduced to zero; and
third, to the Class A24 Certificates, until the Class Certificate
Principal Balance thereof has been reduced to zero.
The Class A24 Accrual Amount distributed as described above on a
Distribution Date will be added to the Class Certificate Principal Balance of
the Class A24 Certificates on such date.
The "Class A24 Accrual Amount" with respect to each Distribution Date
through the Class A24 Accretion Termination Date will be an amount equal to the
sum of (a) the Accrued Certificate Interest in respect of the Class A24
Certificates in accordance with priority first of the second paragraph under
"Allocation of Pool 1 Available Funds" above and (b) any available amounts
allocable to such class in accordance with priority second under "Allocation of
Pool 1 Available Funds" above.
The "Class A24 Accretion Termination Date" is the earlier of:
(1) the Cross-Over Date; and
(2) the Distribution Date on which the Class Certificate Principal
Balance of the Class A23 Certificates has been reduced to zero.
On each Distribution Date after the Cross-Over Date, distributions of
principal on the outstanding Pool 1 senior certificates entitled to principal
distributions (other than the Class 1-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 in the second paragraph under
"Allocation of Pool 1 Available Funds".
"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 under priorities first and second,
and the third paragraph following priority fourth, of the second paragraph under
"Allocation of Pool 1 Available Funds" on any Distribution Date, the remaining
Pool 1 Available Funds are less than the sum of the Pool 1 Senior Optimal
Principal Amount and the Class 1-PO Principal Distribution Amount for such
Distribution Date, the amounts distributable under priority third in the second
paragraph under "Allocation of Pool 1 Available Funds" shall be proportionately
reduced, and such remaining Pool 1 Available Funds will be distributed on the
Pool 1 senior certificates entitled to principal distributions in accordance
with the applicable clauses of priority third in the second paragraph under
"Allocation of Pool 1 Available Funds" on the basis of such reduced amounts.
Notwithstanding such allocation, Realized Losses on Pool 1 or Pool 2 mortgage
loans will be allocated to the Pool 1 senior certificates as described under
"-- Allocation of Realized Losses on the Pool 1 Certificates" herein.
Interest
Interest will accrue on the Pool 1 senior certificates offered hereby
entitled to interest distributions at the respective interest rates set forth in
the summary of this prospectus supplement during each Interest Accrual Period.
The "Interest Accrual Period" for each class of certificates entitled to
distributions of interest will be the one-month period ending on the last day of
the month preceding the month in which a Distribution Date occurs. Interest will
be calculated on the basis of a 360-day year consisting of twelve 30-day months.
A1-14
<PAGE> 56
On each Distribution Date through the Class A24 Accretion Termination Date,
the Accrued Certificate Interest on the Class A24 Certificates on such
Distribution Date will not be distributed on such certificates but will instead
be added to the Class Certificate Principal Balance thereof. On each
Distribution Date after the Class A24 Accretion Termination Date, interest will
be distributable on the Class A24 Certificates and will not be added to the
Class Certificate Principal Balance thereof.
Interest will accrue on the Notional Principal Balance of the Class 1-S
Certificates during each Interest Accrual Period at a variable per annum rate
equal to the excess of (1) the weighted average (by Scheduled Principal Balance)
carried to six decimal places, rounded down, of the Net Mortgage Rates of the
Outstanding Mortgage Loans in Pool 1 which are Non-discount Mortgage Loans as of
the first day of such Interest Accrual Period (or as of the Cut-off Date, in the
case of the first Interest Accrual Period) over (2) 6.75%. However, this
calculation will not include any Pool 1 mortgage loan that was the subject of a
voluntary prepayment in full received by GECMSI, or, in the case of a Pool 1
mortgage loan master-serviced by GECMSI, of which GECMSI receives notice, on or
after the first day but on or before the fifteenth day of such Interest Accrual
Period. The per annum interest rate on the Class 1-S Certificates for the first
Interest Accrual Period is expected to be approximately 0.359190%. The "Notional
Principal Balance" of the Class 1-S Certificates as of any Distribution Date
will equal the aggregate Scheduled Principal Balance of the Pool 1 Outstanding
Mortgage Loans which are Non-discount Mortgage Loans as of the first day of the
calendar month preceding such Distribution Date. The initial Notional Principal
Balance of the Class 1-S Certificates is expected to be approximately
$756,262,996.
The Class A14 and Class 1-PO Certificates are principal-only certificates
and will not accrue interest.
The "Accrued Certificate Interest" for any Pool 1 certificate entitled to
distributions of interest 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 any Class
1-S Certificate, the Notional Principal Balance) of such certificate immediately
prior to such Distribution Date, less such certificate's share of any Net
Interest Shortfall (as defined below) in respect of Pool 1 mortgage loans, the
interest portion of any Excess Losses (as defined herein) in respect of Pool 1
and Pool 2 mortgage loans through the Cross-Over Date and, after the Cross-Over
Date, the interest portion of Realized Losses, including Excess Losses, in
respect of Pool 1 or Pool 2 mortgage loans.
The "Certificate Principal Balance" of any Pool 1 senior certificate
entitled to principal distributions as of any Distribution Date will equal such
certificate's Certificate Principal Balance on the date of the initial issuance
of the certificates,
(1) as reduced by:
- all amounts distributed on previous Distribution Dates on such
certificate on account of principal;
- the principal portion of all Realized Losses in respect of Pool 1 or
Pool 2 mortgage loans previously allocated to such certificate; and
(2) in the case of the Class A24 Certificates through the Class A24
Accretion Termination Date, as increased by all Accrued Certificate Interest
added to the Certificate Principal Balance thereof on previous Distribution
Dates.
A1-15
<PAGE> 57
With respect to any Distribution Date, the "Net Interest Shortfall" in
respect of a mortgage pool will equal the excess of the aggregate Interest
Shortfalls with respect to such Distribution Date in respect of the related
mortgage loans over the applicable Compensating Interest Payment, if any, for
such Distribution Date. See "The Pooling and Servicing Agreement -- Servicing
Compensation, Compensating Interest and Payment of Expenses" herein for a
definition of "Compensating Interest Payment."
With respect to any Distribution Date, an "Interest Shortfall" in respect
of a mortgage loan will result from:
(1) 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;
(2) any partial prepayment of principal on such mortgage loan by the
mortgagor during the month preceding such Distribution Date; or
(3) 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 -- 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 interest rate net of the applicable servicing fee (the "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 in respect of the Pool 1 mortgage loans will, on
each Distribution Date, be allocated among all the outstanding Pool 1 senior
certificates entitled to distributions of interest and the junior certificates
in respect of the related Apportioned Principal Balance in proportion to the
amount of Accrued Certificate Interest that would have been allocated thereto in
the absence of such shortfalls.
The interest portion of any Excess Losses through the Cross-Over Date in
respect of the Pool 1 or Pool 2 mortgage loans will be allocated among all the
outstanding Pool 1 and Pool 2 senior certificates entitled to distributions of
interest and the junior certificates in proportion to the amount of Accrued
Certificate Interest that would have been allocated thereto in the absence of
such losses.
The interest portion of any Realized Losses after the Cross-Over Date in
respect of the Pool 1 or Pool 2 mortgage loans will be allocated among all the
outstanding Pool 1 and Pool 2 senior certificates entitled to distributions of
interest in proportion to the amount of Accrued Certificate Interest that would
have been allocated thereto in the absence of such losses.
The interest portion of any Realized Losses (other than Excess Losses) in
respect of the Pool 1 mortgage loans occurring prior to the Cross-Over Date will
not be allocated among any certificates, but will reduce the amount of Pool 1
Available Funds on the related Distribution Date. As a result of the
subordination of the junior certificates in right
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<PAGE> 58
of distribution, such losses will be borne first by the outstanding junior
certificates in inverse order of priority.
If Pool 1 Available Funds are insufficient on any Distribution Date to
distribute the aggregate Accrued Certificate Interest on the Pool 1 senior
certificates entitled to distributions of interest to their certificateholders,
any shortfall in such available amounts will be allocated among such classes of
Pool 1 senior certificates in proportion to the amounts of Accrued Certificate
Interest otherwise distributable thereon or, in the case of the Class A24
Certificates through the Class A24 Accretion Termination Date, the amounts that
would otherwise have been added to the Class Certificate Principal Balance
thereof. Such reduction with respect to the Class A24 Certificates will effect a
corresponding reduction in the Class A24 Accrual Amount on such Distribution
Date and the amount distributed in respect of the Class A24 Accrual Amount as
principal on certain classes of certificates as described above. The amount of
any such undistributed Accrued Certificate Interest will be added to the amount
of interest to be distributed on the Pool 1 senior certificates entitled to
distributions of interest (or added to the Class Certificate Principal Balance
of the Class A24 Certificates through the Class A24 Accretion Termination Date)
on subsequent Distribution Dates in accordance with priority second in the
second paragraph under "-- Allocation of Pool 1 Available Funds" above. No
interest will accrue on any Accrued Certificate Interest remaining undistributed
from previous Distribution Dates. See "-- Cross-Support" below for a discussion
of the circumstances in which shortfalls in Available Funds to cover Accrued
Certificate Interest on one group of senior certificates may be paid from
collections in respect of the mortgage pool backing the other group of senior
certificates.
Principal
Distributions in reduction of the principal balance of each Pool 1 senior
certificate entitled to principal distributions will be made on each
Distribution Date.
Except in the limited circumstances described under "-- Cross-Support"
below, all payments and other amounts received in respect of principal of the
Pool 1 mortgage loans will be allocated between (1) the Pool 1 senior
certificates (other than the Class 1-PO Certificates) and the junior
certificates, on the one hand, and (2) the Class 1-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 Pool 1 mortgage loan with a Net
Mortgage Rate ("NMR") less than 6.75% per annum (each such mortgage loan, a
"Pool 1 Discount Mortgage Loan") will be the fraction, expressed as a
percentage, equal to NMR / 6.75%. The "Non-PO Percentage" with respect to any
Pool 1 mortgage loan with a Net Mortgage Rate equal to or greater than 6.75%
(each such mortgage loan, a "Pool 1 Non-discount Mortgage Loan") will be 100%.
The "PO Percentage" with respect to any Pool 1 Discount Mortgage Loan will be
the fraction, expressed as a percentage, equal to (6.75% -- NMR) / 6.75%. The
"PO Percentage" with respect to any Pool 1 Non-discount Mortgage Loan will be
0%.
The initial Class Certificate Principal Balance of the Class 1-PO
Certificates, which are not offered hereby, will be approximately $4,376,027,
subject to the variance described herein.
Distributions in reduction of the Class Certificate Principal Balance of
each class of Pool 1 senior certificates entitled to principal distributions
will be made on each
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<PAGE> 59
Distribution Date under priority third in the second paragraph under
"-- Allocation of Pool 1 Available Funds" above or, if applicable, the third
paragraph following priority fourth thereunder. In accordance with priority
third, the Pool 1 Available Funds remaining after the distribution of interest
on the Pool 1 senior certificates entitled to interest distributions will be
allocated to the Pool 1 senior certificates entitled to principal distributions
in an aggregate amount not to exceed the sum of the Pool 1 Senior Optimal
Principal Amount and the Class 1-PO Principal Distribution Amount for such
Distribution Date. The Pool 1 Group II Senior Certificates will not receive any
distributions in respect of scheduled payments of principal, prepayments or
other unscheduled recoveries of principal on the Pool 1 mortgage loans during
the first five years after the date of initial issuance of the certificates,
except as otherwise described herein on or following the earlier of the Pool 1
Group I Final Distribution Date and the Cross-Over Date.
The "Pool 1 Senior Optimal Principal Amount" with respect to each
Distribution Date will be an amount equal to the sum of:
(1) the Pool 1 Senior Percentage (as defined herein) of the applicable
Non-PO Percentage of all scheduled payments of principal due on each Pool 1
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 in respect of Pool 1 mortgage
loans 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;
(2) the Pool 1 Senior Prepayment Percentage (as defined herein) of the
applicable Non-PO Percentage of the Scheduled Principal Balance of each
Pool 1 mortgage loan which was the subject of a prepayment in full received
by GECMSI (or, in the case of a Pool 1 mortgage loan master-serviced by
GECMSI, of which GECMSI receives notice) during the applicable Prepayment
Period (as defined below);
(3) the Pool 1 Senior Prepayment Percentage of the applicable Non-PO
Percentage of all partial prepayments of principal received in respect of
Pool 1 mortgage loans during the applicable Prepayment Period;
(4) the lesser of:
(a) the Pool 1 Senior Prepayment Percentage of the applicable
Non-PO Percentage of the sum of (w) the net liquidation proceeds
allocable to principal on each Pool 1 mortgage loan which became a
Liquidated Mortgage Loan during the related Prepayment Period, other
than mortgage loans described in clause (4)(a)(x), and (x) the principal
balance of each Pool 1 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 Pool 1 Senior Percentage of the applicable Non-PO
Percentage of the sum of (w) the Scheduled Principal Balance of each
Pool 1 mortgage loan which became a Liquidated Mortgage Loan during the
related Prepayment Period, other than mortgage loans described in clause
(4)(b)(x), and (x) the Scheduled Principal Balance of each Pool 1
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 minus (y) the Pool 1 Senior Percentage of
the applicable Non-PO Percentage of the principal portion of
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<PAGE> 60
Excess Losses (other than Debt Service Reductions) in respect of Pool 1
mortgage loans during the related Prepayment Period; and
(5) the Pool 1 Senior Prepayment Percentage of the applicable Non-PO
Percentage of the sum of (a) the Scheduled Principal Balance of each Pool 1
mortgage loan which was repurchased by GECMSI in connection with such
Distribution Date and (b) the difference, if any, between the Scheduled
Principal Balance of a Pool 1 mortgage loan that has been replaced by
GECMSI 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 "Pool 1 Group II Senior Principal Distribution Amount" for any
Distribution Date will equal the product of (1) the Pool 1 Senior Optimal
Principal Amount for such date (determined without application of the Pool 1
Senior Percentage or Pool 1 Senior Prepayment Percentage), (2) the Pool 1 Group
II Senior Percentage for such date and (3) the Pool 1 Group II Senior
Distribution Percentage for such date. Notwithstanding the foregoing, (1) on the
Pool 1 Group I Final Distribution Date, the Pool 1 Group II Senior Principal
Distribution Amount will be increased by any Pool 1 Senior Optimal Principal
Amount remaining after distributions of principal have been made on the Pool 1
Group I Senior Certificates, and (2) following the Pool 1 Group I Final
Distribution Date, the Pool 1 Group II Senior Principal Distribution Amount will
equal the Pool 1 Senior Optimal Principal Amount.
The "Pool 1 Group II Senior Percentage" for any Distribution Date will
equal the percentage (carried to six places rounded up) obtained by dividing (1)
the aggregate Certificate Principal Balance of the Pool 1 Group II Senior
Certificates immediately preceding such Distribution Date by (2) the Pool 1
Scheduled Principal Balance (less the Class Certificate Principal Balance of the
Class 1-PO Certificates) immediately preceding such Distribution Date. The
initial Pool 1 Group II Senior Percentage is expected to be approximately 10%.
The "Pool 1 Group II Senior Distribution Percentage" for any Distribution
Date will equal 0% through the Distribution Date in July 2004; 30% thereafter
through the Distribution Date in July 2005; 40% thereafter through the
Distribution Date in July 2006; 60% thereafter through the Distribution Date in
July 2007; 80% thereafter through the Distribution Date in July 2008; and 100%
thereafter.
The "Pool 1 Group I Final Distribution Date" is the Distribution Date on
which the Class Certificate Principal Balance of each of the Pool 1 Group I
Senior Certificates has been reduced to zero.
With respect to any Pool 1 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 Pool 1
mortgage loan and any Distribution Date, the "Prepayment Period" is the month
preceding the month of such Distribution Date.
The "Pool 1 Senior Percentage" on any Distribution Date will equal the
lesser of 100% and the percentage (carried to six places rounded up) obtained by
dividing the aggregate Certificate Principal Balances of all the Pool 1 senior
certificates (other than the Class 1-PO Certificates) immediately preceding such
Distribution Date by the Pool 1
A1-19
<PAGE> 61
Scheduled Principal Balance (less the Class Certificate Principal Balance of the
Class 1-PO Certificates) immediately preceding such Distribution Date. The
initial Pool 1 Senior Percentage is expected to be approximately 95.73%.
The "Pool 1 Senior Prepayment Percentage" on any Distribution Date
occurring during the periods set forth below will be as follows:
<TABLE>
<CAPTION>
PERIOD (DATES INCLUSIVE) POOL 1 SENIOR PREPAYMENT PERCENTAGE
- ------------------------ -----------------------------------
<S> <C>
August 1999 - July 2004.............. 100%
August 2004 - July 2005.............. Pool 1 Senior Percentage plus 70%
of the Pool 1 Apportioned Junior
Percentage
August 2005 - July 2006.............. Pool 1 Senior Percentage plus 60%
of the Pool 1 Apportioned Junior
Percentage
August 2006 - July 2007.............. Pool 1 Senior Percentage plus 40%
of the Pool 1 Apportioned Junior
Percentage
August 2007 - July 2008.............. Pool 1 Senior Percentage plus 20%
of the Pool 1 Apportioned Junior
Percentage
August 2008 and thereafter........... Pool 1 Senior Percentage
</TABLE>
Notwithstanding the foregoing, if on any Distribution Date either the Pool
1 Senior Percentage exceeds the initial Pool 1 Senior Percentage or the Pool 2
Senior Percentage (as defined in "Distributions on the Pool 2 Senior
Certificates -- Principal" in Annex 2) exceeds the initial Pool 2 Senior
Percentage, the Pool 1 Senior Prepayment Percentage for such Distribution Date
will equal 100%.
In addition, no reduction of the Pool 1 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 on which the Pool 1 Senior
Prepayment Percentage Stepdown Limitation (as defined below) or the Pool 2
Senior Prepayment Percentage Stepdown Limitation (as defined in "Distributions
on the Pool 2 Senior Certificates -- Principal" in Annex 2) is in effect. The
"Pool 1 Senior Prepayment Percentage Stepdown Limitation" will be in effect on
any Distribution Date unless, as of the last day of the month preceding such
Distribution Date, either:
(A)(1) the aggregate Scheduled Principal Balance of Pool 1 mortgage loans
delinquent 60 days or more (including for this purpose any Pool 1
mortgage loans in foreclosure and Pool 1 mortgage loans with respect
to which the related mortgaged property has been acquired by the
trust) does not exceed 50% of the aggregate Pool 1 Apportioned
Junior Principal Balance (as defined below) of the junior
certificates as of such date; and
(2) cumulative Realized Losses in respect of the Pool 1 mortgage loans
do not exceed:
(a) 30% of the Pool 1 Apportioned Junior Principal Balance as of
the date of issuance of the certificates (the "Original Pool 1
Apportioned Junior Principal Balance") if such Distribution
Date occurs between and including August 2004 and July 2005;
A1-20
<PAGE> 62
(b) 35% of the Original Pool 1 Apportioned Junior Principal Balance
if such Distribution Date occurs between and including August
2005 and July 2006;
(c) 40% of the Original Pool 1 Apportioned Junior Principal Balance
if such Distribution Date occurs between and including August
2006 and July 2007;
(d) 45% of the Original Pool 1 Apportioned Junior Principal Balance
if such Distribution Date occurs between and including August
2007 and July 2008; and
(e) 50% of the Original Pool 1 Apportioned Junior Principal Balance
if such Distribution Date occurs during or after August 2008;
or
(B)(1) the aggregate Scheduled Principal Balance of Pool 1 mortgage loans
delinquent 60 days or more (including for this purpose any Pool 1
mortgage loans in foreclosure and Pool 1 mortgage loans with respect
to which the related mortgaged property has been acquired by the
trust), averaged over the last three months, as a percentage of the
aggregate Scheduled Principal Balance of all Pool 1 mortgage loans
averaged over the last three months, does not exceed 4%; and
(2) cumulative Realized Losses in respect of Pool 1 mortgage loans do
not exceed:
(a) 10% of the Original Pool 1 Apportioned Junior Principal Balance
if such Distribution Date occurs between and including August
2004 and July 2005;
(b) 15% of the Original Pool 1 Apportioned Junior Principal Balance
if such Distribution Date occurs between and including August
2005 and July 2006;
(c) 20% of the Original Pool 1 Apportioned Junior Principal Balance
if such Distribution Date occurs between and including August
2006 and July 2007;
(d) 25% of the Original Pool 1 Apportioned Junior Principal Balance
if such Distribution Date occurs between and including August
2007 and July 2008; and
(e) 30% of the Original Pool 1 Apportioned Junior Principal Balance
if such Distribution Date occurs during or after August 2008.
The "Class 1-PO Principal Distribution Amount" with respect to each
Distribution Date will be an amount equal to the sum of:
(1) the applicable PO Percentage of all scheduled payments of
principal due on each Pool 1 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;
A1-21
<PAGE> 63
(2) the applicable PO Percentage of the Scheduled Principal Balance of
each Pool 1 mortgage loan which was the subject of a prepayment in full
received by GECMSI, or, in the case of a Pool 1 mortgage loan
master-serviced by GECMSI, of which GECMSI receives notice, during the
related Prepayment Period;
(3) the applicable PO Percentage of all partial prepayments of
principal received in respect of Pool 1 mortgage loans during the related
Prepayment Period;
(4) the applicable PO Percentage of the sum of (a) the net liquidation
proceeds allocable to principal on each Pool 1 mortgage loan which became a
Liquidated Mortgage Loan during the related Prepayment Period, other than
mortgage loans described in clause (b), and (b) the principal balance of
each Pool 1 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
(5) the applicable PO Percentage of the sum of (a) the Scheduled
Principal Balance of each Pool 1 mortgage loan which was repurchased by
GECMSI in connection with such Distribution Date and (b) the difference, if
any, between the Scheduled Principal Balance of a Pool 1 mortgage loan that
has been replaced by GECMSI 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 (2) and (5) above, the Scheduled Principal Balance
of a Pool 1 mortgage loan will be reduced by the amount of any Deficient
Valuation that occurred on or before the Bankruptcy Coverage Termination Date.
The "Pool 1 Apportioned Junior Percentage" on any Distribution Date prior
to the Cross-Over Date will equal 100% minus the Pool 1 Senior Percentage. The
"Pool 1 Apportioned Junior Prepayment Percentage" on any Distribution Date prior
to the Cross-Over Date will equal 100% minus the Pool 1 Senior Prepayment
Percentage. The "Pool 1 Apportioned Junior Principal Balance" for any date prior
to the Cross-Over Date will equal the excess of the Pool 1 Scheduled Principal
Balance (calculated on the basis of Non-PO Percentages thereof) over the
aggregate Class Certificate Principal Balance of the Pool 1 senior certificates
(other than the Class 1-PO Certificates) for such date. After the Cross-Over
Date, the Pool 1 Apportioned Junior Percentage and the Pool 1 Apportioned Junior
Prepayment Percentage will equal zero. The initial Pool 1 Apportioned Junior
Percentage is expected to be approximately 4.27%.
CROSS-SUPPORT
In addition to the subordination provided by the junior certificates, the
senior certificates will benefit from the credit enhancement provided by a
cross-support feature. Under this cross-support feature, collections received on
the mortgage loans in one pool may be distributed to holders of senior
certificates backed by the mortgage loans in the other pool. Cross-support will
apply in the following instances:
- On each Distribution Date prior to the Cross-Over Date but on or
after the date on which the aggregate Class Certificate Principal Balance
of the senior certificates of either mortgage pool (other than, in the case
of Pool 1, the Class 1-PO Certificates) has been reduced to zero, all
amounts otherwise distributable as principal to the junior certificates
pursuant to "Distributions on the Junior Certificates -- Allocation of
Junior Available Funds" in Annex 3, will be distributed as principal to the
outstanding senior certificates entitled to principal distributions backed
by the
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<PAGE> 64
other mortgage pool (other than, in the case of Pool 1, the Class 1-PO
Certificates) until the Class Certificate Principal Balances thereof have
each been reduced to zero, provided that on such Distribution Date either
(a) the Aggregate Junior Percentage (as defined below) for such
Distribution Date is less than 200% of the Aggregate Junior Percentage as
of the Cut-off Date or (b) the aggregate Scheduled Principal Balance of
Pool 1 or Pool 2 mortgage loans delinquent 60 days or more (including for
this purpose any mortgage loans in such pool in foreclosure and mortgage
loans in such pool with respect to which the related mortgaged property has
been acquired by the trust), averaged over the last six months, as a
percentage of the related Apportioned Junior Principal Balance, is greater
than or equal to 50%. Any principal distributed pursuant to this paragraph
on a Distribution Date to the classes of the Pool 1 or Pool 2 senior
certificates will be allocated to such classes in the same manner as the
Pool 1 Senior Optimal Principal Amount or Pool 2 Senior Optimal Principal
Amount, as applicable, is allocated to such classes on such date, and will
be applied in reduction of the amount distributable on the junior
certificates in inverse order of priority.
- If on a Distribution Date either:
(1) the aggregate Class Certificate Principal Balance of the Pool 1
senior certificates (other than the Class 1-PO Certificates) exceeds the
Pool Scheduled Principal Balance of Pool 1 (calculated on the basis of
the Non-PO Percentage) as of such Distribution Date or
(2) the aggregate Class Certificate Principal Balance of the Pool 2
senior certificates exceeds the Pool Scheduled Principal Balance of Pool
2 as of such Distribution Date,
the certificate group as to which such excess exists will be a "Pool
Balance Shortfall Group." In such event, all amounts otherwise
distributable as principal on the junior certificates (other than amounts
necessary to pay any interest shortfalls described in the second succeeding
sentence) will be distributed as principal to the senior certificates
(other than the Class 1-PO Certificates) of such Pool Balance Shortfall
Group, until the aggregate Class Certificate Principal Balances of such
senior certificates equals the Pool Scheduled Principal Balance of the
related mortgage pool for such Distribution Date (such distribution, a
"Pool Balance Shortfall Distribution"). In the event that the senior
certificates in respect of either mortgage pool constitute a Pool Balance
Shortfall Group on any Distribution Date on or following the Cross-Over
Date, Pool Balance Shortfall Distributions will be made from the related
Available Funds of the other mortgage pool remaining after all required
amounts have been distributed to the senior certificates related to such
other mortgage pool (other than, in the case of Pool 1, the Class 1-PO
Certificates). In addition, the amount of any shortfalls in funds available
to pay Accrued Certificate Interest or undistributed Accrued Certificate
Interest on a Pool Balance Shortfall Group under priorities first and
second of the second paragraph under "Distributions on the Pool 1 Senior
Certificates -- Allocation of Pool 1 Available Funds" in Annex 1 or
"Distributions on the Pool 2 Senior Certificates -- Allocation of Pool 2
Available Funds" in Annex 2, as the case may be, on any Distribution Date
(including any such shortfalls for the current Distribution Date) will be
distributed as interest to the senior certificates of such Pool Balance
Shortfall Group (other than, in the case of Pool 1, the Class 1-PO
Certificates) prior to the payment of any Pool Balance Shortfall
Distributions from amounts otherwise distributable as principal on the
junior
A1-23
<PAGE> 65
certificates, in inverse order of priority (or, following the Cross-Over
Date, as provided in the preceding sentence). Any principal distributed
pursuant to this paragraph on a Distribution Date to the classes of the
Pool 1 or Pool 2 senior certificates will be allocated to such classes in
the same manner as the Pool 1 Senior Optimal Principal Amount or Pool 2
Senior Optimal Principal Amount, as applicable, is allocated to such
classes on such date, and any amounts otherwise distributable as principal
on the junior certificates will be applied in inverse order of priority.
- On each Distribution Date, the Class 1-PO Certificates will be
entitled to received any Class 1-PO Deferred Amount from amounts otherwise
distributable as principal on the junior certificates on such Distribution
Date, regardless of the amount of principal received in respect of the Pool
1 mortgage loans.
The "Aggregate Junior Percentage" at any time will equal the percentage
(carried to six places rounded up) obtained by dividing the sum of the Class
Certificate Principal Balances of the junior certificates by the aggregate of
the Pool 1 and Pool 2 Scheduled Principal Balances (less the Class Certificate
Principal Balance of the Class 1-PO Certificates).
PRINCIPAL DISTRIBUTIONS ON THE CLASS A19 CERTIFICATES
General
Arrangements have been made to distribute principal on the Class A19
Certificates in $1,000 increments. These arrangements are intended to
accommodate retail investors who may not wish to receive their principal
distributions in amounts smaller than $1,000 and to give a limited payment
priority to investors who request early payment. As a result, only some
certificates in this class will receive distributions of principal on any given
date on which principal would otherwise be distributed on all certificates of
this class.
Principal payments on the Class A19 Certificates will be made as follows:
- The amount of principal, if any, distributable on each Distribution Date
on the class as a whole will be determined as described under
"Distributions on the Pool 1 Senior Certificates -- Allocation of Pool 1
Available Funds" above.
- The distribution of principal will be rounded upward to an integral
multiple of $1,000 by withdrawing funds from the Class A19 Rounding
Account (as defined below), if necessary.
- The Trustee will remit distributions of principal to DTC in integral
multiples of $1,000. DTC will then remit such distributions to its
participants on behalf of the beneficial owners. The participants and the
relevant Financial Intermediaries in turn will be responsible for
remitting principal payments to their customers as described above.
- Holders of the Class A19 Certificates who have properly made a Principal
Distribution Request, as described below, will be paid before other
holders of such class, to the extent of available principal for such
class.
- Principal Distribution Requests submitted on behalf of Deceased Holders
(as defined below) will be entitled to a first priority, and requests
from beneficial owners other than Deceased Holders ("Living Holders")
will be entitled to a second priority.
A1-24
<PAGE> 66
- If more principal is available for distribution on the Class A19
Certificates on a Distribution Date than the amount covered by valid
Principal Distribution Requests, beneficial owners will receive
distributions of principal on such Distribution Date in integral
multiples of $1,000 pursuant to DTC's random lot procedures, to the
extent of such excess.
Notwithstanding the foregoing, on and after the Cross-Over Date, distributions
on the Class A19 Certificates will be made pro rata among all holders of the
certificates of such class and will not be made in integral multiples of $1,000,
by requested distributions or by random lot.
There can be no assurance that each participant receiving distributions of
principal made by random lot, or in accordance with Principal Distribution
Requests, and that each Financial Intermediary in the chain to beneficial
owners, will remit distributions to their customers by random lot or in
accordance with Principal Distribution Requests. Investors should ask their
brokers or other intermediaries what allocation procedures they use. Neither
GECMSI nor the Trustee will be responsible for the manner in which DTC, any
participant or any Financial Intermediary allots distributions on these
certificates.
The Agreement will provide that, in the event definitive physical
certificates are issued in respect of the Class A19 Certificates, the Trustee
will determine which physical certificates will receive principal distributions
on the applicable Distribution Date using procedures comparable to those
described herein.
Due to the procedures for distributions described herein, there can be no
assurance that any particular beneficial owner of a Class A19 Certificate will
receive a principal distribution on any Distribution Date. The timing and amount
of distributions in reduction of the Class Certificate Principal Balance of any
particular Class A19 Certificate is highly uncertain, and such distributions may
be made earlier or later than the date, or in amounts different from that,
desired by a beneficial owner of such certificate. Accordingly, the allocation
of principal distributions in respect of such certificates may result in actual
yields to investors and weighted average lives that vary significantly from
those anticipated, and such yields and weighted average lives will vary among
the holders of such class of certificates. See the related risk factor on page
S-14.
Rounding of Distributions of Principal
For purposes of distributions of principal on the Class A19 Certificates, a
rounding account (the "Class A19 Rounding Account") will be established on
behalf of such class on the date of issuance of the certificates by the deposit
of $999.99 in a segregated, non-interest bearing account maintained by the
Trustee pursuant to the Agreement. Prior to the Cross-Over Date, whenever
distributions of principal are to be made on the Class A19 Certificates, the
amount allocable to each such class will be rounded upward to an integral
multiple of $1,000, if necessary.
On the first Distribution Date when distributions of principal will be made
on the Class A19 Certificates, the Trustee will withdraw from the Class A19
Rounding Account any funds needed to round the amount allocable to the Class A19
Certificates upward to the next integral multiple of $1,000 and will distribute
the rounded amount. On the next Distribution Date when distributions of
principal will be made on the Class A19 Certificates, the Trustee will first
apply the amount allocable to such class in respect of principal to repay any
amount withdrawn from the Class A19 Rounding Account on the previous
Distribution Date; then it will round the remainder of such allocable amount
upward to the next integral multiple of $1,000 by making another withdrawal from
the
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<PAGE> 67
Class A19 Rounding Account and will distribute this amount. This process will
continue on subsequent Distribution Dates prior to the Cross-Over Date until the
Class Certificate Principal Balance of the Class A19 Certificates has been
reduced to zero.
Upon the earlier of the Cross-Over Date and the next Distribution Date
after the Class Certificate Principal Balance of the Class A19 Certificates is
reduced to zero, the balance in the Class A19 Rounding Account will be restored
to $999.99 from Pool 1 Available Funds otherwise available for distribution to
other classes of certificates and will be distributed to the holder of the Class
R Certificate, and the Class A19 Rounding Account will be terminated.
As a result of the operation of the Class A19 Rounding Account, the
aggregate distributions made in reduction of the Class Certificate Principal
Balance of the Class A19 Certificates on each Distribution Date may be slightly
more or less than would be the case in the absence of such rounding procedures,
but such difference in respect of such class will be no more than $999.99 on
such Distribution Date. Under no circumstances will the sum of all distributions
made in reduction of the Class Certificate Principal Balance of the Class A19
Certificates through any Distribution Date be less than the sum that would have
resulted in the absence of such rounding procedures.
Principal Distribution Requests and Withdrawals
Each beneficial owner of a Class A19 Certificate may request that a
distribution of principal on such certificate be made on a Distribution Date, in
any integral multiple of $1,000, by delivering a written request (each, a
"Principal Distribution Request") to the DTC participant or Financial
Intermediary that maintains such beneficial owner's account. The participant
should in turn make the request to DTC (or, in the case of a Financial
Intermediary, such firm must notify the related participant of such request,
which participant should make the request to DTC) on a form required by DTC and
provided to the participant.
In the case of a request on behalf of a Deceased Holder, a certified copy
of the death certificate and any additional appropriate evidence of death and
any tax waivers must be forwarded to the Trustee under separate cover.
Furthermore, such requests of Deceased Holders that are incomplete may not be
honored by the Trustee and, if not honored, will lose their priority and must be
re-requested. Upon receipt of such Principal Distribution Request, DTC will date
and time-stamp such request. Such requests will be honored on any Distribution
Date only to the extent that they are received by DTC on or before the Record
Date for such Distribution Date. DTC may establish such procedures as it deems
fair and equitable to establish the order of receipt of requests for such
distributions received by it on the same day. Such requests shall be made
available to the Trustee through the facilities of DTC, Principal Distribution
Requests delivered to DTC after the Record Date for a particular Distribution
Date and requests received in a timely manner but not accepted with respect to a
particular Distribution Date will be treated as Principal Distribution Requests
for the next succeeding Distribution Date and each succeeding Distribution Date
thereafter until each request is accepted or is withdrawn as described below.
In the case of Principal Distribution Requests on behalf of Living Holders,
DTC will establish a new order of priority for each Distribution Date. This
order will apply both to previously unsatisfied Principal Distribution Requests
and to newly submitted requests. A Principal Distribution Request submitted on
behalf of a Living Holder who later dies will become entitled to the priority of
a newly submitted request on behalf of a Deceased
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Holder. Such priority will be effective for each subsequent Distribution Date if
DTC has received a certified copy of the death certificate for such Deceased
Holder and any additional appropriate evidence of death and any requested tax
waivers by the last business day of the preceding calendar month. Each Principal
Distribution Request submitted by a beneficial owner of a Class A19 Certificate
will be held by DTC until such request has been accepted or has been withdrawn
in writing as described below.
On any Distribution Date on which principal distributions are made on the
Class A19 Certificates, priority of distributions of principal in respect of
such class will be given to holders of such class on whose behalf Principal
Distribution Requests have been duly received and not withdrawn. DTC will honor
Principal Distribution Requests in the following order of priority:
first, DTC will honor Principal Distribution Requests submitted on
behalf of Deceased Holders of such class in the order of their receipt by
DTC, until such requests have been honored in an amount up to $100,000 for
each requesting Deceased Holder; and
second, DTC will honor Principal Distribution Requests submitted on
behalf of Living Holders of such class in the order of priority established
by DTC, until such requests have been honored in an amount of up to $10,000
for each requesting Living Holder.
Thereafter, DTC will honor Principal Distribution Requests submitted on
behalf of each Deceased Holder as provided in priority first up to a second
$100,000 and thereafter, Principal Distribution Requests submitted on behalf of
each Living Holder as provided in priority second up to a second $10,000. This
sequence of priorities will be repeated until all Principal Distribution
Requests have been honored to the extent of amounts available for distribution
in reduction of the Class Certificate Principal Balance of the Class A19
Certificates.
If the amount available for distribution in reduction of the Class
Certificate Principal Balance of the Class A19 Certificates on a given
Distribution Date is insufficient to honor all Principal Distribution Requests,
such requests will be honored on succeeding Distribution Dates as principal
becomes available for distribution on the Class A19 Certificates, without the
need for the holders to resubmit their Principal Distribution Requests.
On any Distribution Date on which principal distributions are to be made on
the Class A19 Certificates, the Trustee will advise DTC as to which Principal
Distribution Requests should be honored, and in what amounts.
Any beneficial owner of a Class A19 Certificate with respect to which a
Principal Distribution Request has been made may withdraw such request by so
notifying in writing the participant or Financial Intermediary that maintains
such beneficial owner's account (each such withdrawal, a "Withdrawal"). The
participant should forward the Withdrawal to DTC on a form required by DTC. In
the event that such account is maintained by a Financial Intermediary, such
Financial Intermediary should notify the related participant, which in turn
should forward the Withdrawal of such request on such form to DTC. If such
Withdrawal has not been received by DTC on or before the Record Date for the
applicable Distribution Date, the previously made Principal Distribution Request
will be irrevocable with respect to such Distribution Date.
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Neither GECMSI nor the Trustee will be liable for any delay or failure by
any DTC participant or any Financial Intermediary in the delivery of Principal
Distribution Requests or Withdrawals to DTC.
If the amount available for distribution in reduction of the Class
Certificate Principal Balance of the Class A19 Certificates on any Distribution
Date exceeds the amount needed to honor all Principal Distribution Requests with
respect to such class on such date, additional principal distributions, in
integral multiples equal to $1,000, will be made to the holders of such class in
accordance with DTC's established random lot procedures, without regard to
whether or not such certificateholders have submitted Principal Distribution
Requests.
Definition of "Deceased Holder"
A "Deceased Holder" is a beneficial owner of a Class A19 Certificate who
was living at the time such interest was acquired and whose executor or other
authorized representative causes to be furnished to the Trustee a certified copy
of the death certificate for such Deceased Holder and any additional evidence of
death satisfactory to the Trustee and any tax waivers requested by the Trustee.
Class A19 Certificates beneficially owned by tenants by the entirety, joint
tenants or tenants in common will be considered to be beneficially owned by a
single owner. The death of a tenant by the entirety, joint tenant or tenant in
common will be deemed to be the death of the beneficial owner, and the Class A19
Certificate so beneficially owned will be eligible for priority with respect to
distributions of principal, subject to the limitations described herein.
Class A19 Certificates beneficially owned by a trust will be considered to
be beneficially owned by each beneficiary of the trust to the extent of such
beneficiary's beneficial interest therein, but in no event will a trust's
beneficiaries collectively be deemed to be beneficial owners of a number of
individual Class A19 Certificates greater than the number of individual Class
A19 Certificates of which such trust is the owner. The death of the beneficiary
of a trust will be deemed to be the death of a beneficial owner of the Class A19
Certificate beneficially owned by the trust to the extent of such beneficiary's
beneficial interest in such trust. The death of an individual who was a tenant
by the entirety, joint tenant or tenant in common in a tenancy that is the
beneficiary of a trust will be deemed to be the death of the beneficiary of the
trust.
The death of a person who, during his or her lifetime, was entitled to
substantially all of the beneficial ownership interest in a Class A19
Certificate will be deemed to be the death of the beneficial owner of the Class
A19 Certificate regardless of the registration of the ownership, if such
beneficial ownership interest can be established to the satisfaction of the
Trustee.
Expenses incurred by the Trustee in an effort to determine the beneficial
ownership interest, including, without limitation, attorney's fees, shall be
paid by the beneficial owner. Such beneficial interest will be deemed to exist
in typical cases of street name or nominee ownership, ownership by a trustee,
ownership under the Uniform Gift to Minors Act and community property or other
joint ownership arrangements between a husband and wife. Beneficial interest
shall include the power to sell, transfer, or otherwise dispose of a Class A19
Certificate and the right to receive the proceeds therefrom, as well as interest
and distributions in reduction of principal balance payable with respect
thereto. As used in this prospectus supplement, a request for a distribution of
principal of a Class A19 Certificate by a Deceased Holder shall mean a request
by the personal representative,
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surviving tenant by the entirety, surviving joint tenant or surviving tenant in
common of such Deceased Holder.
ALLOCATION OF REALIZED LOSSES ON THE POOL 1 CERTIFICATES
A "Realized Loss" is
- as to any Liquidated Mortgage Loan (as defined below), 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.
- as to any mortgage loan, a Deficient Valuation (as defined below)
A "Liquidated Mortgage Loan" is any defaulted mortgage loan as to which
GECMSI has determined that all amounts which it expects to recover from or on
account of such mortgage loan have been recovered.
A Deficient Valuation may result from the personal bankruptcy of a
mortgagor if the bankruptcy court establishes 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 reduces the secured debt to
such value. In such case, the trust, as 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").
An "Excess Loss" is any Deficient Valuation, Fraud Loss or Special Hazard
Loss (each a type of Realized Loss) occurring after, respectively, the
Bankruptcy Coverage Termination Date, Fraud Coverage Termination Date or Special
Hazard Termination Date, each as defined below.
A "Non-Excess Realized Loss" is any Realized Loss other than an Excess
Loss.
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.
Losses Allocable to the Class 1-PO Certificates
On each Distribution Date, the applicable PO Percentage of the principal
portion of any Realized Loss (including any Excess Loss) on a Pool 1 Discount
Mortgage Loan will be allocated to the Class 1-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 sum
of (1) the applicable PO Percentage of the principal portion of Non-Excess
Realized Losses on a Pool 1 Discount Mortgage Loan allocated to the Class 1-PO
Certificates on such date and (2) all amounts previously allocated to the Class
1-PO Certificates in respect of such
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losses and not distributed to the Class 1-PO Certificates on prior Distribution
Dates will be the "Class 1-PO Deferred Amount."
To the extent funds are available therefor on any Distribution Date through
the Cross-Over Date, distributions in respect of the Class 1-PO Deferred Amount
will be made on the Class 1-PO Certificates in accordance with priority fourth
in the second paragraph under "-- Distributions on the Pool 1 Senior
Certificates -- Allocation of Pool 1 Available Funds" above. Any distribution of
Pool 1 Available Funds or Pool 2 Available Funds in respect of the Class 1-PO
Deferred Amount will not reduce the Class Certificate Principal Balance of the
Class 1-PO Certificates. No interest will accrue on the Class 1-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 made to the
Class 1-PO Certificates in respect of the Class 1-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 the Class 1-PO Deferred Amount and Realized Losses allocated to the
Class 1-PO Certificates will be borne by them without a right of reimbursement
from any other class of certificates. Any distribution of Unanticipated
Recoveries (as defined in the accompanying prospectus) on the Class 1-PO
Certificates will be adjusted to take into account the Class 1-PO Deferred
Amount previously paid to such class as specified in the Agreement. See
"Servicing of the Mortgage Loans -- Unanticipated Recoveries of Losses on the
Mortgage Loans" in the accompanying prospectus.
Losses Allocable to Certificates other than Class 1-PO Certificates
Prior to the Cross-Over Date (and on such date under certain
circumstances), the principal portion of any Non-Excess Realized Loss in either
pool (based on the applicable Non-PO Percentage thereof in the case of Pool 1)
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., Non-Excess 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). Fraud Losses,
Special Hazard Losses and Deficient Valuations occurring prior to the Fraud
Coverage Termination Date, Special Hazard Termination Date and Bankruptcy
Coverage Termination Date, respectively, will be allocated to the junior
certificates in the manner described in the preceding sentence.
The principal portion of any Excess Loss on a Pool 1 or Pool 2 mortgage
loan (based on the applicable Non-PO Percentage thereof in the case of Pool 1)
for any Distribution Date will be allocated pro rata among all outstanding
classes of Pool 1 and Pool 2 senior certificates entitled to principal
distributions (other than the Class 1-PO Certificates) and the junior
certificates based on their respective Class Certificate Principal Balances.
Commencing on the Cross-Over Date, the principal portion of any Realized
Loss with respect to any Pool 1 or Pool 2 mortgage loan (based on the applicable
Non-PO Percentage thereof in the case of Pool 1) will be allocated among the
outstanding classes of Pool 1 and Pool 2 senior certificates entitled to
principal distributions (other than the Class 1-PO Certificates) pro rata based
upon their Class Certificate Principal Balances; provided, however, that until
the Class Certificate Principal Balance of the Class A26 Certificates has been
reduced to zero, the portion of any Realized Losses, other than any Special
Event Losses, that would otherwise be allocable to the Class A24 Certificates,
will instead be borne by the holders of the Class A26 Certificates before such
losses will be
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borne by holders of the Class A24 Certificates. A "Special Event Loss" is any
Fraud Loss, Special Hazard Loss or Bankruptcy Loss.
As indicated above, Fraud Losses, Special Hazard Losses and Deficient
Valuations occurring after the Fraud Coverage Termination Date, Special Hazard
Termination Date and Bankruptcy Coverage Termination Date, respectively, will be
Excess Losses. The principal portion of any Excess Loss on a Pool 1 or Pool 2
mortgage loan (based on the applicable Non-PO Percentage thereof in the case of
Pool 1) for any Distribution Date (whether occurring before, on or after the
Cross-Over Date) will be allocated pro rata among all outstanding classes of
certificates entitled to principal distributions (other than the Class 1-PO
Certificates) based on their Class Certificate Principal Balances.
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
$10,045,610 (approximately 1.00% of the aggregate Scheduled Principal Balances
of the Pool 1 and Pool 2 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 $10,045,610, 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 the Pool 1 and Pool 2
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.
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 $10,045,610 (approximately 1.00% of the aggregate Scheduled
Principal Balances of the Pool 1 and Pool 2 mortgage loans as of the Cut-off
Date). As of any Distribution Date, the Special Hazard Loss Amount will equal
approximately $10,045,610 minus the sum of (1) 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 (2) 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 amount calculated by GECMSI 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 Pool 1 and Pool 2 mortgage loans by principal balance secured
by mortgaged properties in any California zip code) of the outstanding
principal balance of all Pool 1 and Pool 2 mortgage loans on the
Distribution Date immediately preceding
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such anniversary and (y) twice the outstanding principal balance of the
Pool 1 or Pool 2 mortgage loan which has the largest outstanding principal
balance on the Distribution Date immediately preceding such anniversary.
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
$358,194 (approximately 0.04% of the aggregate Scheduled Principal Balances of
the Pool 1 and Pool 2 mortgage loans as of the Cut-off Date), subject to
reduction as described in the Agreement, minus the aggregate amount of previous
Deficient Valuations and Debt Service Reductions (as defined below) in respect
of the Pool 1 and Pool 2 mortgage loans. 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 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 Deficient Valuations.
A "Debt Service Reduction" is a reduction in the amount of the monthly
payment due on a mortgage loan as established by a bankruptcy court in a
personal bankruptcy of a mortgagor.
Method of Allocating Realized Losses
All allocations of Realized Losses in respect of Pool 1 or Pool 2 mortgage
loans to a class of Pool 1 certificates or to the junior certificates will be
accomplished on a Distribution Date by reducing the applicable Class Certificate
Principal Balance by the appropriate 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 such certificates (or the calculation of the Class A24 Accrual Amount for the
Class A24 Certificates) commencing on the following Distribution Date. The
aggregate amount of the principal portion of any Non-Excess Realized Losses to
be allocated to the Class 1-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 1-PO Deferred Amount for such Distribution Date. For
purposes of allocating the principal portion of Realized Losses (including
Excess Losses) in respect of Pool 1 or Pool 2 mortgage loans, the Class
Certificate Balance of the Class A24 Certificates will be deemed to equal the
lesser of (1) their original Class Certificate Principal Balance and (2) their
outstanding Class Certificate Principal Balance.
The interest portion of all Realized Losses in respect of Pool 1 or Pool 2
mortgage loans will be allocated among the outstanding classes of Pool 1 and
Pool 2 senior certificates and junior certificates entitled to distributions of
interest to the extent described under "-- Distributions on the Pool 1 Senior
Certificates -- Interest" above.
No reduction of the Class Certificate Principal Balance of any class of
Pool 1 or Pool 2 senior certificates shall be made on any Distribution Date on
account of any Realized Loss with respect to Pool 1 or Pool 2 mortgage loans to
the extent that such reduction would have the effect of reducing the aggregate
Certificate Principal Balances of all of the Pool 1 and Pool 2 senior
certificates as of such Distribution Date to an amount less than the aggregate
Pool 1 and Pool 2 Scheduled Principal Balance as of the first day of the month
of such Distribution Date, less any Deficient Valuations occurring on or prior
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to the Bankruptcy Coverage Termination Date (such limitation being the "Loss
Allocation Limitation").
Debt Service Reductions are not Realized Losses, and the principal portion
thereof will not be allocated in reduction of the Certificate Principal Balance
of any certificate. However, after the Bankruptcy Coverage Termination Date, the
amounts distributable under clause (1) of the definitions of Pool 1 Senior
Optimal Principal Amount and Class 1-PO Principal Distribution Amount and clause
(a)(1) of the definition of Junior Optimal Principal Amount attributable to Pool
1 mortgage loans will be reduced by the amount of the principal portion of any
Debt Service Reductions. Regardless of when they occur, Debt Service Reductions
may reduce the amount of Pool 1 Available Funds otherwise available for
distribution on a Distribution Date. As a result of the subordination of the
junior certificates in right of distribution, the reduction in Pool 1 Available
Funds resulting from any Debt Service Reductions in respect of Pool 1 mortgage
loans prior to the Bankruptcy Coverage Termination Date will be borne by the
junior certificates (to the extent then outstanding) in inverse order of
priority.
YIELD AND WEIGHTED AVERAGE LIFE CONSIDERATIONS
YIELD
The effective yield on the Pool 1 senior 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 Pool 1 mortgage loans underlying the certificates.
You should refer to "Yield, Maturity and Weighted Average Life Considerations"
in the prospectus and the text below for a discussion of the factors that could
affect the yield on your certificates.
PREPAYMENTS
The rate of distribution of principal of the Pool 1 senior certificates
(and the aggregate amount of interest payable on the Class 1-S Certificates)
will be affected primarily by the amount and timing of principal payments
received on or in respect of the Pool 1 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 GECMSI in the ordinary course of conducting its mortgage
banking business, some of which refinancings may be solicited by GECMSI, or
prepayments in connection with biweekly payment programs, participation in which
may be solicited by GECMSI) and prepayments resulting from foreclosure,
condemnation and other dispositions of the mortgaged properties, from repurchase
by GECMSI of any Pool 1 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 GECMSI of its option to repurchase a Pool 1 mortgage loan that is a Defaulted
Mortgage Loan. Mortgagors are permitted to prepay the Pool 1 mortgage loans, in
whole or in part, at any time without penalty. In addition, as a result of the
fact that Pool 1 senior certificateholders (other than holders of the Class 1-S
Certificates) will generally be entitled on any Distribution Date to receive
from Pool 1 Available Funds distributions of amounts based on clause (4) of each
of the definitions of Pool 1 Senior Optimal Principal Amount and Class 1-PO
Principal Distribution Amount, as the case may be, the occurrence of defaults on
the Pool 1 mortgage loans may produce the same effect on the certificates
receiving such distributions as an early receipt of principal. See "Yield,
Maturity and Weighted Average Life
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Considerations" in the prospectus for a discussion of the factors that may
influence prepayment rates.
Voluntary prepayments in full of principal on the Pool 1 mortgage loans
received by GECMSI (or, in the case of Pool 1 mortgage loans master-serviced by
GECMSI, of which GECMSI 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 Pool 1 mortgage loans are passed through to the Pool 1 certificateholders in
the month following the month of receipt or payment. Any prepayment of a Pool 1
mortgage loan or liquidation of a Pool 1 mortgage loan (by foreclosure
proceedings or by virtue of the purchase of a Pool 1 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 Pool 1 senior certificateholders
principal amounts (or, in the case of the Class 1-S 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 Pool 1 mortgage
loan will be allocated solely to the outstanding Pool 1 senior certificates
(other than the Class 1-PO and Class 1-S Certificates) during at least the first
five years after the date of initial issuance of the certificates, with such
allocation being subject to reduction thereafter as described herein. Among such
Pool 1 senior certificates, such amounts otherwise allocable to the Pool 1 Group
II Senior Certificates will be allocated solely to the outstanding Pool 1 Group
I Senior Certificates during the first five years after the date of initial
issuance of the certificates (except as otherwise described herein on or
following the Pool 1 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 Pool 1 senior
certificates (other than the Class 1-PO and Class 1-S Certificates) on each
Distribution Date after the Cross-Over Date. The resulting allocation between
the Pool 1 Group I Senior Certificates and the Pool 1 Group II Senior
Certificates is designed to accelerate the allocation of principal prepayments
and certain other unscheduled recoveries of principal on the Pool 1 mortgage
loans to holders of the Pool 1 Group I Senior Certificates relative to the Pool
1 Group II Senior Certificates through the earlier of the Pool 1 Group I Final
Distribution Date and the Cross-Over Date. In addition, the Pool 1 Group II
Senior Certificates will not receive any distributions of scheduled principal
payments during the first five years after the date of initial issuance of the
certificates, except as otherwise described herein on or following the earlier
of the Pool 1 Group I Final Distribution Date and the Cross-Over Date.
Notwithstanding the foregoing, all distributions of principal on the outstanding
Pool 1 senior certificates (other than the Class 1-S Certificates) will be made
pro rata among such certificates on each Distribution Date after the Cross-Over
Date. See "-- Distributions on the Pool 1 Senior Certificates -- Principal" and
"-- Cross-Support" herein.
When a full prepayment is made on a Pool 1 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 interest 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
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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 Pool 1 senior
certificateholders (other than the holders of any class of principal-only
certificates) in the month following its receipt and the amount of interest thus
distributed to Pool 1 senior certificateholders, to the extent not supplemented
by a Compensating Interest Payment (as defined herein) or certain cross-support
payments in respect of Interest Shortfalls, will be less than the amount which
would have been distributed (or added to the Class Certificate Principal Balance
of the Class A24 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
Pool 1 senior certificateholders to the extent described herein. See
"-- Distributions on the Pool 1 Senior Certificates -- Interest" herein.
Any partial prepayment will be applied to the balance of the related Pool 1
mortgage loan as of the first day of the month of receipt, will be passed
through to the Pool 1 senior 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 Pool 1 senior
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 Pool 1 senior certificates also may be
affected by any repurchase by GECMSI of the mortgage loans as described under
"The Pooling and Servicing Agreement -- Termination" herein.
THE CLASS A26 CERTIFICATES
Beginning on the Cross-Over Date, the principal portion of Realized Losses
on the Pool 1 and Pool 2 mortgage loans (based on the applicable Non-PO
Percentage thereof in the case of Pool 1), other than any Special Event Losses,
that would otherwise be allocable to the Class A24 Certificates, will instead be
borne by the holders of the Class A26 Certificates before such losses will be
borne by the holders of the Class A24 Certificates. As a result, the yield on
the Class A26 Certificates will be more sensitive than the yield on the other
Pool 1 senior certificates to the liquidation of and any subsequent loss
experience on the Pool 1 and Pool 2 mortgage loans (other than in respect of
such Special Event Losses) and to the timing of any such losses. The Class A26
Certificates will also bear their proportionate share of any Net Interest
Shortfalls and the interest and principal portion of Excess Losses and Realized
Losses to the extent described under "Allocation of Realized Losses on the Pool
1 Certificates" above.
SENSITIVITY OF THE CLASS A14 CERTIFICATES
The yield to investors in the Class A14 Certificates, which are
principal-only certificates, will be highly sensitive to the rate of principal
payments (including prepayments) on the Pool 1 mortgage loans. If the Class A14
Certificates are purchased at a discount to their Class Certificate Principal
Balance, lower than anticipated rates of prepayments on the Pool 1 mortgage
loans could result in an extension in the anticipated weighted average lives of
such certificates and actual yields to investors that are significantly lower
than the anticipated yields.
To illustrate the significance of prepayments on the distributions on the
Class A14 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
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percentages of the Prepayment Assumption shown. 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 Class A14 Certificates,
would cause the discounted present value of such cash flows to equal the assumed
purchase price percentage for such certificates stated in such tables 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
such certificates and, consequently, do not reflect the return on any investment
when such reinvestment rates are considered. It is unlikely that the Pool 1
mortgage loans will prepay at any of the constant levels of the Prepayment
Assumption shown or any other constant rate until maturity or that all of the
mortgage loans will prepay at the same rate. The timing of changes in the rate
of 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 Pool 1 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.
The following table has been prepared based on the Pool 1 Modeling
Assumptions (as defined herein) and the additional assumptions that:
(1) the assumed purchase price of the Class A14 Certificates is as
specified (expressed as a percentage of the Class Certificate Principal
Balance thereof) and
(2) such purchase price is paid on July 29, 1999.
PRE-TAX YIELD TO MATURITY OF THE CLASS A14 CERTIFICATES
(ASSUMED PURCHASE PRICE PERCENTAGE -- 52.078125%)
<TABLE>
<CAPTION>
PREPAYMENT ASSUMPTION
0% 125% 250% 400% 500%
----------------------------------------
<S> <C> <C> <C> <C>
2.478% 4.437% 8.423% 13.585% 16.593%
</TABLE>
- -------------------------
* Corporate bond-equivalent basis
The Pool 1 mortgage loans may not have all the characteristics assumed, and
there can be no assurance that:
(1) the Pool 1 mortgage loans will prepay at any of the constant rates
shown in the table or any particular rate;
(2) the pre-tax yield to maturity on the Class A14 Certificates will
correspond to any amounts shown herein; or
(3) the purchase price of the Class A14 Certificates will be as
assumed.
Each investor must make its own decision as to the appropriate prepayment
assumptions to be used in deciding whether or not to purchase a Class A14
Certificate.
A1-36
<PAGE> 78
FINAL PAYMENT CONSIDERATIONS
The rate of payment of principal of the Pool 1 senior certificates will
depend primarily on the rate of payment of principal of the Pool 1 mortgage
loans (including prepayments, defaults, delinquencies and liquidations) which,
in turn, will depend on the characteristics of the Pool 1 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 Pool 1 mortgage loan is expected to be July 2029. In addition, to
the extent delinquencies and defaults are not covered by advances made by GECMSI
or offset by the effect of the subordination of the junior certificates,
delinquencies and defaults could affect the actual maturity of the Pool 1 senior
certificates offered hereby.
WEIGHTED AVERAGE LIVES OF THE POOL 1 CERTIFICATES
The weighted average life of a certificate is determined by:
-- multiplying the reduction, if any, in the principal balance thereof on
each Distribution Date by the number of years from the date of
issuance to such Distribution Date;
-- summing the results; and
-- dividing the sum by the aggregate reductions in the principal balance
of such certificate.
The weighted average lives of the Pool 1 senior certificates will be
affected, to varying degrees, by the rate of principal payments on the Pool 1
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
Pool 1 senior 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 a
class of Pool 1 senior certificates represent discounts or premiums to their
respective original 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 Pool 1 or Pool 2. 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.
Accretion Directed Certificates
On each Distribution Date through the Class A24 Accretion Termination Date,
the Class A24 Accrual Amount will be distributed first to the Class A22
Certificates and then
A1-37
<PAGE> 79
to the Class A23 Certificates until the Class Certificate Principal Balances
thereof have each been reduced to zero.
As shown below under "Tables of Pool 1 Certificate Principal Balances" and
based upon the Pool 1 Modeling Assumptions (including the assumptions that no
defaults or delinquencies are experienced on the Pool 1 mortgage loans and that
no Net Interest Shortfalls occur), the weighted average life of the Class A22
and Class A23 Certificates will remain unchanged if the Pool 1 mortgage loans
prepay at constant rates at or below 390% and 225%, respectively, of the
Prepayment Assumption. The Pool 1 mortgage loans will likely, however, have
payment and performance characteristics that differ from those assumed in the
Pool 1 Modeling Assumptions. Therefore, even if the Pool 1 mortgage loans were
to prepay at a constant rate at or below 390% and 225% of the Prepayment
Assumption, the weighted average life of the Class A22 and Class A23
Certificates, respectively, could be shortened. Moreover, if defaults or
delinquencies are experienced on the Pool 1 mortgage loans or if Net Interest
Shortfalls occur, the weighted average life of the Class A22 or Class A23
Certificates may be extended.
Based upon the Pool 1 Modeling Assumptions, but assuming that prepayments
are experienced on the Pool 1 mortgage loans at a constant rate at or below 390%
of the Prepayment Assumption, the final Distribution Date for the Class A22
Certificates would occur in January 2006. Based upon the Pool 1 Modeling
Assumptions, but assuming that prepayments are experienced on the Pool 1
mortgage loans at a constant rate at or below 225% of the Prepayment Assumption,
the final Distribution Date for the Class A23 Certificates would occur in
January 2012. Depending on the characteristics and performance of the Pool 1
mortgage loans, the actual final Distribution Dates of the Class A22 or Class
A23 Certificates may be earlier or later (perhaps substantially) than the
related dates referred to in the preceding sentence.
Tables of Pool 1 Senior Certificate Principal Balances
The following tables set forth the percentages of the initial Class
Certificate Principal Balance of each class of Pool 1 senior 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 (other than 0% of the Prepayment Assumption) set forth in
the table, it is assumed with respect to the Pool 1 mortgage loans (the "Pool 1
Modeling Assumptions") that:
(1) the distributions in respect of the Pool 1 certificates are made
and received in cash on the 25th day of each month commencing in August
1999;
(2) such mortgage loans prepay at the specified constant percentages
of the Prepayment Assumption;
(3) the aggregate outstanding Scheduled Principal Balance of such
mortgage loans as of the Cut-off Date is $932,211,550.79;
(4) no defaults or delinquencies in the payment by mortgagors of
principal of and interest on such mortgage loans are experienced and GECMSI
does not repurchase any such mortgage loans as permitted or required by the
Agreement;
(5) GECMSI does not exercise its option to repurchase all the mortgage
loans in the trust as described under the caption "The Pooling and
Servicing Agreement -- Termination" herein;
A1-38
<PAGE> 80
(6) scheduled monthly payments on such mortgage loans are received on
the first day of each month commencing in August 1999, and are computed
prior to giving effect to prepayments received in the prior month;
(7) prepayments representing payment in full of individual mortgage
loans are received on the last day of each month (commencing July 1999) and
include 30 days' interest thereon, and no Interest Shortfalls occur in
respect of the Pool 1 mortgage loans;
(8) the scheduled monthly payment for each mortgage loan has been
calculated based on its outstanding balance, interest rate and remaining
term to maturity such that such mortgage loan will amortize in amounts
sufficient to repay the remaining balance of such mortgage loan by its
remaining term to maturity;
(9) the initial Class Certificate Principal Balance and interest rate
on the certificates for each class of Pool 1 senior certificates offered
hereby are as indicated in the summary of this prospectus supplement;
(10) the date of the initial issuance of the certificates is July 29,
1999;
(11) the amount distributable to the Pool 1 certificateholders is not
reduced by the incurrence of any expenses by the trust; and
(12) the Pool 1 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>
STATED
AGGREGATE SCHEDULED REMAINING
PRINCIPAL BALANCE TERM TO
AS OF THE MORTGAGE NET MORTGAGE AGE MATURITY
MORTGAGE LOAN GROUP CUT-OFF DATE INTEREST RATE RATE (MONTHS) (MONTHS)
- ------------------- ------------------- ------------- ------------ -------- ---------
<S> <C> <C> <C> <C> <C>
Discount.............. $175,948,554.99 6.7856203355% 6.5821203355% 2 356
Non-Discount.......... 756,262,995.80 7.3607147404 7.1091904886 2 357
</TABLE>
It is not likely that the Pool 1 mortgage loans will prepay at a constant
level of the Prepayment Assumption. In addition, because certain of such
mortgage loans will have remaining terms to maturity and will bear interest at
rates that are different from those assumed, the actual Class Certificate
Principal Balance of each class of Pool 1 senior certificates outstanding at any
time and the actual weighted average life of each class of such certificates may
differ from the corresponding information in the table for each indicated
percentage of the Prepayment Assumption. Furthermore, even if all the Pool 1
mortgage loans prepay at the indicated percentages of the Prepayment Assumption
and the weighted average mortgage interest rate and weighted average remaining
term to maturity of such pool 1 mortgage loans were to equal the weighted
average mortgage interest rate and weighted average remaining term to maturity
of the assumed mortgage loans, due to the actual distribution of remaining terms
to maturity and interest rates among the Pool 1 mortgage loans, the actual
principal balance of each class of Pool 1 senior certificates outstanding at any
time and the actual weighted average life of each class of such certificates
would differ (which difference could be material) from the corresponding
information set forth in the following table. In addition, if the actual
characteristics of the Pool 1 mortgage loans included in the Pool 1 mortgage
loan pool differ from those assumed in calculating the percentages set forth in
the tables, the actual class principal balance of each class of Pool 1 senior
certificates outstanding at any time and the actual weighted average life of
each class of such certificates would differ (which difference would be
material) from the corresponding information in the tables for each indicated
percentage of the Prepayment Assumption.
A1-39
<PAGE> 81
PERCENT OF ORIGINAL CLASS CERTIFICATE PRINCIPAL BALANCE
OUTSTANDING OF THE POOL 1 CERTIFICATES
<TABLE>
<CAPTION>
CLASS A1 CLASS A2 CLASS A3
-------------------------------- -------------------------------- ------------------
DISTRIBUTION DATE 0% 125% 250% 400% 500% 0% 125% 250% 400% 500% 0% 125% 250%
- ----------------- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <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
July 2000...................... 98 95 91 86 83 99 97 95 93 92 98 94 90
July 2001...................... 96 84 72 58 49 98 92 86 79 75 96 82 69
July 2002...................... 95 70 48 24 10 97 85 75 46 19 94 67 43
July 2003...................... 92 58 28 0 0 96 79 52 0 0 92 53 20
July 2004...................... 90 46 11 0 0 95 73 20 0 0 89 40 1
July 2005...................... 88 35 0 0 0 94 66 0 0 0 86 28 0
July 2006...................... 85 26 0 0 0 93 49 0 0 0 84 18 0
July 2007...................... 83 18 0 0 0 92 34 0 0 0 81 9 0
July 2008...................... 80 11 0 0 0 90 21 0 0 0 78 1 0
July 2009...................... 77 5 0 0 0 89 10 0 0 0 75 0 0
July 2010...................... 74 0 0 0 0 87 0 0 0 0 71 0 0
July 2011...................... 71 0 0 0 0 86 0 0 0 0 67 0 0
July 2012...................... 67 0 0 0 0 84 0 0 0 0 64 0 0
July 2013...................... 63 0 0 0 0 82 0 0 0 0 59 0 0
July 2014...................... 59 0 0 0 0 80 0 0 0 0 55 0 0
July 2015...................... 55 0 0 0 0 78 0 0 0 0 50 0 0
July 2016...................... 50 0 0 0 0 75 0 0 0 0 45 0 0
July 2017...................... 45 0 0 0 0 73 0 0 0 0 39 0 0
July 2018...................... 39 0 0 0 0 70 0 0 0 0 33 0 0
July 2019...................... 34 0 0 0 0 63 0 0 0 0 26 0 0
July 2020...................... 27 0 0 0 0 51 0 0 0 0 19 0 0
July 2021...................... 20 0 0 0 0 38 0 0 0 0 12 0 0
July 2022...................... 13 0 0 0 0 24 0 0 0 0 3 0 0
July 2023...................... 5 0 0 0 0 10 0 0 0 0 0 0 0
July 2024...................... 0 0 0 0 0 0 0 0 0 0 0 0 0
July 2025...................... 0 0 0 0 0 0 0 0 0 0 0 0 0
July 2026...................... 0 0 0 0 0 0 0 0 0 0 0 0 0
July 2027...................... 0 0 0 0 0 0 0 0 0 0 0 0 0
July 2028...................... 0 0 0 0 0 0 0 0 0 0 0 0 0
July 2029...................... 0 0 0 0 0 0 0 0 0 0 0 0 0
Weighted Average Life (in
years)(1).................... 15.6 5.0 3.0 2.2 1.9 19.0 6.6 3.8 2.8 2.4 14.7 4.5 2.8
<CAPTION>
CLASS A3
-----------
DISTRIBUTION DATE 400% 500%
- ----------------- ---- ----
<S> <C> <C>
Initial Percentage............. 100 100
July 2000...................... 85 81
July 2001...................... 53 43
July 2002...................... 16 *
July 2003...................... 0 0
July 2004...................... 0 0
July 2005...................... 0 0
July 2006...................... 0 0
July 2007...................... 0 0
July 2008...................... 0 0
July 2009...................... 0 0
July 2010...................... 0 0
July 2011...................... 0 0
July 2012...................... 0 0
July 2013...................... 0 0
July 2014...................... 0 0
July 2015...................... 0 0
July 2016...................... 0 0
July 2017...................... 0 0
July 2018...................... 0 0
July 2019...................... 0 0
July 2020...................... 0 0
July 2021...................... 0 0
July 2022...................... 0 0
July 2023...................... 0 0
July 2024...................... 0 0
July 2025...................... 0 0
July 2026...................... 0 0
July 2027...................... 0 0
July 2028...................... 0 0
July 2029...................... 0 0
Weighted Average Life (in
years)(1).................... 2.1 1.8
</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 is determined as described on page A1-37.
A1-40
<PAGE> 82
PERCENT OF ORIGINAL CLASS CERTIFICATE PRINCIPAL BALANCE
OUTSTANDING OF THE POOL 1 CERTIFICATES
<TABLE>
<CAPTION>
CLASS A4 CLASS A5 CLASS A6
-------------------------------- -------------------------------- ------------------
DISTRIBUTION DATE 0% 125% 250% 400% 500% 0% 125% 250% 400% 500% 0% 125% 250%
- ----------------- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <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
July 2000...................... 100 100 100 100 100 100 100 100 100 100 100 100 100
July 2001...................... 100 100 100 100 100 100 100 100 100 100 100 100 100
July 2002...................... 100 100 100 100 100 100 100 100 66 28 100 100 100
July 2003...................... 100 100 100 0 0 100 100 76 0 0 100 100 100
July 2004...................... 100 100 100 0 0 100 100 30 0 0 100 100 100
July 2005...................... 100 100 0 0 0 100 96 0 0 0 100 100 100
July 2006...................... 100 100 0 0 0 100 71 0 0 0 100 100 0
July 2007...................... 100 100 0 0 0 100 49 0 0 0 100 100 0
July 2008...................... 100 100 0 0 0 100 30 0 0 0 100 100 0
July 2009...................... 100 51 0 0 0 100 14 0 0 0 100 100 0
July 2010...................... 100 0 0 0 0 100 0 0 0 0 100 100 0
July 2011...................... 100 0 0 0 0 100 0 0 0 0 100 100 0
July 2012...................... 100 0 0 0 0 100 0 0 0 0 100 0 0
July 2013...................... 100 0 0 0 0 100 0 0 0 0 100 0 0
July 2014...................... 100 0 0 0 0 100 0 0 0 0 100 0 0
July 2015...................... 100 0 0 0 0 100 0 0 0 0 100 0 0
July 2016...................... 100 0 0 0 0 100 0 0 0 0 100 0 0
July 2017...................... 100 0 0 0 0 100 0 0 0 0 100 0 0
July 2018...................... 100 0 0 0 0 100 0 0 0 0 100 0 0
July 2019...................... 100 0 0 0 0 91 0 0 0 0 100 0 0
July 2020...................... 100 0 0 0 0 74 0 0 0 0 100 0 0
July 2021...................... 100 0 0 0 0 55 0 0 0 0 100 0 0
July 2022...................... 100 0 0 0 0 35 0 0 0 0 100 0 0
July 2023...................... 52 0 0 0 0 14 0 0 0 0 100 0 0
July 2024...................... 0 0 0 0 0 0 0 0 0 0 100 0 0
July 2025...................... 0 0 0 0 0 0 0 0 0 0 0 0 0
July 2026...................... 0 0 0 0 0 0 0 0 0 0 0 0 0
July 2027...................... 0 0 0 0 0 0 0 0 0 0 0 0 0
July 2028...................... 0 0 0 0 0 0 0 0 0 0 0 0 0
July 2029...................... 0 0 0 0 0 0 0 0 0 0 0 0 0
Weighted Average Life (in
years)(1).................... 24.0 10.1 5.5 3.8 3.2 22.2 8.1 4.6 3.3 2.8 25.7 12.7 6.7
<CAPTION>
CLASS A6
-----------
DISTRIBUTION DATE 400% 500%
- ----------------- ---- ----
<S> <C> <C>
Initial Percentage............. 100 100
July 2000...................... 100 100
July 2001...................... 100 100
July 2002...................... 100 100
July 2003...................... 100 0
July 2004...................... 0 0
July 2005...................... 0 0
July 2006...................... 0 0
July 2007...................... 0 0
July 2008...................... 0 0
July 2009...................... 0 0
July 2010...................... 0 0
July 2011...................... 0 0
July 2012...................... 0 0
July 2013...................... 0 0
July 2014...................... 0 0
July 2015...................... 0 0
July 2016...................... 0 0
July 2017...................... 0 0
July 2018...................... 0 0
July 2019...................... 0 0
July 2020...................... 0 0
July 2021...................... 0 0
July 2022...................... 0 0
July 2023...................... 0 0
July 2024...................... 0 0
July 2025...................... 0 0
July 2026...................... 0 0
July 2027...................... 0 0
July 2028...................... 0 0
July 2029...................... 0 0
Weighted Average Life (in
years)(1).................... 4.4 3.7
</TABLE>
- -------------------------
(1) The weighted average life is determined as described on page A1-37.
A1-41
<PAGE> 83
PERCENT OF ORIGINAL CLASS CERTIFICATE PRINCIPAL BALANCE
OUTSTANDING OF THE POOL 1 CERTIFICATES
<TABLE>
<CAPTION>
CLASS A7 AND CLASS A8 CLASS A9
-------------------------------- --------------------------------
DISTRIBUTION DATE 0% 125% 250% 400% 500% 0% 125% 250% 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
July 2000................................................... 100 100 100 100 100 100 100 100 100 100
July 2001................................................... 100 100 100 100 100 100 100 100 100 100
July 2002................................................... 100 100 100 100 100 100 100 100 100 100
July 2003................................................... 100 100 100 100 0 100 100 100 100 0
July 2004................................................... 100 100 100 0 0 100 100 100 0 0
July 2005................................................... 100 100 100 0 0 100 100 100 0 0
July 2006................................................... 100 100 0 0 0 100 100 0 0 0
July 2007................................................... 100 100 0 0 0 100 100 0 0 0
July 2008................................................... 100 100 0 0 0 100 100 0 0 0
July 2009................................................... 100 100 0 0 0 100 100 0 0 0
July 2010................................................... 100 100 0 0 0 100 100 0 0 0
July 2011................................................... 100 100 0 0 0 100 100 0 0 0
July 2012................................................... 100 0 0 0 0 100 0 0 0 0
July 2013................................................... 100 0 0 0 0 100 0 0 0 0
July 2014................................................... 100 0 0 0 0 100 0 0 0 0
July 2015................................................... 100 0 0 0 0 100 0 0 0 0
July 2016................................................... 100 0 0 0 0 100 0 0 0 0
July 2017................................................... 100 0 0 0 0 100 0 0 0 0
July 2018................................................... 100 0 0 0 0 100 0 0 0 0
July 2019................................................... 100 0 0 0 0 100 0 0 0 0
July 2020................................................... 100 0 0 0 0 100 0 0 0 0
July 2021................................................... 100 0 0 0 0 100 0 0 0 0
July 2022................................................... 100 0 0 0 0 100 0 0 0 0
July 2023................................................... 100 0 0 0 0 100 0 0 0 0
July 2024................................................... 100 0 0 0 0 100 0 0 0 0
July 2025................................................... 0 0 0 0 0 0 0 0 0 0
July 2026................................................... 0 0 0 0 0 0 0 0 0 0
July 2027................................................... 0 0 0 0 0 0 0 0 0 0
July 2028................................................... 0 0 0 0 0 0 0 0 0 0
July 2029................................................... 0 0 0 0 0 0 0 0 0 0
Weighted Average Life (in years)(1)......................... 25.7 12.8 6.7 4.4 3.7 25.7 12.9 6.7 4.5 3.7
</TABLE>
- -------------------------
(1) The weighted average life is determined as described on page A1-37.
A1-42
<PAGE> 84
PERCENT OF ORIGINAL CLASS CERTIFICATE PRINCIPAL BALANCE
OUTSTANDING OF THE POOL 1 CERTIFICATES
<TABLE>
<CAPTION>
CLASS A10 CLASS A11 CLASS A12
--------------------------------- --------------------------------- ---------------------
DISTRIBUTION DATE 0% 125% 250% 400% 500% 0% 125% 250% 400% 500% 0% 125% 250%
- ----------------- ----- ---- ---- ---- ---- ----- ---- ---- ---- ---- ----- ----- -----
<S> <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
July 2000.................. 100 100 100 100 100 100 100 100 100 100 100 100 100
July 2001.................. 100 100 100 100 100 100 100 100 100 100 100 100 100
July 2002.................. 100 100 100 100 100 100 100 100 100 100 100 100 100
July 2003.................. 100 100 100 100 0 100 100 100 100 0 100 100 100
July 2004.................. 100 100 100 0 0 100 100 100 0 0 100 100 100
July 2005.................. 100 100 100 0 0 100 100 100 0 0 100 100 75
July 2006.................. 100 100 0 0 0 100 100 0 0 0 100 100 0
July 2007.................. 100 100 0 0 0 100 100 0 0 0 100 100 0
July 2008.................. 100 100 0 0 0 100 100 0 0 0 100 100 0
July 2009.................. 100 100 0 0 0 100 100 0 0 0 100 100 0
July 2010.................. 100 100 0 0 0 100 100 0 0 0 100 94 0
July 2011.................. 100 100 0 0 0 100 100 0 0 0 100 35 0
July 2012.................. 100 0 0 0 0 100 94 0 0 0 100 0 0
July 2013.................. 100 0 0 0 0 100 0 0 0 0 100 0 0
July 2014.................. 100 0 0 0 0 100 0 0 0 0 100 0 0
July 2015.................. 100 0 0 0 0 100 0 0 0 0 100 0 0
July 2016.................. 100 0 0 0 0 100 0 0 0 0 100 0 0
July 2017.................. 100 0 0 0 0 100 0 0 0 0 100 0 0
July 2018.................. 100 0 0 0 0 100 0 0 0 0 100 0 0
July 2019.................. 100 0 0 0 0 100 0 0 0 0 100 0 0
July 2020.................. 100 0 0 0 0 100 0 0 0 0 100 0 0
July 2021.................. 100 0 0 0 0 100 0 0 0 0 100 0 0
July 2022.................. 100 0 0 0 0 100 0 0 0 0 100 0 0
July 2023.................. 100 0 0 0 0 100 0 0 0 0 100 0 0
July 2024.................. 100 0 0 0 0 100 0 0 0 0 62 0 0
July 2025.................. 0 0 0 0 0 0 0 0 0 0 0 0 0
July 2026.................. 0 0 0 0 0 0 0 0 0 0 0 0 0
July 2027.................. 0 0 0 0 0 0 0 0 0 0 0 0 0
July 2028.................. 0 0 0 0 0 0 0 0 0 0 0 0 0
July 2029.................. 0 0 0 0 0 0 0 0 0 0 0 0 0
Weighted Average Life
(in years)(1)............ 25.8 13.0 6.8 4.5 3.7 25.9 13.2 6.9 4.5 3.8 25.1 11.8 6.2
<CAPTION>
CLASS A12
-----------
DISTRIBUTION DATE 400% 500%
- ----------------- ---- ----
<S> <C> <C>
Initial Percentage......... 100 100
July 2000.................. 100 100
July 2001.................. 100 100
July 2002.................. 100 100
July 2003.................. 88 0
July 2004.................. 0 0
July 2005.................. 0 0
July 2006.................. 0 0
July 2007.................. 0 0
July 2008.................. 0 0
July 2009.................. 0 0
July 2010.................. 0 0
July 2011.................. 0 0
July 2012.................. 0 0
July 2013.................. 0 0
July 2014.................. 0 0
July 2015.................. 0 0
July 2016.................. 0 0
July 2017.................. 0 0
July 2018.................. 0 0
July 2019.................. 0 0
July 2020.................. 0 0
July 2021.................. 0 0
July 2022.................. 0 0
July 2023.................. 0 0
July 2024.................. 0 0
July 2025.................. 0 0
July 2026.................. 0 0
July 2027.................. 0 0
July 2028.................. 0 0
July 2029.................. 0 0
Weighted Average Life
(in years)(1)............ 4.2 3.5
</TABLE>
- -------------------------
(1) The weighted average life is determined as described on page A1-37.
A1-43
<PAGE> 85
PERCENT OF ORIGINAL CLASS CERTIFICATE PRINCIPAL BALANCE
OUTSTANDING OF THE POOL 1 CERTIFICATES
<TABLE>
<CAPTION>
CLASS A13 CLASS A14 CLASS A15
--------------------------------- --------------------------------- ---------------------
DISTRIBUTION DATE 0% 125% 250% 400% 500% 0% 125% 250% 400% 500% 0% 125% 250%
- ----------------- ----- ---- ---- ---- ---- ----- ---- ---- ---- ---- ----- ----- -----
<S> <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
July 2000.................. 99 96 93 89 87 100 100 100 100 100 100 100 100
July 2001.................. 97 87 78 67 59 100 100 100 100 100 100 100 100
July 2002.................. 96 77 59 40 29 100 100 100 100 100 100 100 100
July 2003.................. 94 66 43 20 8 100 100 100 87 56 100 100 100
July 2004.................. 92 57 30 5 0 100 100 100 49 0 100 100 100
July 2005.................. 90 49 19 0 0 100 100 84 10 0 100 100 100
July 2006.................. 88 42 11 0 0 100 100 64 0 0 100 100 61
July 2007.................. 86 35 5 0 0 100 100 48 0 0 100 100 0
July 2008.................. 84 30 0 0 0 100 100 36 0 0 100 100 0
July 2009.................. 82 25 0 0 0 100 94 17 0 0 100 100 0
July 2010.................. 80 21 0 0 0 100 88 1 0 0 100 100 0
July 2011.................. 77 17 0 0 0 100 78 0 0 0 100 100 0
July 2012.................. 74 13 0 0 0 100 69 0 0 0 100 84 0
July 2013.................. 71 9 0 0 0 100 60 0 0 0 100 23 0
July 2014.................. 68 6 0 0 0 100 52 0 0 0 100 0 0
July 2015.................. 64 3 0 0 0 100 44 0 0 0 100 0 0
July 2016.................. 61 * 0 0 0 100 37 0 0 0 100 0 0
July 2017.................. 57 0 0 0 0 100 24 0 0 0 100 0 0
July 2018.................. 52 0 0 0 0 100 11 0 0 0 100 0 0
July 2019.................. 48 0 0 0 0 100 0 0 0 0 100 0 0
July 2020.................. 43 0 0 0 0 100 0 0 0 0 100 0 0
July 2021.................. 37 0 0 0 0 100 0 0 0 0 100 0 0
July 2022.................. 31 0 0 0 0 100 0 0 0 0 100 0 0
July 2023.................. 25 0 0 0 0 94 0 0 0 0 100 0 0
July 2024.................. 18 0 0 0 0 82 0 0 0 0 100 0 0
July 2025.................. 11 0 0 0 0 65 0 0 0 0 65 0 0
July 2026.................. 3 0 0 0 0 45 0 0 0 0 0 0 0
July 2027.................. 0 0 0 0 0 10 0 0 0 0 0 0 0
July 2028.................. 0 0 0 0 0 0 0 0 0 0 0 0 0
July 2029.................. 0 0 0 0 0 0 0 0 0 0 0 0 0
Weighted Average Life (in
years)(1)................ 17.8 6.9 3.9 2.7 2.3 26.5 15.1 8.0 5.0 4.1 26.1 13.6 7.1
<CAPTION>
CLASS A15
-----------
DISTRIBUTION DATE 400% 500%
- ----------------- ---- ----
<S> <C> <C>
Initial Percentage......... 100 100
July 2000.................. 100 100
July 2001.................. 100 100
July 2002.................. 100 100
July 2003.................. 100 0
July 2004.................. 0 0
July 2005.................. 0 0
July 2006.................. 0 0
July 2007.................. 0 0
July 2008.................. 0 0
July 2009.................. 0 0
July 2010.................. 0 0
July 2011.................. 0 0
July 2012.................. 0 0
July 2013.................. 0 0
July 2014.................. 0 0
July 2015.................. 0 0
July 2016.................. 0 0
July 2017.................. 0 0
July 2018.................. 0 0
July 2019.................. 0 0
July 2020.................. 0 0
July 2021.................. 0 0
July 2022.................. 0 0
July 2023.................. 0 0
July 2024.................. 0 0
July 2025.................. 0 0
July 2026.................. 0 0
July 2027.................. 0 0
July 2028.................. 0 0
July 2029.................. 0 0
Weighted Average Life (in
years)(1)................ 4.6 3.9
</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 is determined as described on page A1-37.
A1-44
<PAGE> 86
PERCENT OF ORIGINAL CLASS CERTIFICATE PRINCIPAL BALANCE
OUTSTANDING OF THE POOL 1 CERTIFICATES
<TABLE>
<CAPTION>
CLASS A16 CLASS A17 CLASS A18
--------------------------------- --------------------------------- ---------------------
DISTRIBUTION DATE 0% 125% 250% 400% 500% 0% 125% 250% 400% 500% 0% 125% 250%
- ----------------- ----- ---- ---- ---- ---- ----- ---- ---- ---- ---- ----- ----- -----
<S> <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
July 2000.................. 97 91 85 78 73 100 100 100 100 100 100 100 100
July 2001.................. 94 75 55 33 19 100 100 100 100 100 100 100 100
July 2002.................. 91 53 18 0 0 100 100 100 100 100 100 100 100
July 2003.................. 88 33 0 0 0 100 100 100 100 59 100 100 100
July 2004.................. 84 14 0 0 0 100 100 100 39 0 100 100 100
July 2005.................. 81 0 0 0 0 100 100 100 0 0 100 100 100
July 2006.................. 77 0 0 0 0 100 100 86 0 0 100 100 100
July 2007.................. 73 0 0 0 0 100 100 36 0 0 100 100 100
July 2008.................. 68 0 0 0 0 100 100 0 0 0 100 100 99
July 2009.................. 64 0 0 0 0 100 100 0 0 0 100 100 47
July 2010.................. 59 0 0 0 0 100 100 0 0 0 100 100 2
July 2011.................. 54 0 0 0 0 100 100 0 0 0 100 100 0
July 2012.................. 48 0 0 0 0 100 94 0 0 0 100 100 0
July 2013.................. 42 0 0 0 0 100 72 0 0 0 100 100 0
July 2014.................. 35 0 0 0 0 100 47 0 0 0 100 100 0
July 2015.................. 28 0 0 0 0 100 23 0 0 0 100 100 0
July 2016.................. 21 0 0 0 0 100 2 0 0 0 100 100 0
July 2017.................. 13 0 0 0 0 100 0 0 0 0 100 65 0
July 2018.................. 4 0 0 0 0 100 0 0 0 0 100 30 0
July 2019.................. 0 0 0 0 0 100 0 0 0 0 100 0 0
July 2020.................. 0 0 0 0 0 100 0 0 0 0 100 0 0
July 2021.................. 0 0 0 0 0 100 0 0 0 0 100 0 0
July 2022.................. 0 0 0 0 0 100 0 0 0 0 100 0 0
July 2023.................. 0 0 0 0 0 100 0 0 0 0 100 0 0
July 2024.................. 0 0 0 0 0 100 0 0 0 0 100 0 0
July 2025.................. 0 0 0 0 0 87 0 0 0 0 100 0 0
July 2026.................. 0 0 0 0 0 27 0 0 0 0 100 0 0
July 2027.................. 0 0 0 0 0 0 0 0 0 0 27 0 0
July 2028.................. 0 0 0 0 0 0 0 0 0 0 0 0 0
July 2029.................. 0 0 0 0 0 0 0 0 0 0 0 0 0
Weighted Average Life (in
years)(1)................ 11.7 3.2 2.1 1.6 1.4 26.6 14.9 7.8 4.9 4.1 27.8 18.5 10.0
<CAPTION>
CLASS A18
-----------
DISTRIBUTION DATE 400% 500%
- ----------------- ---- ----
<S> <C> <C>
Initial Percentage......... 100 100
July 2000.................. 100 100
July 2001.................. 100 100
July 2002.................. 100 100
July 2003.................. 100 100
July 2004.................. 100 0
July 2005.................. 28 0
July 2006.................. 0 0
July 2007.................. 0 0
July 2008.................. 0 0
July 2009.................. 0 0
July 2010.................. 0 0
July 2011.................. 0 0
July 2012.................. 0 0
July 2013.................. 0 0
July 2014.................. 0 0
July 2015.................. 0 0
July 2016.................. 0 0
July 2017.................. 0 0
July 2018.................. 0 0
July 2019.................. 0 0
July 2020.................. 0 0
July 2021.................. 0 0
July 2022.................. 0 0
July 2023.................. 0 0
July 2024.................. 0 0
July 2025.................. 0 0
July 2026.................. 0 0
July 2027.................. 0 0
July 2028.................. 0 0
July 2029.................. 0 0
Weighted Average Life (in
years)(1)................ 5.9 4.7
</TABLE>
- -------------------------
(1) The weighted average life is determined as described on page A1-37.
A1-45
<PAGE> 87
PERCENT OF ORIGINAL CLASS CERTIFICATE PRINCIPAL BALANCE
OUTSTANDING OF THE POOL 1 CERTIFICATES
<TABLE>
<CAPTION>
CLASS A19+ AND CLASS A21 CLASS A20 CLASS A22
-------------------------------- -------------------------------- ------------------
DISTRIBUTION DATE 0% 125% 250% 400% 500% 0% 125% 250% 400% 500% 0% 125% 250%
- ----------------- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <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
July 2000............................ 100 100 100 100 100 100 100 100 100 100 87 87 87
July 2001............................ 100 100 100 100 100 100 100 100 100 100 74 74 74
July 2002............................ 100 100 100 100 100 100 100 100 100 100 59 59 59
July 2003............................ 100 100 100 100 100 100 100 100 100 96 43 43 43
July 2004............................ 100 100 100 100 0 100 100 100 81 0 27 27 27
July 2005............................ 100 100 100 28 0 100 100 100 14 0 9 9 9
July 2006............................ 100 100 100 0 0 100 100 100 0 0 0 0 0
July 2007............................ 100 100 100 0 0 100 100 79 0 0 0 0 0
July 2008............................ 100 100 99 0 0 100 100 49 0 0 0 0 0
July 2009............................ 100 100 47 0 0 100 100 23 0 0 0 0 0
July 2010............................ 100 100 2 0 0 100 100 1 0 0 0 0 0
July 2011............................ 100 100 0 0 0 100 100 0 0 0 0 0 0
July 2012............................ 100 100 0 0 0 100 100 0 0 0 0 0 0
July 2013............................ 100 100 0 0 0 100 100 0 0 0 0 0 0
July 2014............................ 100 100 0 0 0 100 87 0 0 0 0 0 0
July 2015............................ 100 100 0 0 0 100 68 0 0 0 0 0 0
July 2016............................ 100 100 0 0 0 100 51 0 0 0 0 0 0
July 2017............................ 100 65 0 0 0 100 32 0 0 0 0 0 0
July 2018............................ 100 30 0 0 0 100 15 0 0 0 0 0 0
July 2019............................ 100 0 0 0 0 100 0 0 0 0 0 0 0
July 2020............................ 100 0 0 0 0 100 0 0 0 0 0 0 0
July 2021............................ 100 0 0 0 0 100 0 0 0 0 0 0 0
July 2022............................ 100 0 0 0 0 100 0 0 0 0 0 0 0
July 2023............................ 100 0 0 0 0 100 0 0 0 0 0 0 0
July 2024............................ 100 0 0 0 0 100 0 0 0 0 0 0 0
July 2025............................ 100 0 0 0 0 100 0 0 0 0 0 0 0
July 2026............................ 100 0 0 0 0 71 0 0 0 0 0 0 0
July 2027............................ 27 0 0 0 0 13 0 0 0 0 0 0 0
July 2028............................ 0 0 0 0 0 0 0 0 0 0 0 0 0
July 2029............................ 0 0 0 0 0 0 0 0 0 0 0 0 0
Weighted Average Life (in
years)(1).......................... 27.8 18.5 10.0 5.9 4.7 27.4 17.1 9.1 5.5 4.5 3.5 3.5 3.5
<CAPTION>
CLASS A22
-----------
DISTRIBUTION DATE 400% 500%
- ----------------- ---- ----
<S> <C> <C>
Initial Percentage................... 100 100
July 2000............................ 87 87
July 2001............................ 74 74
July 2002............................ 59 59
July 2003............................ 43 43
July 2004............................ 27 7
July 2005............................ 9 0
July 2006............................ 0 0
July 2007............................ 0 0
July 2008............................ 0 0
July 2009............................ 0 0
July 2010............................ 0 0
July 2011............................ 0 0
July 2012............................ 0 0
July 2013............................ 0 0
July 2014............................ 0 0
July 2015............................ 0 0
July 2016............................ 0 0
July 2017............................ 0 0
July 2018............................ 0 0
July 2019............................ 0 0
July 2020............................ 0 0
July 2021............................ 0 0
July 2022............................ 0 0
July 2023............................ 0 0
July 2024............................ 0 0
July 2025............................ 0 0
July 2026............................ 0 0
July 2027............................ 0 0
July 2028............................ 0 0
July 2029............................ 0 0
Weighted Average Life (in
years)(1).......................... 3.5 3.3
</TABLE>
- -------------------------
+ The weighted average life shown in the table for the Class A19 Certificates
represents the weighted average life of the Class A19 Certificates taken as
a whole and is not likely to reflect the experience of any particular
investor. Because holders of the Class A19 Certificates will receive
distributions in reduction of the Certificate Principal Balance of such
certificates on the basis of Principal Distribution Requests or by random
lot, the weighted average life of any such certificates owned by an
individual investor may vary significantly from the weighted average life of
the Class A19 Certificates taken as a whole.
(1) The weighted average life is determined as described on page A1-37.
A1-46
<PAGE> 88
PERCENT OF ORIGINAL CLASS CERTIFICATE PRINCIPAL BALANCE
OUTSTANDING OF THE POOL 1 CERTIFICATES
<TABLE>
<CAPTION>
CLASS A22 CLASS A23 CLASS A24
-------------------------------- -------------------------------- ------------------
DISTRIBUTION DATE 0% 125% 250% 400% 500% 0% 125% 250% 400% 500% 0% 125% 250%
- ----------------- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <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
July 2000............................ 87 87 87 87 87 100 100 100 100 100 107 107 107
July 2001............................ 74 74 74 74 74 100 100 100 100 100 114 114 114
July 2002............................ 59 59 59 59 59 100 100 100 100 100 122 122 122
July 2003............................ 43 43 43 43 43 100 100 100 100 100 131 131 131
July 2004............................ 27 27 27 27 7 100 100 100 100 100 140 140 140
July 2005............................ 9 9 9 9 0 100 100 100 100 0 150 150 150
July 2006............................ 0 0 0 0 0 93 93 93 0 0 160 160 160
July 2007............................ 0 0 0 0 0 78 78 78 0 0 171 171 171
July 2008............................ 0 0 0 0 0 62 62 62 0 0 183 183 183
July 2009............................ 0 0 0 0 0 46 46 46 0 0 196 196 196
July 2010............................ 0 0 0 0 0 28 28 28 0 0 210 210 210
July 2011............................ 0 0 0 0 0 8 8 0 0 0 224 224 193
July 2012............................ 0 0 0 0 0 0 0 0 0 0 231 231 159
July 2013............................ 0 0 0 0 0 0 0 0 0 0 231 231 131
July 2014............................ 0 0 0 0 0 0 0 0 0 0 231 231 108
July 2015............................ 0 0 0 0 0 0 0 0 0 0 231 231 88
July 2016............................ 0 0 0 0 0 0 0 0 0 0 231 231 71
July 2017............................ 0 0 0 0 0 0 0 0 0 0 231 231 58
July 2018............................ 0 0 0 0 0 0 0 0 0 0 231 231 46
July 2019............................ 0 0 0 0 0 0 0 0 0 0 231 228 37
July 2020............................ 0 0 0 0 0 0 0 0 0 0 231 195 29
July 2021............................ 0 0 0 0 0 0 0 0 0 0 231 165 23
July 2022............................ 0 0 0 0 0 0 0 0 0 0 231 138 17
July 2023............................ 0 0 0 0 0 0 0 0 0 0 231 112 13
July 2024............................ 0 0 0 0 0 0 0 0 0 0 231 89 9
July 2025............................ 0 0 0 0 0 0 0 0 0 0 231 67 7
July 2026............................ 0 0 0 0 0 0 0 0 0 0 231 47 4
July 2027............................ 0 0 0 0 0 0 0 0 0 0 231 28 2
July 2028............................ 0 0 0 0 0 0 0 0 0 0 114 12 1
July 2029............................ 0 0 0 0 0 0 0 0 0 0 0 0 0
Weighted Average Life
(in years)(1)...................... 3.5 3.5 3.5 3.5 3.3 9.7 9.7 9.5 6.6 5.3 29.0 24.2 16.2
<CAPTION>
CLASS A24
-----------
DISTRIBUTION DATE 400% 500%
- ----------------- ---- ----
<S> <C> <C>
Initial Percentage................... 100 100
July 2000............................ 107 107
July 2001............................ 114 114
July 2002............................ 122 122
July 2003............................ 131 131
July 2004............................ 140 140
July 2005............................ 150 86
July 2006............................ 153 10
July 2007............................ 90 0
July 2008............................ 58 0
July 2009............................ 43 0
July 2010............................ 32 0
July 2011............................ 23 0
July 2012............................ 17 0
July 2013............................ 13 0
July 2014............................ 9 0
July 2015............................ 7 0
July 2016............................ 5 0
July 2017............................ 4 0
July 2018............................ 3 0
July 2019............................ 2 0
July 2020............................ 1 0
July 2021............................ 1 0
July 2022............................ 1 0
July 2023............................ * 0
July 2024............................ * 0
July 2025............................ * 0
July 2026............................ * 0
July 2027............................ * 0
July 2028............................ * 0
July 2029............................ 0 0
Weighted Average Life
(in years)(1)...................... 9.4 6.2
</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 is determined as described on page A1-37.
A1-47
<PAGE> 89
PERCENT OF ORIGINAL CLASS CERTIFICATE PRINCIPAL BALANCE
OUTSTANDING OF THE POOL 1 CERTIFICATES
<TABLE>
<CAPTION>
CLASS A25 AND CLASS A26 CLASS A27
--------------------------------- ---------------------------------
DISTRIBUTION DATE 0% 125% 250% 400% 500% 0% 125% 250% 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
July 2000................................................. 100 100 100 100 100 98 92 87 80 75
July 2001................................................. 100 100 100 100 100 95 77 59 38 25
July 2002................................................. 100 100 100 100 100 92 57 24 0 0
July 2003................................................. 100 100 100 100 100 89 38 0 0 0
July 2004................................................. 100 100 100 100 100 86 21 0 0 0
July 2005................................................. 100 97 95 92 90 82 6 0 0 0
July 2006................................................. 99 94 88 82 77 79 0 0 0 0
July 2007................................................. 98 88 79 69 53 75 0 0 0 0
July 2008................................................. 96 82 69 54 35 71 0 0 0 0
July 2009................................................. 94 74 57 40 24 67 0 0 0 0
July 2010................................................. 92 67 47 30 16 62 0 0 0 0
July 2011................................................. 90 60 39 22 11 57 0 0 0 0
July 2012................................................. 87 54 32 16 8 52 0 0 0 0
July 2013................................................. 84 48 27 12 5 46 0 0 0 0
July 2014................................................. 81 43 22 9 3 40 0 0 0 0
July 2015................................................. 78 38 18 6 2 34 0 0 0 0
July 2016................................................. 75 34 14 5 2 27 0 0 0 0
July 2017................................................. 71 30 12 3 1 20 0 0 0 0
July 2018................................................. 67 26 9 2 1 11 0 0 0 0
July 2019................................................. 63 23 7 2 * 3 0 0 0 0
July 2020................................................. 58 19 6 1 * 0 0 0 0 0
July 2021................................................. 53 16 5 1 * 0 0 0 0 0
July 2022................................................. 48 14 3 1 * 0 0 0 0 0
July 2023................................................. 42 11 3 * * 0 0 0 0 0
July 2024................................................. 36 9 2 * * 0 0 0 0 0
July 2025................................................. 29 7 1 * * 0 0 0 0 0
July 2026................................................. 22 5 1 * * 0 0 0 0 0
July 2027................................................. 15 3 * * * 0 0 0 0 0
July 2028................................................. 6 1 * * * 0 0 0 0 0
July 2029................................................. 0 0 0 0 0 0 0 0 0 0
Weighted Average Life (in years)(1)....................... 21.4 15.0 11.9 10.0 8.8 12.4 3.4 2.2 1.7 1.5
</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 is determined as described on page A1-37.
A1-48
<PAGE> 90
PERCENT OF ORIGINAL CLASS CERTIFICATE PRINCIPAL BALANCE
OUTSTANDING OF THE POOL 1 CERTIFICATES
<TABLE>
<CAPTION>
CLASS A28 CLASS R
------------------------------- -------------------------------
DISTRIBUTION DATE 0% 125% 250% 400% 500% 0% 125% 250% 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
July 2000................................................... 100 100 100 100 100 0 0 0 0 0
July 2001................................................... 100 100 100 100 100 0 0 0 0 0
July 2002................................................... 100 100 100 58 1 0 0 0 0 0
July 2003................................................... 100 100 72 0 0 0 0 0 0 0
July 2004................................................... 100 100 4 0 0 0 0 0 0 0
July 2005................................................... 100 96 0 0 0 0 0 0 0 0
July 2006................................................... 100 65 0 0 0 0 0 0 0 0
July 2007................................................... 100 33 0 0 0 0 0 0 0 0
July 2008................................................... 100 5 0 0 0 0 0 0 0 0
July 2009................................................... 100 0 0 0 0 0 0 0 0 0
July 2010................................................... 100 0 0 0 0 0 0 0 0 0
July 2011................................................... 100 0 0 0 0 0 0 0 0 0
July 2012................................................... 100 0 0 0 0 0 0 0 0 0
July 2013................................................... 100 0 0 0 0 0 0 0 0 0
July 2014................................................... 100 0 0 0 0 0 0 0 0 0
July 2015................................................... 100 0 0 0 0 0 0 0 0 0
July 2016................................................... 100 0 0 0 0 0 0 0 0 0
July 2017................................................... 100 0 0 0 0 0 0 0 0 0
July 2018................................................... 100 0 0 0 0 0 0 0 0 0
July 2019................................................... 92 0 0 0 0 0 0 0 0 0
July 2020................................................... 69 0 0 0 0 0 0 0 0 0
July 2021................................................... 42 0 0 0 0 0 0 0 0 0
July 2022................................................... 12 0 0 0 0 0 0 0 0 0
July 2023................................................... 0 0 0 0 0 0 0 0 0 0
July 2024................................................... 0 0 0 0 0 0 0 0 0 0
July 2025................................................... 0 0 0 0 0 0 0 0 0 0
July 2026................................................... 0 0 0 0 0 0 0 0 0 0
July 2027................................................... 0 0 0 0 0 0 0 0 0 0
July 2028................................................... 0 0 0 0 0 0 0 0 0 0
July 2029................................................... 0 0 0 0 0 0 0 0 0 0
Weighted Average Life (in years)(1)......................... 21.7 7.5 4.3 3.1 2.7 0.1 0.1 0.1 0.1 0.1
</TABLE>
- -------------------------
(1) The weighted average life is determined as described on page A1-37.
A1-49
<PAGE> 91
ANNEX 2
THE POOL 2 MORTGAGE LOANS AND THE POOL 2 SENIOR CERTIFICATES
Except in the limited circumstances described under "-- Cross-Support" in
this Annex 2, interest and principal will be distributable on the Pool 2 senior
certificates solely out of the Pool 2 Available Funds received in respect of the
Pool 2 mortgage loans. This annex sets forth certain data with respect to the
Pool 2 mortgage loans and describes the manner in which interest and principal
will be distributable on the Pool 2 senior certificates. This Annex also
discusses the yield and weighted average life considerations relevant to an
investment in the Pool 2 senior certificates.
THE POOL 2 MORTGAGE LOANS
We expect that the following percentages of the Pool 2 mortgage loans (by
Scheduled Principal Balance as of the Cut-off Date) will have been originated
under the following documentation programs:
- At least 76% of such mortgage loans and substantially all of the mortgage
loans with loan-to-value ratios in excess of 80% will have been
originated under GECMSI's full or alternative documentation program or
other full or alternative documentation programs acceptable to GECMSI.
- No more than 16.50% of such mortgage loans will have been originated
under GECMSI's no income verification programs or other no income
verification programs acceptable to GECMSI.
- No more than 4.50% of such mortgage loans will have been originated under
GECMSI's "Enhanced Streamlined Refinance Program" or other streamlined
refinance programs acceptable to GECMSI.
- No more than 1.50% of such mortgage loans will have been originated under
GECMSI's "No Ratio Program" or other no ratio programs acceptable to
GECMSI.
- None of such mortgage loans will have been originated under GECMSI's "No
Income, No Asset Verification Program" or other no income, no asset
verification programs acceptable to GECMSI.
- No more than 2.47% of such mortgage loans will have been acquired under
GECMSI's "Relocation Loan" program or other relocation programs
acceptable to GECMSI.
See "The Trusts -- The Mortgage Loans -- Loan Underwriting Policies" in the
accompanying prospectus for a description of these documentation programs.
The Pool 2 mortgage loans will have an aggregate Scheduled Principal
Balance as of the Cut-off Date, after deducting payments of principal due or
received on or before such date, of approximately $72,349,463. This amount is
subject to a permitted variance such that the aggregate Scheduled Principal
Balance thereof will not be less than $68,731,990 or greater than $75,966,936.
Prior to issuance of the certificates, we will not remove from the expected
Pool 2 mortgage pool more than 5% of the Pool 2 mortgage loans, measured by
Scheduled Principal Balance as of the Cut-off Date, unless a revised prospectus
supplement is delivered to prospective investors. In addition, prior to issuance
of the certificates, we will
A2-1
<PAGE> 92
not add mortgage loans to the Pool 2 mortgage pool if this would result in more
than a 5% increase in the size of the Pool 2 mortgage pool, measured by
Scheduled Principal Balance as of the Cut-off Date, unless a revised prospectus
supplement is delivered to prospective investors.
The interest rates borne by the Pool 2 mortgage loans are expected to range
from 7.00% to 8.25% per annum, and the weighted average mortgage interest rate
as of the Cut-off Date of such mortgage loans is expected to be between 7.35%
and 7.39% per annum. The original principal balances of the Pool 2 mortgage
loans are expected to range from $43,500 to $1,200,000 and, as of the Cut-off
Date, the average Scheduled Principal Balance of the Pool 2 mortgage loans is
not expected to exceed $313,000 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 Pool 2 mortgage loan will be April 1998, and the month
and year of the latest scheduled maturity date of any such mortgage loan will be
July 2029. All of the Pool 2 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 Pool 2 mortgage loans will be between 356 and
358 months as of the Cut-off Date.
The Pool 2 mortgage loans are expected to have the following additional
characteristics (by Scheduled Principal Balance of all the Pool 2 mortgage
loans) as of the Cut-off Date:
- No more than 10% of the Pool 2 mortgage loans will have a Scheduled
Principal Balance of more than $500,000 and up to and including $750,000.
No more than 5% of the mortgage loans will have a Scheduled Principal
Balance of more than $750,000 and up to and including $1,000,000. No more
than 2.20% of the Pool 2 mortgage loans will have a Scheduled Principal
Balance of more than $1,000,000.
- No more than 18% of the Pool 2 mortgage loans will have a loan-to-value
ratio at origination in excess of 80%, no more than 5% of the Pool 2
mortgage loans will have a loan-to-value ratio at origination in excess
of 90%, and none of the Pool 2 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 Pool 2
mortgage loans is expected to be between 75% and 77%.
- No more than 4.5% of the Pool 2 mortgage loans had a loan-to-value ratio
at origination calculated based on an appraisal conducted more than one
year before the origination date thereof.
- The proceeds of at least 63% of the Pool 2 mortgage loans will have been
used to acquire the related mortgaged property. The proceeds of the
remainder of the Pool 2 mortgage loans will have been used to refinance
an existing loan. No more than 8% of the Pool 2 mortgage loans will have
been the subject of "cash-out" refinancings.
- None of the Pool 2 mortgage loans will be temporary buy-down mortgage
loans.
- No more than 3% of the Pool 2 mortgage loans will be secured by mortgaged
properties located in any one postal zip code area.
- No more than 40% of the Pool 2 mortgage loans will be secured by
mortgaged properties located in California. The majority of the Pool 2
mortgage loans will be secured by mortgaged properties located in
California, New Jersey, Illinois, Pennsylvania and New York.
A2-2
<PAGE> 93
- No more than 5% of the Pool 2 mortgage loans will be secured by mortgaged
properties located in any one state except the states specified in the
preceding sentence.
- At least 91% of the Pool 2 mortgage loans will be secured by mortgaged
properties determined by GECMSI 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 87% of the Pool 2 mortgage loans will be secured by
single-family, detached residences.
- No more than 7% of the Pool 2 mortgage loans will be secured by
condominiums.
- No more than 4% of the Pool 2 mortgage loans will be secured by shares of
stock in cooperative housing corporations and assignments of the
proprietary leases to occupy cooperative apartment units therein (each, a
"Cooperative Loan").
Set forth below is a description of certain characteristics of Pool 2 and
the mortgage loans expected to be included therein, subject to the variance
described herein relating to Pool 2. The sum of the percentages may not equal
100% due to rounding.
ORIGINAL PRINCIPAL BALANCES AS OF THE CUT-OFF DATE
<TABLE>
<CAPTION>
AGGREGATE SCHEDULED PERCENTAGE OF POOL BY
PRINCIPAL AGGREGATE SCHEDULED
RANGE OF ORIGINAL NUMBER OF BALANCE AS OF PRINCIPAL BALANCE AS
PRINCIPAL BALANCE MORTGAGE LOANS THE CUT-OFF DATE OF THE CUT-OFF DATE
----------------- -------------- ------------------- ---------------------
<S> <C> <C> <C>
$ 0 - 227,150........... 48 $ 6,742,128.32 9.32%
227,151 - 250,000........... 9 2,178,570.26 3.01
250,001 - 300,000........... 61 16,876,308.50 23.33
300,001 - 350,000........... 51 16,476,146.55 22.77
350,001 - 400,000........... 28 10,536,758.21 14.56
400,001 - 450,000........... 13 5,556,090.87 7.68
450,001 - 600,000........... 18 9,435,568.79 13.04
600,001 - 650,000........... 1 649,517.61 0.90
650,001 - 1,500,000.......... 4 3,898,374.57 5.39
--- --------------- --------
Total.................... 233 $ 72,349,463.68 100.00%
=== =============== ========
</TABLE>
A2-3
<PAGE> 94
MORTGAGE INTEREST RATES AS OF THE CUT-OFF DATE
<TABLE>
<CAPTION>
AGGREGATE SCHEDULED PERCENTAGE OF POOL BY
PRINCIPAL AGGREGATE SCHEDULED
NUMBER OF BALANCE AS OF PRINCIPAL BALANCE AS
MORTGAGE INTEREST RATE MORTGAGE LOANS THE CUT-OFF DATE OF THE CUT-OFF DATE
---------------------- -------------- ------------------- ---------------------
<S> <C> <C> <C>
7.000%........................ 19 $ 6,352,344.66 8.78%
7.125......................... 48 16,275,637.77 22.50
7.250......................... 48 16,396,436.14 22.66
7.375......................... 32 9,357,394.68 12.93
7.378......................... 1 286,811.08 0.40
7.500......................... 33 9,231,847.10 12.76
7.625......................... 7 2,048,192.51 2.83
7.750......................... 12 3,683,387.70 5.09
7.875......................... 13 3,800,055.31 5.25
8.000......................... 19 4,657,522.53 6.44
8.250......................... 1 259,834.20 0.36
--- -------------- -------
Total.................... 233 $72,349,463.68 100.00%
=== ============== =======
</TABLE>
GEOGRAPHIC DISTRIBUTION OF MORTGAGED PROPERTIES AS OF THE CUT-OFF DATE
<TABLE>
<CAPTION>
AGGREGATE SCHEDULED PERCENTAGE OF POOL BY
PRINCIPAL AGGREGATE SCHEDULED
NUMBER OF BALANCE AS OF PRINCIPAL BALANCE AS
STATE MORTGAGE LOANS THE CUT-OFF DATE OF THE CUT-OFF DATE
----- -------------- ------------------- ---------------------
<S> <C> <C> <C>
Arizona....................... 5 $ 1,245,271.87 1.72%
California.................... 102 28,706,363.08 39.68
Colorado...................... 9 2,328,562.93 3.22
Connecticut................... 4 1,342,239.82 1.86
Florida....................... 5 2,285,084.94 3.16
Georgia....................... 1 499,217.53 0.69
Hawaii........................ 1 425,000.00 0.59
Idaho......................... 1 108,415.36 0.15
Illinois...................... 11 4,675,866.07 6.46
Indiana....................... 2 797,479.90 1.10
Kentucky...................... 1 286,307.35 0.40
Maine......................... 1 282,778.43 0.39
Maryland...................... 8 2,406,296.50 3.33
Michigan...................... 3 992,649.29 1.37
Minnesota..................... 4 1,258,065.94 1.74
Missouri...................... 1 309,115.50 0.43
New Hampshire................. 2 558,431.79 0.77
New Jersey.................... 17 5,508,742.62 7.61
New Mexico.................... 2 150,890.64 0.21
New York...................... 11 3,916,547.52 5.41
North Carolina................ 5 1,272,888.19 1.76
Ohio.......................... 3 953,698.35 1.32
Oregon........................ 1 319,637.78 0.44
Pennsylvania.................. 13 4,266,425.28 5.90
</TABLE>
A2-4
<PAGE> 95
GEOGRAPHIC DISTRIBUTION OF MORTGAGED PROPERTIES AS OF THE CUT-OFF DATE
<TABLE>
<CAPTION>
AGGREGATE SCHEDULED PERCENTAGE OF POOL BY
PRINCIPAL AGGREGATE SCHEDULED
NUMBER OF BALANCE AS OF PRINCIPAL BALANCE AS
STATE MORTGAGE LOANS THE CUT-OFF DATE OF THE CUT-OFF DATE
----- -------------- ------------------- ---------------------
<S> <C> <C> <C>
Rhode Island.................. 2 647,363.70 0.89
Texas......................... 4 1,151,799.79 1.59
Utah.......................... 1 155,099.87 0.21
Virginia...................... 4 921,350.60 1.27
Washington.................... 5 3,277,361.28 4.53
Wisconsin..................... 4 1,300,511.76 1.80
--- --------------- ------
Total............... 233 $ 72,349,463.68 100.00%
=== =============== ======
</TABLE>
YEAR OF ORIGINATION AS OF THE CUT-OFF DATE
<TABLE>
<CAPTION>
AGGREGATE SCHEDULED PERCENTAGE OF POOL BY
PRINCIPAL AGGREGATE SCHEDULED
NUMBER OF BALANCE AS OF PRINCIPAL BALANCE AS
YEAR OF ORIGINATION MORTGAGE LOANS THE CUT-OFF DATE OF THE CUT-OFF DATE
- ------------------- -------------- ------------------- ---------------------
<S> <C> <C> <C>
1998.......................... 27 $ 5,755,744.99 7.96%
1999.......................... 206 66,593,718.69 92.04
----- --------------- ------
Total.................... 233 $ 72,349,463.68 100.00%
===== =============== ======
</TABLE>
YEAR OF MATURITY AS OF THE CUT-OFF DATE
<TABLE>
<CAPTION>
AGGREGATE SCHEDULED PERCENTAGE OF POOL BY
PRINCIPAL AGGREGATE SCHEDULED
NUMBER OF BALANCE AS OF PRINCIPAL BALANCE AS
YEAR OF MATURITY MORTGAGE LOANS THE CUT-OFF DATE OF THE CUT-OFF DATE
- ---------------- -------------- ------------------- ---------------------
<S> <C> <C> <C>
2019.......................... 2 $ 702,822.58 0.97%
2024.......................... 1 309,624.83 0.43
2027.......................... 1 286,811.08 0.40
2028.......................... 23 4,218,449.11 5.83
2029.......................... 206 66,831,756.08 92.37
--- --------------- ------
Total.................... 233 $ 72,349,463.68 100.00%
=== =============== ======
</TABLE>
A2-5
<PAGE> 96
TYPES OF MORTGAGED PROPERTIES
<TABLE>
<CAPTION>
AGGREGATE SCHEDULED PERCENTAGE OF POOL BY
PRINCIPAL AGGREGATE SCHEDULED
NUMBER OF BALANCE AS OF PRINCIPAL BALANCE AS
TYPE OF DWELLING MORTGAGE LOANS THE CUT-OFF DATE OF THE CUT-OFF DATE
---------------- -------------- ------------------- ---------------------
<S> <C> <C> <C>
Single-family detached........ 205 $ 63,831,853.78 88.23%
Single-family attached........ 7 2,000,964.68 2.77
Condominium................... 13 3,646,874.66 5.04
2-4 family units.............. 3 891,270.56 1.23
Cooperative................... 5 1,978,500.00 2.73
--- --------------- ------
Total.................... 233 $ 72,349,463.68 100.00%
=== =============== ======
</TABLE>
OCCUPANCY STATUS OF MORTGAGED PROPERTIES(1)
<TABLE>
<CAPTION>
AGGREGATE SCHEDULED PERCENTAGE OF POOL BY
PRINCIPAL AGGREGATE SCHEDULED
NUMBER OF BALANCE AS OF PRINCIPAL BALANCE AS
OCCUPANCY MORTGAGE LOANS THE CUT-OFF DATE OF THE CUT-OFF DATE
- --------- -------------- ------------------- ---------------------
<S> <C> <C> <C>
Owner Occupied................ 214 $ 67,157,850.72 92.82%
Vacation...................... 14 4,005,716.59 5.54
Investment.................... 5 1,185,896.37 1.64
--- --------------- ------
Total.................... 233 $ 72,349,463.68 100.00%
=== =============== ======
</TABLE>
- ---------------
(1) Based on information supplied by the mortgagor in the loan application.
PURPOSE OF THE MORTGAGE LOANS
<TABLE>
<CAPTION>
AGGREGATE SCHEDULED PERCENTAGE OF POOL BY
PRINCIPAL AGGREGATE SCHEDULED
NUMBER OF BALANCE AS OF PRINCIPAL BALANCE AS
PURPOSE OF THE LOAN MORTGAGE LOANS THE CUT-OFF DATE OF THE CUT-OFF DATE
------------------- -------------- ------------------- ---------------------
<S> <C> <C> <C>
Purchase...................... 139 $ 46,296,112.35 63.99%
Rate Term/Refinance........... 76 20,713,714.89 28.63
Cash-out Refinance............ 18 5,339,636.44 7.38
--- --------------- ------
Total.................... 233 $ 72,349,463.68 100.00%
=== =============== ======
</TABLE>
A2-6
<PAGE> 97
LOAN-TO-VALUE RATIOS AT ORIGINATION
<TABLE>
<CAPTION>
AGGREGATE SCHEDULED PERCENTAGE OF POOL BY
RANGE OF PRINCIPAL AGGREGATE SCHEDULED
LOAN-TO-VALUE RATIO NUMBER OF BALANCE AS OF PRINCIPAL BALANCE AS
AT ORIGINATION MORTGAGE LOANS THE CUT-OFF DATE OF THE CUT-OFF DATE
------------------- -------------- ------------------- ---------------------
<S> <C> <C> <C>
00.000-50.00%................. 16 $ 4,064,252.64 5.62%
50.001-60.00.................. 11 2,488,206.69 3.44
60.001-70.00.................. 35 11,665,671.82 16.12
70.001-75.00.................. 26 8,662,303.71 11.97
75.001-80.00.................. 101 32,542,180.23 44.98
80.001-85.00.................. 4 1,008,555.96 1.39
85.001-90.00.................. 27 8,906,227.63 12.31
90.001-95.00.................. 13 3,012,065.00 4.16
--- --------------- ------
Total.................... 233 $ 72,349,463.68 100.00%
=== =============== ======
</TABLE>
DISTRIBUTIONS ON THE POOL 2 SENIOR CERTIFICATES
Allocation of Pool 2 Available Funds
Interest and principal on the Pool 2 senior certificates will be
distributed monthly 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 August 1999. These distributions, together with certain
distributions to the junior certificates, will be in an aggregate amount equal
to the Pool 2 Available Funds for the related Distribution Date. In certain
limited circumstances, the Pool 2 senior certificates may receive distributions
in respect of Pool 1 Available Funds, and the Pool 1 senior certificates may
receive distributions in respect of Pool 2 Available Funds. See
"-- Cross-Support" in this Annex 2. Distributions will be made to holders of
record at the close of business on the related Record Date.
On each Distribution Date, the Pool 2 Available Funds will be distributed
in the following order of priority among the Pool 2 senior certificates:
first, to the classes of Pool 2 senior certificates entitled to
distributions of interest, 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;
second, to the classes of Pool 2 senior certificates entitled to
distributions of interest, any Accrued Certificate Interest thereon
remaining undistributed from previous Distribution Dates, to the extent of
remaining Pool 2 Available Funds, any shortfall in available amounts being
allocated among such classes in proportion to the amount of such Accrued
Certificate Interest remaining undistributed for each such class for such
Distribution Date; and
third, to the Class 2-A1 through Class 2-A5 Certificates, in reduction
of the Class Certificate Principal Balances thereof, to the extent of
remaining Pool 2 Available Funds, the Pool 2 Senior Optimal Principal
Amount for such Distribution Date, in the following order of priority:
(1) to the Class 2-A5 Certificates, the Class 2-A5 Principal
Distribution Amount (as defined herein) for such Distribution Date,
until the Class Certificate Principal Balance thereof has been reduced
to zero; and
A2-7
<PAGE> 98
(2) to the Class 2-A1 Certificates, until the Class Certificate
Principal Balance thereof has been reduced to zero; and
(3) to the Class 2-A2, Class 2-A3 and Class 2-A4 Certificates
(together with the Class 2-A1 Certificates the "Pool 2 Group I Senior
Certificates"), concurrently as follows:
(a) approximately 10.0% of the amount distributable under
clause (3) to the Class 2-A3 Certificates, until the Class
Certificate Principal Balance thereof has been reduced to zero; and
(b) approximately 90.0% of the amount distributable under
clause (3), sequentially, to the Class 2-A2 and Class 2-A4
Certificates, in that order, until the respective Class Certificate
Principal Balances thereof have each been reduced to zero.
Except in the limited circumstances described under "-- Cross-Support"
below, any Pool 2 Available Funds remaining after distributions pursuant to
priority third above (the "Pool 2 Junior Available Funds") will be combined with
the Pool 1 Junior Available Funds (as described in Annex 1 above) for such
Distribution Date (such combined amount, the "Junior Available Funds") and
distributed to the junior certificates in accordance with the priorities set
forth in the second paragraph under "-- Distributions on the Junior
Certificates -- Allocation of Junior Available Funds" in Annex 3 of this
prospectus supplement.
The percentages set forth in priority third above were calculated on the
basis of the Class Certificate Principal Balances of the related certificates
described herein. If these 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 after the Cross-Over Date, distributions of
principal on the outstanding Pool 2 senior certificates entitled to principal
distributions will be made pro rata among all such certificates, regardless of
the allocation, or sequential nature, of principal payments described in
priority third in the second paragraph under "Allocation of Pool 2 Available
Funds."
"Pro rata" distributions among classes of certificates will be made in
proportion to the then-current Class Certificate Principal Balances of such
classes.
Interest
Interest will accrue on the Pool 2 senior certificates offered hereby
entitled to interest distributions at the respective interest rates set forth in
the summary of this prospectus supplement during each Interest Accrual Period.
Interest will accrue on the Notional Principal Balance of the Class 2-S
Certificates during each Interest Accrual Period at a variable per annum rate
equal to the excess of (1) the weighted average (by Scheduled Principal Balance)
carried to six decimal places, rounded down, of the Net Mortgage Rates of the
Outstanding Mortgage Loans in Pool 2 which are Non-discount Mortgage Loans as of
the first day of such Interest Accrual Period (or as of the Cut-off Date, in the
case of the first Interest Accrual Period) over (2) 6.75%. However, this
calculation will not include any Pool 2 mortgage loan that was the subject of a
voluntary prepayment in full received by GECMSI, or, in the case of a Pool 2
mortgage loan master-serviced by GECMSI, of which GECMSI receives notice, on
A2-8
<PAGE> 99
or after the first day but on or before the fifteenth day of such Interest
Accrual Period. The per annum interest rate on the Class 2-S Certificates for
the first Interest Accrual Period is expected to be approximately 0.362531%. The
"Notional Principal Balance" of the Class 2-S Certificates as of any
Distribution Date will equal the aggregate Scheduled Principal Balance of the
Pool 2 Outstanding Mortgage Loans which are Non-discount Mortgage Loans as of
the first day of the calendar month preceding such Distribution Date. The
initial Notional Principal Balance of the Class 2-S Certificates is expected to
be approximately $72,349,464.
The Class 2-A3 Certificates are principal-only certificates and will not
accrue interest.
The "Accrued Certificate Interest" for any Pool 2 certificate entitled to
distributions of interest 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 any Class
2-S Certificate, the Notional Principal Balance) of such certificate immediately
prior to such Distribution Date, less such certificate's share of any Net
Interest Shortfall (as defined below) in respect of Pool 2 mortgage loans, the
interest portion of any Excess Losses (as defined herein) in respect of Pool 1
and Pool 2 mortgage loans through the Cross-Over Date and, after the Cross-Over
Date, the interest portion of Realized Losses, including Excess Losses, in
respect of Pool 1 or Pool 2 mortgage loans.
The "Certificate Principal Balance" of any Pool 2 senior certificate
entitled to principal distributions as of any Distribution Date will equal such
certificate's Certificate Principal Balance on the date of the initial issuance
of the certificates as reduced by:
- all amounts distributed on previous Distribution Dates on such
certificate on account of principal; and
- the principal portion of all Realized Losses in respect of Pool 1 or
Pool 2 mortgage loans previously allocated to such certificate.
For definitions of "Interest Accrual Period," "Net Interest Shortfall" and
"Interest Shortfall" see "-- Distributions on the Pool 1 Senior Certificates" in
Annex 1.
Any Net Interest Shortfall in respect of the Pool 2 mortgage loans will, on
each Distribution Date, be allocated among all the outstanding Pool 2 senior
certificates entitled to distributions of interest and the junior certificates
in respect of the related Apportioned Principal Balance in proportion to the
amount of Accrued Certificate Interest that would have been allocated thereto in
the absence of such shortfalls.
The interest portion of any Excess Losses through the Cross-Over Date in
respect of the Pool 1 or Pool 2 mortgage loans will be allocated among all the
outstanding Pool 1 and Pool 2 senior certificates entitled to distributions of
interest and the junior certificates in proportion to the amount of Accrued
Certificate Interest that would have been allocated thereto in the absence of
such losses.
The interest portion of any Realized Losses after the Cross-Over Date in
respect of the Pool 1 and Pool 2 mortgage loans will be allocated among all the
outstanding Pool 1 and Pool 2 senior certificates entitled to distributions of
interest in proportion to the amount of Accrued Certificate Interest that would
have been allocated thereto in the absence of such losses.
The interest portion of any Realized Losses (other than Excess Losses) in
respect of the Pool 2 mortgage loans occurring prior to the Cross-Over Date will
not be allocated among any certificates, but will reduce the amount of Pool 2
Available Funds on the
A2-9
<PAGE> 100
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
outstanding junior certificates in inverse order of priority.
If Pool 2 Available Funds are insufficient on any Distribution Date to
distribute the aggregate Accrued Certificate Interest on the Pool 2 senior
certificates entitled to distributions of interest to their certificateholders,
any shortfall in available amounts will be allocated among such classes of Pool
2 senior certificates in proportion to the amounts of Accrued Certificate
Interest otherwise distributable thereon. The amount of any such undistributed
Accrued Certificate Interest will be added to the amount of interest to be
distributed on the Pool 2 senior certificates entitled to distributions of
interest on subsequent Distribution Dates in accordance with priority second in
the second paragraph under "-- Allocation of Pool 2 Available Funds" above. No
interest will accrue on any Accrued Certificate Interest remaining undistributed
from previous Distribution Dates. See "-- Cross-Support" below for a discussion
of the circumstances in which shortfalls in Available Funds to cover Accrued
Certificate Interest on one group of senior certificates may be paid from
collections in respect of the mortgage pool backing the other group of senior
certificates.
Principal
Distributions in reduction of the principal balance of each Pool 2 senior
certificate entitled to principal distributions will be made on each
Distribution Date.
Distributions in reduction of the Class Certificate Principal Balance of
each class of Pool 2 senior certificates entitled to principal distributions
will be made on each Distribution Date under priority third in the second
paragraph under "-- Allocation of Pool 2 Available Funds" above. In accordance
with priority third, the Pool 2 Available Funds remaining after the distribution
of interest on the Pool 2 senior certificates entitled to interest distributions
will be allocated to the Pool 2 senior certificates entitled to principal
distributions in an aggregate amount not to exceed the Pool 2 Senior Optimal
Principal Amount for such Distribution Date. The Class 2-A5 Certificates will
not receive any distributions in respect of scheduled payments of principal,
prepayments or other unscheduled recoveries of principal on the Pool 2 mortgage
loans during the first five years after the date of initial issuance of the
certificates, except as otherwise described herein on or following the earlier
of the Pool 2 Group I Final Distribution Date and the Cross-Over Date.
The "Pool 2 Senior Optimal Principal Amount" with respect to each
Distribution Date will be an amount equal to the sum of:
(1) the Pool 2 Senior Percentage (as defined herein) of all scheduled
payments of principal due on each Pool 2 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 in respect of the Pool 2 mortgage loans 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;
(2) the Pool 2 Senior Prepayment Percentage (as defined herein) of the
Scheduled Principal Balance of each Pool 2 mortgage loan which was the
subject of a prepayment in full received by GECMSI (or, in the case of a
Pool 2 mortgage loan
A2-10
<PAGE> 101
master-serviced by GECMSI, of which GECMSI receives notice) during the
applicable Prepayment Period (as defined below);
(3) the Pool 2 Senior Prepayment Percentage of all partial prepayments
of principal received in respect of the Pool 2 mortgage loans during the
applicable Prepayment Period;
(4) the lesser of:
(a) the Pool 2 Senior Prepayment Percentage of the sum of (w) the
net liquidation proceeds allocable to principal on each Pool 2 mortgage
loan which became a Liquidated Mortgage Loan during the related
Prepayment Period, other than mortgage loans described in clause
(4)(a)(x), and (x) the principal balance of each Pool 2 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 Pool 2 Senior Percentage of the sum of (w) the Scheduled
Principal Balance of each Pool 2 mortgage loan which became a Liquidated
Mortgage Loan during the related Prepayment Period, other than Pool 2
mortgage loans described in clause (4)(b)(x), and (x) the Scheduled
Principal Balance of each Pool 2 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 minus
(y) the Pool 2 Senior Percentage of the principal portion of Excess
Losses (other than Debt Service Reductions) in respect of Pool 2
mortgage loans during the related Prepayment Period; and
(5) the Pool 2 Senior Prepayment Percentage of the sum of (a) the
Scheduled Principal Balance of each Pool 2 mortgage loan which was
repurchased by GECMSI in connection with such Distribution Date and (b) the
difference, if any, between the Scheduled Principal Balance of a Pool 2
mortgage loan that has been replaced by GECMSI 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 "Class 2-A5 Principal Distribution Amount" for any Distribution Date
will equal the product of (1) the Pool 2 Senior Optimal Principal Amount for
such date (determined without application of the Pool 2 Senior Percentage or
Pool 2 Senior Prepayment Percentage) (2) the Class 2-A5 Percentage for such date
and (3) the Class 2-A5 Distribution Percentage for such date. Notwithstanding
the foregoing, on the Pool 2 Group I Final Distribution Date, the Class 2-A5
Principal Distribution Amount will be increased by any Pool 2 Senior Optimal
Principal Amount remaining after distributions of principal have been made on
the Pool 2 Group I Senior Certificates, and following the Pool 2 Group I Final
Distribution Date, the Class 2-A5 Principal Distribution Amount will equal the
Pool 2 Senior Optimal Principal Amount.
The "Class 2-A5 Percentage" for any Distribution Date will equal the
percentage (carried to six places rounded up) obtained by dividing (1) the
aggregate Certificate Principal Balance of the Class 2-A5 Certificates
immediately preceding such Distribution Date by (2) the Pool 2 Scheduled
Principal Balance immediately preceding such Distribution Date. The initial
Class 2-A5 Percentage is expected to be approximately 10%.
The "Class 2-A5 Distribution Percentage" for any Distribution Date will
equal 0% through the Distribution Date in July 2004; 30% thereafter through the
Distribution Date
A2-11
<PAGE> 102
in July 2005; 40% thereafter through the Distribution Date in July 2006; 60%
thereafter through the Distribution Date in July 2007; 80% thereafter through
the Distribution Date in July 2008; and 100% thereafter.
The "Pool 2 Group I Final Distribution Date" is the Distribution Date on
which the Class Certificate Principal Balance of each of the Pool 2 Group I
Senior Certificates has been reduced to zero.
With respect to any Pool 2 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 Pool 2
mortgage loan and any Distribution Date, the "Prepayment Period" is the month
preceding the month of such Distribution Date.
The "Pool 2 Senior Percentage" on any Distribution Date will equal the
lesser of 100% and the percentage (carried to six places rounded up) obtained by
dividing the aggregate Certificate Principal Balances of all the Pool 2 senior
certificates immediately preceding such Distribution Date by the Pool 2
Scheduled Principal Balance immediately preceding such Distribution Date. The
initial Pool 2 Senior Percentage is expected to be approximately 95.75%.
The "Pool 2 Senior Prepayment Percentage" on any Distribution Date
occurring during the periods set forth below will be as follows:
<TABLE>
<CAPTION>
PERIOD (DATES INCLUSIVE) POOL 2 SENIOR PREPAYMENT PERCENTAGE
- ------------------------ -----------------------------------
<S> <C>
August 1999 - July 2004.............. 100%
August 2004 - July 2005.............. Pool 2 Senior Percentage plus 70%
of the Pool 2 Apportioned Junior
Percentage
August 2005 - July 2006.............. Pool 2 Senior Percentage plus 60%
of the Pool 2 Apportioned Junior
Percentage
August 2006 - July 2007.............. Pool 2 Senior Percentage plus 40%
of the Pool 2 Apportioned Junior
Percentage
August 2007 - July 2008.............. Pool 2 Senior Percentage plus 20%
of the Pool 2 Apportioned Junior
Percentage
August 2008 and thereafter........... Pool 2 Senior Percentage
</TABLE>
Notwithstanding the foregoing, if on any Distribution Date either the Pool
2 Senior Percentage exceeds the initial Pool 2 Senior Percentage or the Pool 1
Senior Percentage exceeds the initial Pool 1 Senior Percentage, the Pool 2
Senior Prepayment Percentage for such Distribution Date will equal 100%.
In addition, no reduction of the Pool 2 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 on which the Pool 1 Senior
Prepayment Percentage Stepdown Limitation (as defined in "Distributions on the
Pool 1 Senior Certificates -- Principal" in Annex 1) or the Pool 2 Senior
Prepayment Percentage Stepdown Limitation (as defined
A2-12
<PAGE> 103
below) is in effect. The "Pool 2 Senior Prepayment Percentage Stepdown
Limitation" will be in effect on any Distribution Date unless, as of the last
day of the month preceding such Distribution Date, either:
(A)(1) the aggregate Scheduled Principal Balance of Pool 2 mortgage loans
delinquent 60 days or more (including for this purpose any Pool 2
mortgage loans in foreclosure and Pool 2 mortgage loans with respect
to which the related mortgaged property has been acquired by the
trust) does not exceed 50% of the aggregate Pool 2 Apportioned
Junior Principal Balance of the junior certificates as of such date;
and
(2) cumulative Realized Losses in respect of the Pool 2 mortgage loans
do not exceed:
(a) 30% of the Pool 2 Apportioned Junior Principal Balance as of
the date of issuance of the certificates (the "Original Pool 2
Apportioned Junior Principal Balance") if such Distribution
Date occurs between and including August 2004 and July 2005;
(b) 35% of the Original Pool 2 Apportioned Junior Principal Balance
if such Distribution Date occurs between and including August
2005 and July 2006;
(c) 40% of the Original Pool 2 Apportioned Junior Principal Balance
if such Distribution Date occurs between and including August
2006 and July 2007;
(d) 45% of the Original Pool 2 Apportioned Junior Principal Balance
if such Distribution Date occurs between and including August
2007 and July 2008; and
(e) 50% of the Original Pool 2 Apportioned Junior Principal Balance
if such Distribution Date occurs during or after August 2008;
or
(B)(1) the aggregate Scheduled Principal Balance of Pool 2 mortgage loans
delinquent 60 days or more (including for this purpose any Pool 2
mortgage loans in foreclosure and Pool 2 mortgage loans with respect
to which the related mortgaged property has been acquired by the
trust), averaged over the last three months, as a percentage of the
aggregate Scheduled Principal Balance of all Pool 2 mortgage loans
averaged over the last three months, does not exceed 4%; and
(2) cumulative Realized Losses in respect of Pool 2 mortgage loans do
not exceed:
(a) 10% of the Original Pool 2 Apportioned Junior Principal Balance
if such Distribution Date occurs between and including August
2004 and July 2005;
(b) 15% of the Original Pool 2 Apportioned Junior Principal Balance
if such Distribution Date occurs between and including August
2005 and July 2006;
(c) 20% of the Original Pool 2 Apportioned Junior Principal Balance
if such Distribution Date occurs between and including August
2006 and July 2007;
A2-13
<PAGE> 104
(d) 25% of the Original Pool 2 Apportioned Junior Principal Balance
if such Distribution Date occurs between and including August
2007 and July 2008; and
(e) 30% of the Original Pool 2 Apportioned Junior Principal Balance
if such Distribution Date occurs during or after August 2008.
The "Pool 2 Apportioned Junior Percentage" on any Distribution Date prior
to the Cross-Over Date will equal 100% minus the Pool 2 Senior Percentage. The
"Pool 2 Apportioned Junior Prepayment Percentage" on any Distribution Date prior
to the Cross-Over Date will equal 100% minus the Pool 2 Senior Prepayment
Percentage. The "Pool 2 Apportioned Junior Principal Balance" for any date prior
to the Cross-Over Date will equal the excess of the Pool 2 Scheduled Principal
Balance over the aggregate Class Certificate Principal Balance of the Pool 2
senior certificates for such date. After the Cross-Over Date, the Pool 2
Apportioned Junior Percentage and the Pool 2 Apportioned Junior Prepayment
Percentage will equal zero. The initial Pool 2 Apportioned Junior Percentage is
expected to be approximately 4.25%.
CROSS-SUPPORT
In addition to the subordination provided by the junior certificates, the
senior certificates will benefit from the credit enhancement provided by a
cross-support feature. Under this cross-support feature, collections received on
the mortgage loans in one pool may be distributed to holders of senior
certificates backed by the mortgage loans in the other pool. Cross-support will
apply in the following instances:
- On each Distribution Date prior to the Cross-Over Date but on or
after the date on which the aggregate Class Certificate Principal Balance
of the senior certificates of either mortgage pool (other than, in the case
of Pool 1, the Class 1-PO Certificates) has been reduced to zero, all
amounts otherwise distributable as principal to the junior certificates
pursuant to "Distributions on the Junior Certificates -- Allocation of
Junior Available Funds" in Annex 3, will be distributed as principal to the
outstanding senior certificates entitled to principal distributions backed
by the other mortgage pool (other than, in the case of Pool 1, the Class
1-PO Certificates), until the Class Certificate Principal Balances thereof
have each been reduced to zero, provided that on such Distribution Date
either (a) the Aggregate Junior Percentage (as defined below) for such
Distribution Date is less than 200% of the Aggregate Junior Percentage as
of the Cut-off Date or (b) the aggregate Scheduled Principal Balance of
Pool 1 or Pool 2 mortgage loans delinquent 60 days or more (including for
this purpose any mortgage loans in such pool in foreclosure and mortgage
loans in such pool with respect to which the related mortgaged property has
been acquired by the trust), averaged over the last six months, as a
percentage of the related Apportioned Junior Principal Balance, is greater
than or equal to 50%. Any principal distributed pursuant to this paragraph
on a Distribution Date to the classes of the Pool 1 or Pool 2 senior
certificates will be allocated to such classes in the same manner as the
Pool 1 Senior Optimal Principal Amount or Pool 2 Senior Optimal Principal
Amount, as applicable, is allocated to such classes on such date, and will
be applied in reduction of the amount distributable on the junior
certificates, in inverse order of priority.
A2-14
<PAGE> 105
- If on a Distribution Date either:
(1) the aggregate Class Certificate Principal Balance of the Pool 1
senior certificates (other than the Class 1-PO Certificates) exceeds the
Pool Scheduled Principal Balance of Pool 1 (calculated on the basis of
the Non-PO Percentage) as of such Distribution Date or
(2) the aggregate Class Certificate Principal Balance of the Pool 2
senior certificates exceeds the Pool Scheduled Principal Balance of Pool
2 as of such Distribution Date,
the certificate group as to which such excess exists will be a "Pool
Balance Shortfall Group." In such event, all amounts otherwise
distributable as principal on the junior certificates, (other than amounts
necessary to any interest shortfalls described in the second succeeding
sentence) will be distributed as principal to the senior certificates
(other than the Class 1-PO Certificates) of such Pool Balance Shortfall
Group, until the aggregate Class Certificate Principal Balances of such
senior certificates equals the Pool Scheduled Principal Balance of the
related mortgage pool for such Distribution Date (such distribution, a
"Pool Balance Shortfall Distribution"). In the event that the senior
certificates in respect of either mortgage pool constitute a Pool Balance
Shortfall Group on any Distribution Date on or following the Cross-Over
Date, Pool Balance Shortfall Distributions will be made from the related
Available Funds of the other mortgage pool remaining after all required
amounts have been distributed to the senior certificates related to such
other mortgage pool (other than, in the case of Pool 1, the Class 1-PO
Certificates). In addition, the amount of any shortfalls in funds available
to pay Accrued Certificate Interest or undistributed Accrued Certificate
Interest on a Pool Balance Shortfall Group under priorities first and
second of the second paragraph under "Distributions on the Pool 2 Senior
Certificates -- Allocation of Pool 2 Available Funds" in Annex 2 or
"Distributions on the Pool 1 Senior Certificates -- Allocation of Pool 1
Available Funds" in Annex 1, as the case may be, on any Distribution Date
(including any such shortfalls for the current Distribution Date) will be
distributed as interest to the senior certificates of such Pool Balance
Shortfall Group (other than, in the case of Pool 1, the Class 1-PO
Certificates) prior to the payment of any Pool Balance Shortfall
Distributions from amounts otherwise distributable as principal on the
junior certificates, in inverse order of priority (or, following the
Cross-Over Date, as provided in the preceding sentence). Any principal
distributed pursuant to this paragraph on a Distribution Date to the
classes of the Pool 1 or Pool 2 senior certificates will be allocated to
such classes in the same manner as the Pool 1 Senior Optimal Principal
Amount or Pool 2 Senior Optimal Principal Amount, as applicable, is
allocated to such classes on such date, and any amounts otherwise
distributable as principal on the junior certificates will be applied in
inverse order of priority.
The "Aggregate Junior Percentage" at any time will equal the percentage
(carried to six places rounded up) obtained by dividing the sum of the Class
Certificate Principal Balances of the junior certificates by the aggregate of
the Pool 1 and Pool 2 Scheduled Principal Balances (less the Class Certificate
Principal Balance of the Class 1-PO Certificates).
ALLOCATION OF REALIZED LOSSES ON THE POOL 2 CERTIFICATES
For definitions of "Realized Loss," "Non-Excess Realized Loss," "Liquidated
Mortgage Loan," "Deficient Valuation," "Debt Service Reduction," "Bankruptcy
Loss,"
A2-15
<PAGE> 106
"Fraud Loss," "Excess Loss," "Special Hazard Loss," "Fraud Coverage Termination
Date," "Bankruptcy Coverage Termination Date" and "Special Hazard Termination
Date," see "Allocation of Realized Losses on the Pool 1 Certificates" in Annex 1
of this prospectus supplement.
Prior to the Cross-Over Date (and on such date under certain
circumstances), the principal portion of any Non-Excess Realized Loss in either
pool (based on the applicable Non-PO Percentage thereof in the case of Pool 1)
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., Non-Excess 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). Fraud Losses,
Special Hazard Losses and Deficient Valuations occurring prior to the Fraud
Coverage Termination Date, Special Hazard Termination Date and Bankruptcy
Coverage Termination Date, respectively, will be allocated to the junior
certificates in the manner described in the preceding sentence.
Fraud Losses, Special Hazard Losses and Deficient Valuations occurring
after the Fraud Coverage Termination Date, Special Hazard Termination Date and
Bankruptcy Coverage Termination Date, respectively, will be Excess Losses. The
principal portion of any Excess Loss on a Pool 1 or Pool 2 mortgage loan (based
on the applicable Non-PO Percentage thereof in the case of Pool 1) for any
Distribution Date (whether occurring before, on or after the Cross-Over Date)
will be allocated pro rata among all outstanding classes of Pool 1 and Pool 2
senior certificates entitled to principal distributions (other than the Class
1-PO Certificates) and the junior certificates based on their respective Class
Certificate Principal Balances.
Commencing on the Cross-Over Date, the principal portion of any Realized
Loss with respect to any Pool 1 or Pool 2 mortgage loan (based on the applicable
Non-PO Percentage thereof in the case of Pool 1) will be allocated among the
outstanding classes of Pool 1 and Pool 2 senior certificates entitled to
principal distributions (other than the Class 1-PO Certificates) pro rata based
upon their Class Certificate Principal Balances.
Method of Allocating Realized Losses
All allocations of Realized Losses in respect of Pool 1 or Pool 2 mortgage
loans to a class of Pool 2 senior 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 such
certificates commencing on the following Distribution Date.
The interest portion of all Realized Losses in respect of Pool 1 or Pool 2
mortgage loans will be allocated among the outstanding classes of Pool 1 and
Pool 2 senior certificates and junior certificates entitled to distributions of
interest to the extent described under "-- Distributions on the Pool 2 Senior
Certificates -- Interest" above.
No reduction of the Class Certificate Principal Balance of any class of
Pool 1 or Pool 2 senior certificates shall be made on any Distribution Date on
account of any Realized Loss with respect to Pool 1 or Pool 2 mortgage loans to
the extent that such reduction would have the effect of reducing the aggregate
Certificate Principal Balances of all of the Pool 1 and Pool 2 senior
certificates as of such Distribution Date to an amount less than the aggregate
Pool 1 and Pool 2 Scheduled Principal Balance as of the first day of the month
of such Distribution Date, less any Deficient Valuations occurring on or prior
A2-16
<PAGE> 107
to the Bankruptcy Coverage Termination Date (such limitation being the "Loss
Allocation Limitation").
Debt Service Reductions are not Realized Losses, and the principal portion
thereof will not be allocated in reduction of the Certificate Principal Balance
of any certificate. However, after the Bankruptcy Coverage Termination Date, the
amounts distributable under clause (1) of the definition of Pool 2 Senior
Optimal Principal Amount and clause (b)(1) of the definition of Junior Optimal
Principal Amount attributable to Pool 2 mortgage loans will be reduced by the
amount of the principal portion of any Debt Service Reductions. Regardless of
when they occur, Debt Service Reductions may reduce the amount of Pool 2
Available Funds otherwise available for distribution on a Distribution Date. As
a result of the subordination of the junior certificates in right of
distribution, the reduction in Pool 2 Available Funds resulting from any Debt
Service Reductions in respect of Pool 2 mortgage loans prior to the Bankruptcy
Coverage Termination Date will be borne by the junior certificates (to the
extent then outstanding) in inverse order of priority.
YIELD AND WEIGHTED AVERAGE LIFE CONSIDERATIONS
YIELD
The effective yield on the Pool 2 senior 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 Pool 2 mortgage loans underlying the certificates.
You should refer to "Yield, Maturity and Weighted Average Life Considerations"
in the prospectus and the text below for a discussion of the factors that could
affect the yield of your certificates.
PREPAYMENTS
The rate of distribution of principal of the Pool 2 senior certificates
(and the aggregate amount of interest payable on the Class 2-S Certificates)
will be affected primarily by the amount and timing of principal payments
received on or in respect of the Pool 2 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 GECMSI in the ordinary course of conducting its mortgage
banking business, some of which refinancings may be solicited by GECMSI, or
prepayments in connection with biweekly payment programs, participation in which
may be solicited by GECMSI) and prepayments resulting from foreclosure,
condemnation and other dispositions of the mortgaged properties, from repurchase
by GECMSI of any Pool 2 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 GECMSI of its option to repurchase a Pool 2 mortgage loan that is a Defaulted
Mortgage Loan. Mortgagors are permitted to prepay the Pool 2 mortgage loans, in
whole or in part, at any time without penalty. In addition, as a result of the
fact that Pool 2 senior certificateholders (other than holders of the Class 2-S
Certificates) will generally be entitled on any Distribution Date to receive
from Pool 2 Available Funds distributions of amounts based on clause (4) of the
definition of Pool 2 Senior Optimal Principal Amount, the occurrence of defaults
on the Pool 2 mortgage loans may produce the same effect on the certificates
receiving such distributions as an early receipt of principal. See "Yield,
Maturity and Weighted Average Life Considerations" in the prospectus for a
discussion of the factors that may influence prepayment rates.
A2-17
<PAGE> 108
Voluntary prepayments in full of principal on the Pool 2 mortgage loans
received by GECMSI (or, in the case of Pool 2 mortgage loans master-serviced by
GECMSI, of which GECMSI 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 Pool 2 senior 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 Pool 2 mortgage loans are passed through to the
Pool 2 senior certificateholders in the month following the month of receipt or
payment. Any prepayment of a Pool 2 mortgage loan or liquidation of a Pool 2
mortgage loan (by foreclosure proceedings or by virtue of the purchase of a Pool
2 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 Pool 2
senior certificateholders principal amounts (or, in the case of the Class 2-S
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 any prepayments and other unscheduled recoveries of
principal with respect to a Pool 2 mortgage loan will be allocated solely to the
outstanding Pool 2 senior certificates (other than the Class 2-S Certificates)
during at least the first five years after the date of initial issuance of the
certificates, with such allocation being subject to reduction thereafter as
described herein. Among such Pool 2 senior certificates, such amounts otherwise
allocable to the Class 2-A5 Certificates will be allocated solely to the
outstanding Pool 2 Group I Senior Certificates during the first five years after
the date of initial issuance of the certificates (except as otherwise described
herein on or following the Pool 2 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 Pool 2
senior certificates (other than the Class 2-S Certificates) on each Distribution
Date after the Cross-Over Date. The resulting allocation between the Pool 2
Group I Senior Certificates and the Class 2-A5 Certificates is designed to
accelerate the allocation of principal prepayments and certain other unscheduled
recoveries of principal on the Pool 2 mortgage loans to holders of the Pool 2
Group I Senior Certificates relative to the Class 2-A5 Certificates through the
earlier of the Pool 2 Group I Final Distribution Date and the Cross-Over Date.
In addition, the Class 2-A5 Certificates will not receive any distributions of
scheduled principal payments during the first five years after the date of
initial issuance of the certificates, except as otherwise described herein on or
following the earlier of the Pool 2 Group I Final Distribution Date and the
Cross-Over Date. Notwithstanding the foregoing, all distributions of principal
on the outstanding Pool 2 senior certificates (other than the Class 2-S
Certificates) will be made pro rata among such certificates on each Distribution
Date after the Cross-over Date. See "Distributions on the Pool 2 Senior
Certificates -- Principal" and "-- Cross-Support" herein.
When a full prepayment is made on a Pool 2 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 interest 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 Pool 2 senior certificateholders
(other than the holders of any class of principal-only certificates) in the
month following
A2-18
<PAGE> 109
its receipt and the amount of interest thus distributed to Pool 2 senior
certificateholders, to the extent not supplemented by a Compensating Interest
Payment (as defined herein) or certain cross-support payments in respect of
Interest Shortfalls, will be less than the amount which would have been
distributed 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 Pool 2
senior certificateholders to the extent described herein. See "-- Distributions
on the Pool 2 Senior Certificates -- Interest" herein.
Any partial prepayment will be applied to the balance of the related Pool 2
mortgage loan as of the first day of the month of receipt, will be passed
through to the Pool 2 senior 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 Pool 2 senior
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 Pool 2 senior certificates also may be
affected by any repurchase by GECMSI of the mortgage loans as described under
"The Pooling and Servicing Agreement -- Termination" herein.
SENSITIVITY OF THE CLASS 2-A3 CERTIFICATES
The yield to investors in the Class 2-A3 Certificates, which are
principal-only certificates, will be highly sensitive to the rate of principal
payments (including prepayments) on the Pool 2 mortgage loans. If the Class 2-A3
Certificates are purchased at a discount to their Class Certificate Principal
Balance, lower than anticipated rates of prepayments on the Pool 2 mortgage
loans could result in an extension in the anticipated weighted average lives of
such certificates and actual yields to investors that are significantly lower
than the anticipated yields.
To illustrate the significance of prepayments on the distributions on the
Class 2-A3 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 Assumption shown. 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 Class 2-A3 Certificates, would cause the discounted present value of such
cash flows to equal the assumed purchase price percentage for such certificates
stated in such tables 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 such certificates and, consequently, do not reflect the
return on any investment when such reinvestment rates are considered. It is
unlikely that the Pool 2 mortgage loans will prepay at any of the constant
levels of the Prepayment Assumption shown or any other constant rate until
maturity or that all of the mortgage loans will prepay at the same rate. The
timing of changes in the rate of 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
A2-19
<PAGE> 110
general, the earlier the payment of principal of the Pool 2 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.
The following table has been prepared based on the Pool 2 Modeling
Assumptions (as defined herein) and the additional assumptions that:
(1) the assumed purchase price of the Class 2-A3 Certificates is as
specified (expressed as a percentage of the Class Certificate Principal
Balance thereof) and
(2) such purchase price is paid on July 29, 1999.
PRE-TAX YIELD TO MATURITY OF THE CLASS 2-A3 CERTIFICATES
(ASSUMED PURCHASE PRICE PERCENTAGE -- 45.171875%)
<TABLE>
<CAPTION>
PREPAYMENT ASSUMPTION
0% 125% 250% 400% 500%
----------------------------------------
<S> <C> <C> <C> <C>
2.905% 4.446% 7.918% 13.592% 17.573%
</TABLE>
- -------------------------
* Corporate bond-equivalent basis
The Pool 2 mortgage loans may not have all the characteristics assumed, and
there can be no assurance that:
(1) the Pool 2 mortgage loans will prepay at any of the constant rates
shown in the table or any particular rate;
(2) the pre-tax yield to maturity on the Class 2-A3 Certificates will
correspond to any amounts shown herein; or
(3) the purchase price of the Class 2-A3 Certificates will be as
assumed.
Each investor must make its own decision as to the appropriate prepayment
assumptions to be used in deciding whether or not to purchase a Class 2-A3
Certificate.
FINAL PAYMENT CONSIDERATIONS
The rate of payment of principal of the Pool 2 senior certificates will
depend primarily on the rate of payment of principal of the Pool 2 mortgage
loans (including prepayments, defaults, delinquencies and liquidations) which,
in turn, will depend on the characteristics of the Pool 2 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 Pool 2 mortgage loan is expected to be July 2029. In addition, to
the extent delinquencies and defaults are not covered by advances made by GECMSI
or offset by the effect of the subordination of the junior certificates,
delinquencies and defaults could affect the actual maturity of the Pool 2 senior
certificates offered hereby.
A2-20
<PAGE> 111
WEIGHTED AVERAGE LIVES OF THE POOL 2 CERTIFICATES
The weighted average life of a certificate is determined by:
-- multiplying the reduction, if any, in the principal balance thereof on
each Distribution Date by the number of years from the date of
issuance to such Distribution Date;
-- summing the results; and
-- dividing the sum by the aggregate reductions in the principal balance
of such certificate.
The weighted average lives of the Pool 2 senior certificates will be
affected, to varying degrees, by the rate of principal payments on the Pool 2
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
Pool 2 senior 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 a
class of Pool 2 senior certificates represent discounts or premiums to their
respective original 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 Pool 1 or Pool 2. 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.
Tables of Pool 2 Senior Certificate Principal Balances
The following tables set forth the percentages of the initial Class
Certificate Principal Balance of each class of Pool 2 senior 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 Pool 2 certificates.
For purposes of calculations under the columns at the indicated percentages of
the Prepayment Assumption (other than 0% of the Prepayment Assumption) set forth
in the table, it is assumed with respect to the Pool 2 mortgage loans (the "Pool
2 Modeling Assumptions") that:
(1) the distributions in respect of the certificates are made and
received in cash on the 25th day of each month commencing in August 1999;
(2) such mortgage loans prepay at the specified constant percentages
of the Prepayment Assumption;
(3) the aggregate outstanding Scheduled Principal Balance of such
mortgage loans as of the Cut-off Date is $72,349,463.68;
A2-21
<PAGE> 112
(4) no defaults or delinquencies in the payment by mortgagors of
principal of and interest on such mortgage loans are experienced and GECMSI
does not repurchase any of such mortgage loans as permitted or required by
the Agreement;
(5) GECMSI does not exercise its option to repurchase all the mortgage
loans in the trust as described under the caption "The Pooling and
Servicing Agreement -- Termination" herein;
(6) scheduled monthly payments on such mortgage loans are received on
the first day of each month commencing in August 1999, and are computed
prior to giving effect to prepayments received in the prior month;
(7) prepayments representing payment in full of individual mortgage
loans are received on the last day of each month (commencing July 1999) and
include 30 days' interest thereon, and no Interest Shortfalls occur in
respect of the Pool 2 mortgage loans;
(8) the scheduled monthly payment for each mortgage loan has been
calculated based on its outstanding balance, interest rate and remaining
term to maturity such that such mortgage loan will amortize in amounts
sufficient to repay the remaining balance of such mortgage loan by its
remaining term to maturity;
(9) the initial Class Certificate Principal Balance and interest rate
on the certificates for each class of Pool 2 senior certificates offered
hereby are as indicated in the summary of this prospectus supplement;
(10) the date of the initial issuance of the certificates is July 29,
1999;
(11) the amount distributable to the Pool 2 certificateholders is not
reduced by the incurrence of any expenses by the trust; and
(12) the Pool 2 mortgage loans consist of a single mortgage loan
having the characteristics described below:
<TABLE>
<CAPTION>
STATED
AGGREGATE SCHEDULED REMAINING
PRINCIPAL BALANCE TERM TO
AS OF THE MORTGAGE NET MORTGAGE AGE MATURITY
CUT-OFF DATE INTEREST RATE RATE (MONTHS) (MONTHS)
------------------- ------------- --------------- -------- ---------
<S> <C> <C> <C> <C> <C>
Non-Discount......... $72,349,463.68 7.3692764025% 7.1125313809% 2 357
</TABLE>
It is not likely that the Pool 2 mortgage loans will prepay at a constant
level of the Prepayment Assumption. In addition, because certain of such
mortgage loans will have remaining terms to maturity and will bear interest at
rates that are different from those assumed, the actual Class Certificate
Principal Balance of each class of Pool 2 senior certificates outstanding at any
time and the actual weighted average life of each class of such certificates may
differ from the corresponding information in the table for each indicated
percentage of the Prepayment Assumption. Furthermore, even if all the Pool 2
mortgage loans prepay at the indicated percentages of the Prepayment Assumption
and the weighted average mortgage interest rate and weighted average remaining
term to maturity of such mortgage loans were to equal the weighted average
mortgage interest rate and weighted average remaining term to maturity of the
assumed mortgage loans, due to the actual distribution of remaining terms to
maturity and interest rates among the Pool 2 mortgage loans, the actual
principal balance of each class of Pool 2 senior certificates
A2-22
<PAGE> 113
outstanding at any time and the actual weighted average life of each class of
such certificates would differ (which difference could be material) from the
corresponding information set forth in the following table. In addition, if the
actual characteristics of the Pool 2 mortgage loans included in the Pool 2
mortgage loan pool differ from those assumed in calculating the percentages set
forth in the tables, the actual class principal balance of each class of Pool 2
senior certificates outstanding at any time and the actual weighted average life
of each class of such certificates would differ (which difference would be
material) from the corresponding information in the tables for each indicated
percentage of the Prepayment Assumption.
A2-23
<PAGE> 114
PERCENT OF ORIGINAL CLASS CERTIFICATE PRINCIPAL BALANCE
OUTSTANDING OF THE POOL 2 CERTIFICATES
<TABLE>
<CAPTION>
CLASS 2-A1 CLASS 2-A2 CLASS 2-A3
-------------------------------- -------------------------------- ------------------
DISTRIBUTION DATE 0% 125% 250% 400% 500% 0% 125% 250% 400% 500% 0% 125% 250%
- ----------------- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <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
July 2000...................... 98 95 91 87 84 100 100 100 100 100 100 100 100
July 2001...................... 97 85 73 59 50 100 100 100 100 100 100 100 100
July 2002...................... 95 71 50 27 13 100 100 100 100 100 100 100 100
July 2003...................... 93 59 31 3 0 100 100 100 100 46 100 100 100
July 2004...................... 91 48 14 0 0 100 100 100 33 0 100 100 100
July 2005...................... 89 38 2 0 0 100 100 100 0 0 100 100 100
July 2006...................... 86 29 0 0 0 100 100 64 0 0 100 100 82
July 2007...................... 84 21 0 0 0 100 100 31 0 0 100 100 66
July 2008...................... 81 15 0 0 0 100 100 7 0 0 100 100 54
July 2009...................... 78 9 0 0 0 100 100 0 0 0 100 100 45
July 2010...................... 75 3 0 0 0 100 100 0 0 0 100 100 37
July 2011...................... 72 0 0 0 0 100 92 0 0 0 100 96 31
July 2012...................... 69 0 0 0 0 100 73 0 0 0 100 86 25
July 2013...................... 65 0 0 0 0 100 55 0 0 0 100 77 21
July 2014...................... 61 0 0 0 0 100 38 0 0 0 100 69 17
July 2015...................... 57 0 0 0 0 100 23 0 0 0 100 61 14
July 2016...................... 52 0 0 0 0 100 9 0 0 0 100 54 11
July 2017...................... 47 0 0 0 0 100 0 0 0 0 100 48 9
July 2018...................... 42 0 0 0 0 100 0 0 0 0 100 42 7
July 2019...................... 36 0 0 0 0 100 0 0 0 0 100 36 6
July 2020...................... 30 0 0 0 0 100 0 0 0 0 100 31 5
July 2021...................... 24 0 0 0 0 100 0 0 0 0 100 26 4
July 2022...................... 17 0 0 0 0 100 0 0 0 0 100 22 3
July 2023...................... 9 0 0 0 0 100 0 0 0 0 100 18 2
July 2024...................... 1 0 0 0 0 100 0 0 0 0 100 14 1
July 2025...................... 0 0 0 0 0 66 0 0 0 0 83 11 1
July 2026...................... 0 0 0 0 0 26 0 0 0 0 63 7 1
July 2027...................... 0 0 0 0 0 0 0 0 0 0 42 5 *
July 2028...................... 0 0 0 0 0 0 0 0 0 0 18 2 *
July 2029...................... 0 0 0 0 0 0 0 0 0 0 0 0 0
Weighted Average Life
(in Years)(1)................ 16.0 5.3 3.1 2.3 2.0 26.4 14.4 7.5 4.8 4.0 27.6 18.6 10.9
<CAPTION>
CLASS 2-A3
-----------
DISTRIBUTION DATE 400% 500%
- ----------------- ---- ----
<S> <C> <C>
Initial Percentage............. 100 100
July 2000...................... 100 100
July 2001...................... 100 100
July 2002...................... 100 100
July 2003...................... 100 73
July 2004...................... 66 35
July 2005...................... 41 14
July 2006...................... 24 2
July 2007...................... 14 *
July 2008...................... 9 *
July 2009...................... 7 *
July 2010...................... 5 *
July 2011...................... 4 *
July 2012...................... 3 *
July 2013...................... 2 *
July 2014...................... 2 *
July 2015...................... 1 *
July 2016...................... 1 *
July 2017...................... 1 *
July 2018...................... * *
July 2019...................... * *
July 2020...................... * *
July 2021...................... * *
July 2022...................... * *
July 2023...................... * *
July 2024...................... * *
July 2025...................... * *
July 2026...................... * *
July 2027...................... * *
July 2028...................... * *
July 2029...................... 0 0
Weighted Average Life
(in Years)(1)................ 6.3 4.8
</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 is determined as described on page A2-21.
A2-24
<PAGE> 115
PERCENT OF ORIGINAL CLASS CERTIFICATE PRINCIPAL BALANCE
OUTSTANDING OF THE POOL 2 CERTIFICATES
<TABLE>
<CAPTION>
CLASS 2-A4 CLASS 2-A5
-------------------------------- ---------------------------------
DISTRIBUTION DATE 0% 125% 250% 400% 500% 0% 125% 250% 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
July 2000.................................................. 100 100 100 100 100 100 100 100 100 100
July 2001.................................................. 100 100 100 100 100 100 100 100 100 100
July 2002.................................................. 100 100 100 100 100 100 100 100 100 100
July 2003.................................................. 100 100 100 100 100 100 100 100 100 100
July 2004.................................................. 100 100 100 100 70 100 100 100 100 100
July 2005.................................................. 100 100 100 83 28 100 97 95 92 90
July 2006.................................................. 100 100 100 49 3 99 94 88 82 77
July 2007.................................................. 100 100 100 29 0 98 88 79 69 53
July 2008.................................................. 100 100 100 18 0 96 82 69 54 35
July 2009.................................................. 100 100 89 14 0 94 74 57 40 24
July 2010.................................................. 100 100 74 10 0 92 67 47 30 17
July 2011.................................................. 100 100 61 8 0 90 60 39 22 11
July 2012.................................................. 100 100 51 6 0 87 54 32 16 8
July 2013.................................................. 100 100 42 4 0 84 49 27 12 5
July 2014.................................................. 100 100 34 3 0 81 43 22 9 4
July 2015.................................................. 100 100 28 2 0 78 39 18 6 2
July 2016.................................................. 100 100 23 2 0 75 34 15 5 2
July 2017.................................................. 100 96 18 1 0 71 30 12 3 1
July 2018.................................................. 100 83 15 1 0 67 26 9 2 1
July 2019.................................................. 100 72 12 1 0 63 23 8 2 *
July 2020.................................................. 100 62 9 * 0 58 19 6 1 *
July 2021.................................................. 100 53 7 * 0 53 16 5 1 *
July 2022.................................................. 100 44 5 * 0 48 14 4 1 *
July 2023.................................................. 100 36 4 * 0 42 11 3 * *
July 2024.................................................. 100 28 3 * 0 36 9 2 * *
July 2025.................................................. 100 21 2 * 0 30 7 1 * *
July 2026.................................................. 100 15 1 * 0 23 5 1 * *
July 2027.................................................. 83 9 1 * 0 15 3 * * *
July 2028.................................................. 37 4 * * 0 7 1 * * *
July 2029.................................................. 0 0 0 0 0 0 0 0 0 0
Weighted Average Life
(in Years)(1)............................................ 28.7 22.8 14.3 7.9 5.6 21.4 15.0 11.9 10.0 8.8
</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 is determined as described on page A2-21.
A2-25
<PAGE> 116
ANNEX 3
THE JUNIOR CERTIFICATES
Interest and principal will be distributable on the junior certificates out
of both the Pool 1 Available Funds and the Pool 2 Available Funds. This Annex 3
describes the manner in which interest and principal will be distributable on
the junior certificates, and also describes some of the features of the junior
certificates, including yield and weighted average life considerations, that are
relevant to an investment in the junior certificates. You should read this Annex
carefully if you are considering a purchase of any class of the junior
certificates offered hereby.
DESCRIPTION OF THE JUNIOR CERTIFICATES
As described in this prospectus supplement, the trust will issue one group
of junior certificates representing interests in both mortgage pools. The rights
of holders of the junior certificates to distributions will be based on
collections from both the Pool 1 mortgage loans and the Pool 2 mortgage loans,
and will be subordinate to the rights of the holders of both the Pool 1 senior
certificates and the Pool 2 senior certificates.
DISTRIBUTIONS ON THE JUNIOR CERTIFICATES
Allocation of Junior Available Funds
Interest and principal on the junior certificates will be distributed
monthly 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
August 1999. These distributions will be in an aggregate amount equal to the
Junior Available Funds for the related Distribution Date, less any portion
thereof distributed to any senior certificates as described under
"Cross-Support" in Annex 1 and Annex 2 of this prospectus supplement.
Distributions will be made to holders of record at the close of business on the
related Record Date.
On each Distribution Date, except as described above, the Junior Available
Funds will be distributed in the following order of priority among the junior
certificates:
first, to the Class M Certificates in the following order: (1) the
Accrued Certificate Interest thereon for such Distribution Date, (2) any
Accrued Certificate Interest thereon remaining undistributed from previous
Distribution Dates and (3) such class's Allocable Share (as defined under
"-- Principal" below) for such Distribution Date;
second, to the Class B1 Certificates, to the extent of remaining
Junior Available Funds, in the following order: (1) the Accrued Certificate
Interest thereon for such Distribution Date, (2) any Accrued Certificate
Interest thereon remaining undistributed from previous Distribution Dates
and (3) such class's Allocable Share for such Distribution Date;
third, to the Class B2 Certificates, to the extent of remaining Junior
Available Funds, in the following order: (1) the Accrued Certificate
Interest thereon for such Distribution Date, (2) any Accrued Certificate
Interest thereon remaining undistributed from previous Distribution Dates
and (3) such class's Allocable Share for such Distribution Date; and
fourth, to each of the Class B3, Class B4 and Class B5 Certificates,
to the extent of remaining Junior Available Funds: (1) the Accrued
Certificate Interest thereon for such Distribution Date, (2) any Accrued
Certificate Interest thereon remaining
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undistributed from previous Distribution Dates and (3) such class's
Allocable Share for such Distribution Date.
Interest
Interest will accrue on the junior certificates offered hereby at the
respective interest rates set forth in the summary of this prospective
supplement during each Interest Accrual Period.
The "Accrued Certificate Interest" for any junior certificate 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 of such certificate immediately prior to such Distribution
Date, less such certificate's share of any Net Interest Shortfall and the
interest portion of any Excess Losses, in each case in respect of either
mortgage pool.
The "Certificate Principal Balance" of any junior certificate as of any
Distribution Date will equal such certificate's Certificate Principal Balance on
the date of initial issuance of the certificates as reduced by:
- all amounts distributed on previous Distribution Dates on such
certificate on account of principal;
- the principal portion of all Realized Losses previously allocated to
such certificate; and
- such certificate's share, if any, of the Junior Certificate
Writedown Amount and the Class PO Deferred Payment Writedown Amount for
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 Pool 1 and Pool 2 senior certificates and the junior
certificates, after giving effect to the distribution of principal and the
application of Realized Losses in respect of Pool 1 and Pool 2 in reduction of
the Certificate Principal Balances of such certificates on such Distribution
Date, exceeds (b) the aggregate Pool 1 Scheduled Principal Balance and Pool 2
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
1-PO Deferred Amount.
The Junior Certificate Writedown Amount and the Class PO Deferred Payment
Writedown Amount will be allocated to the junior certificates in inverse order
of priority, until the Class Certificate Principal Balance of each such
certificate has been reduced to zero.
For definitions of "Interest Accrual Period" and "Net Interest Shortfall"
see "Distributions on the Pool 1 Senior Certificates," in Annex 1.
The interest portion of any Realized Losses (other than Excess Losses) in
respect of the mortgage loans will not be allocated among any certificates, but
will reduce the amount of Junior Available Funds on the related Distribution
Date. As a result of the
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subordination of the junior certificates in right of distribution, such losses
will be borne first by the outstanding junior certificates in inverse order of
priority.
Principal
Distributions in reduction of the principal balance of each junior
certificate then entitled thereto will be made on each Distribution Date out of
Junior Available Funds in an amount not to exceed the Junior Optimal Principal
Amount for such Distribution Date.
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):
(a) the sum of:
(1) the Pool 1 Apportioned Junior Percentage of the applicable
Non-PO Percentage of all scheduled payments of principal due on each
outstanding mortgage loan in Pool 1 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 in respect of the Pool 1 mortgage loans 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;
(2) the Pool 1 Apportioned Junior Prepayment Percentage of the
applicable non-PO Percentage of the Scheduled Principal Balance of each
mortgage loan in Pool 1 which was the subject to a prepayment in full
received by GECMSI, or, in the case of a Pool 1 mortgage loan
master-serviced by GECMSI, of which GECMSI receives notice, during the
related Prepayment Period;
(3) the Pool 1 Apportioned Junior Prepayment Percentage of the
applicable Non-PO Percentage of all partial prepayments of principal
received in respect of the Pool 1 mortgage loans during the related
Prepayment Period, plus, on the Pool 1 Senior Final Distribution Date,
100% of any Pool 1 Senior Optimal Principal Amount remaining
undistributed on such date;
(4) the amount, if any, by which 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 in Pool 1, other than mortgage loans described
in clause (b) and (b) the applicable Non-PO Percentage of the principal
balance of each mortgage loan in Pool 1 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 exceeds (c) the sum
of the amounts distributable to the Pool 1 senior certificateholders
(other than the holders of the Class 1-PO Certificates) under clause (4)
of the definition of Pool 1 Senior Optimal Principal Amount on such
Distribution Date; and
(5) the Pool 1 Apportioned Junior Prepayment Percentage of the
applicable Non-PO Percentage of the sum of (a) the Scheduled Principal
Balance of each mortgage loan in Pool 1 which was repurchased by GECMSI
in connection with such Distribution Date and (b) the difference, if
any, between the Scheduled
A3-3
<PAGE> 119
Principal Balance of a mortgage loan in Pool 1 that has been replaced by
GECMSI 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; and
(b) the sum of:
(1) the Pool 2 Apportioned Junior Percentage of all scheduled
payments of principal due on each outstanding mortgage loan in Pool 2 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 in respect of the Pool 2 mortgage
loans 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;
(2) the Pool 2 Apportioned Junior Prepayment Percentage of the
Scheduled Principal Balance of each mortgage loan in Pool 2 which was
the subject to a prepayment in full received by GECMSI, or, in the case
of a Pool 2 mortgage loan master-serviced by GECMSI, of which GECMSI
receives notice, during the related Prepayment Period;
(3) the Pool 2 Apportioned Junior Prepayment Percentage of all
partial prepayments of principal received in respect of the Pool 2
mortgage loans during the related Prepayment Period, plus, on the Pool 2
Senior Final Distribution Date, 100% of any Pool 2 Senior Optimal
Principal Amount remaining undistributed on such date;
(4) the amount, if any, by which the sum of (a) the net liquidation
proceeds allocable to principal received during the related Prepayment
Period in respect of each Liquidated Mortgage Loan in Pool 2, other than
mortgage loans described in clause (b) and (b) the principal balance of
each mortgage loan in Pool 2 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 exceeds (c) the sum of the
amounts distributable to the Pool 2 senior certificateholders under
clause (4) of the definition of Pool 2 Senior Optimal Principal Amount
on such Distribution Date; and
(5) the Pool 2 Apportioned Junior Prepayment Percentage of the sum
of (a) the Scheduled Principal Balance of each mortgage loan in Pool 2
which was repurchased by GECMSI in connection with such Distribution
Date and (b) the difference, if any, between the Scheduled Principal
Balance of a mortgage loan in Pool 2 that has been replaced by GECMSI
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
B1, Class B2, Class B3, Class B4 or Class B5 Certificate (together, the "Class B
Certificates") shall be entitled on any Distribution Date to receive
distributions pursuant to subclauses (2), (3) and (5) of clauses (a) and (b) of
A3-4
<PAGE> 120
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 of which is the aggregate of the Pool 1 Scheduled Principal
Balance and the Pool 2 Scheduled Principal Balance with respect to such
Distribution Date, equals or exceeds such percentage calculated as of the date
of initial issuance of the certificates. 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 under subclauses (2), (3) and (5) of clauses (a) and
(b) 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 under subclauses (2), (3) and (5) of clauses (a) and
(b) 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
in the second paragraph under "-- Allocation of Junior Available Funds" in this
Annex. On any Distribution Date, any reduction in funds available for
distribution to the classes of junior certificates resulting from a distribution
of the Class 1-PO Deferred Amount to the Class 1-PO Certificates will be
allocated to the classes of junior certificates, in reduction of the Allocable
Shares thereof, in inverse order of priority.
SUBORDINATION OF THE JUNIOR CERTIFICATES
Priority of Pool 1 and Pool 2 Senior Certificates
As of the date of the initial issuance of the certificates, the aggregate
Class Certificate Principal Balance of the junior certificates will equal
approximately 4.25% of the aggregate of the Pool 1 Scheduled Principal Balance
and the Pool 2 Scheduled Principal Balance.
The rights of the holders of the junior certificates to receive
distributions in respect of a mortgage pool will be subordinate to (1) the
rights of the holders of the senior certificates in respect of such mortgage
pool, to the extent described in "Distributions on the Pool 1 Senior
Certificates" in Annex 1 and "Distributions on the Pool 2 Senior Certificates"
in Annex 2 and (2) the rights of the holders of the senior certificates in
respect of the other mortgage pool, to the extent described in "Cross-Support"
in Annex 1 and Annex 2 of this prospectus supplement.
The subordination of the junior certificates is intended:
(a) to enhance the likelihood of timely receipt by the holders of the
Pool 1 and Pool 2 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 such senior
certificates; and
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<PAGE> 121
(b) to afford the holders of the Pool 1 and Pool 2 senior certificates
(to the extent of the subordination of the junior certificates) protection
against Realized Losses, to the extent described in the applicable Annex.
If Realized Losses on the junior certificates exceed the credit support
provided to the Pool 1 or Pool 2 senior certificates through subordination, or
if Excess Losses on the mortgage loans occur, all such losses will be borne by
the Pool 1 and Pool 2 senior certificates as described in Annex 1 and Annex 2.
The protection afforded to the holders of the Pool 1 and Pool 2 senior
certificates by means of the subordination feature will be accomplished by:
(1) 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 under
"Distributions on the Pool 1 Senior Certificates -- Allocation of Pool 1
Available Funds" in Annex 1 or under "Distributions on the Pool 2 Senior
Certificates -- Allocation of Pool 2 Available Funds" in Annex 2, as
applicable, and "Cross-Support" in Annex 1 and Annex 2, as applicable, the
amounts due to the Pool 1 or Pool 2 senior certificate holders on each
Distribution Date out of the Pool 1 or Pool 2 Available Funds, as
applicable (or in certain cases out of Available Funds in the other pool)
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 junior certificates;
(2) the allocation to the junior certificates of the principal portion
of any Non-Excess Realized Loss on the Pool 1 or Pool 2 mortgage loans
(based on the applicable Non-PO Percentage thereof in the case of Pool 1),
as applicable, to the extent set forth herein; and
(3) the allocation to the junior certificates of the principal portion
of any Non-Excess Realized Loss on the Pool 1 mortgage loans (based on the
applicable PO Percentage thereof), 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) on the Pool 1 and Pool 2 mortgage loans to the junior certificates on
any Distribution Date will decrease the protection provided to the Pool 1 and
Pool 2 senior certificates then outstanding on future Distribution Dates by
reducing the Class Certificate Principal Balances then outstanding of the junior
certificates.
In addition, in order to extend the period during which the junior
certificates remain available as credit enhancement for the Pool 1 and Pool 2
senior certificates, the entire amount of any prepayment or other unscheduled
recovery of principal with respect to a mortgage loan (based on the applicable
Non-PO Percentage thereof in the case of Pool 1) will be allocated to the Pool 1
or Pool 2 senior certificates entitled to principal distributions (other than
the Class 1-PO Certificates), as applicable, during at least the first five
years after the date of initial issuance of the certificates, with such
allocation being subject to reduction thereafter as described herein. This
allocation has the effect of accelerating the amortization of such Pool 1 or
Pool 2 senior certificates as a group while, in the absence of losses in respect
of the Pool 1 or Pool 2 mortgage loans, increasing the percentage interest in
the principal balance of the Pool 1 and Pool 2 mortgage loans evidenced by the
junior certificates. Among the Pool 1 senior certificates, such amounts will be
allocated to the outstanding Pool 1 Group I Senior Certificates during the first
five years after the date of initial issuance of such certificates (except as
otherwise described herein on or following
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the Pool 1 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 Pool 1 senior certificates
entitled to principal distributions (other than the Class 1-PO Certificates) on
each Distribution Date after the Cross-Over Date. Among the Pool 2 senior
certificates, such amounts will be allocated to the outstanding Pool 2 Group I
Senior certificates during the first five years after the date of initial
issuance of such certificates (except as otherwise described herein on or
following the Pool 2 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 Pool 2 senior
certificates entitled to principal distributions on each Distribution Date after
the Cross-Over Date.
After the payment of amounts distributable in respect of the Pool 1 and
Pool 2 senior certificates on each Distribution Date, the junior certificates
will be entitled on such date to the remaining portion, if any, of the Pool 1
and Pool 2 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 junior certificates. Amounts so
distributed to junior certificate holders 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 0.95% of the
initial aggregate Certificate Principal Balance of all of the certificates and
approximately 22.36% 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 Junior 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 principal portion of any Non-Excess
Realized Loss with respect to a Pool 1 or Pool 2 mortgage loan (based on the
applicable Non-PO Percentage thereof in the case of Pool 1), as applicable, 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 Non-Excess 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, prepayments and certain other unscheduled recoveries of principal
in respect of the Pool 1 and Pool 2 mortgage loans (based on the applicable
Non-PO Percentage thereof in the case of Pool 1), which will not be
distributable to such certificates for at least the first five years after the
date of initial issuance of the certificates, except as otherwise described
herein on or following the Pool 1 or Pool 2 Senior Final Distribution Date, as
applicable, 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 Junior Certificates." If
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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 Pool 1 and Pool 2 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 Pool 1 and Pool 2
mortgage loans and under certain circumstances investors in such certificates
may not recover their initial investment.
YIELD AND WEIGHTED AVERAGE LIFE CONSIDERATIONS
YIELD
The effective yield on the junior 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. For a discussion of
relevant factors relating to each of the mortgage pools underlying the junior
certificates and of factors relating to the yield and weighted average life of
the Pool 1 and Pool 2 senior certificates, see "Yield and Weighted Average Life
Considerations" in Annex 1 and Annex 2, respectively. You should also refer to
"Yield, Maturity and Weighted Average Life Considerations" in the prospectus and
the text below for a discussion of the factors that could affect the yield of
your certificates.
THE CLASS M, CLASS B1 AND CLASS B2 CERTIFICATES
The aggregate 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 depend upon the rate of payment of principal and the amount of
distributions on the Class M, Class B1 and Class B2 Certificates. Principal
payment rates and distributions will be affected by the rate of prepayments on
the Pool 1 and Pool 2 mortgage loans, as well as the rate of mortgagor defaults
resulting in Realized Losses on the Pool 1 and Pool 2 mortgage loans, by the
severity of those losses and by the timing thereof. See "Distributions on the
Pool 1 Senior Certificates -- Allocation of Realized Losses on the Pool 1
Certificates" in Annex 1 and "Distributions on the Pool 2 Senior
Certificates -- Allocation of Realized Losses on the Pool 2 Certificates" in
Annex 2 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 on the Pool 1 and Pool 2 mortgage loans
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 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 the
A3-8
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yields on the other classes of certificates. The yields to maturity on the Class
M Certificates will be more sensitive to such losses than the yields on the Pool
1 and Pool 2 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 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
GECMSI's advances of delinquent monthly payments of principal and interest,
delinquencies on the mortgage loans may also have a relatively greater effect:
(1) 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;
(2) on the yields to investors in the Class B Certificates than on the
yields to investors in the other classes of the certificates; and
(3) on the yields to investors in the Class M Certificates than on the
yields to investors in the Pool 1 and Pool 2 senior certificates.
As described above in Annex 1 and Annex 2, 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 the holders of the Class M Certificates will
be made available to protect the holders of the Pool 1 and Pool 2 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 on the junior certificates will depend on
the rate of payment of principal of the Pool 1 and Pool 2 mortgage loans
(including prepayments, defaults, delinquencies and liquidations) which, in
turn, will depend on the characteristics of the Pool 1 and Pool 2 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 in each of Pool 1 and Pool 2 is expected to be July
2029. In addition, to the extent delinquencies and defaults are not covered by
advances made by GECMSI 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 JUNIOR CERTIFICATES
For a general discussion of how the weighted average life of a certificate
is determined and the factors that could affect the weighted average life of a
certificate, see "Yield and Weighted Average Life Considerations" in Annex 1 of
this prospectus supplement.
A3-9
<PAGE> 125
Tables of Junior Certificate Principal Balances
The following tables set forth the percentages of the initial Class
Certificate Principal Balance of each class of junior certificates offered
hereby that would be outstanding after each of the dates shown at the specified
constant percentages of the Prepayment Assumption (as defined in Annex 1) and
the corresponding weighted average life of each such class of junior
certificates. For purposes of calculations under the columns at the indicated
percentages of the Prepayment Assumption (other than 0% of the Prepayment
Assumption) set forth in the table, it is assumed with respect to each of the
Pool 1 and Pool 2 mortgage loans (the "Junior Certificate Modeling Assumptions")
that:
(1) the distributions in respect of the certificates are made and
received in cash on the 25th day of each month commencing in August 1999;
(2) such mortgage loans prepay at the specified constant percentages
of the Prepayment Assumption;
(3) the aggregate outstanding Scheduled Principal Balance of the Pool
1 mortgage loans as of the Cut-off Date is $932,211,550.79 and of the Pool
2 mortgage loans is $72,349,463.68;
(4) no defaults or delinquencies in the payment by mortgagors of
principal of and interest on such mortgage loans are experienced and GECMSI
does not repurchase any such mortgage loans as permitted or required by the
Agreement;
(5) GECMSI does not exercise its option to repurchase all the mortgage
loans in the trust as described under the caption "The Pooling and
Servicing Agreement -- Termination" herein;
(6) scheduled monthly payments on such mortgage loans are received on
the first day of each month commencing in August 1999, and are computed
prior to giving effect to prepayments received in the prior month;
(7) prepayments representing payment in full of individual mortgage
loans are received on the last day of each month (commencing July 1999) and
include 30 days' interest thereon, and no Interest Shortfalls occur in
respect of the mortgage loans;
(8) the scheduled monthly payment for each such mortgage loan has been
calculated based on its outstanding balance, interest rate and remaining
term to maturity such that such mortgage loan will amortize in amounts
sufficient to repay the remaining balance of such mortgage loan by its
remaining term to maturity;
(9) the initial Class Certificate Principal Balance and interest rate
on each class of certificates offered hereby are as indicated in the
summary of this prospectus supplement;
(10) the date of the initial issuance of the certificates is July 29,
1999;
(11) the amount distributable to certificateholders is not reduced by
the incurrence of any expenses by the trust; and
A3-10
<PAGE> 126
(12) 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>
STATED
AGGREGATE SCHEDULED REMAINING
PRINCIPAL BALANCE TERM TO
AS OF THE MORTGAGE NET MORTGAGE AGE MATURITY
MORTGAGE LOAN GROUP CUT-OFF DATE INTEREST RATE RATE (MONTHS) (MONTHS)
- ------------------- ------------------- ------------- ------------ -------- ---------
<S> <C> <C> <C> <C> <C>
Discount.............. $175,948,554.99 6.7856203355% 6.5821203355% 2 356
Non-Discount.......... 828,612,459.48 7.3614622933 7.1094821953 2 357
</TABLE>
It is not likely that the Pool 1 and Pool 2 mortgage loans will prepay at a
constant level of the Prepayment Assumption. In addition, because certain of
such mortgage loans will have remaining terms to maturity and will bear interest
at rates that are different from those assumed, the actual Class Certificate
Principal Balance of each class of junior certificates outstanding at any time
and the actual weighted average life of each class of such certificates may
differ from the corresponding information in the table for each indicated
percentage of the Prepayment Assumption. Furthermore, even if all the Pool 1 and
Pool 2 mortgage loans prepay at the indicated percentages of the Prepayment
Assumption and the weighted average mortgage interest rate and weighted average
remaining term to maturity of such mortgage loans were to equal the weighted
average mortgage interest rate and weighted average remaining term to maturity
of the assumed mortgage loans, due to the actual distribution of remaining terms
to maturity and interest rates among the Pool 1 and Pool 2 mortgage loans, the
actual principal balance of each class of junior certificates outstanding at any
time and the actual weighted average life of each class of such certificates
would differ (which difference could be material) from the corresponding
information set forth in the following table. In addition, if the actual
characteristics of the Pool 1 and Pool 2 mortgage loans included in the Pool 1
and Pool 2 mortgage loan pools differ from those assumed in calculating the
percentages set forth in the tables, the actual class principal balance of each
class of junior certificates outstanding at any time and the actual weighted
average life of each class of such certificates would differ (which difference
would be material) from the corresponding information in the tables for each
indicated percentage of the Prepayment Assumption.
A3-11
<PAGE> 127
PERCENT OF ORIGINAL CLASS CERTIFICATE PRINCIPAL BALANCE
OUTSTANDING OF THE JUNIOR CERTIFICATES
<TABLE>
<CAPTION>
CLASSES M, B1 AND B2
------------------------------------
DISTRIBUTION DATE 0% 125% 225% 400% 500%
- ----------------- ----- ----- ----- ----- ----
<S> <C> <C> <C> <C> <C>
Initial Percentage.......................................... 100 100 100 100 100
July 2000................................................... 99 99 99 99 99
July 2001................................................... 98 98 98 98 98
July 2002................................................... 97 97 97 97 97
July 2003................................................... 96 96 96 96 96
July 2004................................................... 94 94 94 94 94
July 2005................................................... 93 91 89 86 84
July 2006................................................... 91 86 83 75 71
July 2007................................................... 90 81 74 63 57
July 2008................................................... 88 75 65 50 42
July 2009................................................... 86 68 55 37 29
July 2010................................................... 84 61 46 27 20
July 2011................................................... 82 55 39 20 13
July 2012................................................... 79 49 33 15 9
July 2013................................................... 77 44 27 11 6
July 2014................................................... 74 39 23 8 4
July 2015................................................... 71 35 19 6 3
July 2016................................................... 68 31 16 4 2
July 2017................................................... 65 27 13 3 1
July 2018................................................... 61 24 11 2 1
July 2019................................................... 57 21 9 2 1
July 2020................................................... 53 18 7 1 *
July 2021................................................... 49 15 5 1 *
July 2022................................................... 44 12 4 1 *
July 2023................................................... 38 10 3 * *
July 2024................................................... 33 8 2 * *
July 2025................................................... 27 6 2 * *
July 2026................................................... 20 4 1 * *
July 2027................................................... 13 3 1 * *
July 2028................................................... 6 1 * * *
July 2029................................................... 0 0 0 0 0
Weighted Average Life (in years)(1)......................... 19.9 14.0 11.6 9.5 8.8
</TABLE>
- -------------------------
* Indicates an amount above zero and less than 0.5% of original principal
balance is outstanding.
(1) The weighted average life is determined as described on page A1-37.
A3-12
<PAGE> 128
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NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS SUPPLEMENT OR
PROSPECTUS. ANY INFORMATION OR REPRESENTATIONS GIVEN OR MADE OUTSIDE OF THIS
PROSPECTUS SUPPLEMENT AND PROSPECTUS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED. THIS PROSPECTUS SUPPLEMENT AND 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 A
SOLICITATION OF AN OFFER TO BUY IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR
SOLICITATION IS UNLAWFUL. THE INFORMATION CONTAINED IN THE PROSPECTUS SUPPLEMENT
AND PROSPECTUS IS CORRECT ONLY AS OF THE DATE RELATING TO SUCH INFORMATION, AND
DELIVERY OF THIS PROSPECTUS SUPPLEMENT OR PROSPECTUS, OR ANY SALE MADE
THEREUNDER, SUBSEQUENT TO THE DATE OF THIS PROSPECTUS SUPPLEMENT SHALL NOT,
UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION THAT THE INFORMATION IS CORRECT
AS OF THAT SUBSEQUENT DATE.
------------------------
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PROSPECTUS SUPPLEMENT
Summary of Terms............................... S-3
Risk Factors................................... S-11
Description of the Mortgage Pool and the
Mortgaged Properties......................... S-19
Description of the Certificates................ S-20
GE Capital Mortgage Services, Inc. ............ S-25
Delinquency and Foreclosure Experience of
GECMSI....................................... S-25
Use of Proceeds................................ S-27
The Pooling and Servicing Agreement............ S-27
Federal Income Tax Consequences................ S-33
ERISA Considerations........................... S-34
Legal Investment Matters....................... S-36
Plan of Distribution........................... S-37
Certificate Ratings............................ S-38
Legal Matters.................................. S-39
Index of Certain Prospectus Supplement
Definitions.................................. S-40
Annex 1........................................ A1-1
Annex 2........................................ A2-1
Annex 3........................................ A3-1
PROSPECTUS
Description of the Certificates................ 1
The Trusts..................................... 9
Credit Enhancement............................. 19
Yield, Maturity and Weighted Average Life
Considerations............................... 27
Servicing of the Mortgage Loans................ 31
The Pooling and Servicing Agreement............ 44
GE Capital Mortgage Services, Inc. ............ 56
GE Capital Mortgage Funding Corporation........ 57
Where You Can Find More Information About GE
Capital Mortgage Services, Inc. and GE
Capital Mortgage Funding Corporation......... 59
The Guarantor.................................. 59
Certain Legal Aspects of the Mortgage Loans.... 59
Legal Investment Matters....................... 69
ERISA Considerations........................... 70
Federal Income Tax Consequences................ 72
Plan of Distribution........................... 89
Use of Proceeds................................ 90
Legal Matters.................................. 91
Financial Information.......................... 91
Index of Certain Prospectus Definitions........ 92
</TABLE>
------------------------
UNTIL OCTOBER 26, 1999, ALL DEALERS THAT EFFECT TRANSACTIONS IN THESE
SECURITIES, WHETHER OR NOT PARTICIPATING IN THIS OFFERING, MAY BE REQUIRED TO
DELIVER A PROSPECTUS SUPPLEMENT AND PROSPECTUS. THIS IS IN ADDITION TO THE
OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS SUPPLEMENT AND PROSPECTUS WHEN
ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
- ------------------------------------------------------------
- ------------------------------------------------------------
- ------------------------------------------------------------
- ------------------------------------------------------------
GE CAPITAL MORTGAGE
SERVICES, INC. 1999-15 TRUST
ISSUER
GE CAPITAL MORTGAGE
SERVICES, INC.
DEPOSITOR AND SERVICER
$990,640,144
(APPROXIMATE)
REMIC MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 1999-15
------------------------
PROSPECTUS SUPPLEMENT
------------------------
BEAR, STEARNS & CO. INC.
MERRILL LYNCH & CO.
JULY 28, 1999
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