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Filed Pursuant to Rule 424(b)(5)
Registration No. 333-68951
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED APRIL 22, 1999)
GE CAPITAL MORTGAGE SERVICES, INC. 1999-9 TRUST
ISSUER
GE CAPITAL MORTGAGE SERVICES, INC.
DEPOSITOR AND SERVICER
$492,926,200
(APPROXIMATE)
REMIC MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 1999-9
PRINCIPAL AND INTEREST PAYABLE MONTHLY, BEGINNING MAY 25, 1999
THE TRUST WILL ISSUE:
- 24 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-3.
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.
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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.
Salomon Smith Barney Inc. will purchase the certificates offered by this
prospectus supplement and will sell them 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 99.728133% of the total principal
balance of those certificates plus accrued interest, before deducting expenses.
The underwriter's commission will be the difference between the price it pays
for those certificates and the amount it receives from their sale to the public.
The certificates will be available for delivery to investors on or about April
29, 1999.
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SALOMON SMITH BARNEY
The date of this prospectus supplement is April 27, 1999.
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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.
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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.
1999-9 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 $362,601,200, the
total original principal balance of the Pool 2 senior certificates, excluding
the Class 2-PO Certificates, will be approximately $115,042,000, and the total
original principal balance of the junior certificates will be approximately
$20,045,813, in each case subject to a variance of plus or minus 5%. The total
original principal balance of the Class 1-PO and Class 2-PO Certificates will be
approximately $2,915,567 and $529,356, respectively. The following
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table shows the approximate initial principal balance, annual certificate
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
1-A1....................... $98,563,000 6.10% $ 25,000
1-A2....................... 32,000,000 6.10 25,000
1-A3(2).................... 71,103,000(3) (4) 25,000
1-A4....................... 50,041,000 6.50 25,000
1-A5....................... 4,155,000 6.75(5) 25,000
1-A6....................... 38,000,000 6.75 25,000
1-A7....................... 1,203,000 6.75 25,000
1-A8....................... 62,652,000 6.50 25,000
1-A9....................... 4,884,000 6.75(5) 1,000
Class R.................... 100 6.75 (6)
Class RL................... 100 6.75 (6)
POOL 2 SENIOR CERTIFICATES
2-A1....................... $38,400,000 6.75% $ 25,000
2-A2....................... 3,653,000 6.75 1,000
2-A3....................... 12,039,000 6.75 25,000
2-A4....................... 1,750,000 6.75 1,000
2-A5....................... 50,000,000 6.75 25,000
2-A6....................... 2,000,000 6.75 1,000
2-A7....................... 2,600,000 6.75 1,000
2-A8....................... 1,000,000 6.75 1,000
2-A9....................... 3,600,000 6.75 1,000
JUNIOR CERTIFICATES
M.......................... 9,271,000 6.75% $100,000
B1......................... 3,758,000 6.75 100,000
B2......................... 2,254,000 6.75 100,000
</TABLE>
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(1) Approximate, subject to adjustment as described in this prospectus
supplement.
(2) This class of certificates will consist of four components, including two
components that pay principal (one of which is an accrual component) and two
interest-only components, as described in this prospectus supplement. The
components are not separately transferable. The initial component principal
balances of the principal components will be approximately $20,103,000 and
$51,000,000, and the initial notional component principal balances of the
interest-only components will be approximately $150,666,000 and
$112,693,000.
(3) The class certificate principal balance of this class will at all times
equal the aggregate of the component principal balances of its two principal
components.
(4) The interest rate on the Class 1-A3 Certificates is variable. Interest will
accrue on each component of these certificates during each interest accrual
period in an amount equal to the product of the component principal balance
or notional component principal balance of each component as of the related
distribution date and the applicable rate described herein. As described in
this prospectus supplement, the interest accruing on the accrual component
of these certificates will not be distributable to holders of these
certificates until the time specified in this prospectus supplement and will
instead be added to the component principal balance of that component. The
annual interest rate for the initial interest accrual period is 8.3398%.
(5) The amount of interest accruing on these certificates will not be payable to
holders of these certificates until such time as is described in this
prospectus supplement but will instead be added to the certificate principal
balance of this class.
(6) 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.
The Class 1-A1 through Class 1-A9, Class R, Class RL, Class 1-PO and Class
1-S Certificates are the Pool 1 senior certificates. The Class 2-A1 through
Class 2-A9, Class 2-PO and Class 2-S Certificates are the Pool 2 senior
certificates. The Class R and
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Class RL 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 2-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 2-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 $475,000,000 or greater than
$525,000,000, and the total original principal balance of the Pool 1 senior
certificates, excluding the Class 1-PO Certificates, is expected to be
approximately $362,601,200 and the total original principal balance of the Pool
2 senior certificates, excluding the Class 2-PO Certificates, is expected to be
approximately $115,042,000. The total original principal balance of the junior
certificates will not be less than $19,000,000 or greater than $21,000,000.
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 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 April 1, 1999:
Pool 1 Mortgage Loans
<TABLE>
<S> <C>
- - Total outstanding principal
balance(1): $380,746,934
- - Original terms to maturity: 20 to 30 years
- - Weighted average maturity: between 356 and 358 months
- - Weighted average annual
interest rate: between 7.10% and 7.14%
- - Largest geographic No more than 49.99% of the
concentration: mortgage loans are secured by
properties located in California
</TABLE>
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(1) Approximate, after deducting payments of principal due on, or received on or
before, April 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): $120,387,002
- - Original terms to maturity: 30 years
- - Weighted average maturity: between 354 and 356 months
- - Weighted average annual
interest rate: between 7.20% and 7.24%
- - Largest geographic 100% of the mortgage loans are
concentration: secured by properties located in
California
</TABLE>
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(1) Approximate, after deducting payments of principal due on, or received on or
before, April 1, 1999, and subject to the variance described in this
prospectus supplement.
THE SERVICER
We will directly service approximately 74% of the Pool 1 mortgage loans and
78% 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 May
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 or each component
of your certificates;
-- the total amount of funds available for distribution from the mortgage
pool relating to your certificates or to each component of your
certificates, or in certain limited circumstances available for
distribution from collections on the other mortgage pool;
-- the amount of any accrued interest not paid on your certificates on
earlier distribution dates; and
-- whether you are a holder of the Class 1-A3 Certificates, a component
of which accrues interest rather than pay it on a current basis, or of
the Class 1-A5 or Class 1-A9 Certificates, which accrue interest
rather than pay it on a current basis, as described below.
- 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.
- 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.
- If you are a holder of the Class 1-A3, Class 1-A5 or Class 1-A9
Certificates, the interest accrued on your certificates, or, in the case
of the Class 1-A3 Certificates, the interest accrued on the accrual
component of your certificates, will initially not be distributed to you.
This accrued interest will instead be added to the principal amount of
your certificates until such time described in "Distributions on the Pool
1 Senior Certificates" in Annex 1 of this prospectus supplement.
- 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
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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.
- The amount of principal you receive on your certificates or each
component of your certificates will depend on:
-- the various formulas and, if applicable, the principal payment
schedules 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 and Class 2-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 1-A6, Class 1-A7 and Class 2-A3
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.
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
April 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.
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
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OTHER MORTGAGE POOL. In addition, if you are a holder of the Class 1-A3
Certificates, the Class 1-A7 Certificates will bear certain losses that would
otherwise have been allocated to you. See the risk factor concerning
subordination on page S-12.
FEDERAL INCOME TAX CONSEQUENCES
The trust will be treated as a two-tier REMIC for federal income tax
purposes. The assets of the lower-tier REMIC will consist of the assets of both
Pool 1 and Pool 2, and the assets of the upper-tier REMIC will consist of the
regular interests of the lower-tier REMIC. The certificates other than the
residual certificates will be treated as regular interests in the upper-tier
REMIC. The Class R Certificates will be treated as the residual interest in the
upper-tier REMIC, and the Class RL Certificates will be treated as the residual
interest in the lower-tier REMIC.
All of the regular interest certificates will be treated as debt for tax
purposes. In addition, unless you are the holder of the residual 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 1-A3, Class 1-A5 and Class 1-A9 Certificates, which will be,
and certain other classes of certificates, which may be, issued with
original issue discount;
- the residual 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 1-A7, Class M, Class B1 or Class B2 Certificates or the residual
certificates. In addition, you
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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.
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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
ONTHE 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 1-A7
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 1-A3 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 you 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 -- Allocation of Pool 1
Available Funds" in Annex 1 and "Allocation
of Realized Losses on the Pool 2 Senior
Certificates" and "Distributions on the
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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. These
losses will be allocated to such
certificates in inverse order of priority.
(Thus, for example, losses on the mortgage
loans will first be allocated to the Class
B5 Certificates, then to the Class B4
Certificates, and so forth.)
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 1-A7 Certificates, you
will bear certain specified losses otherwise
allocable to the Class 1-A3 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.
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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 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.
PREPAYMENT RATES THAT ARE FASTER
ORSLOWER 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
(especially the Class 1-A5 and Class
1-A9 Certificates), the yield on your
certificates will drop if
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<PAGE> 14
principal payments occur at a rate
slower than you expect.
- If you are a holder of the Class 1-A5
or 1-A9 Certificates, your
certificates will support, in varying
degrees, the stability of the
principal payments made to certain
other classes of Pool 1 certificates
backed by the Pool 1 mortgage loans
that will receive principal payments
according to a designated schedule as
described in this prospectus
supplement. Principal amounts
collected on Pool 1 in excess of the
amounts needed to make payments
according to these schedules may be
used to make distributions on your
certificates, which will shorten the
life of your certificates.
Conversely, if the Pool 1 mortgage
loans prepay at a rate that is slower
than expected, the life of your
certificates could lengthen, perhaps
significantly.
- If you are a holder of a class of
certificates that receives principal
payments according to a designated
schedule, your certificates will
receive principal distributions in
accordance with those schedules so
long as the mortgage loans backing
your certificates prepay at a rate
consistent with those designated
schedules. Prepayments that are
significantly slower or faster than
those assumed in creating these
schedules could adversely affect the
yield of these certificates.
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.
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
S-14
<PAGE> 15
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.
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.
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 half 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 all 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 secured by
California properties. 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.
S-15
<PAGE> 16
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 were considered separately. If the
proceeds realized 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 underwriter of this offering intends to
create a resale market for the certificates
offered by it, it has 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.
S-16
<PAGE> 17
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 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 are implementing a plan, which is
described in "Year 2000 Computer Readiness"
in the prospectus, to become year 2000
compliant by mid-1999. 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, 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, 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-17
<PAGE> 18
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-38 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 91 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 A1-1 through A1-7 of Annex 1 and pages A2-1 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-A3 Percentage,
the initial 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 Valuations
occurring after the Bankruptcy Coverage Termination Date, as such term is
defined herein, irrespective of any delinquency in payment by the related
borrower.
S-18
<PAGE> 19
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 Trust Fund -- 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. 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 2-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 $362,601,200, the Pool 2
senior certificates, excluding the Class 2-PO Certificates, will have an
aggregate original principal balance of approximately $115,042,000 and the
junior certificates will have an aggregate original principal balance of
approximately $20,045,813, in each case subject to a variance of plus or minus
5%. The total original principal balance of the Class 1-PO and Class 2-PO
Certificates will be approximately $2,915,567 and $529,356, respectively, in
each case 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 (or components of the Class 1-A3 Certificates)
described herein.
As described below, each class of certificates offered hereby, other than
the residual certificates, will be issued in book-entry form. Beneficial
interests in these certificates (the "Book-Entry Certificates") will be held by
investors through the book-entry facilities of The Depository Trust Company, as
described below, in the 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
S-19
<PAGE> 20
the residual certificates may evidence an additional amount equal to the
remaining Class Certificate Principal Balance thereof.
BOOK-ENTRY CERTIFICATES
Each class of 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 IN
THE SECONDARY MARKET SINCE CERTAIN POTENTIAL INVESTORS MAY BE UNWILLING TO
PURCHASE CERTIFICATES FOR WHICH THEY CANNOT OBTAIN PHYSICAL CERTIFICATES.
S-20
<PAGE> 21
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 1-A7, 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 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.
S-21
<PAGE> 22
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
other than the related Class PO Certificates backed by one mortgage pool
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 (other than the related Class PO Certificates) backed
by the other mortgage pool before being distributed as principal to the
junior certificates.
S-22
<PAGE> 23
- If the aggregate certificate principal balance of the senior certificates
other than the related Class PO Certificates backed by one mortgage pool
exceeds the aggregate Non-PO Percentage (as defined herein) of the
aggregate principal balances of that mortgage pool, such senior
certificates may be entitled to receive distribution 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, other than the related Class PO Certificate, backed by such
other mortgage pool.
- Amounts distributable to the Class 1-PO and Class 2-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:
(1) The Class R Certificates will be entitled to receive:
(a) the amount, if any, of Pool 1 Available Funds and Pool 2
Available Funds remaining in the upper-tier REMIC on any Distribution
Date after distributions of principal and interest and in respect of any
Class 1-PO Deferred Amount or any Class 2-PO Deferred Amount are made on
the senior certificates of the related pool and the junior certificates
on such date; and
(b) the proceeds, if any, of the assets of the trust remaining in
the upper-tier REMIC after the Class Certificate Principal Balances of
all classes of certificates have been reduced to zero; and
(2) the Class RL Certificates of the residual certificates will be
entitled to receive:
(a) the amount, if any, of Pool 1 Available Funds and Pool 2
Available Funds remaining in the lower-tier REMIC on any Distribution
Date after distributions of principal and interest on the lower-tier
regular interests are made on such date;
(b) the proceeds, if any, of the assets of the trust remaining in
the lower-tier REMIC after the principal balances of the regular
interests in the lower-tier REMIC have been reduced to zero; and
(c) 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
S-23
<PAGE> 24
the Mortgage Loans--Unanticipated Recoveries of Losses on the Mortgage
Loans" in the accompanying prospectus.
It is not anticipated that any material assets will be remaining for such
distributions on the residual 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.
S-24
<PAGE> 25
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.
<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 $883,535,531 622,179 $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>
- ------------------------
(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.
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<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>
- -------------------------
(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.
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.
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<PAGE> 27
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.
SERVICING ARRANGEMENT WITH RESPECT TO THE MORTGAGE LOANS
It is expected that GECMSI will directly service approximately 74% (by
aggregate Scheduled Principal Balance as of the Cut-off Date) of the mortgage
loans in Pool 1 and 78% (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. 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
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<PAGE> 28
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.
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 made by it with respect to any
mortgage loan may not ultimately be recoverable from related liquidation or
insurance proceeds or other collections on such mortgage loan (a "Nonrecoverable
Advance"), 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.
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<PAGE> 29
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 the
junior certificates (to the extent then outstanding) in inverse order of
priority before they are borne by the senior certificates.
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 0.20% to 0.29%, with an anticipated initial weighted average rate
of between approximately 0.23% and 0.27%. For Pool 2, this rate is expected to
range from approximately 0.20% to 0.29%, with an anticipated initial weighted
average rate of between approximately 0.22% and 0.26%. 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
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<PAGE> 30
extent the proportion of such mortgage loans decreases. It is expected that no
more than 27% of the mortgage loans in Pool 1 and 24% 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 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 the Company 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 Two International Place, Boston, Massachusetts.
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 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 this 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
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<PAGE> 31
month of such repurchase, plus accrued and unpaid interest thereon to
the first 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 be allocated 1% of
the votes and the other classes of certificates in the aggregate will be
allocated 99% of the votes eligible to be cast in connection with any vote of
all certificateholders under the Agreement.
Votes allocated to the certificates 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.
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.
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<PAGE> 32
An election will be made to treat the trust as a double-tier REMIC for
federal income tax purposes.
The Pool 1 senior certificates (other than the residual certificates), the
Pool 2 senior certificates and the junior certificates (the "Regular
Certificates") will be designated as "regular interests" in the upper-tier
REMIC. The Class R Certificates will be designated as the "residual interest" in
the upper-tier REMIC, and the Class RL Certificates will be designated as the
"residual interest" in the lower-tier REMIC.
Regular Certificates
The Regular Certificates generally will be treated as debt instruments
issued by the 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 1-A3, Class 1-A5 and Class
1-A9 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 1-A3, Class 1-A5 and Class 1-A9 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 275% 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 classes of
Pool 1 and Pool 2 senior certificates to receive cash distributions in the event
of losses or delinquencies on mortgage loans. Prospective purchasers of junior
certificates should consult their tax advisors regarding the timing of income
from those certificates and the timing and character of any deductions that may
be available with respect to principal or accrued interest that is not paid. See
"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 upper-tier and lower-tier REMIC, as applicable, 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.
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
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<PAGE> 33
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 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 Salomon
Smith Barney Inc. an individual administrative exemption, Prohibited Transaction
Exemption 89-89 (55 Fed. Reg. 42589, October 17, 1989), 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 1-A7 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 1-A7 Certificates) are the
following:
- Salomon Smith Barney Inc. is the sole underwriter or the manager or
co-manager of the underwriting syndicate for such 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;
- 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 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;
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<PAGE> 34
- 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 Salomon Smith Barney Inc. 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 1-A7 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;
- Salomon Smith Barney Inc.;
- 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").
Before purchasing any certificate offered hereby, a fiduciary of an ERISA Plan
should make its own determination as to the availability of the exemptive relief
provided in the Exemption or the availability of any other prohibited
transaction exemptions, and whether the conditions of any such exemption will be
applicable to such certificate.
The Exemption does not apply to the initial purchase, the holding or the
subsequent resale of the Class 1-A7, 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 1-A7, CLASS M,
CLASS B1 OR CLASS B2 CERTIFICATES, except that any insurance company may
purchase such certificates with assets of its general account if the exemptive
relief granted by the DOL for transactions involving insurance company general
accounts in Prohibited Transaction Exemption 95-60, 60 Fed. Reg. 35925 (July 12,
1995) is available with respect to such investment. Any insurance
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<PAGE> 35
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 interests in the
upper-tier and lower-tier REMICs 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 1-A7, 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 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
S-35
<PAGE> 36
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 Underwriting Agreement
between GECMSI and Salomon Smith Barney Inc., the certificates offered hereby
are being purchased from GECMSI by Salomon Smith Barney Inc. upon issuance.
Distribution of the certificates offered hereby will be made by Salomon Smith
Barney Inc. 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 99.728133% 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
underwriter may be deemed to have received compensation from GECMSI in the form
of underwriting discounts. The commission received by Salomon Smith Barney Inc.
will be the difference between the price paid by it for the certificates and the
amount it receives from the sale of the certificates to the public.
GECMSI has agreed to indemnify the underwriter against, or make
contributions to the underwriter with respect to, certain liabilities, including
liabilities under the Securities Act of 1933, as amended.
Salomon Smith Barney Inc. 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.
CERTIFICATE RATINGS
It is a condition of issuance of the certificates that the senior
certificates offered hereby other than the Class 1-A3 Certificates be rated
"AAA" by each of Fitch and S&P, that the Class 1-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-36
<PAGE> 37
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-13 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.
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 underwriter by Brown & Wood LLP, Washington, D.C.
S-37
<PAGE> 38
INDEX OF CERTAIN PROSPECTUS SUPPLEMENT DEFINITIONS
<TABLE>
<CAPTION>
DEFINED TERM PAGE
- ------------ -----
<S> <C>
Accretion Termination Date........ A1-12
Accrued Certificate Interest...... A2-9
Adjustment Amount................. A1-27
Aggregate Junior Percentage....... A1-23
Agreement......................... S-19
Allocable Share................... A3-5
Available Funds................... S-22
Bankruptcy Coverage Termination
Date............................ A1-27
Bankruptcy Loss................... A1-24
Bankruptcy Loss Amount............ A1-27
beneficial owner.................. S-20
BIF............................... S-27
Book-Entry Certificates........... S-19
Certificate Principal Balance..... A3-2
Class 1-A3 TAC Component Accretion
Termination Date................ A1-11
Class 1-A3 TAC Component Accrual
Amount.......................... A1-11
Class 1-A5 Accretion Termination
Date............................ A1-12
Class 1-A5 Accrual Amount......... A1-11
Class 1-A9 Accretion Termination
Date............................ A1-12
Class 1-A9 Accrual Amount......... A1-12
Class 1-PO Deferred Amount........ A1-24
Class 1-PO Principal Distribution
Amount.......................... A1-21
Class 1-S Notional Principal
Balance......................... A1-14
Class 2-A3 Distribution
Percentage...................... A2-12
Class 2-A3 Percentage............. A2-12
Class 2-A3 Principal Distribution
Amount.......................... A2-12
Class 2-PO Deferred Amount........ A2-17
Class 2-PO Principal Distribution
Amount.......................... A2-14
Class 2-S Notional Principal
Balance......................... A2-9
Class Certificate Principal
Balance......................... A1-8
Class PO Deferred Prepayment
Writedown Amount................ A3-2
</TABLE>
<TABLE>
<CAPTION>
DEFINED TERM PAGE
- ------------ -----
<S> <C>
Class Prepayment Distribution
Trigger......................... A3-5
Code.............................. S-33
Collection Account................ S-27
Compensating Interest Payment..... S-29
Component Principal Balance....... A1-8
Cooperative Loan.................. A2-3
Cross-Over Date................... A1-10
Cut-off Date...................... S-18
Debt Service Reduction............ A1-24
Defaulted Mortgage Loan........... S-29
Deficient Valuation............... A1-24
Distribution Date................. A1-7
DOL............................... S-33
Effective Range................... A1-33
ERISA............................. S-33
ERISA Plan........................ S-33
Excess Loss....................... A1-25
Exemption......................... S-33
FDIC.............................. S-27
Financial Intermediary............ S-20
Fitch............................. S-27
Fraud Coverage Termination Date... A1-27
Fraud Loss........................ A1-24
Fraud Loss Amount................. A1-27
GECMSI............................ S-18
Interest Accrual Period........... A1-13
Interest Shortfall................ A1-15
Junior Percentage................. A3-3
Junior Prepayment Percentage...... A3-3
Junior Available Funds............ A1-10
Junior Certificate Modeling
Assumptions..................... A3-12
Junior Certificate Writedown
Amount.......................... A3-2
Junior Optimal Principal Amount... A3-3
Junior Prepayment Percentage...... A3-3
Junior Percentage................. A3-3
mortgage related securities....... S-35
Net Interest Shortfall............ A1-15
Net Mortgage Rate................. A1-16
</TABLE>
S-38
<PAGE> 39
<TABLE>
<CAPTION>
DEFINED TERM PAGE
- ------------ -----
<S> <C>
NMR............................... A1-17
Non-Book-Entry Certificates....... S-21
noneconomic residual interests.... S-32
Non-PO Percentage................. A2-10
Nonrecoverable Advance............ S-28
Notional Component Principal
Balance......................... A1-13
Original Pool 1 Apportioned Junior
Principal Balance............... A1-20
Original Pool 2 Apportioned Junior
Principal Balance............... A2-13
Outstanding Mortgage Loan......... S-19
PO Percentage..................... A2-10
Pool 1 Apportioned Junior
Percentage...................... A1-21
Pool 1 Apportioned Junior
Prepayment Percentage........... A1-21
Pool 1 Apportioned Junior
Principal Balance............... A1-22
Pool 1 Available Funds............ S-22
Pool 1 Discount Mortgage Loan..... A1-17
Pool 1 Group I Final Distribution
Date............................ A1-19
Pool 1 Group I Senior
Certificates.................... A1-9
Pool 1 Group II Senior
Certificates.................... A1-8
Pool 1 Group II Senior
Distribution Percentage......... A1-19
Pool 1 Group II Senior
Percentage...................... A1-18
Pool 1 Group II Senior Principal
Distribution Amount............. A1-18
Pool 1 Junior Available Funds..... A1-10
Pool 1 Modeling Assumptions....... A1-36
Pool 1 Non-discount Mortgage
Loan............................ A1-17
Pool 1 PAC Certificates........... A1-33
Pool 1 Scheduled Principal
Balance......................... S-19
Pool 1 Senior Optimal Principal
Amount.......................... A1-17
Pool 1 Senior Percentage.......... A1-19
Pool 1 Senior Prepayment
Percentage...................... A1-19
Pool 1 Senior Prepayment
Percentage Stepdown
Limitation...................... A1-20
Pool 1 Support Certificates....... A1-35
Pool 1 TAC Certificates........... A1-34
</TABLE>
<TABLE>
<CAPTION>
DEFINED TERM PAGE
- ------------ -----
<S> <C>
Pool 2 Apportioned Junior
Percentage...................... A2-15
Pool 2 Apportioned Junior
Principal Balance............... A2-15
Pool 2 Available Funds............ S-22
Pool 2 Discount Mortgage Loan..... A2-10
Pool 2 Group I Final Distribution
Date............................ A2-12
Pool 2 Group I Senior
Certificates.................... A2-7
Pool 2 Junior Available Funds..... A2-8
Pool 2 Modeling Assumptions....... A2-23
Pool 2 Non-discount Mortgage
Loan............................ A2-10
Pool 2 Scheduled Principal
Balance......................... S-19
Pool 2 Senior Optimal Principal
Amount.......................... A2-11
Pool 2 Senior Percentage.......... A2-12
Pool 2 Senior Prepayment
Percentage...................... A2-13
Pool 2 Senior Prepayment
Percentage Stepdown
Limitation...................... A2-13
Pool Balance Shortfall
Distribution.................... A1-23
Pool Balance Shortfall Group...... A1-22
Prepayment Assumption............. A1-33
Prepayment Interest............... A1-29
Prepayment Period................. A2-12
Realized Loss..................... A1-23
Record Date....................... S-22
Regular Certificates.............. S-32
Restricted Group.................. S-34
S&P............................... S-27
SAIF.............................. S-27
Scheduled Principal Balance....... S-18
SMMEA............................. S-35
Special Event Loss................ A2-18
Special Hazard Loss............... A1-24
Special Hazard Loss Amount........ A1-27
Special Hazard Termination Date... A1-27
Structuring Range................. A1-33
TAC Balances Schedule............. A1-34
TAC Prepayment Assumption......... A1-44
Tax Exempt Investor............... S-35
</TABLE>
S-39
<PAGE> 40
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 93% 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 3.50% 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 1.50% 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 0.25% 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 $380,746,934. This amount is
subject to a permitted variance such that the aggregate Scheduled Principal
Balance thereof will not be less than $361,000,000 or greater than $399,000,000.
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> 41
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 6.250% to 9.375% per annum, and the weighted average mortgage interest rate
as of the Cut-off Date of such mortgage loans is expected to be between 7.10%
and 7.14% per annum. The original principal balances of the Pool 1 mortgage
loans are expected to range from $54,750 to $1,000,000 and, as of the Cut-off
Date, the average Scheduled Principal Balance of the Pool 1 mortgage loans is
not expected to exceed $333,000 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 May 1992, and the month and
year of the latest scheduled maturity date of any such mortgage loan will be
April 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 11% 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. None of the mortgage loans will have a Scheduled Principal
Balance of more than $1,000,000.
- No more than 12% of the Pool 1 mortgage loans will have a loan-to-value
ratio at origination in excess of 80%, no more than 4% of the Pool 1
mortgage loans will have a loan-to-value ratio at origination in excess
of 90%, and none of the mortgage loans will have a loan-to-value ratio at
origination in excess of 95%. As of the Cut-off Date, the weighted
average loan-to-value ratio at origination of the Pool 1 mortgage loans
is expected to be between 73% and 75%.
- No more than 1.50% 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 36% 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 21% of the Pool 1 mortgage loans will have
been the subject of "cash-out" refinancings.
- No more than 1% of the Pool 1 mortgage loans will be temporary buy-down
mortgage loans. The portion of the interest rate paid by the related
mortgagor will not increase by more than one percentage point for each
six month period. No mortgage interest rate may exceed the "bought down"
rate by more than 3 percentage points, and no buy-down period will exceed
3 years.
A1-2
<PAGE> 42
- 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 49.99% 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, Maryland and Washington.
- No more than 6% of the Pool 1 mortgage loans will be secured by mortgaged
properties located in any one state except California.
- At least 97% 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 92% of the Pool 1 mortgage loans will be secured by
single-family, detached residences.
- No more than 4% of the Pool 1 mortgage loans will be secured by
condominiums.
- None 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........... 80 $ 12,167,218.47 3.20%
227,151 - 250,000........... 54 12,931,419.21 3.40
250,001 - 300,000........... 388 107,161,681.21 28.15
300,001 - 350,000........... 257 83,169,956.52 21.84
350,001 - 400,000........... 162 60,867,915.92 15.99
400,001 - 450,000........... 70 29,909,119.18 7.86
450,001 - 600,000........... 114 57,778,887.95 15.18
600,001 - 650,000........... 18 11,530,874.41 3.03
650,001 - 1,000,000.......... 6 5,229,861.44 1.37
----- --------------- ------
Total.................... 1,149 $380,746,934.31 100.00%
===== =============== ======
</TABLE>
A1-3
<PAGE> 43
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>
6.2500%....................... 1 $ 340,726.39 0.09%
6.3750........................ 4 1,111,436.63 0.29
6.5000........................ 8 2,473,397.18 0.65
6.6250........................ 30 10,331,637.43 2.71
6.7500........................ 80 27,828,004.11 7.31
6.8750........................ 190 63,015,944.73 16.55
7.0000........................ 225 77,020,465.42 20.23
7.1250........................ 192 68,094,008.35 17.88
7.2500........................ 160 53,128,225.20 13.95
7.3750........................ 107 34,580,079.70 9.08
7.5000........................ 63 19,761,494.55 5.19
7.6250........................ 32 8,993,825.66 2.36
7.7500........................ 12 3,146,507.50 0.83
7.8750........................ 10 2,626,185.21 0.69
8.0000........................ 3 683,248.68 0.18
8.1250........................ 1 68,000.00 0.02
8.2500........................ 2 671,954.21 0.18
8.3750........................ 1 466,191.88 0.12
8.5000........................ 7 1,790,128.13 0.47
8.6250........................ 6 1,408,341.37 0.37
8.7500........................ 7 1,701,137.23 0.45
8.8750........................ 4 744,416.30 0.20
9.0000........................ 1 214,321.63 0.06
9.1250........................ 1 211,310.44 0.06
9.3750........................ 2 335,946.38 0.09
----- --------------- ------
Total.................... 1,149 $380,746,934.31 100.00%
===== =============== ======
</TABLE>
A1-4
<PAGE> 44
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....................... 3 $ 1,069,969.28 0.28%
Arizona....................... 8 2,960,197.60 0.78
Arkansas...................... 1 331,721.07 0.09
California.................... 562 189,582,279.65 49.79
Colorado...................... 25 7,986,874.88 2.10
Connecticut................... 12 3,536,568.01 0.93
Delaware...................... 2 636,181.63 0.17
District Of Columbia.......... 3 1,029,274.09 0.27
Florida....................... 15 4,818,600.22 1.27
Georgia....................... 11 3,102,537.92 0.81
Hawaii........................ 1 225,000.00 0.06
Illinois...................... 33 11,000,248.16 2.89
Indiana....................... 5 1,669,175.90 0.44
Iowa.......................... 1 287,571.19 0.08
Kansas........................ 2 626,388.81 0.16
Kentucky...................... 2 644,174.46 0.17
Louisiana..................... 5 1,670,108.43 0.44
Maryland...................... 65 20,648,024.41 5.42
Massachusetts................. 48 15,848,368.87 4.16
Michigan...................... 8 2,872,996.53 0.76
Minnesota..................... 4 1,132,498.06 0.30
Missouri...................... 11 4,107,940.31 1.08
Nevada........................ 10 3,303,239.87 0.87
New Hampshire................. 1 439,656.75 0.12
New Jersey.................... 35 12,358,764.42 3.25
New Mexico.................... 4 1,258,705.79 0.33
New York...................... 16 5,171,520.26 1.36
North Carolina................ 22 7,268,733.25 1.91
Ohio.......................... 7 1,978,471.05 0.52
Oklahoma...................... 2 721,113.06 0.19
Oregon........................ 31 9,965,751.34 2.62
Pennsylvania.................. 23 7,108,949.38 1.87
Rhode Island.................. 2 740,500.00 0.19
South Carolina................ 3 977,943.85 0.26
Tennessee..................... 9 2,983,083.17 0.78
Texas......................... 33 10,673,912.09 2.80
Utah.......................... 2 844,273.98 0.22
Vermont....................... 1 310,400.00 0.08
Virginia...................... 59 18,071,135.66 4.75
Washington.................... 60 19,753,598.14 5.19
Wisconsin..................... 2 1,030,482.77 0.27
----- --------------- ------
Total.................... 1,149 $380,746,934.31 100.00%
===== =============== ======
</TABLE>
A1-5
<PAGE> 45
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>
1992.......................... 24 $ 6,150,044.72 1.62%
1997.......................... 3 385,798.38 0.10
1998.......................... 113 35,833,233.94 9.41
1999.......................... 1,009 338,377,857.27 88.87
----- --------------- -------
Total.................... 1,149 $380,746,934.31 100.00%
===== =============== =======
</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>
2012.......................... 1 $ 221,954.21 0.06%
2019.......................... 6 1,879,982.52 0.49
2022.......................... 23 5,928,090.51 1.56
2024.......................... 6 1,626,340.80 0.43
2027.......................... 3 385,798.38 0.10
2028.......................... 71 21,991,216.75 5.78
2029.......................... 1,039 348,713,551.14 91.59
----- --------------- ------
Total......................... 1,149 $380,746,934.31 100.00%
===== =============== ======
</TABLE>
TYPES 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
TYPE OF DWELLING MORTGAGE LOANS THE CUT-OFF DATE OF THE CUT-OFF DATE
---------------- -------------- ------------------- ---------------------
<S> <C> <C> <C>
Single-family detached........ 1,073 $358,779,156.88 94.23%
Single-family attached........ 18 5,295,980.72 1.39
Condominium................... 38 11,067,769.63 2.91
2 - 4 family units............ 20 5,604,027.08 1.47
----- --------------- ------
Total.................... 1,149 $380,746,934.31 100.00%
===== =============== ======
</TABLE>
A1-6
<PAGE> 46
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................ 1,125 $375,106,177.96 98.52%
Vacation...................... 12 3,654,215.97 0.96
Investment.................... 12 1,986,540.38 0.52
----- --------------- -------
Total.................... 1,149 $380,746,934.31 100.00%
===== =============== =======
</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...................... 454 $144,892,342.90 38.05%
Rate Term/Refinance........... 486 164,234,561.28 43.13
Cash-out Refinance............ 209 71,620,030.13 18.81
------ --------------- -------
Total.................... 1,149 $380,746,934.31 100.00%
====== =============== =======
</TABLE>
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>
00.00-50.00%.................. 48 $ 16,906,817.02 4.44%
50.01-60.00................... 67 24,842,036.60 6.52
60.01-70.00................... 187 66,416,557.79 17.44
70.01-75.00................... 162 55,767,560.99 14.65
75.01-80.00................... 537 174,535,303.34 45.84
80.01-85.00................... 30 8,785,392.27 2.31
85.01-90.00................... 81 23,456,482.43 6.16
90.01-95.00................... 37 10,036,783.87 2.64
----- --------------- -------
Total.................... 1,149 $380,746,934.31 100.00%
===== =============== =======
</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 May 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
A1-7
<PAGE> 47
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 or component for such Distribution Date, any shortfall in available
amounts being allocated among such classes and components in proportion to
the amount of Accrued Certificate Interest otherwise distributable thereon;
provided however, that on each Distribution Date through the related
Accretion Termination Date (as defined herein) for the Class 1-A5 or Class
1-A9 Certificates or the Class 1-A3 TAC Accrual Component, such amounts
with respect to such certificates or such component will not be distributed
under this priority first but will instead be added to the class
certificate principal balance (the "Class Certificate Principal Balance")
or component principal balance (the "Component Principal Balance") thereof
and distributed in accordance with the second, fifth and eighth paragraphs
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 1-A5 or Class 1-A9 Certificates or to the Component
Principal Balance of the Class 1-A3 TAC Accrual Component, as the case may
be) from previous Distribution Dates, to the extent of remaining Pool 1
Available Funds, any shortfall in available amounts being allocated among
such classes and components in proportion to the amount of such Accrued
Certificate Interest remaining undistributed (or not added to the Class
Certificate Principal Balance of the Class 1-A5 or Class 1-A9 Certificates
or to the Component Principal Balance of the Class 1-A3 TAC Accrual
Component, as the case may be) for each such class or component for such
Distribution Date; provided, however, that on each Distribution Date
through the related Accretion Termination Date for the Class 1-A5 and Class
1-A9 Certificates and the Class 1-A3 TAC Accrual Component, such amounts
with respect to such certificates or such component will not be distributed
under this priority second but will instead be added to the Class
Certificate Principal Balance or Component Principal Balance thereof and
distributed in accordance with the second, fifth and eighth paragraphs
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 or Component Principal Balances thereof, to the extent of
remaining Pool 1 Available Funds, in the following order of priority:
(1) to the Class 1-A1 through Class 1-A9, Class R and Class RL
Certificates, the Pool 1 Senior Optimal Principal Amount for such
Distribution Date, concurrently, as follows:
(a) pro rata, to the Class 1-A6 and Class 1-A7 Certificates
(together, the "Pool 1 Group II Senior 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
A1-8
<PAGE> 48
(b) to the Class 1-A1, Class 1-A2, Class 1-A3, Class 1-A4,
Class 1-A5, Class 1-A8, Class 1-A9, Class R and Class RL
Certificates (together, the "Pool 1 Group I Senior Certificates"),
the Pool 1 Senior Optimal Principal Amount less the Pool 1 Group II
Senior Principal Distribution Amount for such Distribution Date, in
the following order of priority:
(I) pro rata, to the Class R and Class RL Certificates,
until the Class Certificate Principal Balances thereof have
each been reduced to zero;
(II) sequentially, to the Class 1-A1 and Class 1-A2
Certificates and the Class 1-A3 PAC Component, in that order,
up to the amount necessary to reduce the aggregate Class
Certificate Principal Balances and Component Principal
Balance, as applicable, thereof to the Aggregate Pool 1 PAC
Balance set forth in the Pool 1 PAC Balances Table for such
Distribution Date;
(III) sequentially, to the Class 1-A4 and Class 1-A8
Certificates, in that order, up to the amount necessary to
reduce the aggregate Class Certificate Principal Balances
thereof to the Class 1-A4 and Class 1-A8 Aggregate TAC Balance
No. 1 set forth in the Pool 1 TAC Balances Table for such
Distribution Date;
(IV) to the Class 1-A3 TAC Accrual Component, up to the
amount necessary to reduce the Component Principal Balance
thereof to the Class 1-A3 TAC Component Balance No. 1 set
forth in the Pool 1 TAC Balances Table for such Distribution
Date;
(V) to the Class 1-A5 and Class 1-A9 Certificates, in the
following order of priority:
(A) to the Class 1-A5 Certificates, until the Class
Certificate Principal Balance thereof has been reduced to
zero; and
(B) to the Class 1-A9 Certificates, until the Class
Certificate Principal Balance thereof has been reduced to
zero;
(VI) sequentially, to the Class 1-A4 and Class 1-A8
Certificates, in that order, up to the amount necessary to
reduce the aggregate Class Certificate Principal Balances
thereof to the Class 1-A4 and Class 1-A8 Aggregate TAC Balance
No. 2 set forth in the Pool 1 TAC Balances Table for such
Distribution Date;
(VII) to the Class 1-A3 TAC Accrual Component, up to the
amount necessary to reduce the Component Principal Balance
thereof to the Class 1-A3 TAC Component Balance No. 2 set
forth in the Pool 1 TAC Balances Table for such Distribution
Date;
(VIII) to the Class 1-A4 and Class 1-A8 Certificates and
the Class 1-A3 TAC Accrual Component, in the following order
of priority:
(A) to the Class 1-A4 Certificates, without regard to
the Pool 1 TAC Balances Table for such Distribution Date,
until the Class Certificate Principal Balance thereof has
been reduced to zero;
A1-9
<PAGE> 49
(B) to the Class 1-A8 Certificates, without regard to
the Pool 1 TAC Balances Table for such Distribution Date,
until the Class Certificate Principal Balance thereof has
been reduced to zero; and
(C) to the Class 1-A3 TAC Accrual Component, without
regard to the Pool 1 TAC Balances Table for such
Distribution Date, until the Component Principal Balance
thereof has been reduced to zero; and
(IX) sequentially, to the Class 1-A1 and Class 1-A2
Certificates and the Class 1-A3 PAC Component, in that order,
without regard to the Pool 1 PAC Balances Table for such
Distribution Date, until the Class Certificate Principal
Balances and Component Principal Balance, as applicable,
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, (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") and (3) in the event the
Junior Optimal Principal Amount is less than the sum of the Class 1-PO
Deferred Amount and the Class 2-PO Deferred Amount for such Distribution
Date, such Junior Optimal Principal Amount shall be distributed pro rata to
the Class 1-PO and Class 2-PO Certificates on the basis of their respective
Deferred Amounts.
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.
On each Distribution Date through the Class 1-A3 TAC Component Accretion
Termination Date (as defined below), before distributions have been made
pursuant to priority third in the second paragraph under "Allocation of Pool 1
Available Funds" above, an amount equal to the Class 1-A3 TAC Component 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 1-A4 Certificates, without regard to the Pool 1
TAC Balances Table for such Distribution Date, until the Class Certificate
Principal Balance thereof has been reduced to zero;
A1-10
<PAGE> 50
second, to the Class 1-A8 Certificates, without regard to the Pool 1
TAC Balances Table for such Distribution Date, until the Class Certificate
Principal Balance thereof has been reduced to zero; and
third, to the Class 1-A3 TAC Accrual Component, without regard to the
Pool 1 TAC Balances Table for such Distribution Date, until the Component
Principal Balance thereof has been reduced to zero.
Any Class 1-A3 TAC Component Accrual Amount distributed as described above
on a Distribution Date through the Class 1-A3 TAC Component Accretion
Termination Date will be added to the Component Principal Balance of the Class
1-A3 TAC Accrual Component on such date.
The "Class 1-A3 TAC Component Accrual Amount" with respect to each
Distribution Date through the Class 1-A3 TAC Component Accretion Termination
Date will be an amount equal to the sum of (a) the Accrued Certificate Interest
on the Class 1-A3 TAC Accrual Component in accordance with priority first in the
second paragraph under "Allocation of Pool 1 Available Funds" above and (b) any
available amount allocable to the Class 1-A3 TAC Accrual Component in accordance
with priority second in the second paragraph under "Allocation of Pool 1
Available Funds" above. The "Class 1-A3 TAC Component Accretion Termination
Date" is the earlier of (1) the Distribution Date on which the Class Certificate
Principal Balances of the Class 1-A4 and Class 1-A8 Certificates have each been
reduced to zero and (2) the Cross-Over Date.
On each Distribution Date through the Class 1-A5 Accretion Termination Date
(as defined below), before distributions have been made pursuant to priority
third in the second paragraph under "Allocation of Pool 1 Available Funds"
above, an amount equal to the Class 1-A5 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 (or Component Principal
Balances) of the following classes of certificates (or components):
first, to the Class 1-A4 Certificates, without regard to the Pool 1
TAC Balances Table for such Distribution Date, until the Class Certificate
Principal Balance thereof has been reduced to zero;
second, to the Class 1-A8 Certificates, without regard to the Pool 1
TAC Balances Table for such Distribution Date, until the Class Certificate
Principal Balance thereof has been reduced to zero;
third, to the Class 1-A3 TAC Accrual Component, without regard to the
Pool 1 TAC Balances Table for such Distribution Date, until the Component
Principal Balance thereof has been reduced to zero; and
fourth, to the Class 1-A5 Certificates, until the Class Certificate
Principal Balance thereof has been reduced to zero.
Any Class 1-A5 Accrual Amount distributed as described above on a
Distribution Date through the Class 1-A5 Accretion Termination Date will be
added to the Component Principal Balance of the Class 1-A5 Certificates on such
date.
The "Class 1-A5 Accrual Amount" with respect to each Distribution Date
through the Class 1-A5 Accretion Termination Date will be an amount equal to the
sum of (a) the Accrued Certificate Interest on the Class 1-A5 Certificates in
accordance with priority first in the second paragraph under "Allocation of Pool
1 Available Funds" above and (b) any available amount allocable to the Class
1-A5 Certificates in accordance with
A1-11
<PAGE> 51
priority second in the second paragraph under "Allocation of Pool 1 Available
Funds" above. The "Class 1-A5 Accretion Termination Date" is the earlier of (1)
the Distribution Date on which the Component Principal Balance of the Class 1-A3
TAC Accrual Component has been reduced to zero and (2) the Cross-Over Date.
On each Distribution Date through the Class 1-A9 Accretion Termination Date
(as defined below), before distributions have been made pursuant to priority
third in the second paragraph under "Allocation of Pool 1 Available Funds"
above, an amount equal to the Class 1-A9 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 (or Component Principal
Balances) of the following classes of certificates (or components):
first, to the Class 1-A4 Certificates, without regard to the Pool 1
TAC Balances Table for such Distribution Date, until the Class Certificate
Principal Balance thereof has been reduced to zero;
second, to the Class 1-A8 Certificates, without regard to the Pool 1
TAC Balances Table for such Distribution Date, until the Class Certificate
Principal Balance thereof has been reduced to zero;
third, to the Class 1-A3 TAC Accrual Component, without regard to the
Pool 1 TAC Balances Table for such Distribution Date, until the Component
Principal Balance thereof has been reduced to zero;
fourth, to the Class 1-A5 Certificates, until the Class Certificate
Principal Balance thereof has been reduced to zero; and
fifth, to the Class 1-A9 Certificates, until the Class Certificate
Principal Balance thereof has been reduced to zero.
Any Class 1-A9 Accrual Amount distributed as described above on a
Distribution Date through the Class 1-A9 Accretion Termination Date will be
added to the Component Principal Balance of the Class 1-A9 Certificates on such
date.
The "Class 1-A9 Accrual Amount" with respect to each Distribution Date
through the Class 1-A9 Accretion Termination Date will be an amount equal to the
sum of (a) the Accrued Certificate Interest on the Class 1-A9 Certificates in
accordance with priority first in the second paragraph under "Allocation of Pool
1 Available Funds" above and (b) any available amount allocable to the Class
1-A9 Certificates in accordance with priority second in the second paragraph
under "Allocation of Pool 1 Available Funds" above. The "Class 1-A9 Accretion
Termination Date" (and, together with the Class 1-A3 TAC Component Accretion
Termination Date and the Class 1-A5 Accretion Termination Date, each an
"Accretion Termination Date") is the earlier of (1) the Distribution Date on
which the Component Principal Balance of the Class 1-A3 TAC Accrual Component
has been reduced to zero and (2) the Cross-Over Date.
Solely for purposes of determining distributions of principal and interest,
the Class 1-A3 Certificates will consist of four payment components: the Class
1-A3 PAC Component, the Class 1-A3 PAC IO Component, the Class 1-A3 TAC Accrual
Component and the Class 1-A3 TAC IO Component. The Class 1-A3 PAC Component and
the Class 1-A3 TAC Accrual Component will be entitled to distributions of
principal and interest. The Class 1-A3 PAC IO Component and the Class 1-A3 TAC
IO Component will be entitled to distributions of interest only, based on their
respective notional component principal balances. The initial Component
Principal Balances of the
A1-12
<PAGE> 52
Class 1-A3 PAC Component and the Class 1-A3 TAC Accrual Component are expected
to equal approximately $20,103,000 and $51,000,000, respectively, subject to the
variance described herein. (The Class Certificate Principal Balance of the Class
1-A3 Certificates will at all times equal the sum of the Component Principal
Balances of the Class 1-A3 PAC Component and the Class 1-A3 TAC Accrual
Component thereof.)
The Notional Component Principal Balance of the Class 1-A3 PAC IO Component
as of any Distribution Date will equal the sum of the Class Certificate
Principal Balances of the Class 1-A1 Certificates and Class 1-A2 Certificates
and the Component Principal Balance of the Class 1-A3 PAC Component as of such
Distribution Date. The Notional Component Principal Balance of the Class 1-A3
TAC IO Component as of any Distribution Date will equal the sum of the Class
Certificate Principal Balances of the Class 1-A4 and Class 1-A8 Certificates on
such Distribution Date. The initial Notional Component Principal Balance for the
Class 1-A3 PAC IO Component is expected to be approximately $150,666,000, and
the initial Notional Component Principal Balance for the Class 1-A3 TAC IO
Component is expected to be approximately $112,693,000, in each case subject to
the variance described herein.
The holders of the Class 1-A3 Certificates will not have a severable
interest in any component but will have an undivided interest in the entire
class, and the amount distributed in respect of any component will be
distributed pro rata to the holders of the Class 1-A3 Certificates.
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 in
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.
A1-13
<PAGE> 53
Interest will be calculated on the basis of a 360-day year consisting of twelve
30-day months.
On each Distribution Date through the applicable Accretion Termination Date
for the Class 1-A5 and Class 1-A9 Certificates and the Class 1-A3 TAC Accrual
Component, the Accrued Certificate Interest on such certificates and such
component on such Distribution Date will not be distributed on such certificates
or such component but will instead be added to the Class Certificate Principal
Balance of the Class 1-A5 or the Class 1-A9 Certificates or the Component
Principal Balance of the Class 1-A3 TAC Accrual Component, as applicable.
On each Distribution Date after the applicable Accretion Termination Date
for the Class 1-A5 and Class 1-A9 Certificates and the Class 1-A3 TAC Accrual
Component, interest will be distributable on such certificates or such component
and will not be added to the Class Certificate Principal Balance or Component
Principal Balance thereof.
Interest will accrue on 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 0.27496%. The "Class 1-S 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 Class 1-S Notional
Principal Balance of the Class 1-S Certificates is expected to be approximately
$250,334,296.
The 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 (other than the Class 1-A3 Certificates) for any
Distribution Date will equal the interest accrued during the related Interest
Accrual Period at the applicable certificate interest rate on the Certificate
Principal Balance (or, in the case of Class 1-S Certificate, the Class 1-S
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 "Accrued Certificate Interest" for the Class 1-A3 Certificates for any
Distribution Date will equal the sum of the interest accrued during the related
Interest Accrual Period on each component of the Class 1-A3 Certificates, at the
respective fixed interest rates per annum set forth in the following table, on
the Component Principal Balance or the Notional Component Principal Balance, as
the case may be, of such component immediately prior to such Distribution Date,
less such component's pro rata
A1-14
<PAGE> 54
share of any allocable Net Interest Shortfall in respect of Pool 1 mortgage
loans, the interest portion of any Excess Losses in respect of Pool 1 or 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.
Interest will accrue on the components of the Class 1-A3 Certificates at
the following rates per annum during each Interest Accrual Period:
<TABLE>
<CAPTION>
COMPONENT RATE
- --------- ----
<S> <C>
Class 1-A3 PAC Component.................................... 6.10%
Class 1-A3 PAC IO Component................................. 0.65
Class 1-A3 TAC Accrual Component............................ 6.75
Class 1-A3 TAC IO Component................................. 0.25
</TABLE>
The "Certificate Principal Balance" of any Pool 1 senior certificate (other
than the
Class 1-S Certificates) as of any Distribution Date will equal such
certificate's Certificate Principal Balance on the date of issuance of the
certificates:
- as reduced by all amounts distributed on previous Distribution Dates
on such certificate on account of principal;
- as reduced by the principal portion of all Realized Losses in
respect of Pool 1 or Pool 2 mortgage loans previously allocated to such
certificate; and
- in the case of a Class 1-A3, Class 1-A5 or Class 1-A9 Certificate
through the related Accretion Termination Date, increased by all Accrued
Certificate Interest added to the Certificate Principal Balance (or in the
case of a Class 1-A3 Certificate, the Component Principal Balance) thereof
on previous Distribution Dates.
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
A1-15
<PAGE> 55
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 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 1-A5 and
Class 1-A9 Certificates and the Class 1-A3 TAC Accrual Component through their
related Accretion Termination Dates, the amounts that would otherwise have been
added to the Class Certificate Principal Balances or Component Principal Balance
thereof. Such reduction with respect to the Class 1-A5 and Class 1-A9
Certificates and the Class 1-A3 TAC Accrual Component will effect a
corresponding reduction in the Class 1-A5 and Class 1-A9 Accrual Amount or Class
1-A3 TAC Accrual Amount, respectively, on such Distribution Date. 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 1-A5 and Class 1-A9 Certificates or the Component Principal Balance
of the Class 1-A3 TAC Accrual Component, through their related Accretion
Termination Dates) 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
A1-16
<PAGE> 56
senior certificates may be paid from collections in respect of the mortgage pool
backing the after group for 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 $2,915,567,
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 Distribution Date under priority third in the second
paragraph under "-- Allocation of Pool 1 Available Funds" above or, if
applicable, the second, fifth and eighth paragraphs 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 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
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<PAGE> 57
(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 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 multiplied by (2) the Pool 1 Group II Senior
Percentage for such date multiplied by (3) the Pool 1 Group II Senior
Distribution Percentage for such date. Notwithstanding the foregoing, 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 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 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 aggregate Certificate Principal
Balance of all the Pool 1 senior certificates (other
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<PAGE> 58
than the Class 1-PO Certificates) immediately preceding such Distribution Date.
The initial Pool 1 Group II Senior Percentage is expected to be approximately
10.81%.
The "Pool 1 Group II Senior Distribution Percentage" for any Distribution
Date will equal 0% through the Distribution Date in April 2004; 30% thereafter
through the Distribution Date in April 2005; 40% thereafter through the
Distribution Date in April 2006; 60% thereafter through the Distribution Date in
April 2007; 80% thereafter through the Distribution Date in April 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 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 95.97%.
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>
May 1999 - April 2004................ 100%
May 2004 - April 2005................ Pool 1 Senior Percentage plus 70%
of the Pool 1 Apportioned Junior
Percentage
May 2005 - April 2006................ Pool 1 Senior Percentage plus 60%
of the Pool 1 Apportioned Junior
Percentage
May 2006 - April 2007................ Pool 1 Senior Percentage plus 40%
of the Pool 1 Apportioned Junior
Percentage
May 2007 - April 2008................ Pool 1 Senior Percentage plus 20%
of the Pool 1 Apportioned Junior
Percentage
May 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)
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<PAGE> 59
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 May 2004 and April 2005;
(b) 35% of the Original Pool 1 Apportioned Junior Principal Balance
if such Distribution Date occurs between and including May
2005 and April 2006;
(c) 40% of the Original Pool 1 Apportioned Junior Principal Balance
if such Distribution Date occurs between and including May
2006 and April 2007;
(d) 45% of the Original Pool 1 Apportioned Junior Principal Balance
if such Distribution Date occurs between and including May
2007 and April 2008; and
(e) 50% of the Original Pool 1 Apportioned Junior Principal Balance
if such Distribution Date occurs during or after May 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 May
2004 and April 2005;
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<PAGE> 60
(b) 15% of the Original Pool 1 Apportioned Junior Principal Balance
if such Distribution Date occurs between and including May
2005 and April 2006;
(c) 20% of the Original Pool 1 Apportioned Junior Principal Balance
if such Distribution Date occurs between and including May
2006 and April 2007;
(d) 25% of the Original Pool 1 Apportioned Junior Principal Balance
if such Distribution Date occurs between and including May
2007 and April 2008; and
(e) 30% of the Original Pool 1 Apportioned Junior Principal Balance
if such Distribution Date occurs during or after May 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;
(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-
A1-21
<PAGE> 61
Over Date will equal 100% minus the Pool 1 Senior Prepayment Percentage. The
"Pool 1 Apportioned Junior Principal Balance" for any Distribution 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 Distribution Date. After the
Cross-Over Date, the Pool 1 Apportioned Junior Percentage will equal zero. The
initial Pool 1 Apportioned Junior Percentage is expected to be approximately
4.03%.
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 (other than the Class 1-PO or Class 2-PO
Certificates, as applicable) of either mortgage pool 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 (other than the Class 1-PO or Class 2-PO
Certificates, as applicable) backed by the other mortgage pool, 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 Optional Principal
Amount or Pool 2 Senior Optional 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.
- On any Distribution Date on which the aggregate Class Certificate
Principal Balance of the senior certificates (other than Class 1-PO or
Class 2-PO Certificates) in respect of either mortgage pool is greater than
the related Pool Scheduled Principal Balance (calculated on the basis of
the Non-PO percentage thereof) on such Distribution Date (such group of
certificates, a "Pool Balance Shortfall Group"), 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 related Class 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
A1-22
<PAGE> 62
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
(other than the Class 1-PO or Class 2-PO Certificates) related to such
other mortgage pool. 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 (other than the related
Class PO Certificates) of such Pool Balance Shortfall Group 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 Optional Principal Amount or Pool 2 Senior Optional 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 and Class 2-PO
Certificates will each be entitled to received any Class 1-PO Deferred
Amount and Class 2-PO Deferred Amount, respectively, 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
related mortgage pool. On any Distribution Date on which there are
insufficient funds, after distributions of interest and principal have been
made on the Pool 1 and Pool 2 senior certificates, to fully pay the Class
1-PO Deferred Amount and the Class 2-PO Deferred Amount to both the Class
1-PO and Class 2-PO Certificates, such remaining funds shall be distributed
pro rata to such certificates.
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 Balances of the Class 1-PO and Class 2-PO Certificates).
ALLOCATION OF REALIZED LOSSES ON THE POOL 1 CERTIFICATES
A "Realized Loss" with respect to a mortgage loan is
- a Bankruptcy Loss (as defined below) or
- as to any Liquidated Mortgage Loan, the unpaid principal balance thereof
plus accrued and unpaid interest thereon at the Net Mortgage Rate through
the last day of the month of liquidation, less the net proceeds from the
liquidation of, and any insurance proceeds from, such mortgage loan and
the related mortgaged property. A "Liquidated Mortgage Loan" is any
defaulted mortgage loan as to which GECMSI
A1-23
<PAGE> 63
has determined that all amounts which it expects to recover from or on
account of such mortgage loan have been recovered.
In the event of a personal bankruptcy of a mortgagor, the bankruptcy court
may establish the value of the mortgaged property at an amount less than the
then outstanding principal balance of the mortgage loan secured by such
mortgaged property and could reduce the secured debt to such value. In such
case, the 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"). In addition, certain other modifications of the terms of
a mortgage loan can result from a bankruptcy proceeding, including the reduction
of the amount of the monthly payment on the related mortgage loan (a "Debt
Service Reduction").
A "Bankruptcy Loss" with respect to any mortgage loan is a Deficient
Valuation or Debt Service Reduction.
A "Fraud Loss" is any Realized Loss attributable to fraud in the
origination of the related mortgage loan.
A "Special Hazard Loss" is a Realized Loss attributable to damage or a
direct physical loss suffered by a mortgaged property -- including any Realized
Loss due to the presence or suspected presence of hazardous wastes or substances
on a mortgaged property -- other than any such damage or loss covered by a
hazard policy or a flood insurance policy required to be maintained in respect
of such mortgaged property under the Agreement or any loss due to normal wear
and tear or certain other causes.
On each Distribution Date, the applicable PO Percentage of the principal
portion of any Realized Loss (including any Excess Loss, but not including any
Debt Service Reduction) on a 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 aggregate of all amounts so allocable to the Class 1-PO
Certificates on such date in respect of Realized Losses other than Excess Losses
in respect of the Pool 1 Discount Mortgage Loans and all amounts previously
allocated in respect of such losses to the Class 1-PO Certificates and not
distributed 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 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, and losses
allocated to the Class 1-PO Certificates will not be added to, the Class 1-PO
Deferred Amount. 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
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<PAGE> 64
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.
Prior to the Cross-Over Date (and on such date under certain
circumstances), the applicable Non-PO Percentage of the principal portion of any
Realized Loss (in either pool) (other than an Excess Loss or a Debt Service
Reduction) will be allocated among the outstanding classes of junior
certificates, in inverse order of priority, until the Class Certificate
Principal Balance of each such class has been reduced to zero (i.e., such
Realized Losses will be allocated first to the Class B5 Certificates while such
certificates are outstanding, second to the Class B4 Certificates, and so on).
The applicable Non-PO Percentage of the principal portion of any Excess
Loss (other than a Debt Service Reduction) on a Pool 1 or Pool 2 mortgage loan
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 and Class 2-PO Certificates) and the
junior certificates based on their respective Class Certificate Principal
Balances.
An "Excess Loss" in respect of a Pool 1 and Pool 2 mortgage loan is any
Bankruptcy Loss, Fraud Loss and Special Hazard Loss (each a type of Realized
Loss) occurring after the Bankruptcy Coverage Termination Date, Fraud Coverage
Termination Date and Special Hazard Termination Date, respectively, as described
more fully below.
Commencing on the Cross-Over Date, the applicable Non-PO Percentage of the
principal portion of any Realized Loss (other than a Debt Service Reduction)
with respect to any Pool 1 or Pool 2 mortgage loan 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 and Class 2-PO Certificates)
pro rata based upon their Class Certificate Principal Balances; provided,
however, that until the Class Certificate Principal Balance of the Class 1-A7
Certificates has been reduced to zero, the applicable Non-PO Percentage of any
such Realized Losses, other than any Special Event Losses, that would otherwise
be allocable to the Class 1-A3 Certificates, will instead be borne by the
holders of the Class 1-A7 Certificates before such losses will be borne by
holders of the Class 1-A3 Certificates. A "Special Event Loss" is any Fraud
Loss, Special Hazard Loss or Bankruptcy Loss.
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
to the Bankruptcy Coverage Termination Date (such limitation being the "Loss
Allocation Limitation").
Any portion of a Realized Loss so allocated to the Class 1-A3 Certificates
will be allocated between the Class 1-A3 PAC Component and the Class 1-A3 TAC
Accrual Component on a pro rata basis.
Because the aggregate Notional Component Principal Balances of the Class
1-A3 PAC IO and Class 1-A3 TAC IO Components (each, a "Class 1-A3 IO Component")
of the Class 1-A3 Certificates will be determined by reference to the Class
Certificate
A1-25
<PAGE> 65
Principal Balance from time to time of various other classes of Pool 1
certificates, any Realized Losses that are applied to reduce the Class
Certificate Principal Balances of such other certificates will also reduce by an
equivalent amount the Notional Component Principal Balances of the applicable
Class 1-A3 IO Component. As a result, the amount of interest distributable on
the applicable Class 1-A3 IO Components would be reduced.
The principal portion of Debt Service Reductions with respect to Pool 1 or
Pool 2 mortgage loans will not be allocated in reduction of the Certificate
Principal Balance or Component 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, 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, 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.
All allocations of Realized Losses in respect of Pool 1 or Pool 2 mortgage
loans to a class of Pool 1 certificates, to the Class 1-A3 PAC Component or
Class 1-A3 TAC Accrual Component or to the junior certificates will be
accomplished on a Distribution Date by reducing the applicable Class Certificate
Principal Balance or Component Principal Balance by the appropriate pro rata
share of any such losses occurring during the month preceding the month of such
Distribution Date and, accordingly, will be taken into account in determining
the distributions of principal and interest on the certificates (or the
calculation of the Class 1-A3 TAC Component Accrual Amount, Class 1-A5 Accrual
Amount or the Class 1-A9 Accrual Amount) commencing on the following
Distribution Date, except that the aggregate amount of the principal portion of
any Realized Losses (other than Excess Losses and Debt Service Reductions) to be
allocated to the Class 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 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 Principal
Balance of the Class 1-A5 and Class 1-A9 Certificates and the Component
Principal Balance of the Class 1-A3 TAC Accrual Component will be deemed to
equal the lesser of:
(1) the original Class Certificate Principal Balance or Component
Principal Balance of the Class 1-A5 and Class 1-A9 Certificates or Class
1-A3 TAC Accrual Component, as applicable; and
(2) the outstanding Class Certificate Principal Balance or Component
Principal Balance of the Class 1-A5 and Class 1-A9 Certificates or Class
1-A3 TAC Accrual Component, as applicable.
The interest portion of all Realized Losses in respect of Pool 1 or Pool 2
mortgage loans will be allocated among the outstanding classes and components of
Pool 1 and Pool 2 senior certificates entitled to distributions of interest to
the extent described under "-- Distributions on the Pool 1 Senior
Certificates -- Interest" above.
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<PAGE> 66
The applicable Non-PO Percentage of any Deficient Valuation on a Pool 1 or
Pool 2 mortgage loan will on each Distribution Date be allocated solely to the
outstanding junior certificates until the Bankruptcy Coverage Termination Date.
The "Bankruptcy Coverage Termination Date" is the Distribution Date upon which
the Bankruptcy Loss Amount has been reduced to zero or a negative number (or the
Cross-Over Date, if earlier). On each Distribution Date, the "Bankruptcy Loss
Amount" will equal approximately $165,208 (approximately 0.03% 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 Bankruptcy Losses 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 Bankruptcy Losses.
The applicable Non-PO Percentage of any Fraud Loss in respect of a Pool 1
or Pool 2 mortgage loan will on each Distribution Date be allocated solely to
the outstanding junior certificates until the Fraud Coverage Termination Date.
The "Fraud Coverage Termination Date" is the Distribution Date upon which the
Fraud Loss Amount has been reduced to zero or a negative number (or the
Cross-Over Date, if earlier). Upon the initial issuance of the certificates, the
"Fraud Loss Amount" will equal approximately $5,011,339 (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
$5,011,339, minus the aggregate amount of Fraud Losses that would have been
allocated to the junior certificates in the absence of the Loss Allocation
Limitation since the Cut-off Date. As of any Distribution Date from the first to
the fifth anniversaries of the Cut-off Date, the Fraud Loss Amount will equal
(1) the lesser of (a) the Fraud Loss Amount as of the most recent anniversary of
the Cut-off Date and (b) 1% (from the first to but excluding the third
anniversaries of the Cut-off Date) or 0.5% (from and including the third to but
excluding the fifth anniversaries of the Cut-off Date) of the aggregate
outstanding principal balance of all of the 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.
The applicable Non-PO Percentage of any Special Hazard Loss in respect of a
Pool 1 or Pool 2 mortgage loan will on each Distribution Date be allocated
solely to the outstanding junior certificates until the Special Hazard
Termination Date. The "Special Hazard Termination Date" is the Distribution Date
upon which the Special Hazard Loss Amount has been reduced to zero or a negative
number (or the Cross-Over Date, if earlier). Upon the initial issuance of the
certificates, the "Special Hazard Loss Amount" will equal approximately
$5,011,339 (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
$5,011,339 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
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<PAGE> 67
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 the Pool 1 and Pool 2 mortgage loans on the
Distribution Date immediately preceding such anniversary and (y) twice the
outstanding principal balance of the Pool 1 and Pool 2 mortgage loan which
has the largest outstanding principal balance on the Distribution Date
immediately preceding such anniversary.
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 and
the Class 1-A3 IO Components) 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 Considerations" in the prospectus for a discussion of the
factors that may influence prepayment rates.
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<PAGE> 68
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 or the Class
1-A3 IO Components, reducing the Notional Principal Balance thereof or Notional
Component Principal Balances 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 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 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 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
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<PAGE> 69
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), will be less than the amount
which would have been distributed (or added to the Class Certificate Principal
Balance of the Class 1-A5 or Class 1-A9 Certificates or the Component Principal
Balance of the Class 1-A3 TAC Accrual Component) 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 or components 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 1-A7 CERTIFICATES
Beginning on the Cross-Over Date, the Non-PO Percentage of the principal
portion of Realized Losses on the Pool 1 and Pool 2 mortgage loans, other than
any Special Event Losses, that would otherwise be allocable to the Class 1-A3
Certificates, will instead be borne by the holders of the Class 1-A7
Certificates before such losses will be borne by the holders of the Class 1-A3
Certificates. As a result, the yield on the Class 1-A7 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 1-A7 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 1-A3 CERTIFICATES
As described in this prospectus supplement, the Class 1-A3 Certificates
consist of four components, two of which are interest-only components and the
other two of which pay interest and principal. Because the notional component
balances of the interest-only components are determined at all times by
reference to the principal balances of the Pool 1 PAC Certificates and Pool 1
TAC Certificates (as defined below), interest distributions on these components
are likely to be relatively stable, so long as principal distributions on the
Pool 1 PAC Certificates and the Pool 1 TAC Certificates are in accordance with
their PAC Balance or TAC Balance schedules, as applicable. See "-- Pool 1 PAC
Certificates" and "-- Pool 1 TAC Certificates" in this Annex 1.
In addition, principal distributions on the Class 1-A3 TAC Accrual
Component are expected to be more stable than would be the case if such
components were not entitled to receive payments, to the extent of available
principal, according to the Class 1-A3 TAC
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<PAGE> 70
Balances schedules (each, a "TAC Balances Schedule"). Based on the Pool 1
Modeling Assumptions, the Class 1-A3 TAC Accrual Component would pay down in
accordance with the Class 1-A3 TAC Component Balance No. 1 if the Pool 1
mortgage loans were to prepay at a constant rate of 250% of the Prepayment
Assumption, the Class 1-A3 TAC Accrual Component would pay down in accordance
with the Class 1-A3 TAC Component Balance No. 2 if the Pool 1 mortgage loans
were to prepay at a constant rate of 800% of the Prepayment Assumption, in each
case, until the Component Principal Balance thereof has been reduced to zero.
However, because the actual characteristics of the mortgage loans in Pool 1 may
differ from those assumed in the Pool 1 Modeling Assumptions, and because such
mortgage loans will not prepay at a constant rate of 250% or 800% of the
Prepayment Assumption or any other prescribed constant rate, it is not likely
that the Class 1-A3 TAC Accrual Component will consistently pay down in
accordance with either of its Class 1-A3 TAC Component Balance schedules. The
Class 1-A3 TAC Component Balances schedules are set forth in the Pool 1 TAC
Balances Table attached to this Annex 1.
The following table indicates the pre-tax yields to maturity on the Class
1-A3 Certificates (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 1-A3 Certificates, would cause the discounted present value of such
cash flows to equal the assumed purchase price for such certificates stated in
such table and converting the applicable monthly discount rate to a corporate
bond-equivalent rate. Implicit in the use of any discounted present value or
internal rate of return calculations such as these is the assumption that
intermediate cash flows are reinvested at the discount rate or internal rate of
return. Thus, these calculations do not take into account the different interest
rates at which investors may be able to reinvest funds received by them as
distributions on the Class 1-A3 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 a constant level of the
Prepayment Assumption until maturity or that all of the Pool 1 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 payments 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, and the additional assumptions that:
(1) the assumed purchase price for the Class 1-A3 Certificates is the
sum of:
(a) the product of the assumed purchase price percentage specified
below (which does not include accrued interest) and the initial Class
Certificate Principal Balance thereof; and
(b) the accrued interest on such certificates from the Cut-off Date
to, but not including, the date of issuance of the certificates; and
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<PAGE> 71
(2) such purchase price is paid on April 29, 1999.
PRE-TAX YIELD* TO MATURITY OF THE CLASS 1-A3 CERTIFICATES
AT AN ASSUMED PURCHASE PRICE PERCENTAGE = 100%
<TABLE>
<CAPTION>
PREPAYMENT ASSUMPTION
- --------------------------------------
0% 100% 275% 400% 500%
- ------ ------ ------ ------ ------
<S> <C> <C> <C> <C>
7.464% 7.300% 7.328% 7.492% 7.737%
</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 1-A3 Certificates will
correspond to any amounts shown herein or
(3) the purchase price of the Class 1-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 1-A3
Certificate.
FINAL PAYMENT CONSIDERATIONS
The rate of payment of principal of the Pool 1 senior certificates will
depend 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 April 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 or the applicable
components thereof. The interaction of the foregoing factors may have different
effects on the various classes of the Pool 1 senior certificates or
A1-32
<PAGE> 72
the applicable components thereof and the effects on any class or component
thereof may vary at different times during the life of such class or component
thereof. Further, to the extent the prices of a class of Pool 1 senior
certificates or component thereof 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.
Pool 1 PAC Certificates
The Aggregate Pool 1 PAC Balances schedule set forth in the Pool 1 PAC
Balances Table hereto for the Class 1-A1 and Class 1-A2 Certificates and Class
1-A3 PAC Component of the Class 1-A3 Certificates (together, the "Pool 1 PAC
Certificates") was prepared by calculating the amount that would be available
for payments on the Pool 1 PAC Certificates using, among other things, the Pool
1 Modeling Assumptions and a range of constant mortgage loan prepayment rates
(the "Structuring Range"), expressed as a percentage of the Prepayment
Assumption, and on the basis of the actual characteristics of the mortgage loans
expected to be included in Pool 1. The Structuring Range for the Pool 1 PAC
Certificates is 125% through 500% of the Prepayment Assumption. However, because
the actual characteristics of the Pool 1 mortgage loans may differ from those
assumed in the Pool 1 Modeling Assumptions and because the Pool 1 mortgage loans
will not prepay at a constant rate or any other prescribed rate, it is not
likely that each class and component of the Pool 1 PAC Certificates will pay
down in accordance with the Aggregate Pool 1 PAC Balances schedule. The
Aggregate Pool 1 PAC Balances schedule for the Pool 1 PAC Certificates is set
forth in the Pool 1 PAC Balances Table attached to this Annex 1.
Principal distributions on the Pool 1 PAC Certificates are likely to be
relatively stable and in accordance with the Aggregate Pool 1 PAC Balances
schedule so long as Pool 1 mortgage loan prepayments are neither too fast or too
slow to support such schedule. Moreover, if the Pool 1 PAC Certificates fall
behind the schedule, they will have cumulative priority for future principal
distributions from amounts available for distribution of principal among the
Pool 1 certificates. For the Pool 1 PAC Certificates there is a range of
constant mortgage prepayment rates (an "Effective Range") at which such
certificates and such component would pay down in accordance with the Aggregate
Pool 1 PAC Balances schedule. The initial Effective Range for each class and
component of Pool 1 PAC Certificates may be wider than the Structuring Range
described above.
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<PAGE> 73
The Effective Range for the Pool 1 PAC Certificates can narrow or "shift"
upward or downward over time as a result of the rates of principal payments
actually experienced on the Pool 1 mortgage loans. Moreover, the Pool 1 mortgage
loans will not prepay at any constant rate and there can be no assurance that
the amount available for principal distributions on the Pool 1 PAC Certificates
on any Distribution Date will be sufficient to reduce the Class Certificate
Principal Balance or Component Principal Balance thereof to the Aggregate Pool 1
PAC Balances. Non-constant prepayment rates on the related mortgage loans can
cause the Pool 1 PAC Certificates not to pay down in accordance with the
Aggregate Pool 1 PAC Balances schedule, even if such rates remain within the
initial Effective Range.
If the Pool 1 mortgage loans prepay at rates that are generally below the
Effective Range, the amount available for principal distributions thereon on any
Distribution Date may be insufficient to reduce the Certificate Principal
Balances and Component Principal Balance thereof to the Aggregate Pool 1 PAC
Balance, and the weighted average lives of such certificates and component may
be extended, perhaps significantly. Conversely, if the Pool 1 mortgage loans
prepay at rates that are generally above the Effective Range, the weighted
average lives thereof may be shortened, perhaps significantly.
The principal payment stability of the Pool 1 PAC Certificates will be
supported by the Class 1-A5 and Class 1-A9 Certificates. As a result, the Pool 1
PAC Certificates will be less sensitive to Pool 1 mortgage loan prepayment rates
than the Class 1-A5 and Class 1-A9 Certificates. When the Class Certificate
Principal Balances of the Class 1-A5 and Class 1-A9 Certificates have been
reduced to zero, the Pool 1 PAC Certificates will become more sensitive to Pool
1 mortgage loan prepayments.
Pool 1 TAC Certificates
Principal distributions on the Class 1-A4 and Class 1-A8 Certificates and
Class 1-A3 TAC Accrual Component of the Class 1-A3 Certificates (together, the
"Pool 1 TAC Certificates") are expected to be more stable than would be the case
if such Pool 1 TAC Certificates were not entitled to receive payments, to the
extent of available principal, according to the Pool 1 TAC Balances schedules
(each, a "TAC Balances Schedule").
Based on the Pool 1 Modeling Assumptions:
(1) the Class 1-A4 and Class 1-A8 Certificates, as a group, would pay down
(a) in accordance with the Class 1-A4 and Class 1-A8 Aggregate TAC Balance No. 1
schedule if the Pool 1 mortgage loans were to prepay at a constant rate of 240%
of the Prepayment Assumption and (b) in accordance with the Class 1-A4 and Class
1-A8 Aggregate TAC Balance No. 2 schedule if the Pool 1 mortgage loans were to
prepay at a constant rate of 490% of the Prepayment Assumption; and
(2) the Class 1-A3 TAC Accrual Component would pay down (a) in accordance
with its Class 1-A3 TAC Component Balance No. 1 schedule if the Pool 1 mortgage
loans were to prepay at a constant rate of 250% of the Prepayment Assumption and
(b) in accordance with its Class 1-A3 TAC Component Balance No. 2 schedule if
the Pool 1 mortgage loans prepay at a constant rate of 800% of the Prepayment
Assumption.
However, because the actual characteristics of the mortgage loans in Pool 1
may differ from those assumed in the Pool 1 Modeling Assumptions, and because
such mortgage loans will not prepay at the constant rates described above or at
any other prescribed constant rate, it is not likely that the Pool 1 TAC
Certificates will consistently pay down in accordance with any of their
respective TAC Balances Schedules. The TAC
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<PAGE> 74
Balances Schedules are set forth in the Pool 1 TAC Balances Table attached to
this Annex 1.
With respect to any class or component of Pool 1 TAC Certificates, the Pool
1 mortgage loans may prepay at rates that are generally below the constant
percentage of the Prepayment Assumption used to derive the TAC Balances
Schedules for such class or component of Pool 1 TAC Certificates. If this
occurs, the Certificate Principal Balance or Component Principal Balance of such
class or component will not be reduced in accordance with such schedules, and
the weighted average life of such class of certificates may be extended, perhaps
significantly.
Conversely, the Pool 1 mortgage loans may prepay at rates that are
generally above the constant percentage of the Prepayment Assumption used to
derive the TAC Balances Schedules for any class or component of Pool 1 TAC
Certificates. If this occurs, and if the Class Certificate Principal Balances of
the certificates supporting such class or component of Pool 1 TAC Certificates
have been reduced to zero, the weighted average life of such class or component
of Pool 1 TAC Certificates may be shortened, perhaps significantly.
The entire Pool 1 Available Funds will be distributed monthly on each
Distribution Date and will not be retained for distribution on subsequent
Distribution Dates. Thus, the likelihood that the Class 1-A4 and Class 1-A8
Certificates will pay down in accordance with either of their TAC Balances
Schedules or that the Class 1-A 3 TAC Accrual Component will pay down in
accordance with either of its TAC Balances Schedules, will not be enhanced by
averaging high and low principal payments in different months.
Support Certificates
The Class 1-A5 and Class 1-A9 Certificates are the "Pool 1 Support
Certificates." The Pool 1 Support Certificates will support the principal
payment stability of the Pool 1 PAC Certificates and the Pool 1 TAC
Certificates. As a result, the weighted average lives of the Pool 1 Support
Certificates will be more sensitive to Pool 1 mortgage loan prepayments than
those of the Pool 1 PAC Certificates and the Pool 1 TAC Certificates. The Pool 1
Support Certificates may receive no principal payments for extended periods of
time or may receive principal payments that vary widely from period to period.
To the extent that a low rate of principal payments on the Pool 1 mortgage loans
results in the Pool 1 Available Funds on any Distribution Date being equal to or
less than the amount required to be distributed as principal on the Pool 1 PAC
Certificates and the Pool 1 TAC Certificates in accordance with the related PAC
and TAC Balances Schedules, the Pool 1 Support Certificates will receive no
principal on such Distribution Date. Conversely, to the extent that a high rate
of principal payments results in the Pool 1 Available Funds being in excess of
such amount, such excess will be applied, to the extent of the Pool 1 Senior
Optimal Principal Amount, to the Pool 1 Support Certificates until the Class
Certificate Principal Balances thereof have been reduced to zero. Thus, a rapid
rate of prepayments in respect of the Pool 1 mortgage loans may significantly
shorten the weighted average lives of the Pool 1 Support Certificates, and a
relatively slow rate of prepayments on such Pool 1 mortgage loans may
significantly extend the weighted average lives of the Pool 1 Support
Certificates.
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
A1-35
<PAGE> 75
Assumption and the corresponding weighted average life of each such class of
certificates. The figures in the table are based on the actual characteristics
of the Pool 1 mortgage loans expected to be included in Pool 1. 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 May 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 $380,746,934.31;
(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 May 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 April 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 April 29,
1999; and
(11) the amount distributable to the Pool 1 certificateholders is not
reduced by the incurrence of any expenses by the trust.
It is not likely that the Pool 1 mortgage loans will prepay at a constant
level of the Prepayment Assumption. In addition, if the actual characteristics
of the Pool 1 mortgage loans included in Pool 1 differ from those used in
calculating the percentages set forth in the tables, 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
Pool 1 senior certificates could differ (which difference would be material)
from the corresponding information in the tables for each indicated percentage
of the Prepayment Assumption.
A1-36
<PAGE> 76
PERCENT OF ORIGINAL CLASS CERTIFICATE PRINCIPAL BALANCE
OUTSTANDING OF THE CERTIFICATES
<TABLE>
<CAPTION>
CLASS 1-A1 CLASS 1-A2 CLASS 1-A3+
--------------------------------- --------------------------------- -------------
DISTRIBUTION DATE 0% 100% 275% 400% 500% 0% 100% 275% 400% 500% 0% 100%
- ----------------- ----- ---- ---- ---- ---- ----- ---- ---- ---- ---- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Initial Percentage......... 100 100 100 100 100 100 100 100 100 100 100 100
April 2000................. 96 90 89 89 89 100 100 100 100 100 105 105
April 2001................. 92 72 67 67 67 100 100 100 100 100 110 110
April 2002................. 88 47 37 37 37 100 100 100 100 100 116 116
April 2003................. 83 23 10 10 10 100 100 100 100 100 122 122
April 2004................. 78 1 0 0 0 100 100 51 51 51 129 129
April 2005................. 73 0 0 0 0 100 43 0 0 0 136 136
April 2006................. 68 0 0 0 0 100 0 0 0 0 143 137
April 2007................. 62 0 0 0 0 100 0 0 0 0 151 123
April 2008................. 56 0 0 0 0 100 0 0 0 0 160 131
April 2009................. 50 0 0 0 0 100 0 0 0 0 169 141
April 2010................. 43 0 0 0 0 100 0 0 0 0 179 150
April 2011................. 36 0 0 0 0 100 0 0 0 0 189 143
April 2012................. 28 0 0 0 0 100 0 0 0 0 200 126
April 2013................. 19 0 0 0 0 100 0 0 0 0 212 110
April 2014................. 11 0 0 0 0 100 0 0 0 0 225 94
April 2015................. 1 0 0 0 0 100 0 0 0 0 234 79
April 2016................. 0 0 0 0 0 71 0 0 0 0 231 65
April 2017................. 0 0 0 0 0 37 0 0 0 0 229 51
April 2018................. 0 0 0 0 0 * 0 0 0 0 226 37
April 2019................. 0 0 0 0 0 0 0 0 0 0 205 24
April 2020................. 0 0 0 0 0 0 0 0 0 0 183 11
April 2021................. 0 0 0 0 0 0 0 0 0 0 159 0
April 2022................. 0 0 0 0 0 0 0 0 0 0 133 0
April 2023................. 0 0 0 0 0 0 0 0 0 0 106 0
April 2024................. 0 0 0 0 0 0 0 0 0 0 78 0
April 2025................. 0 0 0 0 0 0 0 0 0 0 47 0
April 2026................. 0 0 0 0 0 0 0 0 0 0 14 0
April 2027................. 0 0 0 0 0 0 0 0 0 0 0 0
April 2028................. 0 0 0 0 0 0 0 0 0 0 0 0
April 2029................. 0 0 0 0 0 0 0 0 0 0 0 0
Weighted Average Life
(in years)(1)............ 9.4 2.9 2.5 2.5 2.5 17.6 5.9 5.1 5.1 5.1 23.4 15.4
<CAPTION>
CLASS 1-A3+
-------------------
DISTRIBUTION DATE 275% 400% 500%
- ----------------- ----- ---- ----
<S> <C> <C> <C>
Initial Percentage......... 100 100 100
April 2000................. 104 104 103
April 2001................. 108 108 105
April 2002................. 111 111 96
April 2003................. 116 99 52
April 2004................. 121 76 30
April 2005................. 122 62 22
April 2006................. 103 37 5
April 2007................. 80 23 0
April 2008................. 64 15 0
April 2009................. 52 11 0
April 2010................. 42 8 0
April 2011................. 34 6 0
April 2012................. 28 5 0
April 2013................. 22 3 0
April 2014................. 18 2 0
April 2015................. 14 2 0
April 2016................. 11 1 0
April 2017................. 9 1 0
April 2018................. 7 1 0
April 2019................. 5 * 0
April 2020................. 4 * 0
April 2021................. 3 * 0
April 2022................. 2 * 0
April 2023................. 1 * 0
April 2024................. * * 0
April 2025................. 0 * 0
April 2026................. 0 * 0
April 2027................. 0 * 0
April 2028................. 0 * 0
April 2029................. 0 0 0
Weighted Average Life
(in years)(1)............ 10.5 6.7 4.4...
</TABLE>
- -------------------------
* Indicates an amount above zero and less than 0.5% of the original Class
Certificate Principal Balance is outstanding.
+ Reflects only the Component Principal Balance of the Class 1-A3 PAC
Component and the Class 1-A3 TAC Accrual Component and does not take into
account reductions in Notional Component Principal Balances of the Class
1-A3 IO Components.
(1) The weighted average life is determined as described on page A1-32.
A1-37
<PAGE> 77
PERCENT OF ORIGINAL CLASS CERTIFICATE PRINCIPAL BALANCE
OUTSTANDING OF THE CERTIFICATES
<TABLE>
<CAPTION>
CLASS 1-A4 CLASS 1-A5 CLASS 1-A6
------------------------------- -------------------------------- --------------------------------
DISTRIBUTION DATE 0% 100% 275% 400% 500% 0% 100% 275% 400% 500% 0% 100% 275% 400% 500%
- ----------------- --- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Initial Percentage........ 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100
April 2000................ 92 92 78 78 68 107 107 71 0 0 100 100 100 100 100
April 2001................ 83 83 37 1 0 114 114 0 0 0 100 100 100 100 100
April 2002................ 73 73 0 0 0 122 122 0 0 0 100 100 100 100 100
April 2003................ 63 63 0 0 0 131 131 0 0 0 100 100 100 100 100
April 2004................ 52 52 0 0 0 140 140 0 0 0 100 100 100 100 100
April 2005................ 40 40 0 0 0 150 150 0 0 0 100 98 94 91 88
April 2006................ 28 28 0 0 0 160 160 0 0 0 99 95 86 80 74
April 2007................ 14 14 0 0 0 171 171 0 0 0 98 90 76 66 54
April 2008................ * 0 0 0 0 183 183 0 0 0 96 84 65 52 36
April 2009................ 0 0 0 0 0 196 196 0 0 0 94 77 53 39 25
April 2010................ 0 0 0 0 0 210 210 0 0 0 92 71 43 29 17
April 2011................ 0 0 0 0 0 224 224 0 0 0 89 65 35 21 11
April 2012................ 0 0 0 0 0 240 240 0 0 0 87 59 28 16 8
April 2013................ 0 0 0 0 0 257 257 0 0 0 84 54 23 11 5
April 2014................ 0 0 0 0 0 274 274 0 0 0 81 49 18 8 4
April 2015................ 0 0 0 0 0 294 294 0 0 0 78 44 15 6 2
April 2016................ 0 0 0 0 0 314 314 0 0 0 74 40 12 4 2
April 2017................ 0 0 0 0 0 336 336 0 0 0 70 35 9 3 1
April 2018................ 0 0 0 0 0 359 359 0 0 0 66 31 7 2 1
April 2019................ 0 0 0 0 0 384 384 0 0 0 62 27 6 2 *
April 2020................ 0 0 0 0 0 411 411 0 0 0 57 24 4 1 *
April 2021................ 0 0 0 0 0 440 418 0 0 0 52 21 3 1 *
April 2022................ 0 0 0 0 0 470 274 0 0 0 47 17 3 1 *
April 2023................ 0 0 0 0 0 503 139 0 0 0 42 14 2 * *
April 2024................ 0 0 0 0 0 538 13 0 0 0 36 12 1 * *
April 2025................ 0 0 0 0 0 576 0 0 0 0 29 9 1 * *
April 2026................ 0 0 0 0 0 616 0 0 0 0 23 7 1 * *
April 2027................ 0 0 0 0 0 332 0 0 0 0 15 4 * * *
April 2028................ 0 0 0 0 0 0 0 0 0 0 8 2 * * *
April 2029................ 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Weighted Average Life (in
years)(1)............... 5.0 4.9 1.7 1.4 1.2 28.1 23.5 1.3 0.4 0.3 21.3 15.8 11.4 9.9 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 A1-32.
A1-38
<PAGE> 78
PERCENT OF ORIGINAL CLASS CERTIFICATE PRINCIPAL BALANCE
OUTSTANDING OF THE CERTIFICATES
<TABLE>
<CAPTION>
CLASS 1-A7 CLASS 1-A8 CLASS 1-A9
-------------------------------- -------------------------------- ------------------
DISTRIBUTION DATE 0% 100% 275% 400% 500% 0% 100% 275% 400% 500% 0% 100% 275%
- ----------------- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<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
April 2000..................... 100 100 100 100 100 100 100 100 100 100 107 107 107
April 2001..................... 100 100 100 100 100 100 100 100 100 74 114 114 113
April 2002..................... 100 100 100 100 100 100 100 91 30 0 122 122 50
April 2003..................... 100 100 100 100 100 100 100 59 0 0 131 131 15
April 2004..................... 100 100 100 100 100 100 100 33 0 0 140 140 4
April 2005..................... 100 98 94 91 88 100 100 14 0 0 150 150 4
April 2006..................... 99 95 86 80 74 100 100 0 0 0 160 160 4
April 2007..................... 98 90 76 66 54 100 100 0 0 0 171 171 4
April 2008..................... 96 84 65 52 36 100 77 0 0 0 183 183 5
April 2009..................... 94 77 53 39 25 88 45 0 0 0 196 196 5
April 2010..................... 92 71 43 29 17 75 12 0 0 0 210 210 5
April 2011..................... 89 65 35 21 11 61 0 0 0 0 224 224 6
April 2012..................... 87 59 28 16 8 46 0 0 0 0 240 240 6
April 2013..................... 84 54 23 11 5 30 0 0 0 0 257 257 6
April 2014..................... 81 49 18 8 4 13 0 0 0 0 274 274 7
April 2015..................... 78 44 15 6 2 0 0 0 0 0 294 294 7
April 2016..................... 74 40 12 4 2 0 0 0 0 0 314 314 8
April 2017..................... 70 35 9 3 1 0 0 0 0 0 336 336 9
April 2018..................... 66 31 7 2 1 0 0 0 0 0 359 359 9
April 2019..................... 62 27 6 2 * 0 0 0 0 0 384 384 10
April 2020..................... 57 24 4 1 * 0 0 0 0 0 411 411 10
April 2021..................... 52 21 3 1 * 0 0 0 0 0 440 437 11
April 2022..................... 47 17 3 1 * 0 0 0 0 0 470 437 12
April 2023..................... 42 14 2 * * 0 0 0 0 0 503 437 13
April 2024..................... 36 12 1 * * 0 0 0 0 0 538 437 14
April 2025..................... 29 9 1 * * 0 0 0 0 0 576 347 13
April 2026..................... 23 7 1 * * 0 0 0 0 0 616 251 9
April 2027..................... 15 4 * * * 0 0 0 0 0 633 160 5
April 2028..................... 8 2 * * * 0 0 0 0 0 451 74 2
April 2029..................... 0 0 0 0 0 0 0 0 0 0 0 0 0
Weighted Average Life (in
years)(1).................... 21.3 15.8 11.4 9.9 8.8 12.6 9.9 4.5 2.8 2.3 29.3 27.4 5.8
<CAPTION>
CLASS 1-A9
-----------
DISTRIBUTION DATE 400% 500%
- ----------------- ---- ----
<S> <C> <C>
Initial Percentage............. 100 100
April 2000..................... 13 0
April 2001..................... 0 0
April 2002..................... 0 0
April 2003..................... 0 0
April 2004..................... 0 0
April 2005..................... 0 0
April 2006..................... 0 0
April 2007..................... 0 0
April 2008..................... 0 0
April 2009..................... 0 0
April 2010..................... 0 0
April 2011..................... 0 0
April 2012..................... 0 0
April 2013..................... 0 0
April 2014..................... 0 0
April 2015..................... 0 0
April 2016..................... 0 0
April 2017..................... 0 0
April 2018..................... 0 0
April 2019..................... 0 0
April 2020..................... 0 0
April 2021..................... 0 0
April 2022..................... 0 0
April 2023..................... 0 0
April 2024..................... 0 0
April 2025..................... 0 0
April 2026..................... 0 0
April 2027..................... 0 0
April 2028..................... 0 0
April 2029..................... 0 0
Weighted Average Life (in
years)(1).................... 0.9 0.6
</TABLE>
- -------------------------
* Indicates an amount above zero and less than 0.5% of the original Class
Certificate Principal Balance is outstanding.
(1) The weighted average life is determined as described on page A1-32.
A1-39
<PAGE> 79
PERCENT OF ORIGINAL CLASS CERTIFICATE PRINCIPAL BALANCE
OUTSTANDING OF THE CERTIFICATES
<TABLE>
<CAPTION>
CLASS R AND CLASS RL
--------------------------------
DISTRIBUTION DATE 0% 100% 275% 400% 500%
- ----------------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Initial Percentage.......................................... 100 100 100 100 100
April 2000.................................................. 0 0 0 0 0
April 2001.................................................. 0 0 0 0 0
April 2002.................................................. 0 0 0 0 0
April 2003.................................................. 0 0 0 0 0
April 2004.................................................. 0 0 0 0 0
April 2005.................................................. 0 0 0 0 0
April 2006.................................................. 0 0 0 0 0
April 2007.................................................. 0 0 0 0 0
April 2008.................................................. 0 0 0 0 0
April 2009.................................................. 0 0 0 0 0
April 2010.................................................. 0 0 0 0 0
April 2011.................................................. 0 0 0 0 0
April 2012.................................................. 0 0 0 0 0
April 2013.................................................. 0 0 0 0 0
April 2014.................................................. 0 0 0 0 0
April 2015.................................................. 0 0 0 0 0
April 2016.................................................. 0 0 0 0 0
April 2017.................................................. 0 0 0 0 0
April 2018.................................................. 0 0 0 0 0
April 2019.................................................. 0 0 0 0 0
April 2020.................................................. 0 0 0 0 0
April 2021.................................................. 0 0 0 0 0
April 2022.................................................. 0 0 0 0 0
April 2023.................................................. 0 0 0 0 0
April 2024.................................................. 0 0 0 0 0
April 2025.................................................. 0 0 0 0 0
April 2026.................................................. 0 0 0 0 0
April 2027.................................................. 0 0 0 0 0
April 2028.................................................. 0 0 0 0 0
April 2029.................................................. 0 0 0 0 0
Weighted Average Life (in years)(1)......................... 0.1 0.1 0.1 0.1 0.1
</TABLE>
- -------------------------
(1) The weighted average life is determined as described on page A1-32.
A1-40
<PAGE> 80
POOL 1 PAC BALANCES TABLE
The Aggregate Pool 1 PAC Balances set forth in the table below were
calculated on the basis of the Class Certificate Principal Balances of the Class
1-A1 and Class 1-A2 Certificates and the Component Principal Balance of the
Class 1-A3 PAC Component set forth in the summary of this prospectus supplement,
and the other assumptions described in "Yield and Weighted Average Life
Considerations -- Weighted Average Lives of the Pool 1 Certificates -- Pool 1
PAC Certificates" in this Annex 1.
If such Class Certificate or Component Principal Balances are increased or
decreased in accordance with the variance permitted hereby relating to the
mortgage loans, the applicable balances set forth in the table below will be
increased or decreased substantially correspondingly. In such event, the final
Aggregate Pool 1 PAC Balances Table will be calculated on or about April 29,
1999 on the basis of such revised Class Certificate and Component Principal
Balances and the actual characteristics of the Pool 1 mortgage loans and on the
basis of (1) the Structuring Range of the Pool 1 PAC Certificates and (2) the
assumptions set forth in clauses (1), (4) through (8), (11) and (12) of the Pool
1 Modeling Assumptions. The final Pool 1 PAC Balances Table will be set forth in
the Agreement, which will be filed as an exhibit to the definitive description
of the Pool 1 mortgage loans filed on a Current Report on Form 8-K.
<TABLE>
<CAPTION>
AGGREGATE POOL 1
DISTRIBUTION DATE PAC BALANCE
- ----------------- ----------------
<S> <C>
Initial Balance............................................. 150,666,000.00
May 1999.................................................... 150,163,776.22
June 1999................................................... 149,582,583.93
July 1999................................................... 148,922,762.48
August 1999................................................. 148,184,501.93
September 1999.............................................. 147,368,043.11
October 1999................................................ 146,473,677.56
November 1999............................................... 145,501,747.44
December 1999............................................... 144,452,645.41
January 2000................................................ 143,326,814.39
February 2000............................................... 142,124,772.46
March 2000.................................................. 140,847,061.83
April 2000.................................................. 139,494,274.07
May 2000.................................................... 138,067,049.69
June 2000................................................... 136,566,121.80
July 2000................................................... 134,992,237.60
August 2000................................................. 133,346,180.30
September 2000.............................................. 131,628,829.24
October 2000................................................ 129,841,183.91
November 2000............................................... 127,984,316.24
December 2000............................................... 126,059,295.64
January 2001................................................ 124,067,171.11
February 2001............................................... 122,009,114.63
March 2001.................................................. 119,886,328.47
April 2001.................................................. 117,700,447.06
May 2001.................................................... 115,453,314.72
June 2001................................................... 113,147,163.54
July 2001................................................... 110,784,524.30
</TABLE>
A1-41
<PAGE> 81
<TABLE>
<CAPTION>
AGGREGATE POOL 1
DISTRIBUTION DATE PAC BALANCE
- ----------------- ----------------
<S> <C>
August 2001................................................. 108,369,312.08
September 2001.............................................. 105,913,689.67
October 2001................................................ 103,442,505.28
November 2001............................................... 100,987,700.16
December 2001............................................... 98,549,169.22
January 2002................................................ 96,126,808.02
February 2002............................................... 93,720,512.83
March 2002.................................................. 91,330,180.59
April 2002.................................................. 88,955,708.91
May 2002.................................................... 86,596,996.08
June 2002................................................... 84,253,941.05
July 2002................................................... 81,926,443.43
August 2002................................................. 79,614,403.48
September 2002.............................................. 77,317,722.13
October 2002................................................ 75,036,300.94
November 2002............................................... 72,770,042.14
December 2002............................................... 70,518,848.56
January 2003................................................ 68,282,623.71
February 2003............................................... 66,061,271.71
March 2003.................................................. 63,854,697.30
April 2003.................................................. 61,662,805.86
May 2003.................................................... 59,485,503.39
June 2003................................................... 57,322,696.49
July 2003................................................... 55,174,292.39
August 2003................................................. 53,040,198.92
September 2003.............................................. 50,920,324.52
October 2003................................................ 48,814,578.21
November 2003............................................... 46,722,869.64
December 2003............................................... 44,645,109.03
January 2004................................................ 42,581,207.19
February 2004............................................... 40,531,075.52
March 2004.................................................. 38,494,626.00
April 2004.................................................. 36,471,771.19
May 2004.................................................... 34,584,044.47
June 2004................................................... 32,709,510.38
July 2004................................................... 30,848,083.54
August 2004................................................. 28,999,679.09
September 2004.............................................. 27,164,212.75
October 2004................................................ 25,341,600.79
November 2004............................................... 23,552,968.09
December 2004............................................... 21,830,312.84
January 2005................................................ 20,171,584.18
February 2005............................................... 18,574,794.09
March 2005.................................................. 17,038,015.47
April 2005.................................................. 15,559,380.40
May 2005.................................................... 14,287,594.92
June 2005................................................... 13,066,716.94
</TABLE>
A1-42
<PAGE> 82
<TABLE>
<CAPTION>
AGGREGATE POOL 1
DISTRIBUTION DATE PAC BALANCE
- ----------------- ----------------
<S> <C>
July 2005................................................... 11,895,090.11
August 2005................................................. 10,771,109.55
September 2005.............................................. 9,693,220.34
October 2005................................................ 8,659,915.99
November 2005............................................... 7,669,737.00
December 2005............................................... 6,721,269.49
January 2006................................................ 5,813,143.80
February 2006............................................... 4,944,033.18
March 2006.................................................. 4,112,652.54
April 2006.................................................. 3,317,757.19
May 2006.................................................... 2,800,110.95
June 2006................................................... 2,307,715.18
July 2006................................................... 1,839,628.09
August 2006................................................. 1,394,939.42
September 2006.............................................. 972,769.43
October 2006................................................ 572,267.98
November 2006............................................... 192,613.53
December 2006 and thereafter................................ 0.00
</TABLE>
A1-43
<PAGE> 83
POOL 1 TAC BALANCES TABLE
The TAC Balances set forth in the tables below were calculated on the basis
of the Component Principal Balance of the Class 1-A3 TAC Accrual Component and
the Class Certificate Principal Balances of the Class 1-A4 and Class 1-A8
Certificates set forth in the summary of this prospectus supplement and a
constant prepayment rate of 250% of the Prepayment Assumption in the case of
Class 1-A3 TAC Balance No. 1 and a constant prepayment rate of 800% of the
Prepayment Assumption in the case of Class 1-A3 TAC Balance No. 2, and a
constant prepayment rate of 240% of the Prepayment Assumption in the case of
Class 1-A4 Class 1-A8 Aggregate TAC Balance No. 1 and a constant prepayment rate
of 490% of the Prepayment Assumption in the case of Class 1-A4 Class 1-A8
Aggregate TAC Balance No. 2 (each, a "TAC Prepayment Assumption").
If such Class Certificate or Component Principal Balances are increased or
decreased in accordance with the variance permitted hereby relating to the
mortgage loans, the applicable balances set forth in the tables below will be
increased or decreased substantially correspondingly. In such event, the final
Pool 1 TAC Balances Tables will be calculated on or about April 29, 1999 on the
basis of such revised Class Certificate and Component Principal Balances and the
actual characteristics of the Pool 1 mortgage loans and on the basis of (1) the
related TAC Prepayment Assumption and (2) the assumptions set forth in clauses
(1), (4) through (8), (11) and (12) of the Pool 1 Modeling Assumptions. The
final Pool 1 TAC Balances Tables will be set forth in the Agreement, which will
be filed as an exhibit to the definitive description of the Pool 1 mortgage
loans filed on a Current Report on Form 8-K.
<TABLE>
<CAPTION>
CLASS 1-A4 AND CLASS 1-A8 AGGREGATE TAC BALANCES
CLASS 1-A3 TAC COMPONENT BALANCES -------------------------------------------------
--------------------------------- CLASS 1-A4 AND CLASS 1-A4 AND
CLASS 1-A3 CLASS 1-A3 CLASS 1-A8 CLASS 1-A8
TAC COMPONENT TAC COMPONENT AGGREGATE TAC AGGREGATE TAC
BALANCE BALANCE BALANCE BALANCE
DISTRIBUTION DATE NO. 1 NO. 2 NO. 1 NO. 2
- ----------------- --------------- --------------- ----------------------- -----------------------
<S> <C> <C> <C> <C>
Initial Balance........... $51,000,000.00 $51,000,000.00 $112,693,000.00 $112,693,000.00
May 1999.................. 51,270,052.78 51,270,052.78 112,164,018.21 112,164,018.21
June 1999................. 51,535,559.44 51,535,559.44 111,562,274.12 111,562,274.12
July 1999................. 51,796,528.39 51,796,528.39 110,887,803.56 110,887,803.56
August 1999............... 52,052,983.56 52,052,983.56 110,140,775.21 110,140,775.21
September 1999............ 52,304,964.55 52,304,964.55 109,321,491.20 109,321,491.20
October 1999.............. 52,552,526.68 50,953,915.00 108,430,387.56 108,430,387.56
November 1999............. 52,795,741.03 48,266,337.15 107,468,034.27 107,468,034.27
December 1999............. 53,034,694.45 45,257,755.78 106,435,134.97 106,435,134.97
January 2000.............. 53,269,489.43 41,937,954.50 105,332,526.44 105,332,526.44
February 2000............. 53,500,246.21 39,449,369.22 104,161,201.89 103,030,647.02
March 2000................ 53,727,098.09 37,323,664.56 102,922,259.97 100,012,560.52
April 2000................ 53,950,193.57 35,052,019.72 101,616,928.82 96,803,814.98
May 2000.................. 54,169,696.06 32,646,358.42 100,246,564.12 93,411,146.54
June 2000................. 54,385,787.18 30,119,937.15 98,812,688.11 89,842,071.24
July 2000................. 54,598,659.82 27,487,012.40 97,316,912.80 86,104,622.49
August 2000............... 54,808,519.75 24,762,846.04 95,760,959.32 82,207,401.19
September 2000............ 55,015,590.03 21,963,780.39 94,146,710.92 78,159,723.09
October 2000.............. 55,220,112.16 19,107,159.98 92,476,229.71 73,971,642.01
November 2000............. 55,422,341.48 16,211,048.77 90,751,707.43 69,653,766.01
December 2000............. 55,622,540.66 13,293,910.77 88,975,393.45 65,217,011.72
January 2001.............. 55,820,978.04 10,374,472.32 87,149,577.24 60,672,533.17
February 2001............. 56,017,938.29 7,471,962.61 85,276,714.73 56,032,083.79
March 2001................ 56,213,714.34 4,605,711.20 83,359,339.05 51,307,709.48
April 2001................ 56,408,637.10 1,795,917.02 81,400,412.25 46,512,768.77
May 2001.................. 56,603,056.13 0.00 79,403,110.18 41,661,211.28
June 2001................. 56,797,351.38 0.00 77,370,968.20 36,767,957.53
July 2001................. 56,991,924.14 0.00 75,307,785.52 31,848,542.79
August 2001............... 57,187,275.89 0.00 73,218,562.67 26,921,821.67
September 2001............ 57,384,510.95 0.00 71,115,459.90 22,027,329.53
October 2001.............. 57,585,628.46 0.00 69,021,399.79 17,234,892.58
November 2001............. 57,793,052.12 0.00 66,964,755.49 12,627,550.24
December 2001............. 58,006,698.59 0.00 64,944,885.16 8,199,431.12
January 2002.............. 58,226,486.30 0.00 62,961,155.78 3,944,837.50
February 2002............. 58,452,335.42 0.00 61,012,943.00 0.00
March 2002................ 58,684,167.85 0.00 59,099,631.07 0.00
April 2002................ 58,921,907.19 0.00 57,220,612.67 0.00
May 2002.................. 59,165,478.67 0.00 55,375,288.83 0.00
</TABLE>
A1-44
<PAGE> 84
<TABLE>
<CAPTION>
CLASS 1-A4 AND CLASS 1-A8 AGGREGATE TAC BALANCES
CLASS 1-A3 TAC COMPONENT BALANCES -------------------------------------------------
--------------------------------- CLASS 1-A4 AND CLASS 1-A4 AND
CLASS 1-A3 CLASS 1-A3 CLASS 1-A8 CLASS 1-A8
TAC COMPONENT TAC COMPONENT AGGREGATE TAC AGGREGATE TAC
BALANCE BALANCE BALANCE BALANCE
DISTRIBUTION DATE NO. 1 NO. 2 NO. 1 NO. 2
- ----------------- --------------- --------------- ----------------------- -----------------------
<S> <C> <C> <C> <C>
June 2002................. 59,414,809.21 0.00 53,563,068.79 0.00
July 2002................. 59,669,827.30 0.00 51,783,369.94 0.00
August 2002............... 59,930,463.04 0.00 50,035,617.64 0.00
September 2002............ 60,196,648.08 0.00 48,319,245.16 0.00
October 2002.............. 60,468,315.61 0.00 46,633,693.55 0.00
November 2002............. 60,745,400.33 0.00 44,978,411.52 0.00
December 2002............. 61,027,838.42 0.00 43,352,855.41 0.00
January 2003.............. 61,315,567.55 0.00 41,756,488.97 0.00
February 2003............. 61,608,526.79 0.00 40,188,783.34 0.00
March 2003................ 61,906,656.65 0.00 38,649,216.94 0.00
April 2003................ 62,209,899.04 0.00 37,137,275.36 0.00
May 2003.................. 62,518,197.23 0.00 35,652,451.22 0.00
June 2003................. 62,831,495.84 0.00 34,194,244.17 0.00
July 2003................. 63,149,740.82 0.00 32,762,160.69 0.00
August 2003............... 63,472,879.44 0.00 31,355,714.06 0.00
September 2003............ 63,800,860.23 0.00 29,974,424.25 0.00
October 2003.............. 64,133,633.01 0.00 28,617,817.83 0.00
November 2003............. 64,471,148.83 0.00 27,285,427.87 0.00
December 2003............. 64,813,359.98 0.00 25,976,793.84 0.00
January 2004.............. 65,160,219.95 0.00 24,691,461.59 0.00
February 2004............. 65,511,683.41 0.00 23,428,983.14 0.00
March 2004................ 65,867,706.20 0.00 22,188,916.73 0.00
April 2004................ 66,228,245.31 0.00 20,970,826.63 0.00
May 2004.................. 66,600,779.19 0.00 19,882,213.56 0.00
June 2004................. 66,975,408.58 0.00 18,814,011.32 0.00
July 2004................. 67,352,145.25 0.00 17,765,804.67 0.00
August 2004............... 67,731,001.07 0.00 16,737,184.09 0.00
September 2004............ 68,111,987.95 0.00 15,727,745.73 0.00
October 2004.............. 68,495,117.88 0.00 14,737,091.29 0.00
November 2004............. 68,880,402.92 0.00 13,743,619.90 0.00
December 2004............. 69,267,855.18 0.00 12,714,863.36 0.00
January 2005.............. 69,657,486.87 0.00 11,652,408.37 0.00
February 2005............. 70,049,310.23 0.00 10,557,784.64 0.00
March 2005................ 70,443,337.60 0.00 9,432,466.64 0.00
April 2005................ 70,839,581.38 0.00 8,277,875.36 0.00
May 2005.................. 71,238,054.02 0.00 7,016,269.21 0.00
June 2005................. 71,638,768.08 0.00 5,731,013.22 0.00
July 2005................. 72,041,736.15 0.00 4,423,337.73 0.00
August 2005............... 72,446,970.91 0.00 3,094,426.95 0.00
September 2005............ 72,854,485.12 0.00 1,745,420.38 0.00
October 2005.............. 73,264,291.60 0.00 377,414.27 0.00
November 2005............. 73,072,047.84 0.00 0.00 0.00
December 2005............. 72,123,468.63 0.00 0.00 0.00
January 2006.............. 71,162,648.57 0.00 0.00 0.00
February 2006............. 70,190,503.46 0.00 0.00 0.00
March 2006................ 69,207,913.09 0.00 0.00 0.00
April 2006................ 68,215,722.41 0.00 0.00 0.00
May 2006.................. 67,108,605.59 0.00 0.00 0.00
June 2006................. 66,000,235.24 0.00 0.00 0.00
July 2006................. 64,891,190.98 0.00 0.00 0.00
August 2006............... 63,782,025.99.. 0.00 0.00 0.00
September 2006............ 62,673,267.91.. 0.00 0.00 0.00
October 2006.............. 61,565,419.72.. 0.00 0.00 0.00
November 2006............. 60,458,960.66.. 0.00 0.00 0.00
December 2006............. 59,187,359.30.. 0.00 0.00 0.00
January 2007.............. 57,744,710.24.. 0.00 0.00 0.00
February 2007............. 56,323,298.90.. 0.00 0.00 0.00
March 2007................ 54,922,801.74.. 0.00 0.00 0.00
April 2007................ 53,542,899.77.. 0.00 0.00 0.00
May 2007.................. 52,301,750.26.. 0.00 0.00 0.00
June 2007................. 51,078,021.15.. 0.00 0.00 0.00
July 2007................. 49,871,444.68.. 0.00 0.00 0.00
August 2007............... 48,681,756.87.. 0.00 0.00 0.00
September 2007............ 47,508,697.49.. 0.00 0.00 0.00
October 2007.............. 46,352,009.99.. 0.00 0.00 0.00
</TABLE>
A1-45
<PAGE> 85
<TABLE>
<CAPTION>
CLASS 1-A4 AND CLASS 1-A8 AGGREGATE TAC BALANCES
CLASS 1-A3 TAC COMPONENT BALANCES -------------------------------------------------
--------------------------------- CLASS 1-A4 AND CLASS 1-A4 AND
CLASS 1-A3 CLASS 1-A3 CLASS 1-A8 CLASS 1-A8
TAC COMPONENT TAC COMPONENT AGGREGATE TAC AGGREGATE TAC
BALANCE BALANCE BALANCE BALANCE
DISTRIBUTION DATE NO. 1 NO. 2 NO. 1 NO. 2
- ----------------- --------------- --------------- ----------------------- -----------------------
<S> <C> <C> <C> <C>
November 2007............. 45,211,441.43.. 0.00 0.00 0.00
December 2008............. 44,086,742.48.. 0.00 0.00 0.00
January 2008.............. 42,977,667.32.. 0.00 0.00 0.00
February 2008............. 41,883,973.64.. 0.00 0.00 0.00
March 2008................ 40,805,422.53.. 0.00 0.00 0.00
April 2008................ 39,741,778.47.. 0.00 0.00 0.00
May 2008.................. 38,792,281.89.. 0.00 0.00 0.00
June 2008................. 37,854,530.82.. 0.00 0.00 0.00
July 2008................. 36,928,351.54.. 0.00 0.00 0.00
August 2008............... 36,013,572.69.. 0.00 0.00 0.00
September 2008............ 35,110,025.15.. 0.00 0.00 0.00
October 2008.............. 34,217,542.12.. 0.00 0.00 0.00
November 2008............. 33,335,958.98.. 0.00 0.00 0.00
December 2008............. 32,465,113.33.. 0.00 0.00 0.00
January 2009.............. 31,604,844.95.. 0.00 0.00 0.00
February 2009............. 30,754,995.74.. 0.00 0.00 0.00
March 2009................ 29,915,409.71.. 0.00 0.00 0.00
April 2009................ 29,085,932.97.. 0.00 0.00 0.00
May 2009.................. 28,266,413.65.. 0.00 0.00 0.00
June 2009................. 27,456,701.93.. 0.00 0.00 0.00
July 2009................. 26,656,649.98.. 0.00 0.00 0.00
August 2009............... 25,886,111.93.. 0.00 0.00 0.00
September 2009............ 25,084,943.85.. 0.00 0.00 0.00
October 2009.............. 24,313,003.74.. 0.00 0.00 0.00
November 2009............. 23,550,151.47.. 0.00 0.00 0.00
December 2009............. 22,796,248.79.. 0.00 0.00 0.00
January 2010.............. 22,051,159.27.. 0.00 0.00 0.00
February 2010............. 21,314,748.29.. 0.00 0.00 0.00
March 2010................ 20,586,883.03.. 0.00 0.00 0.00
April 2010................ 19,867,432.42.. 0.00 0.00 0.00
May 2010.................. 19,156,267.14.. 0.00 0.00 0.00
June 2010................. 18,453,259.56.. 0.00 0.00 0.00
July 2010................. 17,758,283.76.. 0.00 0.00 0.00
August 2010............... 17,071,215.47.. 0.00 0.00 0.00
September 2010............ 16,391,932.09.. 0.00 0.00 0.00
October 2010.............. 15,720,312.60.. 0.00 0.00 0.00
November 2010............. 15,056,237.60.. 0.00 0.00 0.00
December 2010............. 14,399,589.28.. 0.00 0.00 0.00
January 2011.............. 13,750,251.35.. 0.00 0.00 0.00
February 2011............. 13,108,109.08.. 0.00 0.00 0.00
March 2011................ 12,473,049.24.. 0.00 0.00 0.00
April 2011................ 11,844,960.09.. 0.00 0.00 0.00
May 2011.................. 11,223,731.35.. 0.00 0.00 0.00
June 2011................. 10,609,254.21.. 0.00 0.00 0.00
July 2011................. 10,001,421.27 0.00 0.00 0.00
August 2011............... 9,400,126.55 0.00 0.00 0.00
September 2011............ 8,805,265.46 0.00 0.00 0.00
October 2011.............. 8,216,734.76 0.00 0.00 0.00
November 2011............. 7,634,432.58 0.00 0.00 0.00
December 2011............. 7,058,258.38 0.00 0.00 0.00
January 2012.............. 6,488,112.94 0.00 0.00 0.00
February 2012............. 5,923,898.31 0.00 0.00 0.00
March 2012................ 5,365,517.84 0.00 0.00 0.00
April 2012................ 4,812,876.14 0.00 0.00 0.00
May 2012.................. 4,265,879.04 0.00 0.00 0.00
June 2012................. 3,724,433.63 0.00 0.00 0.00
July 2012................. 3,188,448.16 0.00 0.00 0.00
August 2012............... 2,657,832.11 0.00 0.00 0.00
September 2012............ 2,132,654.14 0.00 0.00 0.00
October 2012.............. 1,612,664.84 0.00 0.00 0.00
November 2012............. 1,097,777.20 0.00 0.00 0.00
December 2012............. 587,905.34 0.00 0.00 0.00
January 2013.............. 82,964.48 0.00 0.00 0.00
February 2013 and
thereafter.............. 0.00 0.00 0.00 0.00
</TABLE>
A1-46
<PAGE> 86
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 92% 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 2.50% 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 0.50% of such mortgage loans will have been originated under
GECMSI's "Enhanced Streamlined Refinance Program" or other streamlined
refinance programs acceptable to GECMSI.
- None 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 0.25% 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 $120,387,002. This amount is
subject to a permitted variance such that the aggregate Scheduled Principal
Balance thereof will not be less than $114,000,000 or greater than $126,000,000.
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 not add mortgage loans to the Pool 2 mortgage pool
if this would result in more than a 5%
A2-1
<PAGE> 87
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 6.250% to 9.375% per annum, and the weighted average mortgage interest rate
as of the Cut-off Date of such mortgage loans is expected to be between 7.20%
and 7.24% per annum. The original principal balances of the Pool 2 mortgage
loans are expected to range from $54,000 to $1,500,000 and, as of the Cut-off
Date, the average Scheduled Principal Balance of the Pool 2 mortgage loans is
not expected to exceed $335,000 after application of payments due on or before
the Cut-off Date. It is expected that the month and year of the earliest
origination date of any Pool 2 mortgage loan will be January 1992, and the month
and year of the latest scheduled maturity date of any such mortgage loan will be
April 2029. All of the Pool 2 mortgage loans will have original terms to
maturity of 30 years, and it is expected that the weighted average scheduled
remaining term to maturity of the Pool 2 mortgage loans will be between 354 and
356 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 13% 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 2% 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 1.7% of the Pool 2 mortgage loans will have a Scheduled Principal
Balance of more than $1,000,000.
- No more than 10% of the Pool 2 mortgage loans will have a loan-to-value
ratio at origination in excess of 80%, no more than 3% 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 72.00% and 74.00%.
- No more than 0.50% 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 35% 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 17% 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.
- 100% of the Pool 2 mortgage loans will be secured by mortgaged properties
located in California.
- At least 96% 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
A2-2
<PAGE> 88
origination that the underlying property will be used as the mortgagor's
primary residence.
- At least 92% of the Pool 2 mortgage loans will be secured by
single-family, detached residences.
- No more than 4% of the Pool 2 mortgage loans will be secured by
condominiums.
- None 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........... 18 $ 2,738,863.82 2.28%
227,151 - 250,000........... 17 3,946,029.26 3.28
250,001 - 300,000........... 140 38,434,914.08 31.93
300,001 - 350,000........... 72 23,029,305.75 19.13
350,001 - 400,000........... 47 17,559,498.22 14.59
400,001 - 450,000........... 24 10,062,485.32 8.36
450,001 - 600,000........... 31 15,804,177.77 13.13
600,001 - 650,000........... 8 5,154,283.23 4.28
650,001 - 1,500,000.......... 4 3,657,444.24 3.04
--- --------------- --------
Total.................... 361 $120,387,001.69 100.0000%
=== =============== ========
</TABLE>
A2-3
<PAGE> 89
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>
6.2500%...................... 1 $ 107,897.53 0.09%
6.5000....................... 4 1,179,190.96 0.98
6.6250....................... 3 1,193,412.40 0.99
6.7500....................... 7 2,093,843.99 1.74
6.8750....................... 54 19,519,749.45 16.21
7.0000....................... 70 25,021,468.97 20.78
7.1250....................... 47 16,549,082.24 13.75
7.2500....................... 62 20,231,503.98 16.81
7.3750....................... 39 12,886,553.66 10.70
7.5000....................... 31 9,293,834.75 7.72
7.6250....................... 12 3,632,675.84 3.02
7.7000....................... 1 268,956.74 0.22
7.7500....................... 4 1,210,846.96 1.01
7.8000....................... 1 290,378.86 0.24
7.8750....................... 3 998,696.40 0.83
8.0000....................... 1 304,036.10 0.25
8.1250....................... 1 298,804.41 0.25
8.2500....................... 1 382,468.24 0.32
8.3750....................... 2 586,621.34 0.49
8.5000....................... 5 1,168,088.63 0.97
8.6250....................... 1 385,549.67 0.32
8.7500....................... 5 1,277,788.39 1.06
8.8750....................... 3 790,464.08 0.66
9.0000....................... 1 282,126.31 0.23
9.2500....................... 1 239,035.30 0.20
9.3750....................... 1 193,926.49 0.16
--- --------------- -------
Total.................... 361 $120,387,001.69 100.00%
=== =============== =======
</TABLE>
A2-4
<PAGE> 90
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>
California.................... 361 $120,387,001.69 100.00%
--- --------------- ------
Total............... 361 $120,387,001.69 100.00%
=== =============== ======
</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>
1992......................... 19 $ 5,041,576.01 4.19%
1997......................... 5 1,417,942.58 1.18
1998......................... 56 16,901,285.55 14.04
1999......................... 281 97,026,197.55 80.60
----- --------------- ------
Total.................... 361 $120,387,001.69 100.00%
===== =============== ======
</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>
2022.......................... 19 $ 5,041,576.01 4.19%
2027.......................... 2 578,544.58 0.48
2028.......................... 39 11,855,471.33 9.85
2029.......................... 301 102,911,409.77 85.48
--- --------------- ------
Total.................... 361 $120,387,001.69 100.00%
=== =============== ======
</TABLE>
TYPES 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
TYPE OF DWELLING MORTGAGE LOANS THE CUT-OFF DATE OF THE CUT-OFF DATE
---------------- -------------- ------------------- ---------------------
<S> <C> <C> <C>
Single-family detached........ 342 $113,614,079.12 94.37%
Single-family attached........ 3 980,836.36 0.81
Condominium................... 13 4,484,483.28 3.73
2 - 4 family units............ 3 1,307,602.93 1.09
--- --------------- ------
Total.................... 361 $120,387,001.69 100.00%
=== =============== ======
</TABLE>
A2-5
<PAGE> 91
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................ 353 $117,996,084.25 98.01%
Vacation...................... 4 1,302,684.65 1.08
Investment.................... 4 1,088,232.79 0.90
--- --------------- ------
Total.................... 361 $120,387,001.69 100.00%
=== =============== ======
</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 $ 46,152,220.49 38.34%
Rate Term/Refinance........... 164 56,421,491.29 46.87
Cash-out Refinance............ 58 17,813,289.91 14.80
--- --------------- ------
Total.................... 361 $120,387,001.69 100.00%
=== =============== ======
</TABLE>
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>
00.00-50.00%.................. 19 $ 5,486,030.09 4.56%
50.01-60.00................... 39 14,847,996.02 12.33
60.01-70.00................... 61 21,398,339.23 17.78
70.01-75.00................... 57 20,121,381.58 16.71
75.01-80.00................... 145 47,118,385.16 39.14
80.01-85.00................... 4 1,250,649.64 1.04
85.01-90.00................... 25 7,179,730.15 5.97
90.01-95.00................... 11 2,984,489.82 2.48
--- --------------- ------
Total.................... 361 $120,387,001.69 100.00%
=== =============== ======
</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 May 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
A2-6
<PAGE> 92
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 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;
third, to the classes of Pool 2 senior certificates entitled to
principal distributions, in reduction of the Class Certificate Principal
Balances thereof, to the extent of remaining Pool 2 Available Funds, in the
following order of priority:
(1) to the Class 2-A1 through Class 2-A9 Certificates, the Pool 2
Senior Optimal Principal Amount for such Distribution Date, concurrently as
follows:
(a) to the Class 2-A3 Certificates, the Class 2-A3 Principal
Distribution Amount (as defined herein) for such Distribution Date,
until the Class Certificate Principal Balance thereof has been reduced
to zero; and
(b) to the Class 2-A1, Class 2-A2, Class 2-A4, Class 2-A5, Class
2-A6, Class 2-A7, Class 2-A8 and Class 2-A9 Certificates (together, the
"Pool 2 Group I Senior Certificates"), the Pool 2 Senior Optimal
Principal Amount less the Class 2-A3 Principal Distribution Amount for
such Distribution Date, in the following order of priority:
(i) to the Class 2-A1, Class 2-A5, Class 2-A6, Class 2-A7,
Class 2-A8 and Class 2-A9 Certificates, as follows:
(A) approximately 39.3442622951% of the amount
distributable pursuant to this clause (b)(i) to the Class 2-A1
Certificates, until the Class Certificate Principal Balance
thereof has been reduced to zero; and
(B) approximately 60.6557377049% of the amount
distributable pursuant to this clause (b)(i), sequentially, to
the Class 2-A5, Class 2-A6, Class 2-A7, Class 2-A8 and Class
2-A9 Certificates, in that order, until the Class Certificate
Principal Balances thereof have each been reduced to zero;
(ii) to the Class 2-A2 Certificates, until the Class
Certificate Principal Balance thereof has been reduced to zero; and
(iii) to the Class 2-A4 Certificates, until the Class
Certificate Principal Balance thereof has been reduced to zero; and
A2-7
<PAGE> 93
(2) to the Class 2-PO Certificates, the Class 2-PO Principal
Distribution Amount for such Distribution Date, until the Class Certificate
Principal Balance thereof has been reduced to zero;
fourth, to the Class 2-PO Certificates, the Class 2-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
2-PO Certificates shall not reduce the Class Certificate Principal Balance
of the Class 2-PO Certificates, (2) no distribution will be made in respect
of the Class 2-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") and (3) in the event the
Junior Optimal Principal Amount is less than the sum of the Class 1-PO
Deferred Amount and the Class 2-PO Deferred Amount for such Distribution
Date, such Junior Optimal Principal Amount shall be distributed pro rata to
the Class 1-PO and Class 2-PO Certificates on the basis of their respective
Deferred Amounts.
Except in the limited circumstances described under "-- Cross-Support"
below, any Pool 2 Available Funds remaining after distributions pursuant to
priority fourth 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 and amounts 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 and such amounts 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 (other than the Class 2-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 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.
If, after distributions have been made under priorities first and second in
the second paragraph under "Allocation of Pool 2 Available Funds" on any
Distribution Date, the remaining Pool 2 Available Funds are less than the sum of
the Pool 2 Senior Optimal Principal Amount and the Class 2-PO Principal
Distribution Amount for such Distribution Date, the amounts distributable under
priority third above shall be proportionately reduced, and such remaining Pool 2
Available Funds will be distributed on the Pool 2 senior certificates entitled
to principal distributions in accordance with the applicable clauses of priority
third in the second paragraph under "Allocation of Pool 2 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 2 senior
certificates as described under "-- Allocation of Realized Losses on the Pool 2
Certificates" herein.
A2-8
<PAGE> 94
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 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 0.33275%. The "Class 2-S
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 Class
2-S Notional Principal Balance of the Class 2-S Certificates is expected to be
approximately $92,959,531.
The Class 2-PO 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 the Class
2-S Certificate, the Class 2-S 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 2 senior certificate (other
than the Class 2-S Certificates) as of any Distribution Date will equal such
certificate's Certificate Principal Balance on the date of 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.
A2-9
<PAGE> 95
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 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 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 after group for 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.
Except in the limited circumstances described under "Cross-Support" below,
all payments and other amounts received in respect of principal of the Pool 2
mortgage loans will be allocated between (1) the Pool 2 senior certificates
(other than the Class 2-PO Certificates) and the junior certificates, on the one
hand, and (2) the Class 2-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 2 mortgage loan with a Net
Mortgage Rate ("NMR") less than 6.75% per annum (each such mortgage loan, a
"Pool 2 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 2 mortgage loan with a Net Mortgage Rate equal to or greater than 6.75%
(each such mortgage loan, a "Pool 2 Non-discount Mortgage Loan") will be 100%.
The "PO Percentage" with respect to any Pool 2 Discount Mortgage Loan will be
the fraction, expressed as a percentage,
A2-10
<PAGE> 96
equal to (6.75% -- NMR) / 6.75%. The "PO Percentage" with respect to any Pool 2
Non-discount Mortgage Loan will be 0%.
The initial Class Certificate Principal Balance of the Class 2-PO
Certificates, which are not offered hereby, will be approximately $529,356
subject to the variance described herein.
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 sum of the Pool 2 Senior
Optimal Principal Amount and the Class 2-PO Principal Distribution Amount for
such Distribution 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 the applicable
Non-PO Percentage 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
applicable Non-PO Percentage 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 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 the applicable Non-PO
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 applicable
Non-PO 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 applicable Non-PO
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
A2-11
<PAGE> 97
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 applicable Non-PO
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 applicable Non-PO
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-A3 Principal Distribution Amount" for any Distribution Date
will equal the product of (1) the Pool 2 Senior Optimal Principal Amount for
such date multiplied by (2) the Class 2-A3 Percentage for such date multiplied
by (3) the Class 2-A3 Distribution Percentage for such date. Notwithstanding the
foregoing, on the Pool 2 Group I Final Distribution Date, the Class 2-A3
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-A3 Principal Distribution Amount will equal the
Pool 2 Senior Optimal Principal Amount.
The "Class 2-A3 Percentage" for any Distribution Date will equal the
percentage obtained by dividing (1) the aggregate Certificate Principal Balance
of the Class 2-A3 Certificates immediately preceding such Distribution Date by
(2) the aggregate Certificate Principal Balance of all the Pool 2 senior
certificates (other than the Class 2-PO Certificates) immediately preceding such
Distribution Date. The initial Class 2-A3 Percentage is expected to be
approximately 10.46%.
The "Class 2-A3 Distribution Percentage" for any Distribution Date will
equal 0% through the Distribution Date in April 2004; 30% thereafter through the
Distribution Date in April 2005; 40% thereafter through the Distribution Date in
April 2006; 60% thereafter through the Distribution Date in April 2007; 80%
thereafter through the Distribution Date in April 2008; and 100% thereafter.
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 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.
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 (other than the Class 2-PO Certificates) immediately preceding such
Distribution Date by the Pool 2
A2-12
<PAGE> 98
Scheduled Principal Balance (less the Class Certificate Principal Balance of the
Class 2-PO Certificates) immediately preceding such Distribution Date. The
initial Pool 2 Senior Percentage is expected to be approximately 95.98%.
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>
May 1999 - April 2004................ 100%
May 2004 - April 2005................ Pool 2 Senior Percentage plus 70%
of the Pool 2 Apportioned Junior
Percentage
May 2005 - April 2006................ Pool 2 Senior Percentage plus 60%
of the Pool 2 Apportioned Junior
Percentage
May 2006 - April 2007................ Pool 2 Senior Percentage plus 40%
of the Pool 2 Apportioned Junior
Percentage
May 2007 - April 2008................ Pool 2 Senior Percentage plus 20%
of the Pool 2 Apportioned Junior
Percentage
May 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 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 May 2004 and April 2005;
A2-13
<PAGE> 99
(b) 35% of the Original Pool 2 Apportioned Junior Principal Balance
if such Distribution Date occurs between and including May
2005 and April 2006;
(c) 40% of the Original Pool 2 Apportioned Junior Principal Balance
if such Distribution Date occurs between and including May
2006 and April 2007;
(d) 45% of the Original Pool 2 Apportioned Junior Principal Balance
if such Distribution Date occurs between and including May
2007 and April 2008; and
(e) 50% of the Original Pool 2 Apportioned Junior Principal Balance
if such Distribution Date occurs during or after May 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 May
2004 and April 2005;
(b) 15% of the Original Pool 2 Apportioned Junior Principal Balance
if such Distribution Date occurs between and including May
2005 and April 2006;
(c) 20% of the Original Pool 2 Apportioned Junior Principal Balance
if such Distribution Date occurs between and including May
2006 and April 2007;
(d) 25% of the Original Pool 2 Apportioned Junior Principal Balance
if such Distribution Date occurs between and including May
2007 and April 2008; and
(e) 30% of the Original Pool 2 Apportioned Junior Principal Balance
if such Distribution Date occurs during or after May 2008.
The "Class 2-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 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
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;
A2-14
<PAGE> 100
(2) the applicable PO Percentage 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
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 2 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 2 mortgage loan which became a
Liquidated Mortgage Loan during the related Prepayment Period, other than
Pool 2 mortgage loans described in clause (b), and (b) 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
(5) the applicable PO 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.
For purposes of clauses (2) and (5) above, the Scheduled Principal Balance
of a Pool 2 mortgage loan will be reduced by the amount of any Deficient
Valuation that occurred on or before the Bankruptcy Coverage Termination Date.
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
Distribution Date prior to the Cross-Over Date will equal the excess of the Pool
2 Scheduled Principal Balance (calculated on the basis of Non-PO Percentages
thereof) over the aggregate Class Certificate Principal Balance of the Pool 2
senior certificates (other than the Class 2-PO Certificates) for such
Distribution Date. After the Cross-Over Date, the Pool 2 Apportioned Junior
Percentage will equal zero. The initial Pool 2 Apportioned Junior Percentage is
expected to be approximately 4.02%
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 (other than the Class 1-PO or Class 2-PO
Certificates, as applicable) of either mortgage pool 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
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(other than the Class 1-PO or Class 2-PO Certificates, as applicable)
backed by the other mortgage pool, 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 Optional Principal Amount or Pool 2
Senior Optional 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.
- On any Distribution Date on which the aggregate Class Certificate
Principal Balance of the senior certificates (other than Class 1-PO or
Class 2-PO Certificates) in respect of either mortgage pool is greater than
the related Pool Scheduled Principal Balance (calculated on the basis of
the Non-PO percentage thereof) on such Distribution Date (such group of
certificates, a "Pool Balance Shortfall Group"), 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 related Class 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 (other than the
Class 1-PO or Class 2-PO Certificates) related to such other mortgage pool.
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 (other than the related
Class PO Certificates) of such Pool Balance Shortfall Group 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 Optional Principal Amount or Pool 2 Senior Optional Principal
Amount, as applicable, is allocated to such classes on such date, and any
amounts otherwise
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distributable as principal on the junior certificates will be applied in
inverse order of priority.
- On each Distribution Date, the Class 1-PO and Class 2-PO
Certificates will each be entitled to receive any Class 1-PO Deferred
Amount and Class 2-PO Deferred Amount, respectively, 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
related mortgage pool. On any Distribution Date on which there are
insufficient funds, after distributions of interest and principal have been
made on the Pool 1 and Pool 2 senior certificates, to fully pay the Class
1-PO Deferred Amount and the Class 2-PO Deferred Amount to both the Class
1-PO and Class 2-PO Certificates, such remaining funds shall be distributed
pro rata to such certificates.
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 Balances of the Class 1-PO and Class 2-PO Certificates).
ALLOCATION OF REALIZED LOSSES ON THE POOL 2 CERTIFICATES
For definitions of "Realized Loss," "Liquidated Mortgage Loan," "Deficient
Valuation," "Debt Service Reduction," "Bankruptcy Loss," "Fraud Loss," "Excess
Loss" and "Special Hazard Loss," see "Allocation of Realized Losses on the Pool
1 Certificates" in Annex 1 of this Prospectus Supplement.
On each Distribution Date, the applicable PO Percentage of the principal
portion of any Realized Loss (including any Excess Loss, but not including any
Debt Service Reduction) on a Pool 2 Discount Mortgage Loan will be allocated to
the Class 2-PO Certificates until the Class Certificate Principal Balance
thereof is reduced to zero. With respect to any Distribution Date through the
Cross-Over Date, the aggregate of all amounts so allocable to the Class 2-PO
Certificates on such date in respect of Realized Losses other than Excess Losses
in respect of the Pool 2 Discount Mortgage Loans and all amounts previously
allocated in respect of such losses to the Class 2-PO Certificates and not
distributed on prior Distribution Dates will be the "Class 2-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 2-PO Deferred Amount
will be made on the Class 2-PO Certificates in accordance with priority fourth
in the second paragraph under "-- Distributions on the Pool 2 Senior
Certificates -- Allocation of Pool 2 Available Funds" above. Any distribution of
Pool 1 Available Funds or Pool 2 Available Funds in respect of the Class 2-PO
Deferred Amount will not reduce the Class Certificate Principal Balance of the
Class 2-PO Certificates. No interest will accrue on the Class 2-PO Deferred
Amount. On each Distribution Date through the Cross-Over Date, the Class
Certificate Principal Balance of the lowest ranking class of junior certificates
then outstanding will be reduced by the amount of any distributions in respect
of the Class 2-PO Deferred Amount on such Distribution Date, through the
operation of the Class PO Deferred Payment Writedown Amount. After the
Cross-Over Date, no distributions will be made in respect of, and losses
allocated to the Class 2-PO Certificates will not be added to, the Class 2-PO
Deferred Amount. Any distribution of Unanticipated Recoveries (as defined in the
accompanying prospectus) on the Class 2-PO Certificates will be adjusted to take
into account the Class 2-PO Deferred Amount previously paid to
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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.
Prior to the Cross-Over Date (and on such date under certain
circumstances), the applicable Non-PO Percentage of the principal portion of any
such Realized Loss (in either Pool) (other than an Excess Loss or a Debt Service
Reduction) will be allocated among the outstanding classes of junior
certificates, in inverse order of priority, until the Class Certificate
Principal Balance of each such class has been reduced to zero (i.e., such
Realized Losses will be allocated first to the Class B5 Certificates while such
certificates are outstanding, second to the Class B4 Certificates, and so on).
The applicable Non-PO Percentage of the principal portion of any Excess
Loss (other than a Debt Service Reduction) on a Pool 1 or Pool 2 mortgage loan
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 and Class 2-PO Certificates) and the
junior certificates based on their respective Class Certificate Principal
Balances.
Commencing on the Cross-Over Date, the applicable Non-PO Percentage of the
principal portion of any Realized Loss (other than a Debt Service Reduction)
with respect to any Pool 1 or Pool 2 mortgage loan 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 and Class 2-PO Certificates)
pro rata based upon their Class Certificate Principal Balances. A "Special Event
Loss" is any Fraud Loss, Special Hazard Loss or Bankruptcy Loss.
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
to the Bankruptcy Coverage Termination Date (such limitation being the "Loss
Allocation Limitation").
The principal portion of Debt Service Reductions with respect to Pool 1 or
Pool 2 mortgage loans 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 2 Senior Optimal Principal Amount, Class 2-PO Principal Distribution
Amount and clause (a)(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, 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.
All allocations of Realized Losses to a class of Pool 1 or Pool 2 senior
certificates or junior 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
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occurring during the month preceding the month of such Distribution Date and,
accordingly, will be taken into account in determining the distributions of
principal and interest on the certificates commencing on the following
Distribution Date, except that the aggregate amount of the principal portion of
any Realized Losses (other than Excess Losses and Debt Service Reductions) to be
allocated to the Class 2-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 2-PO Deferred Amount for such 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.
The applicable Non-PO Percentage of any Deficient Valuation on a Pool 1 or
Pool 2 mortgage loan will on each Distribution Date be allocated solely to the
outstanding junior certificates until the Bankruptcy Coverage Termination Date.
The "Bankruptcy Coverage Termination Date" is the Distribution Date upon which
the Bankruptcy Loss Amount has been reduced to zero or a negative number (or the
Cross-Over Date, if earlier). On each Distribution Date, the "Bankruptcy Loss
Amount" will equal approximately $165,208 (approximately 0.03% 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 Bankruptcy Losses 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 Bankruptcy Losses.
The applicable Non-PO Percentage of any Fraud Loss in respect of a Pool 1
or Pool 2 mortgage loan will on each Distribution Date be allocated solely to
the outstanding junior certificates until the Fraud Coverage Termination Date.
The "Fraud Coverage Termination Date" is the Distribution Date upon which the
Fraud Loss Amount has been reduced to zero or a negative number (or the
Cross-Over Date, if earlier). Upon the initial issuance of the certificates, the
"Fraud Loss Amount" will equal approximately $5,011,339 (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
$5,011,339, minus the aggregate amount of Fraud Losses that would have been
allocated to the junior certificates in the absence of the Loss Allocation
Limitation since the Cut-off Date. As of any Distribution Date from the first to
the fifth anniversaries of the Cut-off Date, the Fraud Loss Amount will equal
(1) the lesser of (a) the Fraud Loss Amount as of the most recent anniversary of
the Cut-off Date and (b) 1% (from the first to but excluding the third
anniversaries of the Cut-off Date) or 0.5% (from and including the third to but
excluding the fifth anniversaries of the Cut-off Date) of the aggregate
outstanding principal balance of all of the 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.
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The applicable Non-PO Percentage of any Special Hazard Loss in respect of a
Pool 1 or Pool 2 mortgage loan will on each Distribution Date be allocated
solely to the outstanding junior certificates until the Special Hazard
Termination Date. The "Special Hazard Termination Date" is the Distribution Date
upon which the Special Hazard Loss Amount has been reduced to zero or a negative
number (or the Cross-Over Date, if earlier). Upon the initial issuance of the
certificates, the "Special Hazard Loss Amount" will equal approximately
$5,011,339 (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
$5,011,339 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 the Pool 1 and Pool 2 mortgage loans on the
Distribution Date immediately preceding such anniversary and (y) twice the
outstanding principal balance of the Pool 1 and Pool 2 mortgage loan which
has the largest outstanding principal balance on the Distribution Date
immediately preceding such anniversary.
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
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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 each of the definitions of
Pool 2 Senior Optimal Principal Amount, and Class 2-PO Principal Distribution
Amount, as the case may be, 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.
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
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 Class 2-S Notional Component 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 2 mortgage
loan will be allocated solely to the outstanding Pool 2 senior certificates
during at least the first five years after the date of initial issuance of the
Pool 2 certificates, with such allocation being subject to reduction thereafter
as described herein. Among such Pool 2 senior certificates, such amounts 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-PO and
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-A3 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-A3 Certificates through the earlier of the Pool 2 Group I Final
Distribution Date and the Cross-Over Date. In addition, the Class 2-A3
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-PO and Class 2-S
Certificates) will be made
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pro rata among such certificates on each Distribution Date after the Cross-over
Date. See "Distributions on the Pool 2 Senior Certificates -- Principal" 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 in
the month following 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.
FINAL PAYMENT CONSIDERATIONS
The rate of payment of principal of the Pool 2 senior certificates and in
respect of the attributable portion of the junior certificates will depend 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 April 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.
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;
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-- 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.
The figures in the table are based on the actual characteristics of the Pool 2
mortgage loans expected to be included in the Pool 2 mortgage loan pool. 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 May 1999;
(2) the Pool 2 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 $120,387,001.69;
(4) no defaults or delinquencies in the payment by mortgagors of
principal of and interest on the Pool 2 mortgage loans are experienced and
GECMSI does not repurchase any of the Pool 2 mortgage loans as permitted or
required by the Agreement;
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(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 the Pool 2 mortgage loans are
received on the first day of each month commencing in May 1999, and are
computed prior to giving effect to prepayments received in the prior month;
(7) prepayments representing payment in full of individual Pool 2
mortgage loans are received on the last day of each month (commencing April
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 Pool 2 mortgage loan has
been calculated based on its outstanding balance, interest rate and
remaining term to maturity such that such Pool 2 mortgage loan will
amortize in amounts sufficient to repay the remaining balance of such Pool
2 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 April 29,
1999; and
(11) the amount distributable to certificateholders is not reduced by
the incurrence of any expenses by the trust; and
It is not likely that the Pool 2 mortgage loans will prepay at a constant
level of the Prepayment Assumption. In addition, if the actual characteristics
of the Pool 2 mortgage loans included in Pool 2 pool differ from those used in
calculating the percentages set forth in the tables, 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
Pool 2 senior certificates could differ (which difference would be material)
from the corresponding information in the tables for each indicated percentage
of the Prepayment Assumption.
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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% 100% 275% 400% 500% 0% 100% 275% 400% 500% 0% 100% 275%
- ----------------- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<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
April 2000..................... 99 97 93 90 88 100 100 100 100 100 100 100 100
April 2001..................... 98 90 78 70 64 100 100 100 100 100 100 100 100
April 2002..................... 96 83 61 48 38 100 100 100 100 100 100 100 100
April 2003..................... 95 75 47 30 19 100 100 100 100 100 100 100 100
April 2004..................... 93 68 34 17 6 100 100 100 100 100 100 100 100
April 2005..................... 91 62 25 9 0 100 100 100 100 83 100 98 94
April 2006..................... 90 56 18 3 0 100 100 100 100 0 99 95 86
April 2007..................... 88 51 13 0 0 100 100 100 92 0 98 90 76
April 2008..................... 86 46 9 0 0 100 100 100 44 0 96 84 65
April 2009..................... 84 42 7 0 0 100 100 100 21 0 94 77 53
April 2010..................... 82 38 4 0 0 100 100 100 3 0 92 71 43
April 2011..................... 79 34 2 0 0 100 100 100 0 0 89 65 35
April 2012..................... 77 31 1 0 0 100 100 100 0 0 87 59 28
April 2013..................... 74 27 0 0 0 100 100 92 0 0 84 54 23
April 2014..................... 71 24 0 0 0 100 100 65 0 0 81 49 18
April 2015..................... 68 21 0 0 0 100 100 42 0 0 77 44 15
April 2016..................... 65 19 0 0 0 100 100 24 0 0 74 39 12
April 2017..................... 61 16 0 0 0 100 100 9 0 0 70 35 9
April 2018..................... 57 14 0 0 0 100 100 0 0 0 66 31 7
April 2019..................... 53 11 0 0 0 100 100 0 0 0 62 27 6
April 2020..................... 48 9 0 0 0 100 100 0 0 0 57 24 4
April 2021..................... 44 7 0 0 0 100 100 0 0 0 52 20 3
April 2022..................... 38 5 0 0 0 100 100 0 0 0 46 17 3
April 2023..................... 33 3 0 0 0 100 100 0 0 0 41 14 2
April 2024..................... 28 1 0 0 0 100 100 0 0 0 35 11 1
April 2025..................... 22 0 0 0 0 100 96 0 0 0 29 9 1
April 2026..................... 15 0 0 0 0 100 56 0 0 0 22 6 1
April 2027..................... 8 0 0 0 0 100 17 0 0 0 15 4 *
April 2028..................... 1 0 0 0 0 100 0 0 0 0 7 2 *
April 2029..................... 0 0 0 0 0 0 0 0 0 0 0 0 0
Weighted Average Life
(in Years)(1)................ 19.0 9.8 4.5 3.2 2.7 29.4 27.2 15.9 9.1 6.3 21.2 15.8 11.4
<CAPTION>
CLASS 2-A3
-----------
DISTRIBUTION DATE 400% 500%
- ----------------- ---- ----
<S> <C> <C>
Initial Percentage............. 100 100
April 2000..................... 100 100
April 2001..................... 100 100
April 2002..................... 100 100
April 2003..................... 100 100
April 2004..................... 100 100
April 2005..................... 91 88
April 2006..................... 80 74
April 2007..................... 66 54
April 2008..................... 52 36
April 2009..................... 39 24
April 2010..................... 29 17
April 2011..................... 21 11
April 2012..................... 16 8
April 2013..................... 11 5
April 2014..................... 8 4
April 2015..................... 6 2
April 2016..................... 4 2
April 2017..................... 3 1
April 2018..................... 2 1
April 2019..................... 2 *
April 2020..................... 1 *
April 2021..................... 1 *
April 2022..................... 1 *
April 2023..................... * *
April 2024..................... * *
April 2025..................... * *
April 2026..................... * *
April 2027..................... * *
April 2028..................... * *
April 2029..................... 0 0
Weighted Average Life
(in Years)(1)................ 9.9 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 A2-22.
A2-25
<PAGE> 111
PERCENT OF ORIGINAL CLASS CERTIFICATE PRINCIPAL BALANCE
OUTSTANDING OF THE POOL 2 CERTIFICATES
<TABLE>
<CAPTION>
CLASS 2-A4 CLASS 2-A5 CLASS 2-A6
-------------------------------- --------------------------------- ------------------
DISTRIBUTION DATE 0% 100% 275% 400% 500% 0% 100% 275% 400% 500% 0% 100% 275%
- ----------------- ---- ---- ---- ---- ---- ----- ---- ---- ---- ---- ---- ---- ----
<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
April 2000.................... 100 100 100 100 100 99 96 91 88 85 100 100 100
April 2001.................... 100 100 100 100 100 97 89 75 65 57 100 100 100
April 2002.................... 100 100 100 100 100 95 79 54 38 26 100 100 100
April 2003.................... 100 100 100 100 100 94 70 37 17 4 100 100 100
April 2004.................... 100 100 100 100 100 92 62 22 2 0 100 100 100
April 2005.................... 100 100 100 100 100 90 55 12 0 0 100 100 100
April 2006.................... 100 100 100 100 58 88 48 3 0 0 100 100 100
April 2007.................... 100 100 100 100 0 86 42 0 0 0 100 100 25
April 2008.................... 100 100 100 100 0 83 36 0 0 0 100 100 0
April 2009.................... 100 100 100 100 0 81 31 0 0 0 100 100 0
April 2010.................... 100 100 100 100 0 78 27 0 0 0 100 100 0
April 2011.................... 100 100 100 79 0 75 22 0 0 0 100 100 0
April 2012.................... 100 100 100 58 0 72 18 0 0 0 100 100 0
April 2013.................... 100 100 100 43 0 69 14 0 0 0 100 100 0
April 2014.................... 100 100 100 31 0 66 10 0 0 0 100 100 0
April 2015.................... 100 100 100 23 0 62 7 0 0 0 100 100 0
April 2016.................... 100 100 100 17 0 58 4 0 0 0 100 100 0
April 2017.................... 100 100 100 12 0 54 1 0 0 0 100 100 0
April 2018.................... 100 100 93 9 0 49 0 0 0 0 100 41 0
April 2019.................... 100 100 73 6 0 44 0 0 0 0 100 0 0
April 2020.................... 100 100 56 4 0 39 0 0 0 0 100 0 0
April 2021.................... 100 100 43 3 0 33 0 0 0 0 100 0 0
April 2022.................... 100 100 32 2 0 27 0 0 0 0 100 0 0
April 2023.................... 100 100 24 1 0 21 0 0 0 0 100 0 0
April 2024.................... 100 100 17 1 0 14 0 0 0 0 100 0 0
April 2025.................... 100 100 12 1 0 7 0 0 0 0 100 0 0
April 2026.................... 100 100 7 * 0 0 0 0 0 0 93 0 0
April 2027.................... 100 100 4 * 0 0 0 0 0 0 0 0 0
April 2028.................... 100 61 2 * 0 0 0 0 0 0 0 0 0
April 2029.................... 0 0 0 0 0 0 0 0 0 0 0 0 0
Weighted Average Life
(in Years)(1)............... 29.8 29.2 22.2 14.4 7.2 17.3 7.6 3.5 2.6 2.3 27.2 18.9 7.9
<CAPTION>
CLASS 2-A6
-----------
DISTRIBUTION DATE 400% 500%
- ----------------- ---- ----
<S> <C> <C>
Initial Percentage............ 100 100
April 2000.................... 100 100
April 2001.................... 100 100
April 2002.................... 100 100
April 2003.................... 100 100
April 2004.................... 100 0
April 2005.................... 0 0
April 2006.................... 0 0
April 2007.................... 0 0
April 2008.................... 0 0
April 2009.................... 0 0
April 2010.................... 0 0
April 2011.................... 0 0
April 2012.................... 0 0
April 2013.................... 0 0
April 2014.................... 0 0
April 2015.................... 0 0
April 2016.................... 0 0
April 2017.................... 0 0
April 2018.................... 0 0
April 2019.................... 0 0
April 2020.................... 0 0
April 2021.................... 0 0
April 2022.................... 0 0
April 2023.................... 0 0
April 2024.................... 0 0
April 2025.................... 0 0
April 2026.................... 0 0
April 2027.................... 0 0
April 2028.................... 0 0
April 2029.................... 0 0
Weighted Average Life
(in Years)(1)............... 5.4 4.4
</TABLE>
- -------------------------
(1) The weighted average life is determined as described on page A2-22.
* Indicates an amount above zero and less than 0.5% of the original Class
Certificate Principal Balance is outstanding.
A2-26
<PAGE> 112
PERCENT OF ORIGINAL CLASS CERTIFICATE PRINCIPAL BALANCE
OUTSTANDING OF THE POOL 2 CERTIFICATES
<TABLE>
<CAPTION>
CLASS 2-A7 CLASS 2-A8 CLASS 2-A9
-------------------------------- -------------------------------- ------------------
DISTRIBUTION DATE 0% 100% 275% 400% 500% 0% 100% 275% 400% 500% 0% 100% 275%
- ----------------- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<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
April 2000..................... 100 100 100 100 100 100 100 100 100 100 100 100 100
April 2001..................... 100 100 100 100 100 100 100 100 100 100 100 100 100
April 2002..................... 100 100 100 100 100 100 100 100 100 100 100 100 100
April 2003..................... 100 100 100 100 100 100 100 100 100 100 100 100 100
April 2004..................... 100 100 100 100 0 100 100 100 100 16 100 100 100
April 2005..................... 100 100 100 19 0 100 100 100 100 0 100 100 100
April 2006..................... 100 100 100 0 0 100 100 100 0 0 100 100 100
April 2007..................... 100 100 100 0 0 100 100 100 0 0 100 100 100
April 2008..................... 100 100 34 0 0 100 100 100 0 0 100 100 100
April 2009..................... 100 100 0 0 0 100 100 27 0 0 100 100 100
April 2010..................... 100 100 0 0 0 100 100 0 0 0 100 100 71
April 2011..................... 100 100 0 0 0 100 100 0 0 0 100 100 40
April 2012..................... 100 100 0 0 0 100 100 0 0 0 100 100 16
April 2013..................... 100 100 0 0 0 100 100 0 0 0 100 100 0
April 2014..................... 100 100 0 0 0 100 100 0 0 0 100 100 0
April 2015..................... 100 100 0 0 0 100 100 0 0 0 100 100 0
April 2016..................... 100 100 0 0 0 100 100 0 0 0 100 100 0
April 2017..................... 100 100 0 0 0 100 100 0 0 0 100 100 0
April 2018..................... 100 100 0 0 0 100 100 0 0 0 100 100 0
April 2019..................... 100 78 0 0 0 100 100 0 0 0 100 100 0
April 2020..................... 100 28 0 0 0 100 100 0 0 0 100 100 0
April 2021..................... 100 0 0 0 0 100 48 0 0 0 100 100 0
April 2022..................... 100 0 0 0 0 100 0 0 0 0 100 81 0
April 2023..................... 100 0 0 0 0 100 0 0 0 0 100 51 0
April 2024..................... 100 0 0 0 0 100 0 0 0 0 100 24 0
April 2025..................... 100 0 0 0 0 100 0 0 0 0 100 0 0
April 2026..................... 100 0 0 0 0 100 0 0 0 0 100 0 0
April 2027..................... 16 0 0 0 0 100 0 0 0 0 100 0 0
April 2028..................... 0 0 0 0 0 0 0 0 0 0 19 0 0
April 2029..................... 0 0 0 0 0 0 0 0 0 0 0 0 0
Weighted Average Life
(in Years)(1)................ 27.8 20.6 8.8 5.9 4.7 28.2 22.0 9.9 6.3 5.0 28.8 24.1 11.8
<CAPTION>
CLASS 2-A9
-----------
DISTRIBUTION DATE 400% 500%
- ----------------- ---- ----
<S> <C> <C>
Initial Percentage............. 100 100
April 2000..................... 100 100
April 2001..................... 100 100
April 2002..................... 100 100
April 2003..................... 100 100
April 2004..................... 100 100
April 2005..................... 100 0
April 2006..................... 49 0
April 2007..................... 0 0
April 2008..................... 0 0
April 2009..................... 0 0
April 2010..................... 0 0
April 2011..................... 0 0
April 2012..................... 0 0
April 2013..................... 0 0
April 2014..................... 0 0
April 2015..................... 0 0
April 2016..................... 0 0
April 2017..................... 0 0
April 2018..................... 0 0
April 2019..................... 0 0
April 2020..................... 0 0
April 2021..................... 0 0
April 2022..................... 0 0
April 2023..................... 0 0
April 2024..................... 0 0
April 2025..................... 0 0
April 2026..................... 0 0
April 2027..................... 0 0
April 2028..................... 0 0
April 2029..................... 0 0
Weighted Average Life
(in Years)(1)................ 7.1 5.5
</TABLE>
- -------------------------
(1) The weighted average life is determined as described on page A2-22.
A2-27
<PAGE> 113
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 certificate, 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
May 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) and 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) and 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
A3-1
<PAGE> 114
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 amounts, if any, distributed on such date in respect of the Class
1-PO and Class 2-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
A3-2
<PAGE> 115
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 will be made on each Distribution Date.
The "Junior Percentage" on any Distribution Date will equal the sum of:
(a) the Pool 1 Apportioned Junior Percentage for such Distribution
Date multiplied by a fraction, the numerator of which is the Pool 1
Scheduled Principal Balance (less the Class Certificate Principal Balance
of the Class 1-PO Certificates) for such distribution Date and the
denominator of which is the aggregate of the Pool 1 Scheduled Principal
balance (less the Class Certificate Principal Balance of the Class 1-PO
Certificates) for such Distribution Date and the Pool 2 Scheduled Principal
Balance (less the Class Certificate Principal Balance of the Class 2-PO
Certificates) for such Distribution Date; and
(b) the Pool 2 Apportioned Junior Percentage for such Distribution
Date multiplied by a fraction, the numerator of which is the Pool 2
Scheduled Principal Balance (less the Class Certificate Principal Balance
of the Class 2-PO Certificates) for such Distribution Date and the
denominator of which is the aggregate of the Pool 1 Scheduled Principal
Balance (less the Class Certificate Principal Balance of the Class 1-PO
Certificates) for such Distribution Date and the Pool 2 Scheduled Principal
Balance (less the Class Certificate Principal Balance of the Class 2-PO
Certificates) for such Distribution Date.
The initial Junior Percentage is expected to be approximately 4.03%.
The "Junior Prepayment Percentage" on any Distribution Date will equal the
sum of:
(a) the Pool 1 Apportioned Junior Prepayment Percentage for such
Distribution Date multiplied by a fraction, the numerator of which is the
Pool 1 Scheduled Principal Balance (less the Class Certificate Principal
Balance of the Class 1-PO Certificates) for such Distribution Date and the
denominator of which is the aggregate of the Pool 1 Scheduled Principal
Balance (less the Class Certificate Principal Balance of the Class 1-PO
Certificates) for such Distribution Date and the Pool 2 Scheduled Principal
Balance (less the Class Certificate Principal Balance of the Class 2-PO
Certificates) for such Distribution Date; and
(b) the Pool 2 Apportioned Junior Prepayment Percentage for such
Distribution Date multiplied by a fraction, the numerator of which is the
Pool 2 Scheduled Principal Balance (less the Class Certificate Principal
Balance of the Class 2-PO Certificates) for such Distribution Date and the
denominator of which is the aggregate of the Pool 1 Scheduled Principal
Balance (less the Class Certificate Principal Balance of the Class 1-PO
Certificates) for such Distribution Date and the Pool 2 Scheduled Principal
Balance (less the Class Certificate Principal Balance of the Class 2-PO
Certificates) for such Distribution Date.
A3-3
<PAGE> 116
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 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 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 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 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 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 the applicable
Non-PO Percentage of all scheduled payments of principal due on each
outstanding
A3-4
<PAGE> 117
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 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
applicable non-PO 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 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 the
applicable Non-PO Percentage of all partial prepayments of principal
received 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 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 2, 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 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 senior certificateholders (other
than the holders of the Class 1-PO Certificates) 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
applicable Non-PO 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
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
A3-5
<PAGE> 118
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 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 or
Class 2-PO Deferred Amount to the Class 1-PO or Class 2-PO Certificates, as the
case may be, 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 4.00% 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
(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.
A3-6
<PAGE> 119
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, the Non-PO Percentage of all such
losses will be borne pro rata by the Pool 1 and Pool 2 senior certificates.
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 the applicable Pool 1 Non-PO Percentage or Pool 2 Non-PO Percentage of
any Realized Loss (other than an Excess Loss or a Debt Service Reduction)
on the Pool 1 or Pool 2 mortgage loans, as applicable, to the extent set
forth herein; and
(3) the allocation to the junior certificates of the applicable Pool
1-PO Percentage or Pool 2-PO Percentage, as applicable, of the principal
portion of any Realized Loss (other than an Excess Loss or a Debt Service
Reduction) on the Pool 1 or Pool 2 mortgage loans, as applicable, to the
extent set forth herein through the operation of the Class 1-PO Deferred
Payment Writedown Amount or Class 2-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 the applicable Non-PO Percentage of
any prepayment or other unscheduled recovery of principal with respect to a
mortgage loan will be allocated to the Pool 1 or Pool 2 senior certificates
entitled to principal distributions (other than the Class 1-PO and Class 2-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 the Pool 1 Group I Final Distribution Date) with such
allocation being subject to reduction
A3-7
<PAGE> 120
thereafter as described herein, except that such amounts will be allocated pro
rata among all of 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. 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 (other than Class 2-PO and Class 2-S
Certificates) 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 23.76% 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 applicable Non-PO Percentage of the
principal portion of any Realized Loss with respect to a Pool 1 or Pool 2
mortgage loan (other than a Debt Service Reduction or an Excess Loss), as
applicable, and any Deferred Payment Writedown Amount will be allocated, to the
extent set forth herein, in reduction of the Class Certificate Principal
Balances of the junior certificates in inverse order of priority of such
certificates. The effect of the allocation of such Realized Losses and of the
Deferred Payment Writedown Amount to a class of junior certificates will be to
reduce future distributions allocable to such class and increase the relative
portion of distributions allocable to more senior classes of certificates.
In order to maintain the relative levels of subordination among the junior
certificates, the applicable Non-PO Percentage of prepayments and certain other
unscheduled recoveries of principal in respect of the Pool 1 and Pool 2 mortgage
loans (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 Certificates." If the Class Prepayment
Distribution Trigger is not satisfied with respect to any class of Class B
Certificates, the amortization of more senior ranking classes of junior
certificates may occur more rapidly than would otherwise have
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<PAGE> 121
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 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 Senior
Certificates" in Annex 1 and "Description of the 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 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
A3-9
<PAGE> 122
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 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 April
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.
A3-10
<PAGE> 123
Tables of 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. The figures in the table are based on the actual characteristics
of the mortgage loans expected to be included in each of Pool 1 and Pool 2. 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 May 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 $380,746,934.31 and of the Pool
2 mortgage loans is $120,387,001.69;
(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 May 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 April 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 or Component
Principal Balance and interest rate on each class of certificates or
component thereof offered hereby are as indicated in the summary of this
prospectus supplement;
(10) the date of the initial issuance of the certificates is April 29,
1999; and
(11) the amount distributable to certificateholders is not reduced by
the incurrence of any expenses by the trust.
It is not likely that the mortgage loans in either of Pool 1 or Pool 2 will
prepay at a constant level of the Prepayment Assumption. In addition, if the
actual characteristics of the Pool 1 or Pool 2 mortgage loans differ from those
used in calculating the percentages
A3-11
<PAGE> 124
set forth in the tables, the actual class principal balance of each class of
certificates outstanding at any time and the actual weighted average life of
each class of certificates would differ (which difference would be material)
from the corresponding information in the tables for each indicated percentage
of the Prepayment Assumption.
PERCENT OF ORIGINAL CLASS CERTIFICATE PRINCIPAL BALANCE
OUTSTANDING OF THE CERTIFICATES
<TABLE>
<CAPTION>
CLASSES M, B1 AND B2
------------------------------------
DISTRIBUTION DATE 0% 100% 275% 400% 500%
- ----------------- ----- ----- ----- ----- ----
<S> <C> <C> <C> <C> <C> <C>
Initial Percentage.......................................... 100 100 100 100 100
April 2000 99 99 99 99 99
April 2001.................................................. 98 98 98 98 98
April 2002.................................................. 97 97 97 97 97
April 2003.................................................. 95 95 95 95 95
April 2004.................................................. 94 94 94 94 94
April 2005.................................................. 93 91 88 85 83
April 2006.................................................. 91 87 80 75 71
April 2007.................................................. 89 82 71 63 56
April 2008.................................................. 88 77 60 49 42
April 2009.................................................. 86 71 49 37 28
April 2010.................................................. 84 65 40 27 19
April 2011.................................................. 81 59 32 20 13
April 2012.................................................. 79 54 26 15 9
April 2013.................................................. 76 49 21 11 6
April 2014.................................................. 74 45 17 8 4
April 2015.................................................. 71 40 14 6 3
April 2016.................................................. 67 36 11 4 2
April 2017.................................................. 64 32 9 3 1
April 2018.................................................. 60 29 7 2 1
April 2019.................................................. 56 25 5 2 1
April 2020.................................................. 52 22 4 1 *
April 2021.................................................. 48 19 3 1 *
April 2022.................................................. 43 16 2 1 *
April 2023.................................................. 38 13 2 * *
April 2024.................................................. 32 11 1 * *
April 2025.................................................. 27 8 1 * *
April 2026.................................................. 20 6 1 * *
April 2027.................................................. 14 4 * * *
April 2028.................................................. 7 2 * * *
April 2029.................................................. 0 0 0 0 0
Weighted Average Life (in years)(1)......................... 19.8 14.8 10.8 9.5 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 A1-32.
A3-12
<PAGE> 125
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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-18
Description of the Certificates............. S-19
GE Capital Mortgage Services, Inc........... S-25
Delinquency and Foreclosure Experience of
GECMSI.................................... S-25
Use of Proceeds............................. S-26
The Pooling and Servicing Agreement......... S-27
Federal Income Tax Consequences............. S-31
ERISA Considerations........................ S-33
Legal Investment Matters.................... S-35
Plan of Distribution........................ S-36
Certificate Ratings......................... S-36
Legal Matters............................... S-37
Index of Certain Prospectus Supplement
Definitions............................... S-38
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...... 58
The Guarantor............................... 59
Certain Legal Aspects of the Mortgage
Loans..................................... 59
Legal Investment Matters.................... 68
ERISA Considerations........................ 70
Federal Income Tax Consequences............. 71
Plan of Distribution........................ 89
Use of Proceeds............................. 90
Legal Matters............................... 90
Financial Information....................... 90
Index of Certain Prospectus Definitions..... 91
</TABLE>
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UNTIL JULY 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.
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GE CAPITAL MORTGAGE
SERVICES, INC. 1999-9 TRUST
ISSUER
GE CAPITAL MORTGAGE
SERVICES, INC.
DEPOSITOR AND SERVICER
$492,926,200
(APPROXIMATE)
REMIC MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 1999-9
------------------------
PROSPECTUS SUPPLEMENT
------------------------
SALOMON SMITH BARNEY
April 27, 1999
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