<PAGE> 1
As Filed Pursuant to Rule 424(b)(5)
Registration No. 333-68951
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED APRIL 22, 1999)
GE CAPITAL MORTGAGE SERVICES, INC. 1999-6 TRUST
ISSUER
GE CAPITAL MORTGAGE SERVICES, INC.
DEPOSITOR AND SERVICER
$692,613,100
(APPROXIMATE)
REMIC MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 1999-6
PRINCIPAL AND INTEREST PAYABLE MONTHLY, BEGINNING MAY 25, 1999
THE TRUST WILL ISSUE:
- 21 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.
Lehman Brothers 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 Class 2-A3 Certificates will also be offered by Edward D.
Jones & Co., L.P. at varying prices determined at the time of sale. The proceeds
to the depositor from the sale of the offered certificates will be approximately
98.854177% 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.
---------------------------
LEHMAN BROTHERS EDWARD D. JONES & CO., L.P.
The date of this prospectus supplement is April 22, 1999.
<PAGE> 2
IMPORTANT NOTICE ABOUT INFORMATION PRESENTED IN THIS PROSPECTUS SUPPLEMENT AND
THE ACCOMPANYING PROSPECTUS
We provide information to you about the certificates offered by this
prospectus supplement and the underlying trust in two separate documents: (1)
the accompanying prospectus, which provides general information, some of which
may not apply to your certificates or trust, and (2) this prospectus supplement,
which describes the specific terms of your certificates and the assets in your
trust. You should read both of these documents together.
This prospectus supplement will supplement and enhance the disclosure in
the prospectus for purposes of your certificates.
S-2
<PAGE> 3
SUMMARY OF TERMS
This summary highlights selected information from this document and does
not contain all of the information that you need to consider in making your
investment decision. This summary contains an overview of certain concepts and
other information to aid your understanding. All of the information contained in
this summary is qualified by the more detailed explanation described in other
parts of this prospectus supplement and the accompanying prospectus.
THE ISSUER
The issuer of the certificates will be GE Capital Mortgage Services, Inc.
1999-6 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. Each group
will be backed by one of two separate pools of mortgage loans in the trust.
The trust will also issue one group of junior certificates representing
interests in both mortgage pools. Each class of junior certificates will consist
of two components, each representing an interest in one of the two mortgage
pools. Similarly, the trust will issue a single Class PO Certificate, a single
Class S Certificate and a single residual certificate, each representing
combined interests in both mortgage pools.
With respect to any class of these component certificates, the interest of
any such class in the Pool 1 and Pool 2 mortgage loans is referred to in this
prospectus supplement as the Pool 1 component and Pool 2 component,
respectively, of such class of certificates. The components comprising each
class of the component certificates are not separable and may not be represented
by separate certificates.
Distributions on each group of senior certificates and on each component of
the component certificates backed by a particular mortgage pool will come only
from amounts collected on that mortgage pool. Pool 1 certificates will thus have
no entitlement to funds collected on Pool 2, and vice versa.
The total original principal balance of the Pool 1 senior certificates will
be approximately $433,518,788, the total original principal balance of the Pool
2 senior certificates will be approximately $242,270,084, and the total original
principal balance of the junior certificates will be approximately $28,158,266.
The total original principal balance of the Class PO and the residual
certificates will be approximately $4,519,873. The following table shows the
approximate initial principal balance, annual certificate interest
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<PAGE> 4
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....................... $ 95,940,000 6.10% $ 25,000
1-A2....................... 96,506,000 6.35 25,000
1-A3....................... 8,497,000 6.60 25,000
1-A4....................... 131,909,000 6.35 25,000
1-A5(2).................... 62,400,000(3) (4) 25,000
1-A6....................... 10,600,000 6.75(5) 25,000
1-A7....................... 1,071,571 7.00 25,000
1-A8....................... 7,757,000 7.00 1,000
1-A9....................... 6,568,500 7.00 25,000
1-A10...................... 5,431,500 7.00 25,000
1-A11...................... 771,429 (6) 25,000
1-A12...................... 3,000,000 6.75 25,000
R-RL....................... 100 6.75 (7)
POOL 2 SENIOR CERTIFICATES
2-A1....................... $171,397,000 6.75% $ 25,000
2-A2....................... 15,420,000 6.75 25,000
2-A3....................... 27,000,000 6.50 1,000
2-A4....................... (8) 0.22 (9)
2-A5....................... 27,000,000 6.75 25,000
2-A6....................... (8) 0.03 (10)
JUNIOR CERTIFICATES
M.......................... $ 13,022,000(11) 6.75% $100,000
B1......................... 5,280,000(11) 6.75 100,000
B2......................... 3,042,000(11) 6.75 100,000
</TABLE>
- ---------------
(1) Approximate, subject to adjustment as described in this prospectus
supplement.
(2) This class of certificates will consist of two interest-only components and
one accrual component, as described in this prospectus supplement. The
components are not separately transferable. The initial notional component
principal balances of the interest-only components will be approximately
$15,146,363 and $7,816,830. The initial component principal balance of the
accrual component will be $62,400,000.
(3) The class certificate principal balance of this class will at all times
equal the component principal balance of its accrual component.
(4) The interest rate on these certificates is a variable rate. Interest will
accrue on each component of these certificates during each interest accrual
period in an amount equal to the product of the notional component
principal balance or component principal balance of each component as of
the related distribution date and 6.75% per annum. 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 9.234%.
(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 pays only principal and will not accrue
interest.
(7) This class of certificates will be issued as a single certificate in
definitive physical form.
(8) This class of certificates pays only interest. Interest will accrue on
these certificates on the aggregate notional principal balance, which at
all times will equal the certificate principal balance of the Class 2-A3
Certificates.
(9) This class of certificates will be issued in a minimum notional amount of
$2,900,000.
(10) This class of certificates will be issued as a single certificate.
(11) The initial component principal balances of these certificates are set
forth in Annex 3.
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<PAGE> 5
The Class 1-A1 through Class 1-A12 Certificates and the Class R-RL
Certificates are the Pool 1 senior certificates, and the Class 2-A1 through
Class 2-A6 Certificates are the Pool 2 senior certificates. The Class PO and
Class S Certificates are the senior component certificates. The Class M and the
Class B1 through Class B5 Certificates are the junior certificates.
The Class PO, Class B3, Class B4, Class B5 and Class S Certificates are not
offered by this prospectus supplement. We will initially retain the Class PO and
Class 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 Pool 1 senior certificates will not be less than $427,500,000 or greater
than $472,500,000, and the total original principal balance of the Pool 2 senior
certificates will not be less than $237,500,000 or greater than $262,500,000.
The total original principal balance of the junior certificates will not be less
than $26,750,000 or greater than $29,566,000.
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 $451,582,304
balance(1):
- - Original terms to maturity: 20 to 30 years
- - Weighted average maturity: between 354 and 356 months
- - Weighted average annual between 7.13% and 7.17%
interest rate:
- - Largest geographic No more than 50% of the mortgage
concentration: loans are secured by properties
located in California
</TABLE>
- -------------------------
(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.
S-5
<PAGE> 6
Pool 2 Mortgage Loans
<TABLE>
<S> <C>
- - Total outstanding principal $252,364,835
balance(1):
- - Original terms to maturity: 20 to 30 years
- - Weighted average maturity: between 355 and 357 months
- - Weighted average annual between 7.15% and 7.19%
interest rate:
- - Largest geographic 100% of the mortgage loans are
concentration: secured by properties located in
California
</TABLE>
- -------------------------
(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 85% of the Pool 1 mortgage loans and
95% 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 (including the senior component certificates) the amounts of
interest and principal distributable to them from available funds collected on
the related mortgage pool. The trustee will then pay interest and principal to
each component of the junior certificates from the remaining available funds
collected from the related mortgage pool.
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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;
-- 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-A5 or Class 1-A6 Certificates,
which accrue interest rather than pay it on a current basis, as
described below.
- If you are the 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 the holder of a junior certificate, you will receive interest
payments separately calculated for each component of your certificates.
It is therefore possible that, depending on the performance of the
related mortgage pool, you may receive an interest payment on one
component of your certificates but not the other. With respect to each
component, payments will be made only after the trustee has paid interest
and principal to:
-- all of the senior certificates and the components of the senior
component certificates backed by the same mortgage pool relating to
such component; and
-- each component backed by the same mortgage pool of a class of junior
certificates that ranks higher than the related component of your
certificates.
- If you are a holder of the Class 1-A5 or the Class 1-A6 Certificates, the
interest accrued on your certificates, or, in the case of the Class 1-A5
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 "Description of the Pool 1
Certificates -- Distributions on the Pool 1 Certificates" in Annex 1 of
this prospectus supplement.
- The Class 2-A4 and Class 2-A6 Certificates are interest-only certificates
and will receive no payments of principal. As a result, the yield on
these certificates will be particularly sensitive to the rate of
prepayments on the Pool 2 mortgage loans. See the risk factor relating to
this class of certificates on S-13.
- The trustee will calculate interest on the basis of a 360-day year
consisting of twelve 30-day months.
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Principal Payments
- After interest payments have been made on all senior certificates and the
components of the senior component 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 the holder
of junior certificates, each component of your certificates will receive
principal payments after (1) interest and principal have been paid on all
the related senior certificates and the corresponding components of
higher-ranking certificates and (2) interest has been paid on that
component. You should refer to "Description of the Pool 1
Certificates -- Distributions on the Pool 1 Certificates" or "Description
of the Pool 2 Certificates -- Distributions on the Pool 2 Certificates"
in Annex 1 or Annex 2, as applicable, 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.
- Because of the principal allocation formulas described in this prospectus
supplement, the senior certificates entitled to principal
distributions -- other than the Class PO Certificates -- will receive
principal payments at a faster rate than the corresponding components of
the junior certificates backed by the same mortgage pool for at least the
first nine years after the issuance of the certificates. The Class 2-A5
Certificates will not benefit from this accelerated repayment to the same
extent. You should refer to "Description of the Pool 2
Certificates -- Distributions on the Pool 2 Certificates -- Allocation of
Pool 2 Available Funds" in Annex 2.
- The Class 1-A11 Certificates are principal-only certificates and will
receive no payments of interest. As a result, the yield on these
certificates will be particularly sensitive to the rate of prepayments on
the Pool 1 mortgage loans. See the risk factor relating to these
certificates on page S-13.
- If you are the holder of a Class 1-A8 or Class 2-A3 Certificate, you will
have the option to request redemption of all or any part of your
certificate, in any amount that is a multiple of $1,000. In addition, you
may receive principal payments by random lottery. Accordingly, the timing
of the principal payments you receive will be determined by whether your
redemption request is honored and whether your certificates are selected
for payment. You should refer to "Description of the Pool 1
Certificates -- Principal Distributions on the Class 1-A8 Certificates"
in Annex 1 and "Description of the Pool 2 Certificates -- Principal
Distributions on the Class 2-A3 Certificates" in Annex 2 for a
description of how principal payments will be made on these certificates.
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
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<PAGE> 9
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 the holder of Pool 1 senior certificates, your certificates will
benefit from the credit enhancement provided by the subordination of the Pool 1
components of the junior certificates. If you are the holder of Pool 2 senior
certificates, your certificates will benefit from the credit enhancement
provided by the subordination of the Pool 2 components 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 corresponding components of the junior
certificates to receive funds available for interest and principal
distributions.
- The corresponding components of the junior certificates will absorb all
losses on the mortgage loans of the related mortgage pool up to the
levels described in this prospectus supplement.
If you are the holder of a senior certificate, you should keep in mind,
however, that the subordination of the corresponding components of the junior
certificates offers only limited protection against the loss of your investment.
If you are the holder of Class 1-A5 Certificates, the Class 1-A12 Certificates
will bear certain losses that would otherwise have been allocated to you.
If you are the holder of junior certificates, your certificates will
benefit from the credit enhancement provided by the subordination of any
lower-ranking classes of junior certificates. This subordination will, however,
offer only limited protection against the loss of your investment. See the risk
factor concerning subordination on page S-16.
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 Class
R-RL Certificates, which are the residual certificates, will be treated as
regular interests in the upper-tier REMIC. The interest of the residual
certificates in the upper-tier REMIC will be treated as the residual interest in
the upper-tier REMIC, and the interest of the residual certificates in the
lower-tier REMIC 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 2-A4 and Class 2-A6 Certificates, which will likely be, the
Class 1-A5, Class 1-A6 and Class 1-A11 Certificates, which will be, and
certain other classes of certificates, which may be, issued with original
issue discount;
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<PAGE> 10
- 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-A12, Class M, Class B1 or Class B2 Certificates or the residual
certificates. In addition, you 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
ON THE MORTGAGE LOANS MAY REDUCE
THE YIELD ON YOUR CERTIFICATES Payments on the mortgage loans will not be
insured by the government or any other
person. Moreover, we, as servicer, have a
limited obligation to make advances for
delinquent installments of principal or
interest, as described in "The Pooling and
Servicing Agreement -- Advances."
Consequently, the certificates will absorb
the losses resulting from delinquent
payments, and the yield on your certificates
could be lower than you expect.
If you are buying the Class 1-A12
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-A5 Certificates. See "Annex 1 --
Description of the Pool 1
Certificates -- Allocation of Realized
Losses on the Pool 1 Certificates."
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 related components of
the junior certificates, as described in
"Description of the Pool 1 Certificates --
Allocation of Realized Losses on the Pool 1
Certificates" and "-- Distributions on the
Pool 1 Certificates -- Allocation of Pool 1
Available Funds" in Annex 1 and "Description
of the Pool 2
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<PAGE> 12
Certificates -- Allocation of Realized
Losses on the Pool 2 Certificates" and
"-- Distributions on the Pool 2
Certificates -- Allocation of Pool 2
Available Funds" in Annex 2 of this
prospectus supplement.
The performance of each mortgage pool will
be independent of the other, and payments
made on each of the components in a class of
junior certificates will reflect this. If
defaults and liquidation losses from one
mortgage pool are especially high relative
to those sustained by the other mortgage
pool, or if those losses occur at a faster
rate, junior certificates ranking senior to
another class of junior certificates may
begin to absorb losses even though the
junior-ranking class remains outstanding and
continues to receive payments. For example,
if the Pool 1 component of the Class B5
Certificates has been reduced to zero
through the allocation of losses on Pool 1,
the Pool 1 component of the Class B4
Certificates will begin to bear losses, even
though the Pool 2 component of the Class B5
Certificates may continue to receive
payments.
WE CANNOT GUARANTEE YOU REGULAR
PAYMENTS ON YOUR CERTIFICATES The amounts you receive on your certificates
will depend on the amount of the payments
borrowers make on the mortgage loans.
Because we cannot predict the rate at which
borrowers will repay their loans, you may
receive distributions on your certificates
in amounts that are larger or smaller than
you expect. In addition, the life of your
certificates may be longer or shorter than
anticipated. Because of this, we cannot
guarantee that you will receive
distributions at any specific future date or
in any specific amount. Holders of the Class
1-A8 and Class 2-A3 Certificates should be
aware of the special payment rules for these
certificates that may make these payments
especially unpredictable.
PREPAYMENT RATES THAT ARE FASTER
OR SLOWER THAN YOU EXPECT ON THE
MORTGAGE POOL BACKING YOUR
CERTIFICATES OR THEIR
COMPONENTS
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 backing your certificates
or the components of your certificates.
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
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<PAGE> 13
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-A11
Certificates), the yield on your
certificates will drop if principal
payments occur at a rate slower than
you expect.
- If you are the holder of a Class
1-A11 Certificate, you will receive
only distributions of principal. If
prepayments on the related mortgage
pool occur at a rate slower than
expected, the payments on your
certificates will likewise occur at a
rate slower than expected.
Consequently, the yield on your
certificates could drop
significantly.
- If you are the holder of a Class 2-A4
or Class 2-A6 Certificate, you will
receive only distributions of
interest. If prepayments on the Pool
2 mortgage loans occur at a rate
faster than expected, the yield on
your certificates may drop.
Consequently, you should consider the
risk that you may not fully recover
your investment if there are rapid
rates of principal payments on the
Pool 2 mortgage loans. See "Yield and
Weighted Average Life
Considerations -- Sensitivity of the
Class 2-A4 and Class 2-A6
Certificates" in Annex 2.
- If you are the holder of any of the
Class 1-A5 through 1-A11
Certificates, your certificates will
support, in varying degrees, the
stability of the principal payments
made to other classes of certificates
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 that assumed in creating these
schedules, the life of your
certificates could lengthen, perhaps
significantly.
- If you are the holder of a class of
certificates that receives principal
payments according to a designated
schedule, your
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<PAGE> 14
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.
PRINCIPAL PAYMENTS ON THE
CLASS 1-A8 AND CLASS 2-A3
CERTIFICATES MAY BE LESS
PREDICTABLE THAN ON OTHER
CLASSES
BECAUSE OF SPECIAL RULES FOR
DISTRIBUTING PRINCIPAL As described in this prospectus supplement,
special rules apply to determining which
holders receive principal distributions on
these certificates and when these
distributions are made. Amounts available
for principal on each class of these
certificates will first be paid to holders
who have submitted requests for principal
payments in the order submitted and with
certain priorities given to holders who have
died. Any amounts not paid to these
requesting holders will be paid by random
lot to other holders of these certificates.
If you submitted a request for principal
payments, you may not receive the amount
requested, either because other requests had
priority over yours or because the amount
available for principal payments on your
class of certificates was insufficient to
honor your request. If the amount available
for principal distributions exceeds the
amount requested by all holders of your
class of certificates, you may receive
distributions in excess of the amount you
requested or even if you did not make a
request, you may receive distributions.
As a result, holders may not receive
principal payments when they are expecting
them, and may receive principal payments
when they are not expecting them. In
addition to making distributions on these
classes somewhat unpredictable, your yield
may be affected by the timing of these
payments, as described in some of the other
risk factors in this prospectus supplement.
S-14
<PAGE> 15
Investors in these certificates should pay
particular attention to the risk that they
may be less likely to receive principal
payments when prevailing interest rates
available for reinvestment are high, and may
be more likely to receive principal payments
when prevailing interest rates available for
reinvestment are low. See "Distributions on
the Pool 1 Certificates -- Principal
Distributions on the Class 1-A8
Certificates" in Annex 1 or "Distributions
on the Pool 2 Certificates -- Principal
Distributions on the Class 2-A3
Certificates" in Annex 2.
YOU MAY BE UNABLE TO REINVEST
DISTRIBUTIONS FROM THE
CERTIFICATES IN COMPARABLE
INVESTMENTS Rapid prepayment rates on the mortgage loans
are likely to coincide with periods of low
prevailing interest rates. During these
periods, the yield at which you may be able
to reinvest amounts received as payments on
your certificates may be lower than the
yield on your certificates. Conversely, slow
prepayment rates on the mortgage loans are
likely to coincide with periods of high
interest rates. During these periods, the
amount of payments available to you for
reinvestment at high rates may be relatively
low.
See "Yield and Weighted Average Life
Considerations" in the applicable annex of
this prospectus supplement and "Yield,
Maturity and Weighted Average Life
Considerations" in the prospectus for more
discussion of the effect of prepayments.
PREPAYMENTS MAY CAUSE REDUCTIONS
IN INTEREST DISTRIBUTIONS ON
YOUR CERTIFICATES The actual interest rate on your
certificate, if entitled to distributions of
interest, may be less than the interest rate
stated in this prospectus supplement. Unless
you are the holder of the Class 1-A11
Certificates, which pay only principal, your
certificates will be allocated any interest
shortfalls that we do not compensate for as
described in this prospectus supplement. If
you are the holder of a Class 2-A4 or Class
2-A6 Certificate, which pays only interest,
extremely high rates of prepayment on the
Pool 2 mortgage loans could result in
failure to recover your original investment.
The circumstances under which these interest
shortfalls will occur are described in
"Description of the Pool 1
Certificates -- Distributions on the Pool 1
Certificates" in Annex 1 and "Description of
the Pool 2 Certificates -- Distributions on
the Pool 2 Certificates" in Annex 2.
S-15
<PAGE> 16
THE CONCENTRATION OF MORTGAGE
LOANS IN SPECIFIC GEOGRAPHIC
AREAS MAY INCREASE THE RISK
OF LOSS ON THOSE MORTGAGE
LOANS AND REDUCE THE YIELD
ON YOUR CERTIFICATES If your certificates or a component of 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 or a
component of 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 Certificates" in Annex 1 or "The Pool 2
Mortgage Loans and the Pool 2 Certificates"
in Annex 2 of this prospectus supplement for
more information on the location of the
properties securing the mortgage loans
backing your certificates.
LOSSES ON THE MORTGAGE LOANS MAY
BE HIGHER THAN EXPECTED, WHICH
MAY LOWER THE YIELD ON YOUR
CERTIFICATES A decline in real estate values or in
economic conditions generally could increase
the rates of delinquencies, foreclosures and
losses on the mortgage loans to a level that
is significantly higher than those
experienced currently. This in turn will
reduce the yield on your certificates, if
the credit enhancement described in this
prospectus supplement is not enough to
protect your certificates from these losses.
THE SUBORDINATION PROVIDED BY
THE JUNIOR CERTIFICATES MAY
NOT BE ADEQUATE TO PROTECT
HIGHER-RANKING CERTIFICATES
FROM ALL LOSSES As described in the annex of this prospectus
supplement applicable to your certificates,
losses from a particular mortgage pool will
first be allocated to the components of the
junior certificates that are related to that
pool. These losses will be allocated to such
components in inverse order of priority.
(Thus, for example, losses on the Pool 1
mortgage loans will first be allocated to
the Pool 1 component of the Class B5
Certificates, then to the Pool 1 component
of the Class B4 Certificates, and so forth.)
S-16
<PAGE> 17
Losses may be severe enough in a mortgage
pool, however, to reduce the aggregate
principal balances of these components to
zero. If this occurs, the senior
certificates backed by that mortgage pool
will bear their share of losses thereafter.
This will occur even if the junior
certificates remain outstanding because
losses on the other mortgage pool have not
been as severe. In addition, certain types
of losses from a mortgage pool will be borne
pro rata by the related senior certificates
and the components of the junior
certificates that are related to that pool
after a specified amount of these losses are
borne solely by such components of the
junior certificates.
Each component of the junior certificates
will absorb only losses from the related
mortgage pool. Moreover, the Pool 1 senior
certificates will not absorb losses on the
Pool 2 senior certificates, and vice versa.
In addition, if you are the holder of the
Class 1-A12 Certificates, you will bear
certain specified losses otherwise allocable
to the Class 1-A5 Certificates.
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 -- 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 -- Termination" for a
discussion of additional consequences of the
trust's early termination.
S-17
<PAGE> 18
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.
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 the 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.
S-18
<PAGE> 19
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-19
<PAGE> 20
INDEX OF DEFINITIONS
You can find a list of capitalized terms used in this prospectus supplement
and the annexes hereto, and the pages on which they are defined, under the
caption "Index of Certain Prospectus Supplement Definitions" beginning on page
S-39 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 A1-3 through A1-8 of Annex 1 and pages A2-3 through A2-6 of Annex
2. It will also specify the original principal balance of each class of
certificates (or, in the case of the Class S, Class 2-A4 and Class 2-A6
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 Class 2-A5 Percentage, the initial Pool 1 Junior
Percentage, the initial Pool 2 Junior Percentage, the Pool 1 Bankruptcy Loss
Amount, the Pool 2 Bankruptcy Loss Amount, the Pool 1 Fraud Loss Amount, the
Pool 2 Fraud Loss Amount, the Pool 1 Special Hazard Loss Amount and the Pool 2
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 Pool 1 Bankruptcy Coverage Termination Date or the
S-20
<PAGE> 21
Pool 2 Bankruptcy Coverage Termination Date, as applicable, as such terms are
defined herein, irrespective of any delinquency in payment by the related
borrower.
The "Pool 1 Scheduled Principal Balance" and the "Pool 2 Scheduled
Principal Balance" as of any Distribution Date are equal to the aggregate
Scheduled Principal Balances of all of the mortgage loans in Pool 1 and Pool 2,
respectively, that were Outstanding Mortgage Loans on the first day of the month
preceding the month of such Distribution Date, or such other date as is
specified.
An "Outstanding Mortgage Loan" is any mortgage loan which has not been
prepaid in full, has not become a Liquidated Mortgage Loan and has not been
repurchased.
Each mortgage loan other than a Cooperative Loan, as defined in Annex 1, is
required to be covered by a standard hazard insurance policy. Each mortgage loan
which had a loan-to-value ratio at origination in excess of 80% also will be
covered by a private mortgage insurance policy. See "Servicing of the Mortgage
Loans -- Hazard Insurance" and "-- Private Mortgage Insurance" in the
prospectus.
All payments due on each mortgage loan on which at least one payment of
principal and interest was due prior to the Cut-off Date will have been paid
through the first day of the month preceding the Cut-off Date. Each mortgage
pool will include a substantial number of recently originated loans on which the
first monthly payments are not due until the Cut-off Date or on a date
subsequent to the initial issuance of the certificates.
For a description of the underwriting standards generally applicable to the
mortgage loans, see "The 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 PO, Class B3, Class B4, Class B5 and Class S
Certificates, none of which are offered hereby. Throughout this prospectus
supplement and the annexes hereto, the "Pool 1 certificates" shall mean,
collectively, the Pool 1 senior certificates, the Pool 1 components of the Class
PO and Class S Certificates and the Pool 1 components of the junior
certificates; the "Pool 2 certificates" shall mean, collectively, the Pool 2
senior certificates, the Pool 2 components of the Class PO and Class S
Certificates and the Pool 2 components of the junior certificates; the "Senior
Component Certificates" shall mean the Class PO and Class S Certificates and the
"Component Certificates" shall mean the Senior Component Certificates, and the
junior certificates.
The Pool 1 senior certificates and the Pool 1 components of the Component
Certificates entitled to principal distributions will have an aggregate original
principal balance of approximately $451,582,304, subject to a permitted variance
such that the aggregate original principal balance will not be less than
$427,500,000 or greater than $472,500,000. The Pool 2 senior certificates and
the Pool 2 components of the Component Certificates entitled to principal
distributions will have an aggregate original principal balance of approximately
$252,364,835, subject to a permitted variance such that the
S-21
<PAGE> 22
aggregate original principal balance will not be less than $237,500,000 or
greater than $262,500,000. Any variance will be allocated so as to approximate
the material characteristics of the classes of certificates (or components
thereof) 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 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.
S-22
<PAGE> 23
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.
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-A12, 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.
S-23
<PAGE> 24
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. 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 to holders of certificates backed by 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."
See "Distributions on the Pool 1 Certificates" in Annex 1 or "Distributions
on the Pool 2 Certificates" in Annex 2 for a description of how the Pool 1
Available Funds or Pool 2 Available Funds, as applicable, will be allocated to
your certificates.
ADDITIONAL RIGHTS OF THE RESIDUAL CERTIFICATEHOLDERS
In addition to principal and interest distributable to the residual
certificates as described under "Distributions on the Pool 1 Certificates" in
Annex 1, the holder of the residual certificates will be entitled to receive:
(1) 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 Pool 1 Class
PO Deferred Amount or any Pool 2 Class PO Deferred Amount are made on the
certificates of the related pool on such date;
(2) the amount in the Class 1-A8 Rounding Account upon the earlier of
the Pool 1 Cross-Over Date and the next Distribution Date after the Class
Certificate
S-24
<PAGE> 25
Principal Balance of the Class 1-A8 Certificates is reduced to zero, as
described herein;
(3) the amount in the Class 2-A3 Rounding Account upon the earlier of
the Pool 2 Cross-Over Date and the next Distribution Date after the Class
Certificate Principal Balance of the Class 2-A3 Certificates is reduced to
zero, as described herein;
(4) 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;
(5) 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;
(6) 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
(7) the amount of any Unanticipated Recoveries received by GECMSI in
the calendar month preceding the month of a Distribution Date and not
otherwise allocated to other classes of certificates as described in
"Servicing of the Mortgage Loans--Unanticipated Recoveries of Losses on the
Mortgage Loans" in the accompanying prospectus.
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.
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.
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<PAGE> 26
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 $83,535,531 622,179 $75,039,774
======= =========== ======= =========== ======= ===========
Period of delinquency(1)
30 to 59 days........... 3,362 $ 353,209 2,687 $ 281,657 2,314 $ 242,342
60 to 89 days........... 1,177 135,668 632 71,245 526 56,889
90 days or more(2)...... 6,867 892,643 5,442 662,342 4,561 512,734
------- ----------- ------- ----------- ------- -----------
Total delinquent loans.... 11,406 $ 1,381,520 8,761 $ 1,051,244 7,401 $ 811,965
======= =========== ======= =========== ======= ===========
Percent of portfolio...... 1.45% 1.57% 1.21% 1.22% 1.19% 1.08%
</TABLE>
- ------------------------
(1) The indicated periods of delinquency are based on the number of days past
due on a contractual basis, based on a 30-day month. No mortgage loan is
considered delinquent for these purposes until the monthly anniversary of
its contractual due date (e.g., a mortgage loan with a payment due on
January 1 would first be considered delinquent on February 1). The
delinquencies reported above were determined as of the dates indicated.
(2) Includes pending foreclosures.
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
-----------------------------------------
1996 1997 1998
----------- ----------- -----------
(DOLLAR AMOUNTS IN THOUSANDS)
<S> <C> <C> <C>
Total portfolio................... $88,188,662 $83,535,531 $75,039,774
Foreclosures(1)................... 372,800 271,046 189,421
Foreclosure ratio................. 0.42% 0.32% 0.25%
</TABLE>
- -------------------------
(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
S-26
<PAGE> 27
and graduated payment mortgage loans) and mortgage loans secured by mortgaged
properties in geographic locations that may not be representative of the
geographic locations of the mortgage loans in the trust. The servicing portfolio
also includes mortgage loans originated in accordance with GECMSI's
then-applicable underwriting policies as well as mortgage loans not originated
in accordance with such policies but as to which GECMSI had acquired the related
servicing rights.
The servicing portfolio includes many mortgage loans which have not been
outstanding long enough to have seasoned to a point where delinquencies would be
fully reflected. In the absence of such substantial continuous additions of
servicing for recently originated mortgage loans to the servicing portfolio, it
is possible that the delinquency and foreclosure percentages experienced in the
future could be significantly higher than those indicated in the tables above.
Investors should further note that a number of social, economic, tax,
geographic, demographic, legal and other factors may adversely affect the timely
payment by borrowers of scheduled payments of principal and interest on the
mortgage loans in the servicing portfolio, which could, in turn, cause an
increase in delinquency and foreclosure rates. These factors include economic
conditions, either nationally or in geographic areas where GECMSI's servicing
portfolio tends to be concentrated, the age of the mortgage loans in the trust,
the geographic distribution of the mortgaged properties, the payment terms of
the mortgages, the characteristics of the mortgagors, enforceability of
due-on-sale clauses and servicing decisions.
USE OF PROCEEDS
The net proceeds from the sale of the certificates offered hereby will be
general funds used by GECMSI for general corporate purposes, including the
acquisition of residential mortgage loans and servicing rights.
THE POOLING AND SERVICING AGREEMENT
The certificates will be issued pursuant to the Agreement. The following
summaries describe the material provisions of the Agreement that are unique to
this offering of certificates. See "The Pooling and Servicing Agreement" in the
accompanying prospectus for summaries of the other material provisions of the
Agreement. The summaries below do not purport to be complete and are subject to,
and qualified in their entirety by reference to, the provisions of the
Agreement. Where particular provisions or terms used in the Agreement are
referred to, those provisions or terms are as specified in the Agreement.
SERVICING ARRANGEMENT WITH RESPECT TO THE MORTGAGE LOANS
It is expected that GECMSI will directly service approximately 85% (by
aggregate Scheduled Principal Balance as of the Cut-off Date) of the mortgage
loans in Pool 1 and 95% (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.
S-27
<PAGE> 28
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 Ratings
Services, a division of The McGraw-Hill Companies, Inc. ("S&P"), GECMSI will, in
lieu of the Loan Payment Record described under the caption "Servicing of the
Mortgage Loans -- Loan Payment Record" in the accompanying prospectus, establish
and maintain or cause to be established and maintained a separate account (the
"Collection Account") for the certificates for the collection of payments on the
mortgage loans; provided, however, that such action will not be required if
GECMSI delivers to the Trustee a letter from each rating agency which originally
rated the certificates to the effect that the failure to take such action would
not cause such rating agency to withdraw or reduce its then current rating of
such certificates. If established, such Collection Account would be:
-- maintained with a depository institution the debt obligations of
which are, at the time of any deposit therein, rated by each of Fitch
IBCA, Inc. ("Fitch") and S&P in one of its two highest long-term
rating categories and by S&P in its highest short-term rating
category;
-- an account or accounts the deposits in which are fully insured by
either the Bank Insurance Fund (the "BIF") of the Federal Deposit
Insurance Corporation (the "FDIC") or the Savings Association
Insurance Fund (as successor to the Federal Savings and Loan
Insurance Corporation) of the FDIC (the "SAIF");
-- an account or accounts with a depository institution, which accounts
are insured by the BIF or SAIF (to the limits established by the
FDIC), and which uninsured deposits are invested in United States
government securities or other high quality investments, or are
otherwise secured to the extent required by Fitch and S&P such that,
as evidenced by an opinion of counsel, the holders of the
certificates have a claim with respect to the funds in the account or
a perfected first security interest against any collateral securing
such funds that is superior to claims of any other depositors or
creditors of the depository institution with which the account is
maintained;
-- a trust account maintained with the corporate trust department of a
federal or state chartered depository institution or trust company
with trust powers and acting in its fiduciary capacity for the
benefit of the Trustee; or
-- an account as will not cause either Fitch or S&P to downgrade or
withdraw its then-current ratings assigned to the certificates.
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.
S-28
<PAGE> 29
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.
As a result of the subordination of the Pool 1 and Pool 2 components 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 Pool 1 or Pool 2 components, as
applicable, of the junior certificates (to the extent then outstanding) in
inverse order of priority before they are borne by the related 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 certificateholders.
S-29
<PAGE> 30
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 0.22% and 0.26%. 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 0.21% and 0.25%. 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 or Pool 2 certificateholders,
as applicable, the full amount of interest to which they would have been
entitled in the absence of such prepayments, but in no event greater than the
lesser of (a) 1/12th of 0.125% of the Pool 1 Scheduled Principal Balance or Pool
2 Scheduled Principal Balance, as applicable, for such Distribution Date and (b)
the aggregate amount received by GECMSI on account of its servicing fees for
Pool 1 or Pool 2, as applicable (net of any servicing compensation paid to any
direct servicer), in connection with such Distribution Date. Because the net
amount received by GECMSI on account of its servicing fee is generally less in
the case of mortgage loans master-serviced by GECMSI than in the case of
mortgage loans GECMSI services directly, the amounts available for any
Compensating Interest Payment with respect to either mortgage pool and any
Distribution Date will generally decrease to the extent the proportion of
Outstanding Mortgage Loans in such pool master-serviced by GECMSI increases, and
increase to the extent the proportion of such mortgage loans decreases. It is
expected that no more than 15% of the mortgage loans in Pool 1 and 5% 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
S-30
<PAGE> 31
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 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 "Description of the Pool 1
Certificates -- Distributions on the Pool 1 Certificates -- Allocation of Pool 1
Available Funds" in Annex 1 and "Description of the Pool 2
Certificates -- Distributions on the Pool 2 Certificates -- Allocation of Pool 2
Available Funds" in Annex 2. 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 the outstanding Pool 1 certificates or Pool 2
certificates, as applicable, including, for this purpose, certificate components
relating to Pool 1 or Pool 2, as
S-31
<PAGE> 32
applicable, plus accrued and unpaid interest thereon, then in the event that
such Distribution Date occurs:
- prior to the Pool 1 Cross-Over Date or Pool 2 Cross-Over Date, as
applicable, the resulting shortfall will borne by the Pool 1 or Pool 2
certificates, as applicable, or their corresponding components, in
inverse order of their related payment priorities, and
- on or after the Pool 1 Cross-Over Date or Pool 2 Cross-Over Date, as
applicable, 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 S Certificates will be allocated 2% of the votes, the Class 2-A4
Certificates will be allocated 1% of the votes, and the other classes of
certificates in the aggregate will be allocated 97% of the votes eligible to be
cast in connection with any vote of all certificateholders under the Agreement.
The Class 2-A6 Certificates will have no voting rights.
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 certificates backed by a particular mortgage pool (i.e.
matters relating only to the Pool 1 certificates or only to the Pool 2
certificates), the only certificateholders entitled to vote will be the holders
of the certificates backed by the affected mortgage pool. Votes allocated to the
certificates backed by a particular mortgage pool in such a circumstance will be
allocated based on their respective Certificate Principal Balances or Component
Principal Balances 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.
An election will be made to treat the trust as a double-tier REMIC for
federal income tax purposes.
The Pool 1 and Pool 2 certificates other than the residual certificates
(the "Regular Certificates") will be designated as "regular interests" in the
upper-tier REMIC. The interest of the residual certificates in the upper-tier
REMIC will be designated as the "residual interest" in the upper-tier REMIC, and
the interest of the residual certificates in the lower-tier REMIC will be
designated as the "residual interest" in the lower-tier REMIC.
S-32
<PAGE> 33
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-A5, Class 1-A6, Class
1-A11, Class 2-A4 and Class 2-A6 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 prices. The Class 1-A5, Class
1-A6 and Class 1-A11 Certificates will be, and the Class 2-A4 and Class 2-A6
Certificates will likely be treated as being, 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. With respect to the Pool 1 senior certificates and the Pool 1 components
of the junior certificates, the prepayment assumption that is to be used in
determining the rate of accrual of original issue discount and whether the
original issue discount is considered de minimis, and that may be used by a
holder of a Regular Certificate to amortize premium, will be 250% of the
Prepayment Assumption. With respect to the Pool 2 senior certificates and the
Pool 2 components of the junior certificates, the applicable prepayment
assumption 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 or 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 REMICs 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 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."
S-33
<PAGE> 34
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 Lehman
Brothers Inc. an individual administrative exemption, Prohibited Transaction
Exemption 91-14 (56 Fed. Reg. 7413, February 22, 1991), 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 (other than the
Class 1-A12 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 (other than the Class 1-A12 Certificates) are the following:
- Lehman Brothers 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 pool backing the certificates being
purchased;
- 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;
S-34
<PAGE> 35
- 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 Lehman Brothers 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 (other than the Class 1-A12 Certificates) offered hereby if the
fiduciary (or its affiliate) is an obligor on any of the Pool 1 or Pool 2
mortgage loans backing the certificates being purchased.
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;
- Lehman Brothers Inc.;
- the Trustee;
- any entity that provides insurance or other credit enhancement to the
trust in respect of the mortgage pool backing the certificates being
purchased; or
- any obligor with respect to mortgage loans included in the mortgage pool
backing the certificates being purchased constituting more than five
percent of the aggregate unamortized principal balance of the assets in
such mortgage loan pool (the "Restricted Group").
Before purchasing any certificate offered hereby, a fiduciary of an ERISA Plan
should make its own determination as to the availability of the exemptive relief
provided in the Exemption or the availability of any other prohibited
transaction exemptions, and whether the conditions of any such exemption will be
applicable to such certificate.
The Exemption does not apply to the initial purchase, the holding or the
subsequent resale of the Class 1-A12, 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-A12,
CLASS M, CLASS B1 OR CLASS B2 CERTIFICATES, except that any insurance company
may purchase such certificates with assets of its general account if the
exemptive relief granted by the DOL for transactions involving insurance company
general accounts in Prohibited Transaction Exemption 95-60, 60 Fed. Reg. 35925
(July 12, 1995) is available with respect to such investment. Any insurance
company proposing to purchase such certificates for its general account should
consider whether such relief would be available.
S-35
<PAGE> 36
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-A12, 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 what extent, the Class B1 or Class B2 Certificates will constitute legal
investments for them.
S-36
<PAGE> 37
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 Lehman Brothers Inc., the certificates offered hereby are
being purchased from GECMSI by Lehman Brothers Inc. upon issuance. Distribution
of the certificates offered hereby will be made by Lehman Brothers Inc., and
distribution of the Class 2-A3 Certificates will also be made by Edward D. Jones
& Co., L.P. from time to time in negotiated transactions or otherwise at varying
prices to be determined at the time of sale. The Class 2-A3 Certificates to be
distributed by Edward D. Jones & Co., L.P. will have been purchased from Lehman
Brothers Inc.
Proceeds to GECMSI from the sale of the certificates offered hereby will be
approximately 98.854177% 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 commissions received by both Lehman Brothers Inc.
and Edward D. Jones & Co., L.P. will be the difference between the price paid by
them for the certificates and the amount they receive from the sale of the
certificates to the public. The price of the Class 2-A3 Certificates sold to
Edward D. Jones & Co., L.P. by Lehman Brothers Inc. may exceed the price paid by
Lehman Brothers Inc. to GECMSI.
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.
Lehman Brothers 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-A5, Class 1-A11, Class 2-A4
and Class 2-A6 Certificates be rated "AAA" by each of Fitch and S&P, that the
Class 1-A5, Class 1-A11, Class 2-A4 and Class 2-A6 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.
S-37
<PAGE> 38
Fitch's ratings on mortgage pass-through certificates do not represent any
assessment of the likelihood or rate of principal prepayments. The ratings do
not address the possibility that certificateholders might suffer a lower than
anticipated yield.
S&P's ratings on mortgage pass-through certificates address the likelihood
of receipt by certificateholders of payments required under the operative
agreements. S&P's ratings take into consideration the credit quality of the
mortgage pool including any credit support providers, structural and legal
aspects associated with the certificates, and the extent to which the payment
stream of the mortgage pool is adequate to make payment required under the
certificates. S&P's ratings on the certificates do not, however, constitute a
statement regarding the frequency of prepayments on the mortgage loans. S&P's
rating does not address the possibility that investors may suffer a lower than
anticipated yield. The "r" symbol is appended to the rating by S&P of those
certificates that S&P believes may experience high volatility or high
variability in expected returns due to non-credit risks. The absence of the "r"
symbol in the ratings of other certificates offered hereby should not be taken
as an indication that such certificates will exhibit no volatility or
variability in return.
The ratings of the certificates should be evaluated independently from
similar ratings on other types of securities. A security rating is not a
recommendation to buy, sell or hold securities and may be subject to revision or
withdrawal at any time by the assigning rating agency.
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-38
<PAGE> 39
INDEX OF CERTAIN PROSPECTUS SUPPLEMENT DEFINITIONS
<TABLE>
<CAPTION>
DEFINED TERM PAGE
- ------------ ------------
<S> <C>
Accretion Termination Date...... A1-15
Accrual Amount.................. A1-12
Accrued Certificate Interest.... A1-15, A2-10
Aggregate PAC Balance........... A1-50
Aggregate TAC Balance........... A1-55
Agreement....................... S-21
Allocable Share................. A1-24, A2-18
Available Funds................. S-24
Bankruptcy Loss................. A1-30
beneficial owner................ S-22
BIF............................. S-28
Book-Entry Certificates......... S-22
Certificate Principal Balance... A1-16, A2-10
Class B Certificates............ A1-24
Class 1-A5 Accrual Amount....... A1-13
Class 1-A6 Accrual Amount....... A1-13
Class 1-A5 IO Component......... A1-31
Class 1-A8 Rounding Account..... A1-26
Class 2-A3 Rounding Account..... A2-20
Class 2-A5 Percentage........... A2-14
Class 2-A5 Prepayment
Distribution Percentage....... A2-14
Class 2-A5 Principal
Distribution Amount........... A2-13
Class 2-A5 Scheduled
Distribution Percentage....... A2-14
Class Certificate Principal
Balance....................... A1-8
Code............................ S-34
Collection Account.............. S-28
Compensating Interest Payment... S-30
Component Principal Balance..... A1-8, A2-10
Component Certificates.......... S-21
Cooperative Loan................ A1-3
Cut-off Date.................... S-20
Debt Service Reduction.......... A1-29
Deceased Holder................. A1-28, A2-22
Defaulted Mortgage Loan......... S-29
Deficient Valuation............. A1-29
</TABLE>
<TABLE>
<CAPTION>
DEFINED TERM PAGE
- ------------ ------------
<S> <C>
Discount Mortgage Loan.......... A1-18, A2-11
Distribution Date............... A1-8
DOL............................. S-34
Effective Range................. A1-40
ERISA........................... S-34
ERISA Plan...................... S-34
Excess Loss..................... A1-31, A2-24
Exemption....................... S-34
FDIC............................ S-28
Financial Intermediary.......... S-22
Fitch........................... S-28
Fraud Loss...................... A1-30
GECMSI.......................... S-20
Interest Accrual Period......... A1-15, A2-10
Interest Shortfall.............. A1-17, A2-10
Liquidated Mortgage Loan........ A1-29
Living Holder................... A1-25, A2-19
mortgage related securities..... S-36
Net Interest Shortfall.......... A1-17, A2-10
Net Mortgage Rate............... A1-17
NMR............................. A2-11
Non-Book-Entry Certificates..... S-24
Non-discount Mortgage Loan...... A1-18
Non-PO Percentage............... A1-18, A2-11
noneconomic residual
interests..................... S-33
Notional Component Principal
Balance....................... A1-13
Notional Principal Balance...... A2-10
Original Pool 1 Junior Component
Principal Balance............. A1-20
Original Pool 2 Junior Component
Principal Balance............. A2-15
Outstanding Mortgage Loan....... S-21
PO Percentage................... A1-18, A2-11
Pool 1 Adjustment Amount........ A1-33
Pool 1 Available Funds.......... S-24
Pool 1 Bankruptcy Coverage
Termination Date.............. A1-32
Pool 1 Bankruptcy Loss Amount... A1-33
Pool 1 Certificates............. S-21
Pool 1 Class PO Deferred
Amount........................ A1-30
</TABLE>
S-39
<PAGE> 40
<TABLE>
<CAPTION>
DEFINED TERM PAGE
- ------------ ------------
<S> <C>
Pool 1 Class PO Deferred Payment
Writedown Amount.............. A1-17
Pool 1 Class Prepayment
Distribution Trigger.......... A1-24
Pool 1 Class PO Principal
Distribution Amount........... A1-22
Pool 1 Cross-Over Date.......... A1-11
Pool 1 Fraud Coverage
Termination Date.............. A1-33
Pool 1 Fraud Loss Amount........ A1-33
Pool 1 Junior Certificate
Writedown Amount.............. A1-16
Pool 1 Junior Optimal Principal
Amount........................ A1-23
Pool 1 Junior Percentage........ A1-23
Pool 1 Junior Prepayment
Percentage.................... A1-23
Pool 1 Loss Allocation
Limitation.................... A1-31
Pool 1 Modeling Assumption...... A1-43
Pool 1 Notional Principal
Balance....................... A1-15
Pool 1 PAC Certificates......... A1-40
Pool 1 Scheduled Principal
Balance....................... S-21
Pool 1 Senior Certificates......
Pool 1 Senior Final Distribution
Date.......................... A1-23
Pool 1 Senior Optimal Principal
Amount........................ A1-19
Pool 1 Senior Percentage........ A1-20
Pool 1 Senior Prepayment
Percentage.................... A1-21
Pool 1 Senior Prepayment
Percentage Stepdown
Limitation.................... A1-21
Pool 1 Special Hazard Loss
Amount........................ A1-33
Pool 1 Special Hazard
Termination Date.............. A1-33
Pool 1 TAC Certificates......... A1-41
Pool 2 Adjustment Amount........ A2-26
Pool 2 Available Funds.......... S-24
Pool 2 Bankruptcy Coverage
Termination Date.............. A2-25
Pool 2 Bankruptcy Loss Amount... A2-25
Pool 2 Certificates............. S-21
Pool 2 Class PO Deferred
Amount........................ A2-23
Pool 2 Class PO Deferred Payment
Writedown Amount.............. A2-10
</TABLE>
<TABLE>
<CAPTION>
DEFINED TERM PAGE
- ------------ ------------
<S> <C>
Pool 2 Class PO Principal
Distribution Amount........... A2-16
Pool 2 Class Prepayment
Distribution Trigger.......... A2-18
Pool 2 Cross-over Date.......... A2-8
Pool 2 Group I Final
Distribution Date............. A2-14
Pool 2 Group I Senior
Certificates.................. A2-7
Pool 2 Group I Senior Principal
Distribution Amount........... A2-7
Pool 2 Junior Certificate
Writedown Amount.............. A2-10
Pool 2 Junior Optimal Principal
Amount........................ A2-17
Pool 2 Junior Percentage........ A2-17
Pool 2 Loss Allocation
Limitation.................... A2-24
Pool 2 Modeling Assumption...... A1-43, A2-31
Pool 2 Notional Principal
Balance....................... A2-9
Pool 2 Scheduled Principal
Balance....................... S-21
Pool 2 Senior Certificates...... S-21
Pool 2 Senior Final Distribution
Date.......................... A2-17
Pool 2 Senior Optimal Principal
Amount........................ A1-19, A2-12
Pool 2 Senior Percentage........ A2-14
Pool 2 Senior Prepayment
Percentage.................... A2-12
Pool 2 Senior Prepayment
Percentage Stepdown
Limitation.................... A2-15
Pool 2 Special Hazard Loss
Amount........................ A2-26
Pool 2 Special Hazard
Termination Date.............. A2-26
Prepayment Assumption........... A1-40, A2-31
Prepayment Interest............. A2-28
Prepayment Period............... A1-20, A2-13
Principal Distribution
Request....................... A1-27, A2-21
Realized Loss................... A1-29
Record Date..................... S-24
Regular Certificates............ S-32
regular interests............... S-32
residual interest............... S-33
</TABLE>
S-40
<PAGE> 41
<TABLE>
<CAPTION>
DEFINED TERM PAGE
- ------------ ------------
<S> <C>
Restricted Group................ S-35
S&P............................. S-28
SAIF............................ S-28
Scheduled Principal Balance..... S-20
Senior Component Certificates... S-21
SMMEA........................... S-36
Special Hazard Loss............. A1-30
</TABLE>
<TABLE>
<CAPTION>
DEFINED TERM PAGE
- ------------ ------------
<S> <C>
Structuring Range............... A1-40
TAC Balances Schedule........... A1-41
TAC Prepayment Assumption....... A1-54
Tax-Exempt Investor............. S-36
Trustee......................... S-21
Withdrawal...................... A1-28, A2-21
</TABLE>
S-41
<PAGE> 42
ANNEX 1
THE POOL 1 MORTGAGE LOANS AND THE POOL 1 CERTIFICATES
Interest and principal will be distributable on the Pool 1 senior
certificates and on the Pool 1 components of the Component 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 and on the Pool 1 components of
each of the classes of junior certificates and of the Class PO and Class S
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 90% 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 6.50% 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 0.45% 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 $451,582,304. This amount is
subject to a permitted variance such that the aggregate Scheduled Principal
Balance thereof will not be less than $427,500,000 or greater than $472,500,000.
Prior to issuance of the certificates, we will not remove from the expected
Pool 1 mortgage pool more than 5% of the mortgage loans, measured by Scheduled
Principal
A1-1
<PAGE> 43
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 Pool 1 if this would result in
more than a 5% increase in the size of Pool 1, 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 6.2500% to 9.5000% per annum, and the weighted average mortgage interest
rate as of the Cut-off Date of such mortgage loans is expected to be between
7.1300% and 7.1700% per annum. The original principal balances of the Pool 1
mortgage loans are expected to range from $19,350 to $1,500,000 and, as of the
Cut-off Date, the average Scheduled Principal Balance of the Pool 1 mortgage
loans is not expected to exceed $332,000 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 March 1987, 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 354 and 356 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 10% of the mortgage loans will have a Scheduled Principal
Balance of more than $500,000 and up to and including $750,000. No more
than 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 1.4%
of the mortgage loans will have a Scheduled Principal Balance of more
than $1,000,000.
- No more than 12% of the mortgage loans will have a loan-to-value ratio at
origination in excess of 80%, no more than 4% of the mortgage loans will
have a loan-to-value ratio at origination in excess of 90%, and none of
the mortgage loans will have a loan-to-value ratio at origination in
excess of 95%. As of the Cut-off Date, the weighted average loan-to-value
ratio at origination of the mortgage loans is expected to be between 72%
and 74%.
- No more than 1.00% of the 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 32% of the mortgage loans will have been used to
acquire the related mortgaged property. The proceeds of the remainder of
the mortgage loans will have been used to refinance an existing loan. No
more than 21% of the mortgage loans will have been the subject of
"cash-out" refinancings.
- No more than 1% of the mortgage loans will be temporary buy-down mortgage
loans. The portion of the interest rate paid by the related mortgagor
will not increase by more than one percentage point for each six month
period. No mortgage interest rate may exceed the "bought down" rate by
more than 3 percentage points, and no buy-down period will exceed 3
years.
- No more than 2% of the mortgage loans will be secured by mortgaged
properties located in any one postal zip code area.
A1-2
<PAGE> 44
- No more than 50% of the mortgage loans will be secured by mortgaged
properties located in California. The majority of the mortgage loans will
be secured by mortgaged properties located in California, New Jersey and
Georgia.
No more than 6% of the mortgage loans will be secured by mortgaged
properties located in any one state except California.
- At least 96% of the 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 mortgage loans will be secured by single-family,
detached residences.
- No more than 5% of the mortgage loans will be secured by condominiums.
- No more than 3% of the 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.......... 95 $ 12,473,336.68 2.76%
227,151 - 250,000.......... 67 16,094,425.85 3.56
250,001 - 300,000.......... 469 129,292,524.60 28.63
300,001 - 350,000.......... 323 105,016,505.60 23.26
350,001 - 400,000.......... 178 66,866,124.65 14.81
400,001 - 450,000.......... 88 37,392,130.32 8.28
450,001 - 600,000.......... 117 59,473,739.58 13.17
600,001 - 650,000.......... 22 14,086,541.40 3.12
650,001 - 1,500,000......... 11 10,886,975.57 2.41
----- --------------- ------
Total.................... 1,370 $451,582,304.25 100.00%
===== =============== ======
</TABLE>
A1-3
<PAGE> 45
MORTGAGE INTEREST RATES AS OF THE CUT-OFF DATE
<TABLE>
<CAPTION>
AGGREGATE SCHEDULED PERCENTAGE OF POOL BY
PRINCIPAL AGGREGATE SCHEDULED
NUMBER OF BALANCE AS OF PRINCIPAL BALANCE AS
MORTGAGE INTEREST RATE MORTGAGE LOANS THE CUT-OFF DATE OF THE CUT-OFF DATE
---------------------- -------------- ------------------- ---------------------
<S> <C> <C> <C>
6.2500%....................... 4 $ 1,122,860.59 0.25%
6.3750%....................... 3 938,012.23 0.21
6.5000%....................... 19 6,801,076.95 1.51
6.6250%....................... 28 9,763,326.30 2.16
6.7500%....................... 78 26,291,825.90 5.82
6.8750%....................... 213 74,534,423.89 16.51
6.9000%....................... 1 264,152.56 0.06
7.0000%....................... 279 93,064,013.89 20.61
7.1250%....................... 182 62,527,917.23 13.85
7.1500%....................... 1 343,312.09 0.08
7.2000%....................... 1 334,288.08 0.07
7.2500%....................... 217 74,679,430.90 16.54
7.2750%....................... 1 339,470.56 0.08
7.3750%....................... 118 38,332,841.09 8.49
7.5000%....................... 85 27,205,370.64 6.02
7.5500%....................... 1 892,492.71 0.20
7.6250%....................... 44 12,446,238.89 2.76
7.7500%....................... 19 4,667,445.11 1.03
7.8750%....................... 8 1,557,992.33 0.35
8.0000%....................... 14 2,705,475.88 0.60
8.1250%....................... 5 556,939.60 0.12
8.2500%....................... 7 1,391,180.33 0.31
8.3750%....................... 4 1,189,154.14 0.26
8.5000%....................... 11 2,511,086.71 0.56
8.6250%....................... 6 1,413,600.78 0.31
8.7500%....................... 6 1,518,813.76 0.34
8.8750%....................... 7 1,813,708.47 0.40
9.0000%....................... 3 1,030,030.61 0.23
9.1250%....................... 1 94,286.36 0.02
9.2500%....................... 1 207,280.14 0.05
9.3750%....................... 2 798,396.61 0.18
9.5000%....................... 1 245,858.92 0.05
----- --------------- ------
Total.................... 1,370 $451,582,304.25 100.00%
===== =============== ======
</TABLE>
A1-4
<PAGE> 46
GEOGRAPHIC DISTRIBUTION OF MORTGAGED PROPERTIES AS OF THE CUT-OFF DATE
<TABLE>
<CAPTION>
AGGREGATE SCHEDULED PERCENTAGE OF POOL BY
PRINCIPAL AGGREGATE SCHEDULED
NUMBER OF BALANCE AS OF PRINCIPAL BALANCE AS
STATE MORTGAGE LOANS THE CUT-OFF DATE OF THE CUT-OFF DATE
----- -------------- ------------------- ---------------------
<S> <C> <C> <C>
Alabama....................... 2 $ 724,799.17 0.16%
Arizona....................... 43 13,586,309.36 3.01
Arkansas...................... 2 648,616.24 0.14
California.................... 648 225,689,018.51 49.98
Colorado...................... 56 17,616,456.06 3.90
Connecticut................... 22 7,196,309.18 1.59
Delaware...................... 3 959,364.75 0.21
District Of Columbia.......... 5 1,745,498.41 0.39
Florida....................... 53 14,059,483.94 3.11
Georgia....................... 66 20,692,538.30 4.58
Hawaii........................ 3 662,959.02 0.15
Illinois...................... 52 16,608,958.78 3.68
Indiana....................... 3 756,993.25 0.17
Iowa.......................... 1 118,787.73 0.03
Kentucky...................... 3 1,054,150.04 0.23
Louisiana..................... 2 462,672.36 0.10
Maine......................... 1 341,739.77 0.08
Maryland...................... 16 5,570,608.02 1.23
Massachusetts................. 53 16,464,491.12 3.65
Michigan...................... 7 2,161,935.42 0.48
Minnesota..................... 4 1,771,495.19 0.39
Missouri...................... 8 2,593,842.71 0.57
Nevada........................ 8 2,925,977.66 0.65
New Hampshire................. 4 1,430,569.20 0.32
New Jersey.................... 84 25,503,399.88 5.65
New Mexico.................... 3 835,176.59 0.18
New York...................... 46 14,266,807.75 3.16
North Carolina................ 5 1,888,721.84 0.42
Ohio.......................... 4 1,220,830.95 0.27
Oregon........................ 21 6,689,578.64 1.48
Pennsylvania.................. 31 10,505,663.22 2.33
Rhode Island.................. 6 1,978,000.00 0.44
South Carolina................ 5 1,503,439.50 0.33
South Dakota.................. 1 419,326.27 0.09
</TABLE>
A1-5
<PAGE> 47
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>
Tennessee..................... 3 823,813.88 0.18
Texas......................... 13 3,880,488.00 0.86
Utah.......................... 7 2,059,746.68 0.46
Vermont....................... 3 823,236.39 0.18
Virginia...................... 30 9,409,127.52 2.08
Washington.................... 43 13,931,372.95 3.09
----- --------------- ------
Total.................... 1,370 $451,582,304.25 100.00%
===== =============== ======
</TABLE>
YEAR OF ORIGINATION AS OF THE CUT-OFF DATE
<TABLE>
<CAPTION>
AGGREGATE SCHEDULED PERCENTAGE OF POOL BY
PRINCIPAL AGGREGATE SCHEDULED
NUMBER OF BALANCE AS OF PRINCIPAL BALANCE AS
YEAR OF ORIGINATION MORTGAGE LOANS THE CUT-OFF DATE OF THE CUT-OFF DATE
- ------------------- -------------- ------------------- ---------------------
<S> <C> <C> <C>
1987.......................... 1 $ 402,500.00 0.09%
1990.......................... 1 171,783.04 0.04
1991.......................... 2 310,475.32 0.07
1992.......................... 29 9,004,624.40 1.99
1995.......................... 1 329,390.94 0.07
1996.......................... 1 432,000.00 0.10
1998.......................... 169 51,306,226.62 11.36
1999.......................... 1,166 389,625,303.93 86.28
----- --------------- ------
Total.................... 1,370 $451,582,304.25 100.00%
===== =============== ======
</TABLE>
YEAR OF MATURITY AS OF THE CUT-OFF DATE
<TABLE>
<CAPTION>
AGGREGATE SCHEDULED PERCENTAGE OF POOL BY
PRINCIPAL AGGREGATE SCHEDULED
NUMBER OF BALANCE AS OF PRINCIPAL BALANCE AS
YEAR OF MATURITY MORTGAGE LOANS THE CUT-OFF DATE OF THE CUT-OFF DATE
- ---------------- -------------- ------------------- ---------------------
<S> <C> <C> <C>
2019.......................... 15 $ 3,979,323.91 0.88%
2020.......................... 1 171,783.04 0.04
2022.......................... 30 8,850,099.72 1.96
2023.......................... 1 351,044.12 0.08
2024.......................... 6 1,970,963.23 0.44
2027.......................... 2 420,896.41 0.09
2028.......................... 80 22,152,814.26 4.91
2029.......................... 1,235 413,685,379.56 91.61
----- --------------- ------
Total.................... 1,370 $451,582,304.25 100.00%
===== =============== ======
</TABLE>
A1-6
<PAGE> 48
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........ 1,279 $425,329,380.08 94.19%
Single-family attached........ 16 5,080,091.20 1.13
Condominium................... 48 12,542,343.13 2.78
2 - 4 family units............ 23 7,736,140.61 1.71
Co-op......................... 4 894,349.23 0.20
----- --------------- ------
Total.................... 1,370 $451,582,304.25 100.00%
===== =============== ======
</TABLE>
OCCUPANCY STATUS OF MORTGAGED PROPERTIES(1)
<TABLE>
<CAPTION>
AGGREGATE SCHEDULED PERCENTAGE OF POOL BY
PRINCIPAL AGGREGATE SCHEDULED
NUMBER OF BALANCE AS OF PRINCIPAL BALANCE AS
OCCUPANCY MORTGAGE LOANS THE CUT-OFF DATE OF THE CUT-OFF DATE
- --------- -------------- ------------------- ---------------------
<S> <C> <C> <C>
Owner Occupied................ 1,322 $440,649,419.97 97.58%
Vacation...................... 32 8,680,520.32 1.92
Investment.................... 16 2,252,363.96 0.50
----- --------------- ------
Total.................... 1,370 $451,582,304.25 100.00%
===== =============== ======
</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...................... 482 $151,980,581.67 33.66%
Rate Term/Refinance........... 637 215,237,813.81 47.66
Cash-out Refinance............ 251 84,363,908.77 18.68
----- --------------- ------
Total.................... 1,370 $451,582,304.25 100.00%
===== =============== ======
</TABLE>
A1-7
<PAGE> 49
LOAN-TO-VALUE RATIOS AT ORIGINATION
<TABLE>
<CAPTION>
AGGREGATE SCHEDULED PERCENTAGE OF POOL BY
RANGE OF PRINCIPAL AGGREGATE SCHEDULED
LOAN-TO-VALUE RATIOS 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>
00.001-50.000%................ 65 $ 23,493,644.86 5.20%
50.001-60.000................. 116 40,587,706.28 8.99
60.001-70.000................. 220 79,991,897.91 17.71
70.001-75.000................. 220 73,419,978.32 16.26
75.001-80.000................. 563 183,196,746.32 40.57
80.001-85.000................. 29 7,893,412.82 1.75
85.001-90.000................. 106 30,148,311.61 6.68
90.001-95.000................. 51 12,850,606.13 2.85
----- --------------- ------
Total.................... 1,370 $451,582,304.25 100.00%
===== =============== ======
</TABLE>
DISTRIBUTIONS ON THE POOL 1 CERTIFICATES
Allocation of Pool 1 Available Funds
Interest and principal on the Pool 1 senior certificates and the Pool 1
components of the Component 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 Pool 1 Available Funds
for the related Distribution Date. 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 certificates:
first, to the classes of Pool 1 senior certificates entitled to
distributions of interest and the Pool 1 component of the Class S
Certificates, the Accrued Certificate Interest on each such class for such
Distribution Date, any shortfall in available amounts being allocated among
such classes and component 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-A6 Certificates and the Class 1-A5
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 first paragraph following priority eighth below;
second, to the classes of Pool 1 senior certificates entitled to
distributions of interest and the Pool 1 component of the Class S
Certificates, any Accrued Certificate Interest thereon remaining
undistributed (or not added to the Class Certificate Principal Balance of
the Class 1-A6 Certificates or to the Component Principal Balance of the
Class 1-A5 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
component in proportion to
A1-8
<PAGE> 50
the amount of such Accrued Certificate Interest remaining undistributed (or
not added to the Class Certificate Principal Balance of the Class 1-A6
Certificates or to the Component Principal Balance of the Class 1-A5
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-A6
Certificates and the Class 1-A5 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 first paragraph following priority
eighth below;
third, to the classes of Pool 1 senior certificates entitled to
principal distributions and the Pool 1 component of the Class PO
Certificates, in reduction of the aggregate Class Certificate Principal
Balances or Component Principal Balance thereof, to the extent of remaining
Pool 1 Available Funds, concurrently, as follows:
(1) to the Class 1-A1 through Class 1-A12 Certificates and the
residual certificates, the Pool 1 Senior Optimal Principal Amount for
such Distribution Date, in the following order of priority:
(a) to the residual certificates, until the Class Certificate
Principal Balance thereof has been reduced to zero;
(b) to the Class 1-A1 through Class 1-A12 Certificates,
concurrently, as follows:
(I) approximately 0.6969418193% of the amount
distributable under this clause (1)(b) to the Class 1-A12
Certificates, until the Class Certificate Principal Balance
thereof has been reduced to zero;
(II) approximately 99.3030581807% of the amount
distributable under this clause (1)(b) to the Class 1-A1
through Class 1-A11 Certificates, in the following order of
priority:
(A) sequentially, to the Class 1-A1, Class 1-A2 and
Class 1-A3 Certificates, up to the amount necessary to
reduce the aggregate Certificate Principal Balances
thereof to the Aggregate Pool 1 PAC Balance set forth in
the Pool 1 PAC Balances Table for such Distribution Date;
(B) to the Class 1-A4 Certificates, up to the amount
necessary to reduce the Class Certificate Principal
Balance thereof to the Class 1-A4 TAC Balance No. 1 set
forth in the Pool 1 TAC Balances Table for such
Distribution Date;
(C) to the Class 1-A5 Accrual Component, up to the
amount necessary to reduce the Component Principal Balance
thereof to the Class 1-A5 TAC Component Balance No. 1 set
forth in the Pool 1 TAC Balances Table for such
Distribution Date;
(D) to the Class 1-A6 Certificates, until the Class
Certificate Principal Balance thereof has been reduced to
zero;
(E) to the Class 1-A11 Certificates, approximately
3.57143055556% of the remaining amount distributable under
this
A1-9
<PAGE> 51
clause (1)(b)(II), until the Class Certificate Principal
Balance thereof has been reduced to zero;
(F) to the Class 1-A8 Certificates, approximately
37.2421132492% of the remaining amount distributable under
this clause (1)(b)(II), up to the amount necessary to
reduce the Class Certificate Principal Balance thereof to
its Class 1-A8 TAC Balance set forth in the Pool 1 TAC
Balances Table for such Distribution Date;
(G) sequentially, to the Class 1-A9 and Class 1-A10
Certificates, approximately 91.8022783949% of the
remaining amount distributable under this clause
(1)(b)(II), up to the amount necessary to reduce the
aggregate Class Certificate Principal Balances thereof to
the Class 1-A9, Class 1-A10 Aggregate TAC Balance set
forth in the Pool 1 TAC Balances Table for such
Distribution Date;
(H) to the Class 1-A7 Certificates, until the Class
Certificate Principal Balance thereof has been reduced to
zero;
(I) to the Class 1-A8 through Class 1-A10
Certificates, concurrently, as follows:
(i) approximately 39.2620337096% of the amount
distributable under this clause (1)(b)(II)(I) to the
Class 1-A8 Certificates, until the Class Certificate
Principal Balance thereof has been reduced to zero;
and
(ii) approximately 60.7379662904% of the amount
distributable under this clause (1)(b)(II)(I) first to
the Class 1-A9 Certificates and then to the Class
1-A10 Certificates, without regard to the Class 1-A9,
Class 1-A10 Aggregate TAC Balance for such
Distribution Date, until their respective Class
Certificate Principal Balances have been reduced to
zero;
(J) to the Class 1-A4 Certificates, up to the amount
necessary to reduce the Class Certificate Principal
Balance thereof to the Class 1-A4 TAC Balance No. 2 set
forth in the Pool 1 TAC Balances Table for such
Distribution Date;
(K) to the Class 1-A5 Accrual Component, up to the
amount necessary to reduce the Component Principal Balance
thereof to the Class 1-A5 TAC Component Balance No. 2 set
forth in the Pool 1 TAC Balances Table for such
Distribution Date;
(L) 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;
(M) to the Class 1-A5 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
A1-10
<PAGE> 52
(N) to the Class 1-A1, Class 1-A2 and Class 1-A3
Certificates, in the following order or priority:
(i) to the Class 1-A1 Certificates, without
regard to the Aggregate Pool 1 PAC Balance for such
Distribution Date, until the Class Certificate
Principal Balance thereof has been reduced to zero;
(ii) to the Class 1-A2 Certificates, without
regard to the Aggregate Pool 1 PAC Balance for such
Distribution Date, until the Class Certificate
Principal Balance thereof has been reduced to zero;
and
(iii) to the Class 1-A3 Certificates, without
regard to the Aggregate Pool 1 PAC Balance Table for
such Distribution Date, until the Class Certificate
Principal Balance thereof has been reduced to zero;
and
(2) to the Pool 1 component of the Class PO Certificates, the Pool
1 Class PO Principal Distribution Amount for such Distribution Date,
until the Component Principal Balance thereof has been reduced to zero;
fourth, to the Pool 1 component of the Class PO Certificates, to the
extent of remaining Pool 1 Available Funds, the Pool 1 Class PO Deferred
Amount for such Distribution Date, until the Component Principal Balance
thereof has been reduced to zero; provided that, (1) on any Distribution
Date, distributions pursuant to this priority fourth shall not exceed the
Pool 1 Junior Optimal Principal Amount for such Distribution Date, (2) such
distributions shall not reduce the Component Principal Balance of the Pool
1 component of the Class PO Certificates and (3) no distribution will be
made in respect of the Pool 1 Class PO Deferred Amount after the
Distribution Date on which the respective Component Principal Balances of
the Pool 1 components of the junior certificates have been reduced to zero
(the "Pool 1 Cross-Over Date");
fifth, to the Pool 1 component of the Class M Certificates, to the
extent of remaining Pool 1 Available Funds, in the following order: (1) the
Accrued Certificate Interest thereon for such Distribution Date, (2) any
Accrued Certificate Interest thereon remaining undistributed from previous
Distribution Dates and (3) such component's Allocable Share (as defined
under "-- Principal" below) for such Distribution Date;
sixth, to the Pool 1 component of the Class B1 Certificates, to the
extent of remaining Pool 1 Available Funds, in the following order: (1) the
Accrued Certificate Interest thereon for such Distribution Date, (2) any
Accrued Certificate Interest thereon remaining undistributed from previous
Distribution Dates and (3) such component's Allocable Share for such
Distribution Date;
seventh, to the Pool 1 component of the Class B2 Certificates, to the
extent of remaining Pool 1 Available Funds, in the following order: (1) the
Accrued Certificate Interest thereon for such Distribution Date, (2) any
Accrued Certificate Interest thereon remaining undistributed from previous
Distribution Dates and (3) such component's Allocable Share for such
Distribution Date; and
eighth, to each of the Pool 1 components of the Class B3, Class B4 and
Class B5 Certificates, to the extent of remaining Pool 1 Available Funds:
(1) the Accrued
A1-11
<PAGE> 53
Certificate Interest thereon for such Distribution Date, (2) any Accrued
Certificate Interest thereon remaining undistributed from previous
Distribution Dates and (3) such component's Allocable Share for such
Distribution Date.
On each Distribution Date on which there is an Accrual Amount (as defined
below), before distributions have been made pursuant to priority third above, an
amount equal to the sum of the Class 1-A6 Accrual Amount and the Class 1-A5
Accrual Amount (the "Accrual Amount") 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, up to the amount necessary to
reduce the Class Certificate Principal Balance thereof to the Class 1-A4
TAC Balance No. 1 set forth in the Pool 1 TAC Balances Table for such
Distribution Date;
second, to the Class 1-A5 Accrual Component, up to the amount
necessary to reduce the Component Principal Balance thereof to the Class
1-A5 TAC Component Balance No. 1 set forth in the Pool 1 TAC Balances Table
for such Distribution Date;
third, to the Class 1-A6 Certificates, in reduction of the Class
Certificate Principal Balance thereof, until the Class Certificate
Principal Balance thereof has been reduced to zero;
fourth, to the Class 1-A11 Certificates, approximately 3.57143055556%
of the remaining Accrual Amount, until the Class Certificate Principal
Balance thereof has been reduced to zero;
fifth, to the Class 1-A8 Certificates, approximately 37.2421132492% of
the remaining Accrual Amount, up to the amount necessary to reduce the
Class Certificate Principal Balance thereof to its Class 1-A8 TAC Balance
set forth in the Pool 1 TAC Balances Table for such Distribution Date;
sixth, sequentially, to the Class 1-A9 and Class 1-A10 Certificates,
approximately 91.8022783949% of the remaining Accrual Amount, up to the
amount necessary to reduce the aggregate Class Certificate Principal
Balances thereof to the Class 1-A9, Class 1-A10 Aggregate TAC Balance set
forth in the Pool 1 TAC Balances Table for such Distribution Date;
seventh, to the Class 1-A7 Certificates, until the Class Certificate
Principal Balance thereof has been reduced to zero;
eighth, to the Class 1-A8 through Class 1-A10 Certificates,
concurrently, as follows:
(1) approximately 39.2620337096% of the amount distributable under
this priority eighth to the Class 1-A8 Certificates, without regard to
the Class 1-A8 TAC Balance for such Distribution Date, until the Class
Certificate Principal Balance thereof has been reduced to zero; and
(2) approximately 60.7379662904% of the amount distributable under
this priority eighth first to the Class 1-A9 Certificates and then to
the Class 1-A10 Certificates, without regard to the Class 1-A9, Class
1-A10 Aggregate TAC Balance for such Distribution Date, until their
respective Class Certificate Principal Balances have been reduced to
zero;
ninth, to the Class 1-A4 Certificates, up to the amount necessary to
reduce the Class Certificate Principal Balance thereof to the Class 1-A4
TAC Balance No. 2 set forth in the Pool 1 TAC Balances Table for such
Distribution Date;
A1-12
<PAGE> 54
tenth, to the Class 1-A5 Accrual Component, up to the amount necessary
to reduce the Component Principal Balance thereof to the Class 1-A5
Scheduled Component Balance No. 2 set forth in the Pool 1 TAC Balances
Table for such Distribution Date;
eleventh, 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; and
twelfth, to the Class 1-A5 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-A5 Accrual Amount distributed as described above on a
Distribution Date will be added to the Component Principal Balance of the Class
1-A5 Accrual Component on such date, and any Class 1-A6 Accrual Amount
distributed as described above on such date will be added to the Class
Certificate Principal Balance of the Class 1-A6 Certificates on such date.
The "Class 1-A5 Accrual Amount" with respect to each Distribution Date
through the related Accretion Termination Date will be an amount equal to the
sum of (a) the Accrued Certificate Interest on the Class 1-A5 Accrual Component
in accordance with priority first in the second paragraph under "Allocation of
Pool 1 Available Funds" and (b) any available amount allocable to the Class 1-A5
Accrual Component in accordance with priority second in the second paragraph
under "Allocation of Pool 1 Available Funds."
The "Class 1-A6 Accrual Amount" with respect to each Distribution Date
through the related Accretion Termination Date will be an amount equal to the
sum of (a) Accrued Certificate Interest on the Class 1-A6 Certificates in
accordance with priority first in the second paragraph under "Allocation of Pool
1 Available Funds" and (b) any available amount allocable to the Class 1-A6
Certificates in accordance with priority second in the second paragraph under
"Allocation of Pool 1 Available Funds."
Solely for purposes of determining distributions of principal and interest,
the Class 1-A5 Certificates will consist of three payment components (the Class
1-A5 PAC IO Component, the Class 1-A5 TAC IO Component and the Class 1-A5
Accrual Component). The initial Component Principal Balance of the Class 1-A5
Accrual Component is expected to equal approximately $62,400,000, subject to the
variance described herein relating to Pool 1. The notional component principal
balances of the Class 1-A5 PAC IO Component and of the Class 1-A5 TAC IO
Component (each, a "Notional Component Principal Balance") are initially
expected to be approximately $15,146,363 and $7,816,830, respectively, each
subject to the variance described herein relating to Pool 1. (The Class
Certificate Principal Balance of the Class 1-A5 Certificates will at all times
equal the Component Principal Balance of the Class 1-A5 Accrual Component
thereof.)
The Notional Component Principal Balance of the Class 1-A5 PAC IO Component
as of any Distribution Date will equal the sum of (1) 0.65% of the Class
Certificate Principal Balance of the Class 1-A1 Certificates on such
Distribution Date, (2) 0.40% of the Class Certificate Principal Balance of the
Class 1-A2 Certificates on such Distribution Date and (3) 0.15% of the Class
Certificate Principal Balance of the Class 1-A3 Certificates on such
Distribution Date divided by 6.75%. The Notional Component Principal Balance of
the Class 1-A5 TAC IO Component as of any Distribution Date will
A1-13
<PAGE> 55
equal 0.40% of the Class Certificate Principal Balance of the Class 1-A4
Certificates on such Distribution Date divided by 6.75%.
The holders of the Class 1-A5 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-A5 Certificates.
The percentages set forth in priority third in the second paragraph under
"Allocation of Pool 1 Available Funds" and in the third paragraph under
"Allocation of Pool 1 Available Funds" were calculated on the basis of the Class
Certificate Principal Balances or Component Principal Balances of the related
Pool 1 certificates described herein. If these Class Certificate Principal
Balances or Component Principal Balances are increased or decreased in
accordance with the variance permitted hereby for Pool 1, the applicable
percentages will be increased or decreased substantially correspondingly.
On each Distribution Date after the Pool 1 Cross-Over Date, distributions
of principal on the outstanding Pool 1 senior certificates entitled to principal
distributions will be made pro rata among all such certificates, regardless of
the allocation, or sequential nature, of principal payments described in
priority third in the second paragraph under "Allocation of Pool 1 Available
Funds."
"Pro rata" distributions among classes of certificates will be made in
proportion to the then-current Class Certificate Principal Balances or Component
Principal Balances, as applicable, 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 Pool 1 Class 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 and the Pool 1 component of the Class PO Certificates 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 will be allocated to
the certificates or Pool 1 components thereof as described under "-- Allocation
of Realized Losses on the Pool 1 Certificates" herein.
Interest
Interest will accrue on the Pool 1 senior certificates and the Pool 1
components of the Component 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 or component thereof entitled to
distributions of interest will be the one-month period ending on the last day of
the month preceding the month in which a Distribution Date occurs. Interest will
be calculated on the basis of a 360-day year consisting of twelve 30-day months.
Interest will accrue on the Pool 1 components of the Class B3, Class B4 and
Class B5 Certificates at the interest rate of 6.75% per annum during each
Interest Accrual Period.
On each Distribution Date through the applicable Accretion Termination Date
for the Class 1-A6 Certificates and the Class 1-A5 Accrual Component, the
Accrued Certificate
A1-14
<PAGE> 56
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-A6 Certificates
or the Component Principal Balance of the Class 1-A5 Accrual Component, as
applicable.
On each Distribution Date after the applicable Accretion Termination Date
for the Class 1-A6 Certificates and the Class 1-A5 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.
The "Accretion Termination Date" for the Class 1-A6 Certificates is the
earlier of:
(1) the Pool 1 Cross-Over Date; and
(2) the Distribution Date on which the Class Certificate Principal
Balance of the Class 1-A6 Certificates has been reduced to zero.
The "Accretion Termination Date" for the Class 1-A5 Accrual Component is
the earlier of:
(1) the Pool 1 Cross-Over Date; and
(2) the Distribution Date on which the Component Principal Balance of
the Class 1-A5 Accrual Component has been reduced to zero.
Interest will accrue on the Pool 1 Notional Principal Balance of the Class
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 Pool 1 component of the Class S
Certificates for the first Interest Accrual Period is expected to be
approximately 0.29564394%.
The "Pool 1 Notional Principal Balance" of the Pool 1 component of the
Class S Certificates as of any Distribution Date will equal the aggregate
Scheduled Principal Balance of the Outstanding Mortgage Loans in Pool 1 which
are Non-discount Mortgage Loans as of the first day of the calendar month
preceding such Distribution Date. The initial Pool 1 Notional Principal Balance
of the Class S Certificates is expected to be approximately $316,460,149.
The Class PO and Class 1-A11 Certificates are principal-only certificates
and will not accrue interest.
The "Accrued Certificate Interest" for any Pool 1 certificate or Pool 1
component of a certificate entitled to distributions of interest (other than the
Class 1-A5 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 the Pool
1 component of the Class S Certificates, the Pool 1 Notional Principal Balance)
of such certificate (or, in the case of the Pool 1 component of a class of
junior certificates, the Component Principal Balance thereof) immediately prior
to such
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<PAGE> 57
Distribution Date, less such certificate's (or component's) share of any Net
Interest Shortfall (as defined below), the interest portion of any Excess Losses
(as defined herein) in respect of Pool 1 mortgage loans through the Pool 1
Cross-Over Date and, after the Pool 1 Cross-Over Date, the interest portion of
Realized Losses, including Excess Losses, in respect of Pool 1 mortgage loans.
The "Accrued Certificate Interest" for the Class 1-A5 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-A5 Certificates, at the
fixed interest rate of 6.75% per annum 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 share of any
allocable Net Interest Shortfall, the interest portion of any Excess Losses in
respect of Pool 1 mortgage loans through the Pool 1 Cross-Over Date and, after
the Pool 1 Cross-Over Date, the interest portion of Realized Losses, including
Excess Losses, in respect of Pool 1 mortgage loans.
The "Certificate Principal Balance" of any Pool 1 senior certificate as of
any Distribution Date will equal such certificate's Certificate Principal
Balance on the date of initial issuance of the certificates,
(1) 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
mortgage loans previously allocated to such certificate; and
(2) in the case of the Class 1-A6 Certificates or the Class 1-A5 Accrual
Component of the Class 1-A5 Certificates through the related Accretion
Termination Date, increased by all Accrued Certificate Interest added to
the Certificate Principal Balance or Component Principal Balance thereof
on previous Distribution Dates.
The "Certificate Principal Balance" of the Class PO Certificates will equal
the sum of the Component Principal Balances of each of the Pool 1 component and
the Pool 2 component of such certificates.
The "Component Principal Balance" of any component of a Pool 1 certificate
as of any Distribution Date will equal such component's principal balance on the
date of initial issuance of the certificates as reduced by:
- all amounts distributed on previous Distribution Dates on such
component on account of principal;
- the principal portion of all Realized Losses previously allocated to
such component; and
- in the case of a component of a junior certificate, such component's
pro rata share, if any, of the Pool 1 Junior Certificate Writedown Amount
and the Pool 1 Class PO Deferred Payment Writedown Amount for previous
Distribution Dates.
As of any Distribution Date, the "Pool 1 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 senior certificates and the Component
Principal Balances of the Pool 1 components of the Component Certificates, after
giving effect to the distribution of principal and the application of Realized
Losses in respect of Pool 1 mortgage loans in
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<PAGE> 58
reduction of the Certificate Principal Balances of the Pool 1 senior
certificates or the Component Principal Balances of the Pool 1 components of the
Component Certificates on such Distribution Date, exceeds (b) the Pool 1
Scheduled Principal Balance on the first day of the month of such Distribution
Date less any Deficient Valuations occurring on or prior to the Pool 1
Bankruptcy Coverage Termination Date.
For any Distribution Date, the "Pool 1 Class PO Deferred Payment Writedown
Amount" will equal the amount, if any, distributed on such date in respect of
the Pool 1 Class PO Deferred Amount pursuant to priority fourth in the second
paragraph under "-- Allocation of Pool 1 Available Funds" above. The Pool 1
Junior Certificate Writedown Amount and the Pool 1 Class PO Deferred Payment
Writedown Amount will be allocated to the Pool 1 components of the classes of
junior certificates in inverse order of priority, until the Component Principal
Balance of each such component has been reduced to zero.
With respect to any Distribution Date, the "Net Interest Shortfall" in
respect of a mortgage pool will equal the excess of the aggregate Interest
Shortfalls with respect to such Distribution Date in respect of the related
mortgage loans over the applicable Compensating Interest Payment, if any, for
such Distribution Date. See "The Pooling and Servicing Agreement -- Servicing
Compensation, Compensating Interest and Payment of Expenses" herein for a
definition of "Compensating Interest Payment."
With respect to any Distribution Date, an "Interest Shortfall" in respect
of a mortgage loan will result from:
(1) any voluntary prepayment of principal in full on such mortgage
loan received from the sixteenth day (or, in the case of the first
Distribution Date, from the Cut-off Date) through the last day of the month
preceding such Distribution Date;
(2) any partial prepayment of principal on such mortgage loan by the
mortgagor during the month preceding such Distribution Date; or
(3) a reduction in the interest rate on such mortgage loan due to the
application of the Soldiers' and Sailors' Civil Relief Act of 1940 whereby,
in general, members of the Armed Forces who entered into mortgages prior to
the commencement of military service may have the interest rates on those
mortgage loans reduced for the duration of their active military service.
See "Certain Legal Aspects of the Mortgage Loans -- Soldiers' and Sailors'
Civil Relief Act" in the prospectus. As to any Distribution Date and any
mortgage loan with respect to which a prepayment in full has occurred as
described above, the resulting "Interest Shortfall" generally will equal the
difference between (a) one month's interest at the mortgage interest rate net of
the applicable servicing fee (the "Net Mortgage Rate") on the Scheduled
Principal Balance of such mortgage loan, and (b) the amount of interest at the
Net Mortgage Rate actually received with respect to such mortgage loan. In the
case of a partial prepayment, the resulting "Interest Shortfall" will equal one
month's interest at the applicable Net Mortgage Rate on the amount of such
prepayment.
Any Net Interest Shortfall, the interest portion of any Excess Losses
through the Pool 1 Cross-Over Date and, after the Pool 1 Cross-Over Date, the
interest portion of any Realized Losses in respect of the Pool 1 mortgage loans
(see "-- Allocation of Realized Losses on the Pool 1 Certificates") will, on
each Distribution Date, be allocated among all the outstanding Pool 1 senior
certificates and the Pool 1 components of the Component 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 shortfall
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<PAGE> 59
and losses. See "The Pooling and Servicing Agreement -- Servicing Compensation,
Compensating Interest and Payment of Expenses" herein.
The interest portion of any Realized Losses (other than Excess Losses) in
respect of the Pool 1 mortgage loans occurring prior to the Pool 1 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 Pool 1 components of the junior certificates in right of
distribution, such losses will be borne first by the outstanding Pool 1
components of the 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 or the Pool 1 components of the Senior Component Certificates
entitled to distributions of interest to their certificateholders, any shortfall
in available amounts will be allocated among such classes and components in
proportion to the amounts of Accrued Certificate Interest otherwise
distributable thereon or, in the case of the Class 1-A6 Certificates and the
Class 1-A5 Accrual Component through the related Accretion Termination Date, the
amounts that would otherwise have been added to the Certificate Principal
Balance or Component Principal Balance thereof. Such reduction with respect to
the Class 1-A6 Certificates and the Class 1-A5 Accrual Component will effect a
corresponding reduction in the Class 1-A6 Accrual Amount or Class 1-A5 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 and the Pool 1
components of Senior Component Certificates entitled to distributions of
interest (or to be added to the Class Certificate Principal Balance of the Class
1-A6 Certificates or the Component Principal Balance of the Class 1-A5 Accrual
Component, through the related Accretion Termination Date) on subsequent
Distribution Dates in accordance with priority second in the second paragraph
under "-- Allocation of Pool 1 Available Funds" above. No interest will accrue
on any Accrued Certificate Interest remaining undistributed from previous
Distribution Dates.
Principal
Distributions in reduction of the principal balance of each Pool 1 senior
certificate and in reduction of the Component Principal Balance of the Pool 1
component of each Component Certificate entitled to principal distributions will
be made on each Distribution Date.
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
entitled to principal distributions and the Pool 1 components of the junior
certificates, on the one hand, and (2) the Pool 1 component of the Class PO
Certificates, on the other, in each case based on the applicable Non-PO
Percentage and the applicable PO Percentage, respectively, of such amounts.
The "Non-PO Percentage" with respect to any Pool 1 mortgage loan with a Net
Mortgage Rate ("NMR") less than 6.75% per annum (each such mortgage loan, a
"Discount Mortgage Loan") will be the fraction, expressed as a percentage, equal
to NMR / 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 "Non-discount Mortgage Loan") will be 100%. The "PO Percentage" with
respect to any Discount Mortgage Loan in Pool 1 will be the fraction, expressed
as a percentage, equal to
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<PAGE> 60
(6.75% -- NMR) / 6.75%. The "PO Percentage" with respect to any Non-discount
Mortgage Loan in Pool 1 will be 0%.
The initial Component Principal Balance of the Pool 1 component of the
Class PO Certificates, which are not offered hereby, will be approximately
$3,066,688, subject to the variance described herein relating to Pool 1.
Distributions in reduction of the Class Certificate Principal Balance of
each class of Pool 1 senior certificates entitled to principal distributions and
in reduction of the Component Principal Balance of the Pool 1 component of the
Class PO Certificates will be made on each Distribution Date under priority
third in the second paragraph under "-- Allocation of Pool 1 Available Funds"
above. In accordance with priority third, the Pool 1 Available Funds remaining
after the distribution of interest will be allocated to such certificates and
Pool 1 components in an aggregate amount not to exceed the sum of the Pool 1
Senior Optimal Principal Amount and the Pool 1 Class PO Principal Distribution
Amount for such Distribution Date. Distributions in reduction of the Component
Principal Balances of the Pool 1 component of the Class M, Class B1 and Class B2
Certificates will be made pursuant to priorities fifth, sixth and seventh,
respectively, in the second paragraph under "-- Allocation of Pool 1 Available
Funds" above. In accordance with each such priority, the Pool 1 Available Funds,
if any, remaining after distributions of principal and interest on the Pool 1
senior certificates and the Pool 1 components of the Senior Component
Certificates and payments in respect of the Pool 1 Class PO Deferred Amount on
such Distribution Date will be allocated to the Pool 1 components of the Class
M, Class B1 and Class B2 Certificates in an amount equal to each such
component's Allocable Share for such Distribution Date, provided that no
distribution of principal will be made on any such component until any component
ranking prior thereto has received distributions of interest and principal, and
such component has received distributions of interest, on 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 after the Pool 1 Bankruptcy
Coverage Termination Date, but before any adjustment to such amortization
schedule by reason of any other bankruptcy or similar proceeding or any
moratorium or similar waiver or grace period;
(2) the Pool 1 Senior Prepayment Percentage (as defined herein) of the
applicable Non-PO Percentage of the Scheduled Principal Balance of each
Pool 1 mortgage loan which was the subject of a prepayment in full received
by GECMSI (or, in the case of a Pool 1 mortgage loan master-serviced by
GECMSI, of which GECMSI receives notice) during the applicable Prepayment
Period (as defined below);
(3) the Pool 1 Senior Prepayment Percentage of the applicable Non-PO
Percentage of all partial prepayments of principal received in respect of
Pool 1 mortgage loans during the applicable Prepayment Period;
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<PAGE> 61
(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.
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 immediately preceding such Distribution Date by the aggregate
Certificate Principal Balances of all the Pool 1 senior certificates and the
Component Principal Balances of the Pool 1 components of the junior certificates
immediately preceding such Distribution Date. The initial Pool 1 Senior
Percentage is expected to be approximately 96.00%.
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<PAGE> 62
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 Junior Percentage
May 2005 - April 2006................ Pool 1 Senior Percentage plus 60%
of the Pool 1 Junior Percentage
May 2006 - April 2007................ Pool 1 Senior Percentage plus 40%
of the Pool 1 Junior Percentage
May 2007 - April 2008................ Pool 1 Senior Percentage plus 20%
of the Pool 1 Junior Percentage
May 2008 and thereafter.............. Pool 1 Senior Percentage
</TABLE>
Notwithstanding the foregoing, if the Pool 1 Senior Percentage on any
Distribution Date exceeds the initial Pool 1 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 (such limitation being the
"Pool 1 Senior Prepayment Percentage Stepdown Limitation") 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 Component Principal
Balances of the Pool 1 components 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 aggregate Component Principal Balances of the Pool 1
components of the junior certificates as of the date of
issuance of the certificates (the "Original Pool 1 Junior
Component Principal Balance") if such Distribution Date occurs
between and including May 2004 and April 2005;
(b) 35% of the Original Pool 1 Junior Component Principal Balance
if such Distribution Date occurs between and including May
2005 and April 2006;
(c) 40% of the Original Pool 1 Junior Component Principal Balance
if such Distribution Date occurs between and including May
2006 and April 2007;
(d) 45% of the Original Pool 1 Junior Component Principal Balance
if such Distribution Date occurs between and including May
2007 and April 2008; and
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<PAGE> 63
(e) 50% of the Original Pool 1 Junior Component 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 Junior Component Principal Balance
if such Distribution Date occurs between and including May
2004 and April 2005;
(b) 15% of the Original Pool 1 Junior Component Principal Balance
if such Distribution Date occurs between and including May
2005 and April 2006;
(c) 20% of the Original Pool 1 Junior Component Principal Balance
if such Distribution Date occurs between and including May
2006 and April 2007;
(d) 25% of the Original Pool 1 Junior Component Principal Balance
if such Distribution Date occurs between and including May
2007 and April 2008; and
(e) 30% of the Original Pool 1 Junior Component Principal Balance
if such Distribution Date occurs during or after May 2008.
The "Pool 1 Class 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 Pool 1 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
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<PAGE> 64
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 Pool 1 Bankruptcy Coverage Termination
Date.
The "Pool 1 Junior Percentage" on any Distribution Date will equal 100%
minus the Pool 1 Senior Percentage. The "Pool 1 Junior Prepayment Percentage"
will equal 100% minus the Pool 1 Senior Prepayment Percentage, except that on
any Distribution Date after the respective Class Certificate Principal Balances
of the Pool 1 senior certificates have each been reduced to zero (the "Pool 1
Senior Final Distribution Date"), the Pool 1 Junior Prepayment Percentage will
equal 100%. The initial Pool 1 Junior Percentage is expected to be approximately
4.00%.
The "Pool 1 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 Component Principal Balances of the Pool 1
components of the junior certificates immediately prior to such Distribution
Date):
(1) the Pool 1 Junior Percentage of the applicable Non-PO Percentage
of all scheduled payments of principal due on each outstanding 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 Pool 1 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 Junior Prepayment Percentage of the applicable Non-PO
Percentage of the Scheduled Principal Balance of each Pool 1 mortgage loan
which was the subject of a prepayment in full received by GECMSI, or, in
the case of a Pool 1 mortgage loan master-serviced by GECMSI, of which
GECMSI receives notice, during the related Prepayment Period;
(3) the Pool 1 Junior Prepayment Percentage of the applicable Non-PO
Percentage of all partial prepayments of principal received in respect of
Pool 1 mortgage loans during the related Prepayment Period, plus, on the
Pool 1 Senior Final Distribution Date, 100% of any Pool 1 Senior Optimal
Principal Amount remaining undistributed on such date;
(4) the amount, if any, by which the sum of (a) the applicable Non-PO
Percentage of the net liquidation proceeds allocable to principal received
during the related Prepayment Period in respect of each Liquidated Mortgage
Loan in Pool 1, other than mortgage loans described in clause (b) and (b)
the applicable Non-PO Percentage of the principal balance of each Pool 1
mortgage loan that was purchased
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<PAGE> 65
by a private mortgage insurer during the related Prepayment Period as an
alternative to paying a claim under the related insurance policy exceeds
(c) the sum of the amounts distributable to the Pool 1 senior certificates
under clause (4) of the definition of Pool 1 Senior Optimal Principal
Amount on such Distribution Date; and
(5) the Pool 1 Junior 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 "Allocable Share" with respect to the Pool 1 component of any class of
junior certificates on any Distribution Date will generally equal such
component's pro rata share (based on the Component Principal Balance of each
component entitled thereto) of each of the elements of the Pool 1 Junior Optimal
Principal Amount described above; provided, that, except as described in the
second succeeding sentence, no Pool 1 component of a 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
clauses (2), (3) and (5) of the definition of Pool 1 Junior Optimal Principal
Amount unless the Pool 1 Class Prepayment Distribution Trigger for the related
component is satisfied for such Distribution Date.
The "Pool 1 Class Prepayment Distribution Trigger" for the Pool 1 component
of a class of Class B Certificates for any Distribution Date is satisfied if the
fraction (expressed as a percentage), the numerator of which is the aggregate
Component Principal Balance of the Pool 1 component of such class and each class
subordinate thereto, if any, and the denominator of which is the Pool 1
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 Component Principal Balance of
the Pool 1 component of the Class M Certificates or of any class of Class B
Certificates for which the related Pool 1 Class Prepayment Distribution Trigger
was satisfied on such Distribution Date is reduced to zero, any amounts
distributable to such component under clauses (2), (3) and (5) of the definition
of Pool 1 Junior Optimal Principal Amount, to the extent of such component's
remaining Allocable Share, shall be distributed to the remaining Pool 1
components of the junior certificates in reduction of their respective Component
Principal Balances in order of priority. If the Pool 1 Class Prepayment
Distribution Trigger is not satisfied for the Pool 1 component of any class of
Class B Certificates on any Distribution Date, this may have the effect of
accelerating the amortization of the Pool 1 components of the more senior
ranking classes of junior certificates because the amount otherwise
distributable to such components under clauses (2), (3) and (5) of the
definition of Pool 1 Junior Optimal Principal Amount will be distributable among
the outstanding Pool 1 components of the Class M Certificates and each class of
the Class B Certificates as to which the related Pool 1 Class Prepayment
Distribution Trigger has been satisfied on a pro rata basis subject to the
priority of payments described in this Annex 1. On any Distribution Date, any
reduction in funds available for distribution to the Pool 1 components of the
junior certificates resulting from a distribution of the Pool 1 Class PO
Deferred Amount to the Pool 1 component of the Class PO Certificates will be
allocated to the Pool 1 components of the junior certificates, in reduction of
the Allocable Shares thereof, in inverse order of priority.
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<PAGE> 66
PRINCIPAL DISTRIBUTIONS ON THE CLASS 1-A8 CERTIFICATES
General
Arrangements have been made to distribute principal on the Class 1-A8
Certificates in $1,000 increments. These arrangements are intended to
accommodate retail investors who may not wish to receive their principal
distributions in amounts smaller than $1,000 and to give a limited payment
priority to investors who request early payment. As a result, only some
certificates in this class will receive distributions of principal on any given
date on which principal would otherwise be distributed on all certificates of
this class.
Principal payments on the Class 1-A8 Certificates will be made as follows:
- The amount of principal, if any, distributable on each Distribution Date
on the class as a whole will be determined as described under
"Distributions on the Pool 1 Certificates -- Allocation of Pool 1
Available Funds" above.
- The distribution of principal will be rounded upward to an integral
multiple of $1,000 by withdrawing funds from the Class 1-A8 Rounding
Account (as defined below), if necessary.
- The Trustee will remit distributions of principal to DTC in integral
multiples of $1,000. DTC will then remit such distributions to its
participants on behalf of the beneficial owners. The participants and the
relevant Financial Intermediaries in turn will be responsible for
remitting principal payments to their customers as described above.
- Holders who have properly made a Principal Distribution Request, as
described below, will be paid before other holders, to the extent of
available principal.
- Principal Distribution Requests submitted on behalf of Deceased Holders
(as defined below) will be entitled to a first priority, and requests
from beneficial owners other than Deceased Holders ("Living Holders")
will be entitled to a second priority.
- If more principal is available for distribution on a Distribution Date
than the amount covered by valid Principal Distribution Requests,
beneficial owners will receive distributions of principal on such
Distribution Date in integral multiples of $1,000 pursuant to DTC's
random lot procedures, to the extent of such excess.
Notwithstanding the foregoing, on and after the Pool 1 Cross-Over Date,
distributions on the Class 1-A8 Certificates will be made pro rata among all
holders of the certificates of such class and will not be made in integral
multiples of $1,000, by requested distributions or by random lot.
There can be no assurance that each participant receiving distributions of
principal made by random lot, or in accordance with Principal Distribution
Requests, and that each Financial Intermediary in the chain to beneficial
owners, will remit distributions to their customers by random lot or in
accordance with Principal Distribution Requests. Investors should ask their
brokers or other intermediaries what allocation procedures they use. Neither
GECMSI nor the Trustee will be responsible for the manner in which DTC, any
participant or any Financial Intermediary allots distributions on these
certificates.
The Agreement will provide that, in the event definitive physical
certificates are issued in respect of the Class 1-A8 Certificates, the Trustee
will determine which physical certificates will receive principal distributions
on the applicable Distribution Date using procedures comparable to those
described herein.
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Due to the procedures for distributions described herein, there can be no
assurance that any particular beneficial owner of a Class 1-A8 Certificate will
receive a principal distribution on any Distribution Date. The timing and amount
of distributions in reduction of the Class Certificate Principal Balance of
these certificates is highly uncertain, and such distributions may be made
earlier or later than the date, or in amounts different from that, desired by a
beneficial owner of such certificate. Accordingly, the allocation of principal
distributions in respect of such certificates may result in actual yields to
investors and weighted average lives that vary significantly from those
anticipated, and such yields and weighted average lives will vary among the
holders of each such class of certificates. See the risk factor on page S-14.
Rounding of Distributions of Principal
For purposes of distributions of principal on the Class 1-A8 Certificates,
a rounding account (the "Class 1-A8 Rounding Account") will be established on
behalf of such class on the date of issuance of the certificates by the deposit
of $999.99 in a segregated, non-interest bearing account maintained by the
Trustee pursuant to the Agreement. Prior to the Pool 1 Cross-Over Date, whenever
distributions of principal are to be made on the Class 1-A8 Certificates, the
amount allocable to such class will be rounded upward to an integral multiple of
$1,000, if necessary.
On the first Distribution Date when distributions of principal will be made
on the Class 1-A8 Certificates, the Trustee will withdraw from the Class 1-A8
Rounding Account any funds needed to round the amount allocable to the Class
1-A8 Certificates upward to the next integral multiple of $1,000 and will
distribute the rounded amount. On the next Distribution Date when distributions
of principal will be made on such class of certificates, the Trustee will first
apply the amount allocable to such class in respect of principal to repay any
amount withdrawn from the Class 1-A8 Rounding Account on the previous
Distribution Date; then it will round the remainder of such allocable amount
upward to the next integral multiple of $1,000 by making another withdrawal from
the Class 1-A8 Rounding Account and will distribute this amount. This process
will continue on subsequent Distribution Dates prior to the Pool 1 Cross-Over
Date until the Class Certificate Principal Balance of the Class 1-A8
Certificates has been reduced to zero.
Upon the earlier of the Pool 1 Cross-Over Date and the next Distribution
Date after the Class Certificate Principal Balance of the Class 1-A8
Certificates is reduced to zero, the balance in the Class 1-A8 Rounding Account
will be restored to $999.99 from Pool 1 Available Funds otherwise available for
distribution to other classes of certificates and will be distributed to the
holder of the residual certificates, and the Class 1-A8 Rounding Account will be
terminated.
As a result of the operation of the Class 1-A8 Rounding Account, the
aggregate distributions made in reduction of the Class Certificate Principal
Balance of the Class 1-A8 Certificates on each Distribution Date may be slightly
more or less than would be the case in the absence of such rounding procedures,
but such difference will be no more than $999.99 on such Distribution Date.
Under no circumstances will the sum of all distributions made in reduction of
the Class Certificate Principal Balance of the Class 1-A8 Certificates through
any Distribution Date be less than the sum that would have resulted in the
absence of such rounding procedures.
Principal Distribution Requests and Withdrawals
Each beneficial owner of a Class 1-A8 Certificate may request that a
distribution of principal be made on a Distribution Date, in any integral
multiple of $1,000, by delivering
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a written request (each, a "Principal Distribution Request") to the DTC
participant or Financial Intermediary that maintains such beneficial owner's
account. The participant should in turn make the request to DTC (or, in the case
of a Financial Intermediary, such firm must notify the related participant of
such request, which participant should make the request to DTC) on a form
required by DTC and provided to the participant.
In the case of a request on behalf of a Deceased Holder, a certified copy
of the death certificate and any additional appropriate evidence of death and
any tax waivers must be forwarded to the Trustee under separate cover.
Furthermore, such requests of Deceased Holders that are incomplete may not be
honored by the Trustee and, if not honored, will lose their priority and must be
re-requested. Upon receipt of such Principal Distribution Request, DTC will date
and time-stamp such request. Such requests will be honored on any Distribution
Date only to the extent that they are received by DTC on or before the Record
Date for such Distribution Date. DTC may establish such procedures as it deems
fair and equitable to establish the order of receipt of requests for such
distributions received by it on the same day. Such requests shall be made
available to the Trustee through the facilities of DTC, Principal Distribution
Requests delivered to DTC after the Record Date for a particular Distribution
Date and requests received in a timely manner but not accepted with respect to a
particular Distribution Date will be treated as Principal Distribution Requests
for the next succeeding Distribution Date and each succeeding Distribution Date
thereafter until each request is accepted or is withdrawn as described below.
In the case of Principal Distribution Requests on behalf of Living Holders,
DTC will establish a new order of priority for each Distribution Date. This
order will apply both to previously unsatisfied Principal Distribution Requests
and to newly submitted requests. A Principal Distribution Request submitted on
behalf of a Living Holder who later dies will become entitled to the priority of
a newly submitted request on behalf of a Deceased Holder. Such priority will be
effective for each subsequent Distribution Date if DTC has received a certified
copy of the death certificate for such Deceased Holder and any additional
appropriate evidence of death and any requested tax waivers by the last business
day of the preceding calendar month. Each Principal Distribution Request
submitted by a beneficial owner of a Class 1-A8 Certificate will be held by DTC
until such request has been accepted or has been withdrawn in writing as
described below.
On any Distribution Date on which principal distributions are made on the
Class 1-A8 Certificates, priority of distributions of principal in respect of
such class of certificates will be given to holders of such class of
certificates on whose behalf Principal Distribution Requests have been duly
received and not withdrawn. DTC will honor Principal Distribution Requests in
the following order of priority:
first, DTC will honor Principal Distribution Requests submitted on
behalf of Deceased Holders in the order of their receipt by DTC, until such
requests have been honored in an amount up to $25,000 for each requesting
Deceased Holder; and
second, DTC will honor Principal Distribution Requests submitted on
behalf of Living Holders in the order of priority established by DTC, until
such requests have been honored in an amount of up to $10,000 for each
requesting Living Holder.
Thereafter, DTC will honor Principal Distribution Requests submitted on
behalf of each Deceased Holder as provided in priority first up to a second
$25,000 and Principal Distribution Requests submitted on behalf of each Living
Holder as provided in priority second up to a second $10,000. This sequence of
priorities will be repeated until all
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Principal Distribution Requests have been honored to the extent of amounts
available for distribution in reduction of the Class Certificate Principal
Balance of the Class 1-A8 Certificates.
If the amount available for distribution in reduction of the Class
Certificate Principal Balance of the Class 1-A8 Certificates on a given
Distribution Date is insufficient to honor all Principal Distribution Request,
such requests will be honored on succeeding Distribution Dates as principal
becomes available for distribution on the Class 1-A8 Certificates, without the
need for the holders to resubmit their Principal Distribution Requests.
On any Distribution Date on which principal distributions are to be made on
the Class 1-A8 Certificates, the Trustee will advise DTC as to which Principal
Distribution Requests should be honored, and in what amounts.
Any beneficial owner of a Class 1-A8 Certificate with respect to which a
Principal Distribution Request has been made may withdraw such request by so
notifying in writing the participant or Financial Intermediary that maintains
such beneficial owner's account (each such withdrawal, a "Withdrawal"). The
participant should forward the Withdrawal to DTC on a form required by DTC. In
the event that such account is maintained by a Financial Intermediary, such
Financial Intermediary should notify the related participant, which in turn
should forward the Withdrawal of such request on such form to DTC. If such
Withdrawal has not been received by DTC on or before the Record Date for the
applicable Distribution Date, the previously made Principal Distribution Request
will be irrevocable with respect to such Distribution Date.
Neither GECMSI nor the Trustee will be liable for any delay or failure by
any DTC participant or any Financial Intermediary in the delivery of Principal
Distribution Requests or Withdrawals to DTC.
If the amount available for distribution in reduction of the Class
Certificate Principal Balance of the Class 1-A8 Certificates on any Distribution
Date exceeds the amount needed to honor all Principal Distribution Requests with
respect to such class on such date, additional principal distributions, in
integral multiples equal to $1,000, will be made to the holders of such class in
accordance with DTC's established random lot procedures, without regard to
whether or not such certificateholders have submitted Principal Distribution
Requests.
Definition of "Deceased Holder"
A "Deceased Holder" is a beneficial owner of a Class 1-A8 Certificate who
was living at the time such interest was acquired and whose executor or other
authorized representative causes to be furnished to the Trustee a certified copy
of the death certificate for such Deceased Holder and any additional evidence of
death satisfactory to the Trustee and any tax waivers requested by the Trustee.
Class 1-A8 Certificates beneficially owned by tenants by the entirety,
joint tenants or tenants in common will be considered to be beneficially owned
by a single owner. The death of a tenant by the entirety, joint tenant or tenant
in common will be deemed to be the death of the beneficial owner, and the Class
1-A8 Certificates so beneficially owned will be eligible for priority with
respect to distributions of principal, subject to the limitations described
herein.
Class 1-A8 Certificates beneficially owned by a trust will be considered to
be beneficially owned by each beneficiary of the trust to the extent of such
beneficiary's
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beneficial interest therein, but in no event will a trust's beneficiaries
collectively be deemed to be beneficial owners of a number of individual Class
1-A8 Certificates greater than the number of individual Class 1-A8 Certificates
of which such trust is the owner. The death of the beneficiary of a trust will
be deemed to be the death of a beneficial owner of the Class 1-A8 Certificates
beneficially owned by the trust to the extent of such beneficiary's beneficial
interest in such trust. The death of an individual who was a tenant by the
entirety, joint tenant or tenant in common in a tenancy that is the beneficiary
of a trust will be deemed to be the death of the beneficiary of the trust.
The death of a person who, during his or her lifetime, was entitled to
substantially all of the beneficial ownership interest in a Class 1-A8
Certificate will be deemed to be the death of the beneficial owner of the Class
1-A8 Certificate regardless of the registration of the ownership, if such
beneficial ownership interest can be established to the satisfaction of the
Trustee.
Expenses incurred by the Trustee in an effort to determine the beneficial
ownership interest, including, without limitation, attorney's fees, shall be
paid by the beneficial owner. Such beneficial interest will be deemed to exist
in typical cases of street name or nominee ownership, ownership by a trustee,
ownership under the Uniform Gift to Minors Act and community property or other
joint ownership arrangements between a husband and wife. Beneficial interest
shall include the power to sell, transfer, or otherwise dispose of a Class 1-A8
Certificate and the right to receive the proceeds therefrom, as well as interest
and distributions in reduction of principal balance payable with respect
thereto. As used in this prospectus supplement, a request for a distribution of
principal of a Class 1-A8 Certificate by a Deceased Holder shall mean a request
by the personal representative, surviving tenant by the entirety, surviving
joint tenant or surviving tenant in common of such Deceased Holder.
ALLOCATION OF REALIZED LOSSES ON THE POOL 1 CERTIFICATES
A "Realized Loss" 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 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").
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A "Bankruptcy Loss" with respect to any mortgage loan is a Deficient
Valuation or Debt Service Reduction.
A "Fraud Loss" is any Realized Loss attributable to fraud in the
origination of the related mortgage loan.
A "Special Hazard Loss" is a Realized Loss attributable to damage or a
direct physical loss suffered by a mortgaged property -- including any Realized
Loss due to the presence or suspected presence of hazardous wastes or substances
on a mortgaged property -- other than any such damage or loss covered by a
hazard policy or a flood insurance policy required to be maintained in respect
of such mortgaged property under the Agreement or any loss due to normal wear
and tear or certain other causes.
On each Distribution Date, the applicable PO Percentage of the principal
portion of any Realized Loss (including any Excess Loss, but not including any
Debt Service Reduction) on a Discount Mortgage Loan in Pool 1 will be allocated
to the Pool 1 component of the Class PO Certificates until the Component
Principal Balance thereof is reduced to zero. With respect to any Distribution
Date through the Pool 1 Cross-Over Date, the aggregate of all amounts so
allocable to the Pool 1 component of the Class PO Certificates on such date in
respect of Realized Losses other than Excess Losses in respect of the Discount
Mortgage Loans in Pool 1 and all amounts previously allocated in respect of such
losses to the Pool 1 component of the Class PO Certificates and not distributed
on prior Distribution Dates will be the "Pool 1 Class PO Deferred Amount."
To the extent funds are available therefor on any Distribution Date through
the Pool 1 Cross-Over Date, distributions in respect of the Pool 1 Class PO
Deferred Amount will be made on the Pool 1 component of the Class PO
Certificates in accordance with priority fourth in the second paragraph under
"-- Distributions on the Pool 1 Certificates -- Allocation of Pool 1 Available
Funds" above. Any distribution of Pool 1 Available Funds in respect of the Pool
1 Class PO Deferred Amount will not reduce the Component Principal Balance of
the Pool 1 component of the Class PO Certificates. No interest will accrue on
the Pool 1 Class PO Deferred Amount. On each Distribution Date through the Pool
1 Cross-Over Date, the Component Principal Balance of the Pool 1 component of
the lowest ranking class of junior certificates then outstanding will be reduced
by the amount of any distributions in respect of the Pool 1 Class PO Deferred
Amount on such Distribution Date, through the operation of the Pool 1 Class PO
Deferred Payment Writedown Amount. After the Pool 1 Cross-Over Date, no
distributions will be made in respect of, and losses allocated to the Pool 1
component of the Class PO Certificates will not be added to, the Pool 1 Class PO
Deferred Amount. Any distribution of Unanticipated Recoveries (as defined in the
accompanying prospectus) on the Pool 1 component of the Class PO Certificates
will be adjusted to take into account the Pool 1 Class PO Deferred Amount
previously paid to such component as specified in the Agreement. See "Servicing
of the Mortgage Loans -- Unanticipated Recoveries of Losses on the Mortgage
Loans" in the accompanying prospectus.
The applicable Non-PO Percentage of the principal portion of any Realized
Loss (other than an Excess Loss or a Debt Service Reduction) on a Pool 1
mortgage loan for any Distribution Date will not be allocated to any Pool 1
senior certificates until the Pool 1 Cross-Over Date. Prior to the Pool 1
Cross-Over Date (and on such date under certain circumstances), the applicable
Non-PO Percentage of the principal portion of any such Realized Loss will be
allocated among the Pool 1 components of the outstanding classes of junior
certificates, in inverse order of priority, until the Component Principal
Balance of the Pool 1 component of each such class has been reduced to zero
(i.e., such Realized
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Losses will be allocated first to the Pool 1 component of the Class B5
Certificates while such certificates are outstanding, second to the Pool 1
component of 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 mortgage loan for any Distribution Date will be
allocated pro rata among all outstanding classes of Pool 1 senior certificates
and Pool 1 components of Component Certificates entitled to principal
distributions (other than the Class PO Certificates) based on their Class
Certificate Principal Balances or Component Principal Balances, as the case may
be.
An "Excess Loss" in respect of a Pool 1 mortgage loan is any Bankruptcy
Loss, Fraud Loss and Special Hazard Loss (each a type of Realized Loss)
occurring after the Pool 1 Bankruptcy Coverage Termination Date, Pool 1 Fraud
Coverage Termination Date and Pool 1 Special Hazard Termination Date,
respectively, as described more fully below. Commencing on the Pool 1 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 a Pool 1 mortgage
loan will be allocated among the outstanding classes of Pool 1 senior
certificates entitled to principal distributions pro rata based upon their Class
Certificate Principal Balances; provided, however, that until the Class
Certificate Principal Balance of the Class 1-A12 Certificates has been reduced
to zero, the applicable Non-PO Percentage of any such Realized Losses on the
Pool 1 mortgage loans, other than any Special Event Losses, that would otherwise
be allocable to the Class 1-A5 Certificates, will instead be borne by the
holders of the Class 1-A12 Certificates before such losses will be borne by
holders of the Class 1-A5 Certificates. A "Special Event Loss" is any Fraud
Loss, Special Hazard Loss or Bankruptcy Loss.
No reduction of the Class Certificate Principal Balance or Component
Principal Balance of any class or component of Pool 1 certificates shall be made
on any Distribution Date on account of any Realized Loss with respect to Pool 1
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
senior certificates and the Component Principal Balances of the Pool 1
components of all of the Component Certificates as of such Distribution Date to
an amount less than the Pool 1 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 Pool 1 Bankruptcy Coverage Termination Date (such limitation
being the "Pool 1 Loss Allocation Limitation").
Because the aggregate Notional Component Principal Balances of the Class
1-A5 PAC IO and Class 1-A5 TAC IO Components (each, a "Class 1-A5 IO Component")
of the Class 1-A5 Certificates will be determined by reference to the Class
Certificate 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 Balance of such other certificates will also reduce by an
equivalent amount the Notional Component Principal Balance of the applicable
Class 1-A5 IO Component. As a result, the amount of interest distributable on
the applicable Class 1-A5 IO Component would be reduced.
Beginning on the Pool 1 Cross-Over Date, the Non-PO Percentage of the
principal portion of Realized Losses on the Pool 1 mortgage loans, other than
any Special Event Losses, that would otherwise be allocable to the Class 1-A5
Certificates will instead be borne by the holders of the Class 1-A12
Certificates before such losses will be borne by the holders of the Class 1-A5
Certificates. As a result, the yield on the Class 1-A12 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 mortgage loans
(other
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than in respect of such Special Event Losses) and to the timing of any such
losses. The Class 1-A12 Certificates will also bear their proportionate share of
any Net Interest Shortfalls, any Excess Losses through the Pool 1 Cross-Over
Date, and after the Pool 1 Cross-Over Date, any Realized Losses, in respect of
the Pool 1 mortgage loans.
The principal portion of Debt Service Reductions with respect to Pool 1
mortgage loans will not be allocated in reduction of the Certificate Principal
Balance or the Component Principal Balance of the Pool 1 component of any
certificate. However, after the Pool 1 Bankruptcy Coverage Termination Date, the
amounts distributable under clause (1) of the definitions of Pool 1 Senior
Optimal Principal Amount, Pool 1 Class PO Principal Distribution Amount and Pool
1 Junior Optimal Principal Amount 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 Pool 1 components of the junior certificates in right of
distribution, any Debt Service Reductions prior to the Pool 1 Bankruptcy
Coverage Termination Date will be borne by the Pool 1 components of the junior
certificates (to the extent then outstanding) in inverse order of priority.
All allocations of Realized Losses to a class of Pool 1 certificates or to
the Pool 1 component of a class of 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-A6
Accrual Amount or the Class 1-A5 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 Pool 1 component of the Class PO Certificates on any
Distribution Date through the Pool 1 Cross-Over Date will also be taken into
account in determining distributions in respect of the Pool 1 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
mortgage loans, the Class Certificate Principal Balance of the Class 1-A6
Certificates and the Component Principal Balance of the Class 1-A5 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-A6 Certificates or Class 1-A5 Accrual
Component, as applicable; and
(2) the outstanding Class Certificate Principal Balance or Component
Principal Balance of the Class 1-A6 Certificates or Class 1-A5 Accrual
Component, as applicable.
The interest portion of all Realized Losses in respect of Pool 1 mortgage
loans will be allocated among the outstanding classes of Pool 1 senior
certificates and Pool 1 components of Component Certificates entitled to
distributions of interest to the extent described under "-- Distributions on the
Pool 1 Certificates -- Interest" above.
The applicable Non-PO Percentage of any Deficient Valuation on a Pool 1
mortgage loan will on each Distribution Date be allocated solely to the
outstanding Pool 1 components of the junior certificates until the Pool 1
Bankruptcy Coverage Termination Date. The "Pool 1 Bankruptcy Coverage
Termination Date" is the Distribution Date upon
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which the Pool 1 Bankruptcy Loss Amount has been reduced to zero or a negative
number (or the Pool 1 Cross-Over Date, if earlier). On each Distribution Date,
the "Pool 1 Bankruptcy Loss Amount" will equal approximately $140,297
(approximately 0.03% of the aggregate Scheduled Principal Balances of the Pool 1
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 mortgage loans. The Pool 1 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
mortgage loan will on each Distribution Date be allocated solely to the
outstanding Pool 1 components of the junior certificates until the Pool 1 Fraud
Coverage Termination Date. The "Pool 1 Fraud Coverage Termination Date" is the
Distribution Date upon which the Pool 1 Fraud Loss Amount has been reduced to
zero or a negative number (or the Pool 1 Cross-Over Date, if earlier). Upon the
initial issuance of the certificates, the "Pool 1 Fraud Loss Amount" will equal
approximately $4,515,823 (approximately 1.00% of the aggregate Scheduled
Principal Balances of the Pool 1 mortgage loans as of the Cut-off Date). As of
any Distribution Date prior to the first anniversary of the Cut-off Date, the
Pool 1 Fraud Loss Amount will equal approximately $4,515,823, minus the
aggregate amount of Fraud Losses that would have been allocated to the Pool 1
components of the junior certificates in the absence of the Pool 1 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 Pool 1 Fraud Loss
Amount will equal (1) the lesser of (a) the Pool 1 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
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 Pool 1 components of the
junior certificates in the absence of the Pool 1 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 Pool 1 Fraud
Loss Amount shall be zero.
The applicable Non-PO Percentage of any Special Hazard Loss in respect of a
Pool 1 mortgage loan will on each Distribution Date be allocated solely to the
Pool 1 components of the outstanding junior certificates until the Pool 1
Special Hazard Termination Date. The "Pool 1 Special Hazard Termination Date" is
the Distribution Date upon which the Pool 1 Special Hazard Loss Amount has been
reduced to zero or a negative number (or the Pool 1 Cross-Over Date, if
earlier). Upon the initial issuance of the certificates, the "Pool 1 Special
Hazard Loss Amount" will equal approximately $5,850,634 (approximately 1.30% of
the aggregate Scheduled Principal Balances of the Pool 1 mortgage loans as of
the Cut-off Date). As of any Distribution Date, the Pool 1 Special Hazard Loss
Amount will equal approximately $5,850,634 minus the sum of (1) the aggregate
amount of Special Hazard Losses that would have been previously allocated to the
Pool 1 components of the junior certificates in the absence of the Pool 1 Loss
Allocation Limitation and (2) the Pool 1 Adjustment Amount. For each anniversary
of the Cut-off Date, the "Pool 1 Adjustment Amount" shall be equal to the
amount, if any, by which the
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Pool 1 Special Hazard Loss Amount (without giving effect to the deduction of the
Pool 1 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 mortgage loans by principal balance secured by
mortgaged properties in any California zip code) of the outstanding
principal balance of all the Pool 1 mortgage loans on the Distribution Date
immediately preceding such anniversary and (y) twice the outstanding
principal balance of the Pool 1 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 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 certificates (and the
aggregate amount of interest payable on the Pool 1 component of the Class S
Certificates and the Class 1-A5 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 certificateholders
(other than holders of the Class 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, Pool 1 Class PO Principal Distribution Amount or Pool 1 Junior
Optimal Principal 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> 76
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 certificateholders principal
amounts (or, in the case of the Pool 1 component of the Class S Certificates or
the Class 1-A5 IO Components, reducing the Pool 1 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
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. See "Description of the Pool 1 Certificates -- Distributions
on the Pool 1 Certificates -- Principal" 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 certificateholders in the
month following its receipt and the amount of interest thus distributed to Pool
1 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-A6 Certificates or the Component Principal Balance of the Class 1-A5 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
certificateholders to the extent described herein. See "Description of the Pool
1 Certificates -- Distributions on the Pool 1 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 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 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.
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<PAGE> 77
The yield on certain classes or components of the Pool 1 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-A12 CERTIFICATES
Beginning on the Pool 1 Cross-Over Date, the Non-PO Percentage of the
principal portion of Realized Losses on the Pool 1 mortgage loans, other than
any Special Event Losses, that would otherwise be allocable to the Class 1-A5
Certificates will instead be borne by the holders of the Class 1-A12
Certificates before such losses will be borne by the holders of the Class 1-A5
Certificates. As a result, the yield on the Class 1-A12 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 mortgage loans
(other than in respect of such Special Event Losses) and to the timing of any
such losses. The Class 1-A12 Certificates will also bear their proportionate
share of any Net Interest Shortfalls, any Excess Losses through the Pool 1
Cross-Over Date, and after the Pool 1 Cross-Over Date any Realized Losses, in
respect of the Pool 1 mortgage loans.
SENSITIVITY OF THE CLASS 1-A11 CERTIFICATES
The yield to investors in the Class 1-A11 Certificates will be highly
sensitive to the rate of principal payments (including prepayments) on the Pool
1 mortgage loans. If the Class 1-A11 Certificates are purchased at a discount to
their Class Certificate Principal Balance, lower than anticipated rates of
prepayments on the Pool 1 mortgage loans could result in an extension in the
anticipated weighted average lives of such certificates and actual yields to
investors that are significantly lower than the anticipated yields.
To illustrate the significance of prepayments on the distributions on the
Class 1-A11 Certificates, the following table indicates the pre-tax yields to
maturity (on a corporate bond equivalent basis) under the specified assumptions
at the different constant percentages of the Prepayment Assumption shown. The
yields were calculated by determining the applicable monthly discount rate
which, when applied to the related assumed stream of cash flows to be paid on
the Class 1-A11 Certificates, would cause the discounted present value of such
cash flows to equal the assumed purchase price percentage 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 such certificates and, consequently, do not reflect the
return on any investment when such reinvestment rates are considered.
It is unlikely that the Pool 1 mortgage loans will prepay at any of the
constant levels of the Prepayment Assumption shown or any other constant rate
until maturity or that all of the 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
A1-36
<PAGE> 78
principal prepayments occurring at a rate higher (or lower) than the rate
anticipated by the investor during the period immediately following the issuance
of the certificates will not be equally offset by a subsequent like reduction
(or increase) in the rate of principal prepayments.
The following table has been prepared based on the Pool 1 Modeling
Assumptions (as defined herein) and the additional assumptions that:
(1) the assumed purchase price of the Class 1-A11 Certificates is as
specified (expressed as a percentage of the Class Certificate Principal
Balance thereof); and
(2) such purchase price is paid on April 29, 1999.
PRE-TAX YIELD* TO MATURITY OF THE CLASS 1-A11 CERTIFICATES
(ASSUMED PURCHASE PRICE PERCENTAGE = 55.0%)
<TABLE>
<CAPTION>
PREPAYMENT ASSUMPTION
- ----------------------------------------
<S> <C> <C> <C> <C>
0% 125% 250% 375% 500%
- ------ ------ ------ ------- -------
2.031% 2.211% 2.931% 38.143% 61.712%
</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-A11 Certificates will
correspond to any amounts shown herein; or
(3) the purchase price of the Class 1-A11 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-A11
Certificate.
SENSITIVITY OF THE CLASS 1-A5 CERTIFICATES
As described in this prospectus supplement, the Class 1-A5 Certificates
consist of two interest-only components and one accrual component. 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
(as defined below) or the principal balance of the Class 1-A4 Certificates,
interest distributions on these components are likely to be relatively stable,
so long as principal distributions on the Pool 1 PAC Certificates and the Class
1-A4 Certificates are in accordance with the Aggregate Pool 1 PAC Balance
schedule or the TAC Balances Schedules (as defined below) for the Class 1-A4
Certificates, as applicable. See " -- Pool 1 PAC Certificates" and "-- Pool 1
TAC Certificates."
In addition, principal distributions on the Class 1-A5 Accrual Component
are expected to be more stable than would be the case if such component were not
entitled to receive payments, to the extent of available principal, according to
the applicable TAC Balances Schedules. Based on the Pool 1 Modeling Assumptions,
the Class 1-A5 Accrual Component would pay down in accordance with the Class
1-A5 TAC Component Balance
A1-37
<PAGE> 79
No. 1 schedule if the Pool 1 mortgage loans were to prepay at a constant rate of
250% of the Prepayment Assumption, and the Class 1-A5 Accrual Component would
pay down in accordance with the Class 1-A5 TAC Component Balance No. 2 schedule
if the Pool 1 mortgage loans were to prepay at a constant rate of 750% 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 750% of the Prepayment Assumption or any other
prescribed constant rate, it is not likely that the Class 1-A5 Accrual Component
will consistently pay down in accordance with either of its TAC Balances
Schedules. The TAC Balances Schedules for the Class 1-A5 Accrual Component 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-A5 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-A5 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-A5 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-A5 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
(2) such purchase price is paid on April 29, 1999.
A1-38
<PAGE> 80
PRE-TAX YIELD* TO MATURITY OF THE CLASS 1-A5 CERTIFICATES
(ASSUMED PURCHASE PRICE PERCENTAGE = 101.5%)
<TABLE>
<CAPTION>
PREPAYMENT ASSUMPTION
- --------------------------------------
0% 125% 250% 375% 500%
- ------ ------ ------ ------ ------
<S> <C> <C> <C> <C>
7.629% 7.421% 7.566% 7.583% 8.030%
</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-A5 Certificates will
correspond to any amounts shown herein or
(3) the purchase price of the Class 1-A5 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-A5
Certificate.
FINAL PAYMENT CONSIDERATIONS
The rate of payment of principal of the Pool 1 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 Pool 1 components of the junior
certificates, delinquencies and defaults could affect the actual maturity of the
Pool 1 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 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 on 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 certificates or 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
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<PAGE> 81
the prices of a class of Pool 1 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.
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, Class 1-A2 and 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 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, as a group, 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 would pay down in accordance with the Aggregate Pool 1 PAC Balances
schedule. The initial Effective Range for the Pool 1 PAC Certificates may be
wider than the Structuring Range described above.
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
A1-40
<PAGE> 82
reduce the aggregate Class Certificate Principal Balances thereof to the
Aggregate Pool 1 PAC Balance. 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 Balance schedule, even if such rates
remain within the initial Effective Ranges.
If the Pool 1 mortgage loans prepay at rates that are generally below the
Effective Range, the amount available for principal distributions on any
Distribution Date may be insufficient to reduce the aggregate Class Certificate
Principal Balances of the Pool 1 PAC Certificates to the Aggregate Pool 1 PAC
Balance, and the weighted average lives of the certificates 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.
Pool 1 TAC Certificates
Principal distributions on the Class 1-A4 and the Class 1-A8 through Class
1-A10 Certificates (the "Pool 1 TAC Certificates") are expected to be more
stable than would be the case if such certificates were not entitled to receive
payments, to the extent of available principal, according to their respective
TAC Balances schedules (each, a "TAC Balances Schedule").
Based on the Pool 1 Modeling Assumptions:
(1) the Class 1-A4 Certificates would pay down (a) in accordance with the
Class 1-A4 TAC Balance No. 1 schedule if the Pool 1 mortgage loans were to
prepay at a constant rate of 227% of the Prepayment Assumption and (b) in
accordance with the Class 1-A4 TAC Balance No. 2 schedule if the Pool 1 mortgage
loans were to prepay at a constant rate of 500% of the Prepayment Assumption;
(2) the Class 1-A8 Certificates would pay down in accordance with its Class
1-A8 TAC Balance schedule if the Pool 1 mortgage loans were to prepay at a
constant rate of 800% of the Prepayment Assumption; and
(3) the Class 1-A9 and Class 1-A10 Certificates, as a group, would pay down
in accordance with the Class 1-A9, Class 1-A10 Aggregate TAC Balance schedule if
the Pool 1 mortgage loans were to 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 Balances Schedules are set forth in
the Pool 1 TAC Balances Table attached to this Annex 1.
With respect to any class or classes 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 Schedule
or TAC Balances Schedules for such class or classes of Pool 1 TAC Certificates.
If this occurs, the Certificate Principal Balance of such class of certificates
will not be reduced in accordance with such schedule or schedules, and the
weighted average life of such class of certificates may be extended, perhaps
significantly.
A1-41
<PAGE> 83
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 Schedule or TAC Balances Schedules for any class or
classes of Pool 1 TAC Certificates. If this occurs, and if the Class Certificate
Principal Balances of the certificates supporting such class or classes of Pool
1 TAC Certificates have been reduced to zero, the weighted average life of such
class or classes 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 Certificates will
pay down in accordance with either of its TAC Balances Schedules, that the Class
1-A8 Certificates will pay down in accordance with its TAC Balances Schedule, or
that the Class 1-A9 and Class 1-A10 Certificates will pay down in accordance
with the Class 1-A9, Class 1-A10 Aggregate TAC Balance schedule, will not be
enhanced by averaging high and low principal payments in different months.
Support Certificates
The principal payment stability of the Pool 1 PAC Certificates and the Pool
1 TAC Certificates will be supported by various other classes of Pool 1 senior
certificates. In the case of the Pool 1 PAC Certificates, as described below,
this support will also be provided by the Pool 1 TAC Certificates.
- - The principal payment stability of the Pool 1 PAC Certificates will be
supported primarily by the Class 1-A4 through Class 1-A11 Certificates. Among
these classes of supporting certificates are the Pool 1 TAC Certificates,
which will not be as sensitive to Pool 1 mortgage loan prepayments as they
would be were they not Pool 1 TAC Certificates. However, when the Class
Certificate Principal Balances of the classes supporting a class of Pool 1 TAC
Certificates have been reduced to zero, that class of Pool 1 TAC Certificates,
if then outstanding, will become more sensitive to Pool 1 mortgage loan
prepayments.
- - The principal payment stability of the Class 1-A4 Certificates will be
supported primarily by the Class 1-A6 and Class 1-A11 Certificates, and also
by the Class 1-A5 Accrual Component and the Class 1-A7 through Class 1-A10
Certificates. As with the Pool 1 PAC Certificates, some of the classes
supporting the Class 1-A4 Certificates are in turn supported by other classes
of certificates. The Class 1-A4 Certificates will become more sensitive to
Pool 1 mortgage loan prepayments when each of the Component Principal Balance
of the Class 1-A5 Accrual Component and the Certificate Principal Balances of
the certificates providing support to the Class 1-A4 Certificates have been
reduced to zero.
- - The principal payment stability of the Class 1-A5 Accrual Component will be
supported primarily by the Class 1-A6 and Class 1-A11 Certificates and to a
lesser extent by the Class 1-A8 through Class 1-A10 Certificates. The Class
1-A5 Accrual Component will become more sensitive to Pool 1 mortgage loan
prepayments when the Certificate Principal Balances of the certificates
providing support to the Class 1-A5 Certificates have been reduced to zero.
- - The Class 1-A7 Certificates will provide support to the Class 1-A8 through
Class 1-A10 Certificates. Such support will be provided, however, only if the
Pool 1 mortgage loans generally prepay at a constant rate that exceeds 800% of
the Prepayment Assumption,
A1-42
<PAGE> 84
which is the rate at which each class of the Class 1-A8 through Class 1-A10
Certificates can maintain the applicable TAC Balances Schedule.
In general, the weighted average lives of the certificates supporting other
classes of certificates as described above will be more sensitive to Pool 1
mortgage loan prepayments than those of the classes they are supporting. Certain
supporting classes 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 any class
of certificates that pays principal in accordance with a schedule, the
certificates supporting such class 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 the amount
needed to maintain scheduled payments on any class of certificates, such excess
funds will be applied, to the extent of the Pool 1 Senior Optimal Principal
Amount, to the supporting classes in accordance with their schedules, if
applicable, or until their Class Certificate Principal Balances 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 certain
support classes of certificates, and a relatively slow rate of prepayments on
such Pool 1 mortgage loans may significantly extend the weighted average lives
of certain classes of 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 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 $451,582,304.25;
(4) no defaults or delinquencies in the payment by mortgagors of
principal of and interest on such mortgage loans are experienced and GECMSI
does not repurchase any such mortgage loans as permitted or required by the
Agreement;
(5) GECMSI does not exercise its option to repurchase all the mortgage
loans in the trust as described under the caption "The Pooling and
Servicing Agreement -- Termination" herein;
A1-43
<PAGE> 85
(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 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 initial Component Principal Balances for the Pool 1 component
of each class of the junior certificates offered hereby are as indicated in
Annex 3 of this prospectus supplement, and the interest rate applicable to
each such component is as indicated in the summary of this prospectus
supplement;
(11) the date of the initial issuance of the certificates is April 29,
1999; and
(12) 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 would differ (which difference could be material)
from the corresponding information in the tables for each indicated percentage
of the Prepayment Assumption.
A1-44
<PAGE> 86
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% 125% 250% 375% 500% 0% 125% 250% 375% 500% 0% 125% 250%
- ----------------- ----- ---- ---- ---- ---- ----- ---- ---- ---- ---- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Initial Percentage......... 100 100 100 100 100 100 100 100 100 100 100 100 100
April 2000................. 100 98 98 98 98 100 100 100 100 100 100 100 100
April 2001................. 95 71 71 71 71 100 100 100 100 100 100 100 100
April 2002................. 89 36 36 36 36 100 100 100 100 100 100 100 100
April 2003................. 84 2 2 2 2 100 100 100 100 100 100 100 100
April 2004................. 78 0 0 0 0 100 71 71 71 71 100 100 100
April 2005................. 71 0 0 0 0 100 43 43 43 43 100 100 100
April 2006................. 64 0 0 0 0 100 22 22 22 22 100 100 100
April 2007................. 57 0 0 0 0 100 9 9 9 9 100 100 100
April 2008................. 48 0 0 0 0 100 * * * * 100 100 100
April 2009................. 40 0 0 0 0 100 0 0 0 0 100 41 41
April 2010................. 30 0 0 0 0 100 0 0 0 0 100 0 0
April 2011................. 20 0 0 0 0 100 0 0 0 0 100 0 0
April 2012................. 10 0 0 0 0 100 0 0 0 0 100 0 0
April 2013................. 0 0 0 0 0 98 0 0 0 0 100 0 0
April 2014................. 0 0 0 0 0 86 0 0 0 0 100 0 0
April 2015................. 0 0 0 0 0 72 0 0 0 0 100 0 0
April 2016................. 0 0 0 0 0 58 0 0 0 0 100 0 0
April 2017................. 0 0 0 0 0 43 0 0 0 0 100 0 0
April 2018................. 0 0 0 0 0 26 0 0 0 0 100 0 0
April 2019................. 0 0 0 0 0 9 0 0 0 0 100 0 0
April 2020................. 0 0 0 0 0 0 0 0 0 0 0 0 0
April 2021................. 0 0 0 0 0 0 0 0 0 0 0 0 0
April 2022................. 0 0 0 0 0 0 0 0 0 0 0 0 0
April 2023................. 0 0 0 0 0 0 0 0 0 0 0 0 0
April 2024................. 0 0 0 0 0 0 0 0 0 0 0 0 0
April 2025................. 0 0 0 0 0 0 0 0 0 0 0 0 0
April 2026................. 0 0 0 0 0 0 0 0 0 0 0 0 0
April 2027................. 0 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 0
April 2029................. 0 0 0 0 0 0 0 0 0 0 0 0 0
Weighted Average Life (in
years)(1)................ 8.4 2.6 2.6 2.6 2.6 17.4 6.0 6.0 6.0 6.0 20.7 9.9 9.9
<CAPTION>
CLASS 1-A3
-----------
DISTRIBUTION DATE 375% 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................. 100 100
April 2006................. 100 100
April 2007................. 100 100
April 2008................. 100 100
April 2009................. 41 41
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)................ 9.9 9.9
</TABLE>
- -------------------------
* Indicates an amount above zero and less than 0.5% of the original Class
Certificate Principal Balance is outstanding.
(1) The weighted average life is determined as described on page A1-39.
A1-45
<PAGE> 87
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% 125% 250% 375% 500% 0% 125% 250% 375% 500% 0% 125% 250% 375% 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................ 93 87 81 81 81 107 107 104 104 104 107 107 107 18 0
April 2001................ 89 83 64 64 47 114 114 106 106 106 114 114 114 0 0
April 2002................ 85 78 44 33 0 122 122 107 107 105 122 122 122 0 0
April 2003................ 80 74 28 8 0 131 131 111 111 47 131 131 131 0 0
April 2004................ 75 69 14 0 0 140 140 117 99 19 140 140 140 0 0
April 2005................ 69 63 3 0 0 150 150 125 85 12 150 150 150 0 0
April 2006................ 64 54 0 0 0 160 160 116 75 12 160 160 160 0 0
April 2007................ 57 41 0 0 0 171 171 96 65 12 171 171 171 0 0
April 2008................ 51 25 0 0 0 183 183 76 55 12 183 183 183 0 0
April 2009................ 44 7 0 0 0 196 196 55 47 12 196 196 196 0 0
April 2010................ 36 0 0 0 0 210 187 37 40 12 210 210 210 0 0
April 2011................ 28 0 0 0 0 224 159 16 30 8 224 224 224 0 0
April 2012................ 20 0 0 0 0 240 133 0 22 6 240 240 226 0 0
April 2013................ 10 0 0 0 0 257 108 0 17 4 257 257 149 0 0
April 2014................ * 0 0 0 0 274 85 0 13 3 274 274 85 0 0
April 2015................ 0 0 0 0 0 272 63 0 9 2 294 294 32 0 0
April 2016................ 0 0 0 0 0 269 42 0 7 1 314 314 0 0 0
April 2017................ 0 0 0 0 0 265 22 0 5 1 336 336 0 0 0
April 2018................ 0 0 0 0 0 261 4 0 4 1 359 359 0 0 0
April 2019................ 0 0 0 0 0 257 0 0 3 * 384 301 0 0 0
April 2020................ 0 0 0 0 0 251 0 0 2 * 411 228 0 0 0
April 2021................ 0 0 0 0 0 215 0 0 1 * 440 161 0 0 0
April 2022................ 0 0 0 0 0 176 0 0 1 * 470 99 0 0 0
April 2023................ 0 0 0 0 0 136 0 0 1 * 503 43 0 0 0
April 2024................ 0 0 0 0 0 94 0 0 * * 538 0 0 0 0
April 2025................ 0 0 0 0 0 48 0 0 * * 576 0 0 0 0
April 2026................ 0 0 0 0 0 0 0 0 * * 612 0 0 0 0
April 2027................ 0 0 0 0 0 0 0 0 * * 346 0 0 0 0
April 2028................ 0 0 0 0 0 0 0 0 * * 61 0 0 0 0
April 2029................ 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Weighted Average Life (in
years)(1)............... 8.5 6.3 2.9 2.4 1.8 23.7 14.5 9.6 9.7 5.0 28.2 21.8 14.6 0.7 0.5
</TABLE>
- -------------------------
* Indicates an amount above zero and less than 0.5% of the original Class
Certificate Principal Balance is outstanding.
(1) The weighted average life is determined as described on page A1-39.
A1-46
<PAGE> 88
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% 125% 250% 375% 500% 0% 125% 250% 375% 500% 0% 125% 250%
- ----------------- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Initial Percentage............. 100 100 100 100 100 100 100 100 100 100 100 100 100
April 2000..................... 100 100 100 100 65 100 100 100 100 65 100 100 100
April 2001..................... 100 100 100 22 0 100 100 100 22 0 100 100 100
April 2002..................... 100 100 100 0 0 100 100 100 0 0 100 100 100
April 2003..................... 100 100 100 0 0 100 100 100 0 0 100 100 100
April 2004..................... 100 100 100 0 0 100 100 100 0 0 100 100 100
April 2005..................... 100 100 100 0 0 100 100 100 0 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..................... 100 100 100 0 0 100 100 100 0 0 100 100 100
April 2009..................... 100 100 100 0 0 100 100 100 0 0 100 100 100
April 2010..................... 100 100 100 0 0 100 100 100 0 0 100 100 100
April 2011..................... 100 100 100 0 0 100 100 100 0 0 100 100 100
April 2012..................... 100 100 100 0 0 100 100 100 0 0 100 100 100
April 2013..................... 100 100 100 0 0 100 100 100 0 0 100 100 100
April 2014..................... 100 100 100 0 0 100 100 100 0 0 100 100 100
April 2015..................... 100 100 100 0 0 100 100 100 0 0 100 100 100
April 2016..................... 100 100 94 0 0 100 100 94 0 0 100 100 89
April 2017..................... 100 100 76 0 0 100 100 76 0 0 100 100 56
April 2018..................... 100 100 61 0 0 100 100 61 0 0 100 100 28
April 2019..................... 100 100 48 0 0 100 100 48 0 0 100 100 5
April 2020..................... 100 100 38 0 0 100 100 38 0 0 100 100 0
April 2021..................... 100 100 29 0 0 100 100 29 0 0 100 100 0
April 2022..................... 100 100 22 0 0 100 100 22 0 0 100 100 0
April 2023..................... 100 100 17 0 0 100 100 17 0 0 100 100 0
April 2024..................... 100 96 12 0 0 100 96 12 0 0 100 93 0
April 2025..................... 100 73 9 0 0 100 73 9 0 0 100 51 0
April 2026..................... 100 52 6 0 0 100 52 6 0 0 100 12 0
April 2027..................... 100 32 3 0 0 100 32 3 0 0 100 0 0
April 2028..................... 100 14 1 0 0 100 14 1 0 0 100 0 0
April 2029..................... 0 0 0 0 0 0 0 0 0 0 0 0 0
Weighted Average Life (in
years)(1).................... 29.6 27.2 20.7 1.7 1.1 29.6 27.2 20.7 1.7 1.1 29.4 26.1 18.3
<CAPTION>
CLASS 1-A9
-----------
DISTRIBUTION DATE 375% 500%
- ----------------- ---- ----
<S> <C> <C>
Initial Percentage............. 100 100
April 2000..................... 100 36
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).................... 1.5 1.0
</TABLE>
- -------------------------
(1) The weighted average life is determined as described on page A1-39.
+ The weighted average life shown in the table for this class of certificates
represents the weighted average life of these certificates taken as a whole
and is not likely to reflect the experience of any particular investor.
Because holders of these certificates will receive distributions in
reduction of the Certificate Principal Balance of such certificates on the
basis of Principal Distribution Requests or by random lot, the weighted
average life of any such certificates owned by an individual investor may
vary significantly from the weighted average life of this class of
certificates taken as a whole.
A1-47
<PAGE> 89
PERCENT OF ORIGINAL CLASS CERTIFICATE PRINCIPAL BALANCE
OUTSTANDING OF THE CERTIFICATES
<TABLE>
<CAPTION>
CLASS 1-A10 CLASS 1-A11 CLASS 1-A12
---------------------------------- ---------------------------------- -------------
DISTRIBUTION DATE 0% 125% 250% 375% 500% 0% 125% 250% 375% 500% 0% 125%
- ----------------- ----- ----- ---- ---- ---- ----- ----- ---- ---- ---- ----- -----
<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................ 100 100 100 100 100 100 100 100 100 65 99 97
April 2001................ 100 100 100 48 0 100 100 100 22 0 98 91
April 2002................ 100 100 100 0 0 100 100 100 0 0 97 83
April 2003................ 100 100 100 0 0 100 100 100 0 0 95 75
April 2004................ 100 100 100 0 0 100 100 100 0 0 94 68
April 2005................ 100 100 100 0 0 100 100 100 0 0 93 62
April 2006................ 100 100 100 0 0 100 100 100 0 0 91 56
April 2007................ 100 100 100 0 0 100 100 100 0 0 89 51
April 2008................ 100 100 100 0 0 100 100 100 0 0 87 46
April 2009................ 100 100 100 0 0 100 100 100 0 0 86 42
April 2010................ 100 100 100 0 0 100 100 100 0 0 83 38
April 2011................ 100 100 100 0 0 100 100 100 0 0 81 34
April 2012................ 100 100 100 0 0 100 100 100 0 0 79 30
April 2013................ 100 100 100 0 0 100 100 100 0 0 76 27
April 2014................ 100 100 100 0 0 100 100 100 0 0 73 24
April 2015................ 100 100 100 0 0 100 100 100 0 0 70 21
April 2016................ 100 100 100 0 0 100 100 94 0 0 67 19
April 2017................ 100 100 100 0 0 100 100 76 0 0 64 17
April 2018................ 100 100 100 0 0 100 100 61 0 0 60 14
April 2019................ 100 100 100 0 0 100 100 48 0 0 56 13
April 2020................ 100 100 84 0 0 100 100 38 0 0 52 11
April 2021................ 100 100 65 0 0 100 100 29 0 0 47 9
April 2022................ 100 100 50 0 0 100 100 22 0 0 42 8
April 2023................ 100 100 37 0 0 100 100 17 0 0 37 6
April 2024................ 100 100 27 0 0 100 96 12 0 0 32 5
April 2025................ 100 100 19 0 0 100 73 9 0 0 26 4
April 2026................ 100 100 12 0 0 100 52 6 0 0 20 3
April 2027................ 100 72 7 0 0 100 32 3 0 0 14 2
April 2028................ 100 32 3 0 0 100 14 1 0 0 7 1
April 2029................ 0 0 0 0 0 0 0 0 0 0 0 0
Weighted Average Life (in
years)(1)............... 29.8 28.6 23.6 2.0 1.3 29.6 27.2 20.7 1.7 1.1 19.7 10.1
<CAPTION>
CLASS 1-A12
------------------
DISTRIBUTION DATE 250% 375% 500%
- ----------------- ---- ---- ----
<S> <C> <C> <C>
Initial Percentage........ 100 100 100
April 2000................ 95 92 90
April 2001................ 84 77 70
April 2002................ 70 58 48
April 2003................ 58 44 32
April 2004................ 48 33 21
April 2005................ 40 24 14
April 2006................ 33 18 9
April 2007................ 27 13 6
April 2008................ 23 10 4
April 2009................ 19 8 3
April 2010................ 16 6 2
April 2011................ 13 4 1
April 2012................ 11 3 1
April 2013................ 9 2 1
April 2014................ 7 2 *
April 2015................ 6 1 *
April 2016................ 5 1 *
April 2017................ 4 1 *
April 2018................ 3 1 *
April 2019................ 2 * *
April 2020................ 2 * *
April 2021................ 1 * *
April 2022................ 1 * *
April 2023................ 1 * *
April 2024................ 1 * *
April 2025................ * * *
April 2026................ * * *
April 2027................ * * *
April 2028................ * * *
April 2029................ 0 0 0
Weighted Average Life (in
years)(1)............... 6.3 4.5 3.5
</TABLE>
- -------------------------
* Indicates an amount above zero and less than 0.5% of the original Class
Certificate Principal Balance is outstanding.
(1) The weighted average life is determined as described on page A1-39.
A1-48
<PAGE> 90
PERCENT OF ORIGINAL CLASS CERTIFICATE PRINCIPAL BALANCE
OUTSTANDING OF THE CERTIFICATES
<TABLE>
<CAPTION>
CLASS R-RL
------------------------------------
DISTRIBUTION DATE 0% 125% 250% 375% 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 A1-39.
A1-49
<PAGE> 91
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, Class 1-A2 and Class 1-A3 Certificates 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 Principal Balances are increased or decreased in
accordance with the variance permitted hereby relating to Pool 1, the applicable
balances set forth in the table below will be increased or decreased
substantially correspondingly. In such event, the final Pool 1 PAC Balances
Table will be calculated on or about April 29, 1999 on the basis of such revised
Class Certificate 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................................. $200,943,000.00
May 1999........................................ 200,943,000.00
June 1999....................................... 200,943,000.00
July 1999....................................... 200,943,000.00
August 1999..................................... 200,943,000.00
September 1999.................................. 200,943,000.00
October 1999.................................... 200,943,000.00
November 1999................................... 200,943,000.00
December 1999................................... 200,943,000.00
January 2000.................................... 200,943,000.00
February 2000................................... 200,943,000.00
March 2000...................................... 200,943,000.00
April 2000...................................... 199,303,241.57
May 2000........................................ 197,576,374.60
June 2000....................................... 195,763,234.32
July 2000....................................... 193,864,746.86
August 2000..................................... 191,881,926.70
September 2000.................................. 189,815,834.52
October 2000.................................... 187,667,591.63
November 2000................................... 185,438,390.11
December 2000................................... 183,129,648.46
January 2001.................................... 180,742,662.33
February 2001................................... 178,278,912.44
March 2001...................................... 175,740,172.51
April 2001...................................... 173,128,336.93
May 2001........................................ 170,445,297.96
June 2001....................................... 167,693,267.63
July 2001....................................... 164,874,918.88
August 2001..................................... 161,996,310.36
</TABLE>
A1-50
<PAGE> 92
<TABLE>
<CAPTION>
AGGREGATE POOL 1
DISTRIBUTION DATE PAC BALANCE
- ----------------- ----------------------------
<S> <C>
September 2001.................................. $159,086,638.98
October 2001.................................... 156,180,411.49
November 2001................................... 153,293,442.03
December 2001................................... 150,425,607.05
January 2002.................................... 147,576,783.77
February 2002................................... 144,746,850.25
March 2002...................................... 141,935,685.33
April 2002...................................... 139,143,168.65
May 2002........................................ 136,369,180.63
June 2002....................................... 133,613,602.48
July 2002....................................... 130,876,316.19
August 2002..................................... 128,157,204.50
September 2002.................................. 125,456,150.95
October 2002.................................... 122,773,039.81
November 2002................................... 120,107,756.15
December 2002................................... 117,460,185.74
January 2003.................................... 114,830,215.14
February 2003................................... 112,217,731.64
March 2003...................................... 109,622,623.27
April 2003...................................... 107,044,778.78
May 2003........................................ 104,484,087.66
June 2003....................................... 101,940,440.14
July 2003....................................... 99,413,727.14
August 2003..................................... 96,903,840.32
September 2003.................................. 94,410,672.02
October 2003.................................... 91,934,115.33
November 2003................................... 89,474,064.01
December 2003................................... 87,030,412.52
January 2004.................................... 84,603,056.02
February 2004................................... 82,191,890.35
March 2004...................................... 79,796,812.05
April 2004...................................... 77,417,718.32
May 2004........................................ 75,087,240.76
June 2004....................................... 72,772,397.84
July 2004....................................... 70,473,088.39
August 2004..................................... 68,189,211.93
September 2004.................................. 65,920,668.60
October 2004.................................... 63,667,359.22
November 2004................................... 61,429,185.24
December 2004................................... 59,206,048.76
January 2005.................................... 56,997,852.50
February 2005................................... 54,804,499.84
March 2005...................................... 52,625,894.76
April 2005...................................... 50,474,497.16
May 2005........................................ 48,435,209.67
June 2005....................................... 46,461,233.48
July 2005....................................... 44,550,560.80
</TABLE>
A1-51
<PAGE> 93
<TABLE>
<CAPTION>
AGGREGATE POOL 1
DISTRIBUTION DATE PAC BALANCE
- ----------------- ----------------------------
<S> <C>
August 2005..................................... $ 42,701,244.42
September 2005.................................. 40,911,395.86
October 2005.................................... 39,179,183.64
November 2005................................... 37,502,831.59
December 2005................................... 35,880,617.16
January 2006.................................... 34,310,869.84
February 2006................................... 32,791,969.62
March 2006...................................... 31,322,345.45
April 2006...................................... 29,900,473.77
May 2006........................................ 28,599,451.86
June 2006....................................... 27,340,867.18
July 2006....................................... 26,123,386.73
August 2006..................................... 24,945,718.41
September 2006.................................. 23,806,609.78
October 2006.................................... 22,704,846.90
November 2006................................... 21,639,253.10
December 2006................................... 20,608,687.91
January 2007.................................... 19,612,045.94
February 2007................................... 18,648,255.81
March 2007...................................... 17,716,279.14
April 2007...................................... 16,815,109.53
May 2007........................................ 16,002,931.23
June 2007....................................... 15,217,023.00
July 2007....................................... 14,456,553.88
August 2007..................................... 13,720,718.72
September 2007.................................. 13,008,737.45
October 2007.................................... 12,319,854.24
November 2007................................... 11,653,336.82
December 2007................................... 11,008,475.73
January 2008.................................... 10,384,583.60
February 2008................................... 9,780,994.52
March 2008...................................... 9,197,063.32
April 2008...................................... 8,632,164.98
May 2008........................................ 8,129,297.07
June 2008....................................... 7,641,818.19
July 2008....................................... 7,169,262.09
August 2008..................................... 6,711,176.56
September 2008.................................. 6,267,122.96
October 2008.................................... 5,836,675.87
November 2008................................... 5,419,422.66
December 2008................................... 5,014,963.11
January 2009.................................... 4,622,909.05
February 2009................................... 4,242,884.00
March 2009...................................... 3,874,522.82
April 2009...................................... 3,517,471.34
May 2009........................................ 3,171,386.10
June 2009....................................... 2,835,933.94
</TABLE>
A1-52
<PAGE> 94
<TABLE>
<CAPTION>
AGGREGATE POOL 1
DISTRIBUTION DATE PAC BALANCE
- ----------------- ----------------------------
<S> <C>
July 2009....................................... $ 2,510,791.78
August 2009..................................... 2,195,646.25
September 2009.................................. 1,890,193.43
October 2009.................................... 1,594,138.57
November 2009................................... 1,307,195.81
December 2009................................... 1,029,087.91
January 2010.................................... 759,545.98
February 2010................................... 498,309.26
March 2010...................................... 245,124.85
April 2010 and thereafter....................... 0.00
</TABLE>
A1-53
<PAGE> 95
POOL 1 TAC BALANCES TABLE
The TAC Balances set forth in the table below were calculated on the basis
of the Class Certificate Principal Balances of the Pool 1 TAC Certificates and
the Class 1-A5 Certificates set forth in the summary of this prospectus
supplement and the following constant prepayment rates (each, a "TAC Prepayment
Assumption").
(1) 227% of the Prepayment Assumption in the case of the Class 1-A4 TAC
Balance No. 1 schedule;
(2) 500% of the Prepayment Assumption in the case of the Class 1-A4 TAC
Balance No. 2 schedule;
(3) 250% of the Prepayment Assumption in the case of the Class 1-A5 TAC
Component Balance No. 1 schedule;
(4) 750% of the Prepayment Assumption in the case of the Class 1-A5 TAC
Component Balance No. 2 schedule;
(5) 800% of the Prepayment Assumption in the case of the Class 1-A8 TAC
Balance schedule; and
(6) 800% of the Prepayment Assumption in the case of the Class 1-A9, Class
1-A10 Aggregate TAC Balance schedule for the Class 1-A9 and Class 1-A10
Certificates.
If the Class Certificate Principal Balance of any class of the Pool 1 TAC
Certificates or the Component Principal Balance of the Class 1-A5 Accrual
Component is increased or decreased in accordance with the variance permitted
hereby, the applicable balances set forth in the table below will be increased
or decreased substantially correspondingly. In such event, the final Pool 1 TAC
Balances Table will be calculated on or about April 29, 1999 on the basis of
such revised Class Certificate Principal Balances or Component Principal Balance
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 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.
A1-54
<PAGE> 96
<TABLE>
<CAPTION>
CLASS 1-A5 CLASS 1-A5 CLASS 1-A9,
CLASS 1-A4 CLASS 1-A4 TAC COMPONENT TAC COMPONENT CLASS 1-A10
TAC BALANCE TAC BALANCE BALANCE BALANCE CLASS 1-A8 AGGREGATE
NO. 1 NO. 2 NO. 1 NO. 2 TAC BALANCE TAC BALANCE
----------- ----------- ------------- ------------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Distribution Date
Initial Balance...... $131,909,000.00 $131,909,000.00 $62,400,000.00 $62,400,000.00 $7,757,000.00 $12,000,000.00
May 1999............. 130,615,001.27 130,615,001.27 62,696,151.61 62,696,151.61 7,757,000.00 12,000,000.00
June 1999............ 129,152,417.99 129,152,417.99 62,977,665.70 62,977,665.70 7,757,000.00 12,000,000.00
July 1999............ 127,521,636.26 127,521,636.26 63,244,569.55 63,244,569.55 7,757,000.00 12,000,000.00
August 1999.......... 125,723,136.49 125,723,136.49 63,496,931.46 63,496,931.46 7,757,000.00 12,000,000.00
September 1999....... 123,757,593.28 123,757,593.28 63,734,861.00 63,734,861.00 7,752,195.47 11,992,567.44
October 1999......... 121,625,875.48 121,625,875.48 63,958,509.12 63,958,509.12 6,572,691.13 10,167,886.23
November 1999........ 119,329,046.03 119,329,046.03 64,168,068.23 64,168,068.23 5,258,525.36 8,134,885.18
December 1999........ 116,868,361.33 116,868,361.33 64,363,772.03 64,363,772.03 3,813,253.12 5,899,063.74
January 2000......... 114,245,270.27 114,245,270.27 64,545,895.30 64,545,895.30 2,241,258.61 3,467,204.24
February 2000........ 111,461,412.87 111,461,412.87 64,714,753.57 64,714,753.57 547,743.61 847,353.79
March 2000........... 108,518,618.57 108,518,618.57 64,870,702.60 64,709,719.77 0.00 0.00
April 2000........... 107,058,662.54 107,058,662.54 65,014,137.78 59,996,353.91 0.00 0.00
May 2000............. 105,531,096.49 105,531,096.49 65,145,493.40 55,010,189.81 0.00 0.00
June 2000............ 103,937,468.72 103,937,468.72 65,265,241.80 49,771,598.70 0.00 0.00
July 2000............ 102,279,478.76 102,279,478.76 65,373,898.81 44,302,758.27 0.00 0.00
August 2000.......... 100,558,971.67 100,558,971.67 65,472,021.88 38,627,503.82 0.00 0.00
September 2000....... 98,777,900.05 98,777,900.05 65,560,200.87 32,771,002.96 0.00 0.00
October 2000......... 96,938,333.14 93,804,822.39 65,639,059.50 29,893,203.87 0.00 0.00
November 2000........ 95,042,461.70 88,684,006.28 65,709,255.90 26,979,631.97 0.00 0.00
December 2000........ 93,092,718.36 83,433,648.66 65,771,508.60 24,043,745.26 0.00 0.00
January 2001......... 91,091,490.51 78,067,350.01 65,826,531.24 21,103,517.19 0.00 0.00
February 2001........ 89,041,366.10 72,599,489.40 65,875,087.14 18,177,455.34 0.00 0.00
March 2001........... 86,945,210.46 67,045,421.74 65,918,004.90 15,284,622.03 0.00 0.00
April 2001........... 84,806,018.85 61,420,913.42 65,956,144.00 12,444,064.24 0.00 0.00
May 2001............. 82,626,813.41 55,741,752.59 65,990,370.88 9,674,423.56 0.00 0.00
June 2001............ 80,410,891.95 50,024,536.78 66,021,613.11 6,994,437.61 0.00 0.00
July 2001............ 78,161,925.22 44,286,914.47 66,050,878.85 4,422,964.50 0.00 0.00
August 2001.......... 75,886,219.79 38,554,912.39 66,079,752.29 1,984,101.31 0.00 0.00
September 2001....... 73,607,997.48 32,912,500.38 66,113,740.12 0.00 0.00 0.00
October 2001......... 71,354,871.93 27,451,031.00 66,158,993.38 0.00 0.00 0.00
November 2001........ 69,139,024.05 22,207,081.51 66,218,151.77 0.00 0.00 0.00
December 2001........ 66,959,831.49 17,173,516.02 66,290,988.07 0.00 0.00 0.00
January 2002......... 64,816,679.98 12,343,416.23 66,377,279.40 0.00 0.00 0.00
February 2002........ 62,708,963.22 7,710,074.95 66,476,807.14 0.00 0.00 0.00
March 2002........... 60,636,082.76 3,266,989.76 66,589,356.89 0.00 0.00 0.00
April 2002........... 58,597,447.91 0.00 66,714,718.37 0.00 0.00 0.00
May 2002............. 56,592,475.61 0.00 66,852,685.38 0.00 0.00 0.00
June 2002............ 54,620,590.39 0.00 67,003,055.70 0.00 0.00 0.00
July 2002............ 52,681,224.22 0.00 67,165,631.08 0.00 0.00 0.00
August 2002.......... 50,773,816.43 0.00 67,340,217.13 0.00 0.00 0.00
September 2002....... 48,897,813.62 0.00 67,526,623.27 0.00 0.00 0.00
October 2002......... 47,052,669.56 0.00 67,724,662.68 0.00 0.00 0.00
November 2002........ 45,237,845.09 0.00 67,934,152.23 0.00 0.00 0.00
</TABLE>
A1-55
<PAGE> 97
<TABLE>
<CAPTION>
CLASS 1-A5 CLASS 1-A5 CLASS 1-A9,
CLASS 1-A4 CLASS 1-A4 TAC COMPONENT TAC COMPONENT CLASS 1-A10
TAC BALANCE TAC BALANCE BALANCE BALANCE CLASS 1-A8 AGGREGATE
NO. 1 NO. 2 NO. 1 NO. 2 TAC BALANCE TAC BALANCE
----------- ----------- ------------- ------------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
December 2002........ $ 43,452,808.04 $ 0.00 $68,154,912.43 $ 0.00 $ 0.00 $ 0.00
January 2003......... 41,697,033.13 0.00 68,386,767.34 0.00 0.00 0.00
February 2003........ 39,970,001.89 0.00 68,629,544.58 0.00 0.00 0.00
March 2003........... 38,271,202.57 0.00 68,883,075.19 0.00 0.00 0.00
April 2003........... 36,600,130.02 0.00 69,147,193.64 0.00 0.00 0.00
May 2003............. 34,956,285.66 0.00 69,421,737.75 0.00 0.00 0.00
June 2003............ 33,339,177.35 0.00 69,706,548.61 0.00 0.00 0.00
July 2003............ 31,748,319.33 0.00 70,001,470.59 0.00 0.00 0.00
August 2003.......... 30,183,232.11 0.00 70,306,351.23 0.00 0.00 0.00
September 2003....... 28,643,442.42 0.00 70,621,041.23 0.00 0.00 0.00
October 2003......... 27,128,483.11 0.00 70,945,394.35 0.00 0.00 0.00
November 2003........ 25,637,893.07 0.00 71,279,267.41 0.00 0.00 0.00
December 2003........ 24,171,217.16 0.00 71,622,520.22 0.00 0.00 0.00
January 2004......... 22,728,006.10 0.00 71,975,015.54 0.00 0.00 0.00
February 2004........ 21,307,816.44 0.00 72,336,619.02 0.00 0.00 0.00
March 2004........... 19,910,210.47 0.00 72,707,199.14 0.00 0.00 0.00
April 2004........... 18,534,756.11 0.00 73,086,627.22 0.00 0.00 0.00
May 2004............. 17,209,595.26 0.00 73,481,475.25 0.00 0.00 0.00
June 2004............ 15,905,507.11 0.00 73,884,853.83 0.00 0.00 0.00
July 2004............ 14,622,076.76 0.00 74,296,642.73 0.00 0.00 0.00
August 2004.......... 13,358,894.67 0.00 74,714,561.35 0.00 0.00 0.00
September 2004....... 12,115,556.59 0.00 75,134,830.75 0.00 0.00 0.00
October 2004......... 10,891,663.48 0.00 75,557,464.18 0.00 0.00 0.00
November 2004........ 9,686,821.46 0.00 75,982,474.91 0.00 0.00 0.00
December 2004........ 8,500,641.71 0.00 76,409,876.33 0.00 0.00 0.00
January 2005......... 7,332,740.44 0.00 76,839,681.89 0.00 0.00 0.00
February 2005........ 6,182,738.78 0.00 77,271,905.10 0.00 0.00 0.00
March 2005........... 5,050,262.78 0.00 77,706,559.57 0.00 0.00 0.00
April 2005........... 3,922,388.00 0.00 78,143,658.96 0.00 0.00 0.00
May 2005............. 2,733,005.40 0.00 78,583,217.04 0.00 0.00 0.00
June 2005............ 1,508,990.81 0.00 79,025,247.64 0.00 0.00 0.00
July 2005............ 251,904.64 0.00 79,469,764.66 0.00 0.00 0.00
August 2005.......... 0.00 0.00 79,336,148.02 0.00 0.00 0.00
September 2005....... 0.00 0.00 78,537,523.33 0.00 0.00 0.00
October 2005......... 0.00 0.00 77,717,042.30 0.00 0.00 0.00
November 2005........ 0.00 0.00 76,875,971.52 0.00 0.00 0.00
December 2005........ 0.00 0.00 76,015,530.92 0.00 0.00 0.00
January 2006......... 0.00 0.00 75,136,895.21 0.00 0.00 0.00
February 2006........ 0.00 0.00 74,241,195.36 0.00 0.00 0.00
March 2006........... 0.00 0.00 73,329,520.01 0.00 0.00 0.00
April 2006........... 0.00 0.00 72,402,916.87 0.00 0.00 0.00
May 2006............. 0.00 0.00 71,426,981.38 0.00 0.00 0.00
June 2006............ 0.00 0.00 70,439,856.93 0.00 0.00 0.00
July 2006............ 0.00 0.00 69,442,426.52 0.00 0.00 0.00
August 2006.......... 0.00 0.00 68,435,538.43 0.00 0.00 0.00
</TABLE>
A1-56
<PAGE> 98
<TABLE>
<CAPTION>
CLASS 1-A5 CLASS 1-A5 CLASS 1-A9,
CLASS 1-A4 CLASS 1-A4 TAC COMPONENT TAC COMPONENT CLASS 1-A10
TAC BALANCE TAC BALANCE BALANCE BALANCE CLASS 1-A8 AGGREGATE
NO. 1 NO. 2 NO. 1 NO. 2 TAC BALANCE TAC BALANCE
----------- ----------- ------------- ------------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
September 2006....... $ 0.00 $ 0.00 $67,420,007.32 $ 0.00 $ 0.00 $ 0.00
October 2006......... 0.00 0.00 66,396,615.34 0.00 0.00 0.00
November 2006........ 0.00 0.00 65,366,113.26 0.00 0.00 0.00
December 2006........ 0.00 0.00 64,329,221.46 0.00 0.00 0.00
January 2007......... 0.00 0.00 63,286,631.01 0.00 0.00 0.00
February 2007........ 0.00 0.00 62,239,004.59 0.00 0.00 0.00
March 2007........... 0.00 0.00 61,186,977.48 0.00 0.00 0.00
April 2007........... 0.00 0.00 60,131,158.48 0.00 0.00 0.00
May 2007............. 0.00 0.00 59,047,839.91 0.00 0.00 0.00
June 2007............ 0.00 0.00 57,963,716.80 0.00 0.00 0.00
July 2007............ 0.00 0.00 56,879,250.16 0.00 0.00 0.00
August 2007.......... 0.00 0.00 55,794,880.18 0.00 0.00 0.00
September 2007....... 0.00 0.00 54,711,027.03 0.00 0.00 0.00
October 2007......... 0.00 0.00 53,628,091.49 0.00 0.00 0.00
November 2007........ 0.00 0.00 52,546,455.67 0.00 0.00 0.00
December 2007........ 0.00 0.00 51,466,483.66 0.00 0.00 0.00
January 2008......... 0.00 0.00 50,388,522.16 0.00 0.00 0.00
February 2008........ 0.00 0.00 49,312,901.09 0.00 0.00 0.00
March 2008........... 0.00 0.00 48,239,934.18 0.00 0.00 0.00
April 2008........... 0.00 0.00 47,169,919.59 0.00 0.00 0.00
May 2008............. 0.00 0.00 46,089,533.83 0.00 0.00 0.00
June 2008............ 0.00 0.00 45,014,270.25 0.00 0.00 0.00
July 2008............ 0.00 0.00 43,944,297.60 0.00 0.00 0.00
August 2008.......... 0.00 0.00 42,879,774.64 0.00 0.00 0.00
September 2008....... 0.00 0.00 41,820,850.47 0.00 0.00 0.00
October 2008......... 0.00 0.00 40,767,664.90 0.00 0.00 0.00
November 2008........ 0.00 0.00 39,720,348.79 0.00 0.00 0.00
December 2008........ 0.00 0.00 38,679,024.38 0.00 0.00 0.00
January 2009......... 0.00 0.00 37,643,805.61 0.00 0.00 0.00
February 2009........ 0.00 0.00 36,614,798.42 0.00 0.00 0.00
March 2009........... 0.00 0.00 35,592,101.05 0.00 0.00 0.00
April 2009........... 0.00 0.00 34,575,804.36 0.00 0.00 0.00
May 2009............. 0.00 0.00 33,565,992.06 0.00 0.00 0.00
June 2009............ 0.00 0.00 32,562,741.02 0.00 0.00 0.00
July 2009............ 0.00 0.00 31,566,121.51 0.00 0.00 0.00
August 2009.......... 0.00 0.00 30,576,197.47 0.00 0.00 0.00
September 2009....... 0.00 0.00 29,593,026.75 0.00 0.00 0.00
October 2009......... 0.00 0.00 28,616,661.32 0.00 0.00 0.00
November 2009........ 0.00 0.00 27,647,147.55 0.00 0.00 0.00
December 2009........ 0.00 0.00 26,684,526.38 0.00 0.00 0.00
January 2010......... 0.00 0.00 25,728,833.58 0.00 0.00 0.00
February 2010........ 0.00 0.00 24,780,099.93 0.00 0.00 0.00
March 2010........... 0.00 0.00 23,838,351.40 0.00 0.00 0.00
April 2010........... 0.00 0.00 22,903,356.90 0.00 0.00 0.00
May 2010............. 0.00 0.00 21,737,830.27 0.00 0.00 0.00
</TABLE>
A1-57
<PAGE> 99
<TABLE>
<CAPTION>
CLASS 1-A5 CLASS 1-A5 CLASS 1-A9,
CLASS 1-A4 CLASS 1-A4 TAC COMPONENT TAC COMPONENT CLASS 1-A10
TAC BALANCE TAC BALANCE BALANCE BALANCE CLASS 1-A8 AGGREGATE
NO. 1 NO. 2 NO. 1 NO. 2 TAC BALANCE TAC BALANCE
----------- ----------- ------------- ------------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
June 2010............ $ 0.00 $ 0.00 $20,586,678.45 $ 0.00 $ 0.00 $ 0.00
July 2010............ 0.00 0.00 19,449,686.47 0.00 0.00 0.00
August 2010.......... 0.00 0.00 18,326,642.21 0.00 0.00 0.00
September 2010....... 0.00 0.00 17,217,336.41 0.00 0.00 0.00
October 2010......... 0.00 0.00 16,121,562.61 0.00 0.00 0.00
November 2010........ 0.00 0.00 15,039,117.10 0.00 0.00 0.00
December 2010........ 0.00 0.00 13,969,798.90 0.00 0.00 0.00
January 2011......... 0.00 0.00 12,913,409.71 0.00 0.00 0.00
February 2011........ 0.00 0.00 11,869,753.89 0.00 0.00 0.00
March 2011........... 0.00 0.00 10,838,638.41 0.00 0.00 0.00
April 2011........... 0.00 0.00 9,819,872.80 0.00 0.00 0.00
May 2011............. 0.00 0.00 8,813,269.15 0.00 0.00 0.00
June 2011............ 0.00 0.00 7,818,642.06 0.00 0.00 0.00
July 2011............ 0.00 0.00 6,835,808.57 0.00 0.00 0.00
August 2011.......... 0.00 0.00 5,864,588.19 0.00 0.00 0.00
September 2011....... 0.00 0.00 4,904,802.81 0.00 0.00 0.00
October 2011......... 0.00 0.00 3,956,276.71 0.00 0.00 0.00
November 2011........ 0.00 0.00 3,018,836.50 0.00 0.00 0.00
December 2011........ 0.00 0.00 2,092,311.09 0.00 0.00 0.00
January 2012......... 0.00 0.00 1,176,531.66 0.00 0.00 0.00
February 2012........ 0.00 0.00 271,331.64 0.00 0.00 0.00
March 2012 and
thereafter.......... 0.00 0.00 0.00 0.00 0.00 0.00
</TABLE>
A1-58
<PAGE> 100
ANNEX 2
THE POOL 2 MORTGAGE LOANS AND THE POOL 2 CERTIFICATES
Interest and principal will be distributable on the Pool 2 senior
certificates and on the Pool 2 components of the Component 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, describes the manner in which interest and principal will be
distributable on the Pool 2 senior certificates and on the Pool 2 components of
the Component 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 90% 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 6.50% 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 1.00% 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.
- None of such mortgage loans will have been originated under GECMSI's "No
Income, No Asset Verification Program" or other no income, no asset
verification programs acceptable to GECMSI.
- No more than 0.15% 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 $252,364,835. This amount is
subject to a permitted variance such that the aggregate Scheduled Principal
Balance thereof will not be less than $237,500,000 or greater than $262,500,000.
Prior to issuance of the certificates, we will not remove from the expected
Pool 2 mortgage pool more than 5% of the 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
A2-1
<PAGE> 101
mortgage loans to Pool 2 if this would result in more than a 5% increase in the
size of Pool 2, 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 6.2500% to 9.8750% per annum, and the weighted average mortgage interest
rate as of the Cut-off Date of such mortgage loans is expected to be between
7.1500% and 7.1900% per annum. The original principal balances of the Pool 2
mortgage loans are expected to range from $69,500 to $1,100,000 and, as of the
Cut-off Date, the average Scheduled Principal Balance of the Pool 2 mortgage
loans is not expected to exceed $343,000 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 October 1991, 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 20 to 30 years, and it is expected that the weighted average
scheduled remaining term to maturity of the Pool 2 mortgage loans will be
between 355 and 357 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:
o No more than 12% of the mortgage loans will have a Scheduled Principal
Balance of more than $500,000 and up to and including $750,000. No more
than 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 0.9%
of the mortgage loans will have a Scheduled Principal Balance of more
than $1,000,000.
o No more than 11% of the mortgage loans will have a loan-to-value ratio at
origination in excess of 80%, no more than 4% of the mortgage loans will
have a loan-to-value ratio at origination in excess of 90%, and none of
the mortgage loans will have a loan-to-value ratio at origination in
excess of 95%. As of the Cut-off Date, the weighted average loan-to-value
ratio at origination of the mortgage loans is expected to be between 72%
and 74%.
o No more than 1% of the 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.
o The proceeds of at least 29% of the mortgage loans will have been used to
acquire the related mortgaged property. The proceeds of the remainder of
the mortgage loans will have been used to refinance an existing loan. No
more than 25% of the mortgage loans will have been the subject of
"cash-out" refinancings.
o No more than 1% of the mortgage loans will be temporary buy-down mortgage
loans. The portion of the interest rate paid by the related mortgagor
will not increase by more than one percentage point for each six month
period. No mortgage interest rate may exceed the "bought down" rate by
more than 3 percentage points, and no buy-down period will exceed 3
years.
o No more than 3% of the mortgage loans will be secured by mortgaged
properties located in any one postal zip code area.
o 100% of the mortgage loans will be secured by mortgaged properties
located in California.
A2-2
<PAGE> 102
o At least 96% of the 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.
o At least 90% of the mortgage loans will be secured by single-family,
detached residences.
o No more than 5% of the mortgage loans will be secured by condominiums.
o None of the mortgage loans will be Cooperative Loans.
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........... 35 $ 5,960,729.15 2.36%
227,151 - 250,000........... 41 9,834,432.59 3.90
250,001 - 300,000........... 249 68,564,863.01 27.17
300,001 - 350,000........... 158 51,477,074.48 20.40
350,001 - 400,000........... 102 38,231,867.13 15.15
400,001 - 450,000........... 61 26,115,299.64 10.35
450,001 - 600,000........... 70 35,040,665.66 13.88
600,001 - 650,000........... 18 11,346,140.43 4.50
650,001 - 1,100,000.......... 7 5,793,762.76 2.30
--- --------------- -------
Total.................... 741 $252,364,834.85 100.00%
=== =============== =======
</TABLE>
A2-3
<PAGE> 103
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%...................... 2 $ 536,989.99 0.21%
6.3750....................... 2 694,206.43 0.28
6.5000....................... 12 3,990,624.93 1.58
6.6250....................... 17 5,474,393.43 2.17
6.7500....................... 40 13,444,180.37 5.33
6.8750....................... 89 30,580,305.13 12.12
7.0000....................... 160 53,168,902.66 21.07
7.1250....................... 116 40,087,328.46 15.88
7.2500....................... 95 34,345,025.30 13.61
7.3750....................... 79 27,569,122.30 10.92
7.5000....................... 68 24,181,035.52 9.58
7.6250....................... 17 5,628,191.73 2.23
7.7500....................... 8 2,614,384.80 1.04
7.8750....................... 8 2,332,427.37 0.92
8.0000....................... 3 532,808.01 0.21
8.1250....................... 1 307,798.53 0.12
8.2500....................... 3 1,355,997.84 0.54
8.3750....................... 1 336,134.67 0.13
8.5000....................... 6 1,382,244.72 0.55
8.6250....................... 8 2,259,691.78 0.90
8.7500....................... 2 434,386.76 0.17
8.8750....................... 2 618,253.19 0.25
9.0000....................... 1 250,151.38 0.10
9.8750....................... 1 240,249.55 0.10
--- --------------- -------
Total.................... 741 $252,364,834.85 100.00%
=== =============== =======
</TABLE>
A2-4
<PAGE> 104
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.................... 741 $252,364,834.85 100.00%
--- --------------- ------
Total............... 741 $252,364,834.85 100.00%
=== =============== ======
</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>
1991.......................... 1 $ 240,249.55 0.10%
1992.......................... 20 5,624,690.94 2.23
1997.......................... 1 333,719.39 0.13
1998.......................... 54 19,395,809.28 7.69
1999.......................... 665 226,770,365.69 89.86
----- --------------- ------
Total............... 741 $252,364,834.85 100.00%
===== =============== ======
</TABLE>
YEAR OF MATURITY AS OF THE CUT-OFF DATE
<TABLE>
<CAPTION>
AGGREGATE SCHEDULED PERCENTAGE OF POOL BY
PRINCIPAL AGGREGATE SCHEDULED
NUMBER OF BALANCE AS OF PRINCIPAL BALANCE AS
YEAR OF MATURITY MORTGAGE LOANS THE CUT-OFF DATE OF THE CUT-OFF DATE
- ---------------- -------------- ------------------- ---------------------
<S> <C> <C> <C>
2019.......................... 3 $ 823,546.53 0.33%
2022.......................... 19 4,978,371.05 1.97
2024.......................... 2 560,832.74 0.22
2026.......................... 1 646,319.89 0.26
2027.......................... 1 333,719.39 0.13
2028.......................... 37 13,366,570.50 5.30
2029.......................... 678 231,655,474.75 91.79
----- --------------- ------
Total............... 741 $252,364,834.85 100.00%
===== =============== ======
</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........ 679 $232,671,241.74 92.20%
Single-family attached........ 6 2,264,605.07 0.90
Condominium................... 36 10,100,268.58 4.00
2 - 4 family units............ 20 7,328,719.46 2.90
--- --------------- ------
Total.................... 741 $252,364,834.85 100.00%
=== =============== ======
</TABLE>
A2-5
<PAGE> 105
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................ 724 $248,210,554.98 98.35%
Vacation...................... 8 2,111,872.26 0.84
Investment.................... 9 2,042,407.61 0.81
--- --------------- ------
Total.................... 741 $252,364,834.85 100.00%
=== =============== ======
</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...................... 239 $ 78,200,258.25 30.99%
Rate Term/Refinance........... 339 116,925,979.95 46.33
Cash-out Refinance............ 163 57,238,596.65 22.68
--- --------------- ------
Total.................... 741 $252,364,834.85 100.00%
=== =============== ======
</TABLE>
LOAN-TO-VALUE RATIOS AT ORIGINATION
<TABLE>
<CAPTION>
AGGREGATE SCHEDULED PERCENTAGE OF POOL BY
RANGE OF PRINCIPAL AGGREGATE SCHEDULED
LOAN-TO-VALUE RATIOS 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>
00.001-50.00%................. 37 $ 14,153,970.09 5.61%
50.001-60.00.................. 48 17,590,325.13 6.97
60.001-70.00.................. 130 46,096,611.13 18.27
70.001-75.00.................. 139 49,523,523.36 19.62
75.001-80.00.................. 303 100,855,730.86 39.96
80.001-85.00.................. 15 4,140,936.60 1.64
85.001-90.00.................. 40 12,261,574.75 4.86
90.001-95.00.................. 29 7,742,162.93 3.07
--- --------------- ------
Total.................... 741 $252,364,834.85 100.00%
=== =============== ======
</TABLE>
DISTRIBUTIONS ON THE POOL 2 CERTIFICATES
Allocation of Pool 2 Available Funds
Interest and principal on the Pool 2 certificates and the Pool 2 components
of the Component 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 Pool 2 Available Funds
for the related Distribution Date. Distributions will be made to holders of
record at the close of business on the related Record Date.
A2-6
<PAGE> 106
On each Distribution Date, the Pool 2 Available Funds will be distributed
in the following order of priority among the certificates:
first, to the classes of Pool 2 senior certificates entitled to
distributions of interest and the Pool 2 component of the Class S
Certificates, the Accrued Certificate Interest on each such class for such
Distribution Date, any shortfall in available amounts being allocated among
such classes and component 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 and the Pool 2 component of the Class S
Certificates, any Accrued Certificate Interest thereon remaining
undistributed from previous Distribution Dates, to the extent of remaining
Pool 2 Available Funds, any shortfall in available amounts being allocated
among such classes and component in proportion to the amount of such
Accrued Certificate Interest remaining undistributed for each such class or
component for such Distribution Date;
third, to the classes of Pool 2 senior certificates entitled to
principal distributions and the Pool 2 component of the Class PO
Certificates, in reduction of the Class Certificate Principal Balances or
Component Principal Balance thereof, to the extent of remaining Pool 2
Available Funds, concurrently, as follows:
(1) to the Class 2-A1 through Class 2-A3 Certificates and the Class
2-A5 Certificates, the Pool 2 Senior Optimal Principal Distribution Amount
for such Distribution Date, in the following order of priority:
(a) to the Class 2-A3 Certificates, up to approximately $27,000 on
each Distribution Date; provided, however, that no distributions
pursuant to this clause (1)(a) shall be made prior to the Distribution
Date occurring in May 2002;
(b) to the Class 2-A5 Certificates, the Class 2-A5 Principal
Distribution Amount for such Distribution Date, until the Class
Certificate Principal Balance thereof has been reduced to zero;
(c) to the Class 2-A1 and Class 2-A2 Certificates (together with
the Class 2-A3 Certificates, the "Pool 2 Group I Senior Certificates"),
the Pool 2 Senior Optimal Principal Amount for such Distribution Date,
less the amount distributable to the Class 2-A3 Certificates pursuant to
clause (1)(a) above and to Class 2-A5 Certificates pursuant to clause
(1)(b) above for such Distribution Date (such reduced amount, the "Pool
2 Group I Senior Principal Distribution Amount"), in the following order
of priority:
(I) to the Class 2-A1 Certificates, until the Class
Certificate Principal Balance thereof has been reduced to zero; and
(II) to the Class 2-A2 Certificates, until the Class
Certificate Principal Balance thereof has been reduced to zero; and
(d) to the Class 2-A3 Certificates, until the Class Certificate
Principal Balance thereof has been reduced to zero; and
(2) to the Pool 2 component of the Class PO Certificates, the Pool 2
Class PO Principal Distribution Amount for such Distribution Date, until
the Component Principal Balance thereof has been reduced to zero;
fourth, to the Pool 2 component of the Class PO Certificates, to the
extent of remaining Pool 2 Available Funds, the Pool 2 Class PO Deferred
Amount for such
A2-7
<PAGE> 107
Distribution Date, until the Component Principal Balance thereof has been
reduced to zero; provided that, (1) on any Distribution Date, distributions
pursuant to this priority fourth shall not exceed the Pool 2 Junior Optimal
Principal Amount for such Distribution Date, (2) such distributions shall
not reduce the Component Principal Balance of the Pool 2 component of the
Class PO Certificates and (3) no distribution will be made in respect of
the Pool 2 Class PO Deferred Amount after the Distribution Date on which
the respective Component Principal Balances of the Pool 2 components of the
junior certificates have been reduced to zero (the "Pool 2 Cross-Over
Date");
fifth, to the Pool 2 component of the Class M Certificates, to the
extent of remaining Pool 2 Available Funds, in the following order: (1) the
Accrued Certificate Interest thereon for such Distribution Date, (2) any
Accrued Certificate Interest thereon remaining undistributed from previous
Distribution Dates and (3) such component's Allocable Share (as defined
under "-- Principal" below) for such Distribution Date;
sixth, to the Pool 2 component of the Class B1 Certificates, to the
extent of remaining Pool 2 Available Funds, in the following order: (1) the
Accrued Certificate Interest thereon for such Distribution Date, (2) any
Accrued Certificate Interest thereon remaining undistributed from previous
Distribution Dates and (3) such component's Allocable Share for such
Distribution Date;
seventh, to the Pool 2 component of the Class B2 Certificates, to the
extent of remaining Pool 2 Available Funds, in the following order: (1) the
Accrued Certificate Interest thereon for such Distribution Date, (2) any
Accrued Certificate Interest thereon remaining undistributed from previous
Distribution Dates and (3) such component's Allocable Share for such
Distribution Date; and
eighth, to each of the Pool 2 components of the Class B3, Class B4 and
Class B5 Certificates, to the extent of remaining Pool 2 Available Funds:
(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 component's Allocable Share for
such Distribution Date.
The percentages and amounts set forth in priority third above were
calculated on the basis of the Class Certificate Principal Balances or Component
Principal Balances of the related Pool 2 certificates described herein. If these
Class Certificate Principal Balances or Component Principal Balances are
increased or decreased in accordance with the variance permitted hereby for Pool
2, the applicable percentages and such amounts will be increased or decreased
substantially correspondingly.
On each Distribution Date after the Pool 2 Cross-Over Date, distributions
of principal on the outstanding Pool 2 senior certificates entitled to principal
distributions will be made pro rata among all such certificates, regardless of
the allocation, or sequential nature, of principal payments described in
priority third above.
"Pro rata" distributions among classes of certificates will be made in
proportion to the then-current Class Certificate Principal Balances or Component
Principal Balances, as applicable, of such classes.
If, after distributions have been made under priorities first and second
above 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 Pool 2 Class
PO Principal Distribution
A2-8
<PAGE> 108
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 and the Pool 2 component of the Class PO Certificates
in accordance with the applicable clauses of priority third above on the basis
of such reduced amounts. Notwithstanding such allocation, Realized Losses will
be allocated to the certificates or Pool 2 components thereof as described under
"-- Allocation of Realized Losses on the Pool 2 Certificates" herein.
Interest
Interest will accrue on the Pool 2 senior certificates and the Pool 2
components of the Component 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 Pool 2 components of the Class B3, Class B4 and
Class B5 Certificates at the interest rate of 6.75% per annum during each
Interest Accrual Period.
Interest will accrue on the Pool 2 Notional Principal Balance of the Class
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 Pool 2 component of the Class S
Certificates for the first Interest Accrual Period is expected to be
approximately 0.29155230%.
The "Pool 2 Notional Principal Balance" of the Pool 2 component of the
Class S Certificates as of any Distribution Date will equal the aggregate
Scheduled Principal Balance of the Outstanding Mortgage Loans in Pool 2 which
are Non-discount Mortgage Loans as of the first day of the calendar month
preceding such Distribution Date. The initial Pool 2 Notional Principal Balance
of the Class S Certificates is expected to be approximately $195,711,244.
The Class PO Certificates are principal-only certificates and will not
accrue interest.
The "Accrued Certificate Interest" for any Pool 2 certificate or Pool 2
component of a 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 Notional
Principal Balance or Certificate Principal Balance (or, in the case of the Pool
2 component of the Class S Certificates, the Pool 2 Notional Principal Balance)
of such certificate (or, in the case of the Pool 2 component of a class of
junior certificates, the Component Principal Balance thereof) immediately prior
to such Distribution Date, less such certificate's (or component's) share of any
Net Interest Shortfall (as defined below), the interest portion of any Excess
Losses (as defined herein) in respect of Pool 2 mortgage loans through the Pool
2 Cross-Over Date and, after the
A2-9
<PAGE> 109
Pool 2 Cross-Over Date, the interest portion of Realized Losses, including
Excess Losses in respect of Pool 2 mortgage loans.
The "Notional Principal Balance" of each of the Class 2-A4 and Class 2-A6
Certificates as of any Distribution Date will equal the Class Certificate
Principal Balance of the Class 2-A3 Certificates of such date.
The "Certificate Principal Balance" of any Pool 2 senior certificate
entitled to principal distributions as of any Distribution Date will equal such
certificate's Certificate Principal Balance on the date of initial issuance of
the certificates as reduced by:
o all amounts distributed on previous Distribution Dates on such
certificate on account of principal; and
o the principal portion of all Realized Losses in respect of Pool 2
mortgage loans previously allocated to such certificate.
The "Certificate Principal Balance" of the Class PO Certificates will equal
the sum of the Component Principal Balances of each of the Pool 1 component and
the Pool 2 component of such certificates.
The "Component Principal Balance" of any component of a Pool 2 certificate
as of any Distribution Date will equal such component's principal balance on the
date of initial issuance of the certificates as reduced by:
o all amounts distributed on previous Distribution Dates on such
component on account of principal;
o the principal portion of all Realized Losses previously allocated to
such component; and
o in the case of a component of a junior certificate, such component's
pro rata share, if any, of the Pool 2 Junior Certificate Writedown Amount
and the Pool 2 Class PO Deferred Payment Writedown Amount for previous
Distribution Dates.
As of any Distribution Date, the "Pool 2 Junior Certificate Writedown
Amount" will equal the amount by which (a) the sum of the Class Certificate
Principal Balances of all of the Pool 2 senior certificates and the Component
Principal Balances of the Pool 2 components of the Component Certificates, after
giving effect to the distribution of principal and the application of Realized
Losses in respect of Pool 2 mortgage loans in reduction of the Certificate
Principal Balances of the Pool 2 senior certificates or the Component Principal
Balances of the Pool 2 components of the Component Certificates on such
Distribution Date, exceeds (b) the 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 Pool 2 Bankruptcy Coverage Termination Date.
For any Distribution Date, the "Pool 2 Class PO Deferred Payment Writedown
Amount" will equal the amount, if any, distributed on such date in respect of
the Pool 2 Class PO Deferred Amount pursuant to priority fourth under
"-- Allocation of Pool 2 Available Funds" above. The Pool 2 Junior Certificate
Writedown Amount and the Pool 2 Class PO Deferred Payment Writedown Amount will
be allocated to the Pool 2 components of the classes of junior certificates in
inverse order of priority, until the Component Principal Balance of each such
component has been reduced to zero.
For definitions of "Interest Accrual Period," "Net Interest Shortfall" and
"Interest Shortfall," see "Distributions on the Pool 1 Certificates" in Annex 1.
A2-10
<PAGE> 110
Any Net Interest Shortfall, the interest portion of any Excess Losses
through the Pool 2 Cross-Over Date and, after the Pool 2 Cross-Over Date, the
interest portion of any Realized Losses in respect of the Pool 2 mortgage loans
(see "-- Allocation of Realized Losses on the Pool 2 Certificates") will, on
each Distribution Date, be allocated among all the outstanding Pool 2 senior
certificates and the Pool 2 components of the Component 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 shortfall
and losses. See "The Pooling and Servicing Agreement -- Servicing Compensation,
Compensating Interest and Payment of Expenses" herein.
The interest portion of any Realized Losses (other than Excess Losses) in
respect of the Pool 2 mortgage loans occurring prior to the Pool 2 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 Pool 2 components of the junior certificates in right of
distribution, such losses will be borne first by the outstanding Pool 2
components of the 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 or the Pool 2 components of the Senior Component Certificates
entitled to distributions of interest to their certificateholders, any shortfall
in available amounts will be allocated among such classes and components 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 and the Pool 2 components of the Senior Component
Certificates entitled to distributions of interest on subsequent Distribution
Dates in accordance with priority second under "-- Allocation of Pool 2
Available Funds" above. No interest will accrue on any Accrued Certificate
Interest remaining undistributed from previous Distribution Dates.
Principal
Distributions in reduction of the principal balance of each Pool 2 senior
certificate and in reduction of the Component Principal Balance of the Pool 2
component of each Component Certificate entitled to principal distributions will
be made on each Distribution Date.
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
entitled to principal distributions and the Pool 2 components of the junior
certificates, on the one hand, and (2) the Pool 2 component of the Class PO
Certificates, on the other, in each case based on the applicable Non-PO
Percentage and the applicable PO Percentage, respectively, of such amounts.
The "Non-PO Percentage" with respect to any Pool 2 mortgage loan with a Net
Mortgage Rate ("NMR") less than 6.75% per annum (each such mortgage loan, a
"Discount Mortgage Loan") will be the fraction, expressed as a percentage, equal
to NMR / 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 "Non-discount Mortgage Loan") will be 100%. The "PO Percentage" with
respect to any Discount Mortgage Loan in Pool 2 will be the fraction, expressed
as a percentage, equal to (6.75% - NMR) / 6.75%. The "PO Percentage" with
respect to any Non-discount Mortgage Loan in Pool 2 will be 0%.
A2-11
<PAGE> 111
The initial Component Principal Balance of the Pool 2 component of the
Class PO Certificates, which are not offered hereby, will be approximately
$1,453,084, subject to the variance described herein relating to Pool 2.
Distributions in reduction of the Class Certificate Principal Balance of
each class of Pool 2 senior certificates entitled to principal distributions and
in reduction of the Component Principal Balance of the Pool 2 component of the
Class PO Certificates will be made on each Distribution Date under priority
third under "-- Allocation of Pool 2 Available Funds" above. In accordance with
priority third, the Pool 2 Available Funds remaining after the distribution of
interest will be allocated to such certificates and Pool 2 components in an
aggregate amount not to exceed the sum of the Pool 2 Senior Optimal Principal
Amount and the Pool 2 Class PO Principal Distribution Amount for such
Distribution Date. Distributions in reduction of the Component Principal
Balances of the Pool 2 component of the Class M, Class B1 and Class B2
Certificates will be made pursuant to priorities fifth, sixth and seventh,
respectively, under "-- Allocation of Pool 2 Available Funds" above. In
accordance with each such priority, the Pool 2 Available Funds, if any,
remaining after distributions of principal and interest on the Pool 2 senior
certificates and the Pool 2 components of the Senior Component Certificates and
payments in respect of the Pool 2 Class PO Deferred Amount on such Distribution
Date will be allocated to the Pool 2 components of the Class M, Class B1 and
Class B2 Certificates in an amount equal to each such component's Allocable
Share for such Distribution Date, provided that no distribution of principal
will be made on any such component until any component ranking prior thereto has
received distributions of interest and principal, and such component has
received distributions of interest, on 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 after the Pool 2 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
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
A2-12
<PAGE> 112
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 mortgage loans described in clause
(4)(b)(x), and (x) the Scheduled Principal Balance of each Pool 2
mortgage loan that was purchased by a private mortgage insurer during
the related Prepayment Period as an alternative to paying a claim under
the related insurance policy minus (y) the Pool 2 Senior Percentage of
the 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.
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 "Class 2-A5 Principal Distribution Amount" for any Distribution Date
will equal the sum of:
(a) the total of the amounts described in clauses (1) and (4) of
the definition of Pool 2 Senior Optimal Principal Amount (without
application of the Pool 2 Senior Percentage or Pool 2 Senior Prepayment
Percentage) for such date multiplied by the Class 2-A5 Scheduled
Distribution Percentage for such date; and
(b) the total of the amounts described in clauses (2), (3) and (5)
of the definition of the Pool 2 Senior Optimal Principal Amount (without
application of the Pool 2 Senior Prepayment Percentage) for such date
multiplied by the product of (x) the Class 2-A5 Percentage for such date
and (y) the Class 2-A5 Prepayment Distribution Percentage for such date.
Notwithstanding the foregoing, (1) on the Pool 2 Group I Final Distribution
Date, the Class 2-A5 Principal Distribution Amount will be increased by any Pool
2 Senior Optimal Principal Amount remaining after distributions of principal
have been made on the Pool 2 Group I Senior Certificates, and (2) following the
Pool 2 Group I Final Distribution Date, the Class 2-A5 Principal Distribution
Amount will equal the Pool 2 Senior Optimal Principal Amount.
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The "Class 2-A5 Percentage" for any Distribution Date will equal the
percentage (carried to ten places rounded up) obtained by dividing (1) the Class
Certificate Principal Balance of the Class 2-A5 Certificates immediately
preceding such Distribution Date by (2) the aggregate Class Certificate
Principal Balances of all the Pool 2 senior certificates and the Pool 2
Component Principal Balances of the Pool 2 component of the junior certificates
immediately preceding such Distribution Date, provided, however, that the Class
2-A5 Percentage for any Distribution Date shall not exceed 100%; and provided,
further, that on any Distribution Date after the Class Certificate Principal
Balance of the Class 2-A5 Certificates has been reduced to zero, the Class 2-A5
Percentage for such Distribution Date shall be zero. The initial Class 2-A5
Percentage is expected to be approximately 10.76%.
The "Class 2-A5 Scheduled Distribution Percentage" for any Distribution
Date through the Distribution Date in April 2004 will equal 0%. The Class 2-A5
Scheduled Distribution Percentage on any Distribution Date after the
Distribution Date in April 2004 will equal the Class 2-A5 Percentage for such
Distribution Date. Notwithstanding the foregoing, on any Distribution Date after
the Pool 2 Group I Final Distribution Date, the Class 2-A5 Scheduled
Distribution Percentage will equal the Pool 2 Senior Percentage for such
Distribution Date.
The "Class 2-A5 Prepayment 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 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 entitled to principal distributions immediately preceding such
Distribution Date by the aggregate Certificate Principal Balances of all the
Pool 2 senior certificates entitled to principal distributions and the Component
Principal Balances of the Pool 2 components of the junior certificates
immediately preceding such Distribution Date. The initial Pool 2 Senior
Percentage is expected to be approximately 96.00%.
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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) SENIOR PREPAYMENT PERCENTAGE
- ------------------------ -------------------------------
<S> <C>
May 1999 - April 2004................ 100%
May 2004 - April 2005................ Pool 2 Senior Percentage plus
70% of the Pool 2 Junior
Percentage
May 2005 - April 2006................ Pool 2 Senior Percentage plus
60% of the Pool 2 Junior
Percentage
May 2006 - April 2007................ Pool 2 Senior Percentage plus
40% of the Pool 2 Junior
Percentage
May 2007 - April 2008................ Pool 2 Senior Percentage plus
20% of the Pool 2 Junior
Percentage
May 2008 and thereafter.............. Pool 2 Senior Percentage
</TABLE>
Notwithstanding the foregoing, if the Pool 2 Senior Percentage on any
Distribution Date exceeds the initial Pool 2 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 (such limitation being the
"Pool 2 Senior Prepayment Percentage Stepdown Limitation") 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 Component Principal
Balances of the Pool 2 components 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 aggregate Component Principal Balances of the Pool 2
components of the junior certificates as of the date of
issuance of the certificates (the "Original Pool 2 Junior
Component Principal Balance") if such Distribution Date occurs
between and including May 2004 and April 2005;
(b) 35% of the Original Pool 2 Junior Component Principal Balance
if such Distribution Date occurs between and including May
2005 and April 2006;
(c) 40% of the Original Pool 2 Junior Component Principal Balance
if such Distribution Date occurs between and including May
2006 and April 2007;
(d) 45% of the Original Pool 2 Junior Component Principal Balance
if such Distribution Date occurs between and including May
2007 and April 2008; and
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(e) 50% of the Original Pool 2 Junior Component 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 Junior Component Principal Balance
if such Distribution Date occurs between and including May
2004 and April 2005;
(b) 15% of the Original Pool 2 Junior Component Principal Balance
if such Distribution Date occurs between and including May
2005 and April 2006;
(c) 20% of the Original Pool 2 Junior Component Principal Balance
if such Distribution Date occurs between and including May
2006 and April 2007;
(d) 25% of the Original Pool 2 Junior Component Principal Balance
if such Distribution Date occurs between and including May
2007 and April 2008; and
(e) 30% of the Original Pool 2 Junior Component Principal Balance
if such Distribution Date occurs during or after May 2008.
The "Pool 2 Class 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 Pool 2 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 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
mortgage loans described in clause (b), and (b) the principal balance of
each Pool 2 mortgage loan
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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 Pool 2 Bankruptcy Coverage Termination
Date.
The "Pool 2 Junior Percentage" on any Distribution Date will equal 100%
minus the Pool 2 Senior Percentage. The "Pool 2 Junior Prepayment Percentage"
will equal 100% minus the Pool 2 Senior Prepayment Percentage, except that on
any Distribution Date after the respective Class Certificate Principal Balances
of the Pool 2 senior certificates entitled to principal distributions have each
been reduced to zero (the "Pool 2 Senior Final Distribution Date"), the Pool 2
Junior Prepayment Percentage will equal 100%. The initial Pool 2 Junior
Percentage is expected to be approximately 4.00%.
The "Pool 2 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 Component Principal Balances of the Pool 2
components of the junior certificates immediately prior to such Distribution
Date):
(1) the Pool 2 Junior Percentage of the applicable Non-PO Percentage
of all scheduled payments of principal due on each outstanding 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 Pool 2 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 Junior Prepayment Percentage 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 related Prepayment Period;
(3) the Pool 2 Junior Prepayment Percentage of the applicable Non-PO
Percentage of all partial prepayments of principal received in respect of
Pool 2 mortgage loans during the related Prepayment Period, plus, on the
Pool 2 Senior Final Distribution Date, 100% of any Pool 2 Senior Optimal
Principal Amount remaining undistributed on such date;
(4) the amount, if any, by which the sum of (a) the 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 Pool 2
mortgage loan that was purchased
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by a private mortgage insurer during the related Prepayment Period as an
alternative to paying a claim under the related insurance policy exceeds
(c) the sum of the amounts distributable to the Pool 2 senior certificates
under clause (4) of the definition of Pool 2 Senior Optimal Principal
Amount on such Distribution Date; and
(5) the Pool 2 Junior 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 "Allocable Share" with respect to the Pool 2 component of any class of
junior certificates on any Distribution Date will generally equal such
component's pro rata share (based on the Component Principal Balance of each
component entitled thereto) of each of the elements of the Pool 2 Junior Optimal
Principal Amount described above; provided, that, except as described in the
second succeeding sentence, no Pool 2 component of a Class B Certificate shall
be entitled on any Distribution Date to receive distributions pursuant to
clauses (2), (3) and (5) of the definition of Pool 2 Junior Optimal Principal
Amount unless the Pool 2 Class Prepayment Distribution Trigger for the related
component is satisfied for such Distribution Date.
The "Pool 2 Class Prepayment Distribution Trigger" for the Pool 2 component
of a class of Class B Certificates for any Distribution Date is satisfied if the
fraction (expressed as a percentage), the numerator of which is the aggregate
Component Principal Balance of the Pool 2 component of such class and each class
subordinate thereto, if any, and the denominator of which is 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 Component Principal Balance of
the Pool 2 component of the Class M Certificates or of any class of Class B
Certificates for which the related Pool 2 Class Prepayment Distribution Trigger
was satisfied on such Distribution Date is reduced to zero, any amounts
distributable to such component under clauses (2), (3) and (5) of the definition
of Pool 2 Junior Optimal Principal Amount, to the extent of such component's
remaining Allocable Share, shall be distributed to the remaining Pool 2
components of the junior certificates in reduction of their respective Component
Principal Balances in order of priority. If the Pool 2 Class Prepayment
Distribution Trigger is not satisfied for the Pool 2 component of any class of
Class B Certificates on any Distribution Date, this may have the effect of
accelerating the amortization of the Pool 2 components of the more senior
ranking classes of junior certificates because the amount otherwise
distributable to such components under clauses (2), (3) and (5) of the
definition of Pool 2 Junior Optimal Principal Amount will be distributable among
the outstanding Pool 2 components of the Class M Certificates and each class of
the Class B Certificates as to which the related Pool 2 Class Prepayment
Distribution Trigger has been satisfied on a pro rata basis subject to the
priority of payments described in this Annex 2. On any Distribution Date, any
reduction in funds available for distribution to the Pool 2 components of the
junior certificates resulting from a distribution of the Pool 2 Class PO
Deferred Amount to the Pool 2 component of the Class PO Certificates will be
allocated to the Pool 2 components of the junior certificates, in reduction of
the Allocable Shares thereof, in inverse order of priority.
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<PAGE> 118
PRINCIPAL DISTRIBUTIONS ON THE CLASS 2-A3 CERTIFICATES
General
Arrangements have been made to distribute principal on the Class 2-A3
Certificates in $1,000 increments. These arrangements are intended to
accommodate retail investors who may not wish to receive their principal
distributions in amounts smaller than $1,000 and to give a limited payment
priority to investors who request early payment. As a result, only some
certificates in this class will receive distributions of principal on any given
date on which principal would otherwise be distributed on all certificates of
this class.
Principal payments on the Class 2-A3 Certificates will be made as follows:
. The amount of principal, if any, distributable on each Distribution Date
on the class as a whole will be determined as described under
"Distributions on the Pool 2 Certificates -- Allocation of Pool 2
Available Funds" above.
. The distribution of principal will be rounded upward to an integral
multiple of $1,000 by withdrawing funds from the Class 2-A3 Rounding
Account (as defined below), if necessary.
. The Trustee will remit distributions of principal to DTC in integral
multiples of $1,000. DTC will then remit such distributions to its
participants on behalf of the beneficial owners. The participants and the
relevant Financial Intermediaries in turn will be responsible for
remitting principal payments to their customers as described above.
. Holders who have properly made a Principal Distribution Request, as
described below, will be paid before other holders, to the extent of
available principal.
. Principal Distribution Requests submitted on behalf of Deceased Holders
(as defined below) will be entitled to a first priority, and requests
from beneficial owners other than Deceased Holders ("Living Holders")
will be entitled to a second priority.
. If more principal is available for distribution on a Distribution Date
than the amount covered by valid Principal Distribution Requests,
beneficial owners will receive distributions of principal on such
Distribution Date in integral multiples of $1,000 pursuant to DTC's
random lot procedures, to the extent of such excess.
Notwithstanding the foregoing, on and after the Pool 2 Cross-Over Date,
distributions on the Class 2-A3 Certificates will be made pro rata among all
holders of the certificates of such class and will not be made in integral
multiples of $1,000, by requested distributions or by random lot.
There can be no assurance that each participant receiving distributions of
principal made by random lot, or in accordance with Principal Distribution
Requests, and that each Financial Intermediary in the chain to beneficial
owners, will remit distributions to their customers by random lot or in
accordance with Principal Distribution Requests. Investors should ask their
brokers or other intermediaries what allocation procedures they use. Neither
GECMSI nor the Trustee will be responsible for the manner in which DTC, any
participant or any Financial Intermediary allots distributions on these
certificates.
The Agreement will provide that, in the event definitive physical
certificates are issued in respect of the Class 2-A3 Certificates, the Trustee
will determine which physical certificates will receive principal distributions
on the applicable Distribution Date using procedures comparable to those
described herein.
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<PAGE> 119
Due to the procedures for distributions described herein, there can be no
assurance that any particular beneficial owner of a Class 2-A3 Certificate will
receive a principal distribution on any Distribution Date. The timing and amount
of distributions in reduction of the Class Certificate Principal Balance of
these certificates is highly uncertain, and such distributions may be made
earlier or later than the date, or in amounts different from that, desired by a
beneficial owner of such certificate. Accordingly, the allocation of principal
distributions in respect of such certificates may result in actual yields to
investors and weighted average lives that vary significantly from those
anticipated, and such yields and weighted average lives will vary among the
holders of each such class of certificates. See the risk factor on page S-14.
Rounding of Distributions of Principal
For purposes of distributions of principal on the Class 2-A3 Certificates,
a rounding account (the "Class 2-A3 Rounding Account") will be established on
behalf of each such class on the date of issuance of the certificates by the
deposit of $999.99 in a segregated, non-interest bearing account maintained by
the Trustee pursuant to the Agreement. Prior to the Pool 2 Cross-Over Date,
whenever distributions of principal are to be made on the Class 2-A3
Certificates, the amount allocable to such class will be rounded upward to an
integral multiple of $1,000, if necessary.
On the first Distribution Date when distributions of principal will be made
on the Class 2-A3 Certificates, the Trustee will withdraw from the Class 2-A3
Rounding Account any funds needed to round the amount allocable to the Class
2-A3 Certificates upward to the next integral multiple of $1,000 and will
distribute the rounded amount. On the next Distribution Date when distributions
of principal will be made on such class of certificates, the Trustee will first
apply the amount allocable to such class in respect of principal to repay any
amount withdrawn from the Class 2-A3 Rounding Account on the previous
Distribution Date; then it will round the remainder of such allocable amount
upward to the next integral multiple of $1,000 by making another withdrawal from
the Class 2-A3 Rounding Account and will distribute this amount. This process
will continue on subsequent Distribution Dates prior to the Pool 2 Cross-Over
Date until the Class Certificate Principal Balance of the Class 2-A3
Certificates has been reduced to zero.
Upon the earlier of the Cross-Over Date and the next Distribution Date
after the Class Certificate Principal Balance of the Class 2-A3 Certificates is
reduced to zero, the balance in the Class 2-A3 Rounding Account will be restored
to $999.99 from Pool 2 Available Funds otherwise available for distribution to
other classes of certificates and will be distributed to the holder of the
residual certificates, and the Class 2-A3 Rounding Account will be terminated.
As a result of the operation of the Class 2-A3 Rounding Account, the
aggregate distributions made in reduction of the Class Certificate Principal
Balance of the Class 2-A3 Certificates on each Distribution Date may be slightly
more or less than would be the case in the absence of such rounding procedures,
but such difference will be no more than $999.99 on such Distribution Date.
Under no circumstances will the sum of all distributions made in reduction of
the Class Certificate Principal Balance of the Class 2-A3 Certificates through
any Distribution Date be less than the sum that would have resulted in the
absence of such rounding procedures.
Principal Distribution Requests and Withdrawals
Each beneficial owner of a Class 2-A3 Certificate may request that a
distribution of principal be made on a Distribution Date, in any integral
multiple of $1,000, by delivering
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a written request (each, a "Principal Distribution Request") to the DTC
participant or Financial Intermediary that maintains such beneficial owner's
account. The participant should in turn make the request to DTC (or, in the case
of a Financial Intermediary, such firm must notify the related participant of
such request, which participant should make the request to DTC) on a form
required by DTC and provided to the participant.
In the case of a request on behalf of a Deceased Holder, a certified copy
of the death certificate and any additional appropriate evidence of death and
any tax waivers must be forwarded to the Trustee under separate cover.
Furthermore, such requests of Deceased Holders that are incomplete may not be
honored by the Trustee and, if not honored, will lose their priority and must be
re-requested. Upon receipt of such Principal Distribution Request, DTC will date
and time-stamp such request. Such requests will be honored on any Distribution
Date only to the extent that they are received by DTC on or before the Record
Date for such Distribution Date. DTC may establish such procedures as it deems
fair and equitable to establish the order of receipt of requests for such
distributions received by it on the same day. Such requests shall be made
available to the Trustee through the facilities of DTC, Principal Distribution
Requests delivered to DTC after the Record Date for a particular Distribution
Date and requests received in a timely manner but not accepted with respect to a
particular Distribution Date will be treated as Principal Distribution Requests
for the next succeeding Distribution Date and each succeeding Distribution Date
thereafter until each request is accepted or is withdrawn as described below.
In the case of Principal Distribution Requests on behalf of Living Holders,
DTC will establish a new order of priority for each Distribution Date. This
order will apply both to previously unsatisfied Principal Distribution Requests
and to newly submitted requests. A Principal Distribution Request submitted on
behalf of a Living Holder who later dies will become entitled to the priority of
a newly submitted request on behalf of a Deceased Holder. Such priority will be
effective for each subsequent Distribution Date if DTC has received a certified
copy of the death certificate for such Deceased Holder and any additional
appropriate evidence of death and any requested tax waivers by the last business
day of the preceding calendar month. Each Principal Distribution Request
submitted by a beneficial owner of a Class 2-A3 Certificate will be held by DTC
until such request has been accepted or has been withdrawn in writing as
described below.
On any Distribution Date on which principal distributions are made on the
Class 2-A3 Certificates, priority of distributions of principal in respect of
such class of certificates will be given to holders of such class of
certificates on whose behalf Principal Distribution Requests have been duly
received and not withdrawn. DTC will honor Principal Distribution Requests in
the following order of priority:
first, DTC will honor Principal Distribution Requests submitted on
behalf of Deceased Holders in the order of their receipt by DTC, until such
requests have been honored in an amount up to $100,000 for each requesting
Deceased Holder; and
second, DTC will honor Principal Distribution Requests submitted on
behalf of Living Holders in the order of priority established by DTC, until
such requests have been honored in an amount of up to $10,000 for each
requesting Living Holder.
Thereafter, DTC will honor Principal Distribution Requests submitted on
behalf of each Deceased Holder as provided in priority first up to a second
$100,000 and Principal Distribution Requests submitted on behalf of each Living
Holder as provided in priority second up to a second $10,000. This sequence of
priorities will be repeated until all
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Principal Distribution Requests have been honored to the extent of amounts
available for distribution in reduction of the Class Certificate Principal
Balance of the Class 2-A3 Certificates.
If the amount available for distribution in reduction of the Class
Certificate Principal Balance of the Class 2-A3 Certificates on a given
Distribution Date is insufficient to honor all Principal Distribution Request,
such requests will be honored on succeeding Distribution Dates as principal
becomes available for distribution on the Class 2-A3 Certificates, without the
need for the holders to resubmit their Principal Distribution Requests.
On any Distribution Date on which principal distributions are to be made on
the Class 2-A3 Certificates, the Trustee will advise DTC as to which Principal
Distribution Requests should be honored, and in what amounts.
Any beneficial owner of a Class 2-A3 Certificate with respect to which a
Principal Distribution Request has been made may withdraw such request by so
notifying in writing the participant or Financial Intermediary that maintains
such beneficial owner's account (each such withdrawal, a "Withdrawal"). The
participant should forward the Withdrawal to DTC on a form required by DTC. In
the event that such account is maintained by a Financial Intermediary, such
Financial Intermediary should notify the related participant, which in turn
should forward the Withdrawal of such request on such form to DTC. If such
Withdrawal has not been received by DTC on or before the Record Date for the
applicable Distribution Date, the previously made Principal Distribution Request
will be irrevocable with respect to such Distribution Date.
Neither GECMSI nor the Trustee will be liable for any delay or failure by
any DTC participant or any Financial Intermediary in the delivery of Principal
Distribution Requests or Withdrawals to DTC.
If the amount available for distribution in reduction of the Class
Certificate Principal Balance of the Class 2-A3 Certificates on any Distribution
Date exceeds the amount needed to honor all Principal Distribution Requests with
respect to such class on such date, additional principal distributions, in
integral multiples equal to $1,000, will be made to the holders of such class in
accordance with DTC's established random lot procedures, without regard to
whether or not such certificateholders have submitted Principal Distribution
Requests.
Definition of "Deceased Holder"
A "Deceased Holder" is a beneficial owner of a Class 2-A3 Certificate who
was living at the time such interest was acquired and whose executor or other
authorized representative causes to be furnished to the Trustee a certified copy
of the death certificate for such Deceased Holder and any additional evidence of
death satisfactory to the Trustee and any tax waivers requested by the Trustee.
Class 2-A3 Certificates beneficially owned by tenants by the entirety,
joint tenants or tenants in common will be considered to be beneficially owned
by a single owner. The death of a tenant by the entirety, joint tenant or tenant
in common will be deemed to be the death of the beneficial owner, and the Class
2-A3 Certificates so beneficially owned will be eligible for priority with
respect to distributions of principal, subject to the limitations described
herein.
Class 2-A3 Certificates beneficially owned by a trust will be considered to
be beneficially owned by each beneficiary of the trust to the extent of such
beneficiary's
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beneficial interest therein, but in no event will a trust's beneficiaries
collectively be deemed to be beneficial owners of a number of individual Class
2-A3 Certificates greater than the number of individual Class 2-A3 Certificates
of which such trust is the owner. The death of the beneficiary of a trust will
be deemed to be the death of a beneficial owner of the Class 2-A3 Certificates
beneficially owned by the trust to the extent of such beneficiary's beneficial
interest in such trust. The death of an individual who was a tenant by the
entirety, joint tenant or tenant in common in a tenancy that is the beneficiary
of a trust will be deemed to be the death of the beneficiary of the trust.
The death of a person who, during his or her lifetime, was entitled to
substantially all of the beneficial ownership interest in a Class 2-A3
Certificate will be deemed to be the death of the beneficial owner of the Class
2-A3 Certificate regardless of the registration of the ownership, if such
beneficial ownership interest can be established to the satisfaction of the
Trustee.
Expenses incurred by the Trustee in an effort to determine the beneficial
ownership interest, including, without limitation, attorney's fees, shall be
paid by the beneficial owner. Such beneficial interest will be deemed to exist
in typical cases of street name or nominee ownership, ownership by a trustee,
ownership under the Uniform Gift to Minors Act and community property or other
joint ownership arrangements between a husband and wife. Beneficial interest
shall include the power to sell, transfer, or otherwise dispose of a Class 2-A3
Certificate and the right to receive the proceeds therefrom, as well as interest
and distributions in reduction of principal balance payable with respect
thereto. As used in this prospectus supplement, a request for a distribution of
principal of a Class 2-A3 Certificate by a Deceased Holder shall mean a request
by the personal representative, surviving tenant by the entirety, surviving
joint tenant or surviving tenant in common of such Deceased Holder.
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," and
"Special Hazard Loss," see "Allocation of Realized Losses on the Pool 1
Certificates" in Annex 1.
On each Distribution Date, the applicable PO Percentage of the principal
portion of any Realized Loss (including any Excess Loss, but not including any
Debt Service Reduction) on a Discount Mortgage Loan in Pool 2 will be allocated
to the Pool 2 component of the Class PO Certificates until the Component
Principal Balance thereof is reduced to zero. With respect to any Distribution
Date through the Pool 2 Cross-Over Date, the aggregate of all amounts so
allocable to the Pool 2 component of the Class PO Certificates on such date in
respect of Realized Losses other than Excess Losses in respect of the Discount
Mortgage Loans in Pool 2 and all amounts previously allocated in respect of such
losses to the Pool 2 component of the Class PO Certificates and not distributed
on prior Distribution Dates will be the "Pool 2 Class PO Deferred Amount."
To the extent funds are available therefor on any Distribution Date through
the Pool 2 Cross-Over Date, distributions in respect of the Pool 2 Class PO
Deferred Amount will be made on the Pool 2 component of the Class PO
Certificates in accordance with priority fourth under "-- Distributions on the
Pool 2 Certificates -- Allocation of Pool 2 Available Funds" above. Any
distribution of Pool 2 Available Funds in respect of the Pool 2 Class PO
Deferred Amount will not reduce the Component Principal Balance of the Pool 2
component of the Class PO Certificates. No interest will accrue on the Pool 2
Class PO Deferred Amount. On each Distribution Date through the Pool 2
Cross-Over
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<PAGE> 123
Date, the Component Principal Balance of the Pool 2 component of the lowest
ranking class of junior certificates then outstanding will be reduced by the
amount of any distributions in respect of the Pool 2 Class PO Deferred Amount on
such Distribution Date, through the operation of the Pool 2 Class PO Deferred
Payment Writedown Amount. After the Pool 2 Cross-Over Date, no distributions
will be made in respect of, and losses allocated to the Pool 2 component of the
Class PO Certificates will not be added to, the Pool 2 Class PO Deferred Amount.
Any distribution of Unanticipated Recoveries on the Pool 2 component of the
Class PO Certificates will be adjusted to take into account the Pool 2 Class PO
Deferred Amount previously paid to such component as specified in the Agreement.
See "Servicing of the Mortgage Loans -- Unanticipated Recoveries of Losses on
the Mortgage Loans" in the accompanying prospectus.
The applicable Non-PO Percentage of the principal portion of any Realized
Loss (other than an Excess Loss or a Debt Service Reduction) on a Pool 2
mortgage loan for any Distribution Date will not be allocated to any Pool 2
senior certificates entitled to principal distributions until the Pool 2
Cross-Over Date. Prior to the Pool 2 Cross-Over Date (and on such date under
certain circumstances), the applicable Non-PO Percentage of the principal
portion of any such Realized Loss will be allocated among the Pool 2 components
of the outstanding classes of junior certificates, in inverse order of priority,
until the Pool 2 Component Principal Balance of each such class has been reduced
to zero (i.e., such Realized Losses will be allocated first to the Pool 2
component of the Class B5 Certificates while such certificates are outstanding,
second to the Pool 2 component of 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 2 mortgage loan for any Distribution
Date will be allocated pro rata among all outstanding classes of Pool 2 senior
certificates entitled to principal distributions and Pool 2 components of
Component Certificates entitled to principal distributions (other than the Class
PO Certificates) based on their Class Certificate Principal Balances or
Component Principal Balances, as the case may be.
An "Excess Loss" in respect of a Pool 2 mortgage loan is any Bankruptcy
Loss, Fraud Loss and Special Hazard Loss (each a type of Realized Loss)
occurring after the Pool 2 Bankruptcy Coverage Termination Date, Pool 2 Fraud
Coverage Termination Date and Pool 2 Special Hazard Termination Date,
respectively, as described more fully below. Commencing on the Pool 2 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 Pool 2 mortgage loans
will be allocated among the outstanding classes of Pool 2 senior certificates
entitled to principal distributions pro rata based upon their Class Certificate
Principal Balances.
No reduction of the Class Certificate Principal Balance or Component
Principal Balance of any class or component of Pool 2 certificates shall be made
on any Distribution Date on account of any Realized Loss with respect to 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 2
senior certificates and the Component Principal Balances of the Pool 2
components of all Component Certificates as of such Distribution Date to an
amount less than the 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 Pool 2 Bankruptcy Coverage Termination Date (such limitation
being the "Pool 2 Loss Allocation Limitation").
A2-24
<PAGE> 124
Because the Notional Principal Balance of each of the Class 2-A4 and Class
2-A6 Certificates will be equal to the Class Certificate Principal Balance from
time to time of the Class 2-A3 Certificates, any Realized Losses that are
applied to reduce the Class Certificate Balance of the Class 2-A3 Certificates
will also reduce by any equivalent amount the Notional Principal Balance of each
of the Class 2-A4 and Class 2-A6 Certificates. As a result, the amount of
interest distributable on the Class 2-A4 and Class 2-A6 Certificates would be
reduced.
The principal portion of Debt Service Reductions with respect to Pool 2
mortgage loans will not be allocated in reduction of the Certificate Principal
Balance or the Component Principal Balance of the Pool 2 component of any
certificate. However, after the Pool 2 Bankruptcy Coverage Termination Date, the
amounts distributable under clause (1) of the definitions of Pool 2 Senior
Optimal Principal Amount, Pool 2 Class PO Principal Distribution Amount and Pool
2 Junior Optimal Principal Amount 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 Pool 2 components of the junior certificates in right of
distribution, any Debt Service Reductions prior to the Pool 2 Bankruptcy
Coverage Termination Date will be borne by the Pool 2 components of the junior
certificates (to the extent then outstanding) in inverse order of priority.
All allocations of Realized Losses to a class of Pool 2 certificates or to
the Pool 2 component of a class of 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 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 Pool 2 component of the Class PO Certificates on any
Distribution Date through the Pool 2 Cross-Over Date will also be taken into
account in determining distributions in respect of the Pool 2 Class PO Deferred
Amount for such Distribution Date.
The interest portion of all Realized Losses in respect of Pool 2 mortgage
loans will be allocated among the outstanding classes of Pool 2 senior
certificates and Pool 2 components of Component Certificates entitled to
distributions of interest to the extent described under "-- Distributions on the
Pool 2 Certificates -- Interest" above.
The applicable Non-PO Percentage of any Deficient Valuation on a Pool 2
mortgage loan will on each Distribution Date be allocated solely to the
outstanding Pool 2 components of the junior certificates until the Pool 2
Bankruptcy Coverage Termination Date. The "Pool 2 Bankruptcy Coverage
Termination Date" is the Distribution Date upon which the Pool 2 Bankruptcy Loss
Amount has been reduced to zero or a negative number (or the Pool 2 Cross-Over
Date, if earlier). On each Distribution Date, the "Pool 2 Bankruptcy Loss
Amount" will equal approximately $100,000 (approximately 0.04% of the aggregate
Scheduled Principal Balances of the 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 2 mortgage loans.
The Pool 2 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
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<PAGE> 125
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 2
mortgage loan will on each Distribution Date be allocated solely to the
outstanding Pool 2 components of the junior certificates until the Pool 2 Fraud
Coverage Termination Date. The "Pool 2 Fraud Coverage Termination Date" is the
Distribution Date upon which the Pool 2 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 "Pool 2 Fraud Loss Amount" will equal
approximately $2,523,648 (approximately 1.00% of the aggregate Scheduled
Principal Balances of the 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
Pool 2 Fraud Loss Amount will equal approximately $2,523,648, minus the
aggregate amount of Fraud Losses that would have been allocated to the Pool 2
components of the junior certificates in the absence of the Pool 2 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 Pool 2 Fraud Loss
Amount will equal (1) the lesser of (a) the Pool 2 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 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 Pool 2 components of the
junior certificates in the absence of the Pool 2 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 Pool 2 Fraud
Loss Amount shall be zero.
The applicable Non-PO Percentage of any Special Hazard Loss in respect of a
Pool 2 mortgage loan will on each Distribution Date be allocated solely to the
Pool 2 components of the outstanding junior certificates until the Pool 2
Special Hazard Termination Date. The "Pool 2 Special Hazard Termination Date" is
the Distribution Date upon which the Pool 2 Special Hazard Loss Amount has been
reduced to zero or a negative number (or the Pool 2 Cross-Over Date, if
earlier). Upon the initial issuance of the certificates, the "Pool 2 Special
Hazard Loss Amount" will equal approximately $4,416,385 (approximately 1.75% of
the aggregate Scheduled Principal Balances of the Pool 2 mortgage loans as of
the Cut-off Date). As of any Distribution Date, the Pool 2 Special Hazard Loss
Amount will equal approximately $4,416,385 minus the sum of (1) the aggregate
amount of Special Hazard Losses that would have been previously allocated to the
Pool 2 components of the junior certificates in the absence of the Pool 2 Loss
Allocation Limitation and (2) the Pool 2 Adjustment Amount. For each anniversary
of the Cut-off Date, the "Pool 2 Adjustment Amount" shall be equal to the
amount, if any, by which the Pool 2 Special Hazard Loss Amount (without giving
effect to the deduction of the Pool 2 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 2 mortgage loans by principal balance secured by
mortgaged properties in any California zip code) of the outstanding
principal balance of all the Pool 2 mortgage loans on the Distribution Date
immediately preceding such anniversary and (y) twice
A2-26
<PAGE> 126
the outstanding principal balance of the 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 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 on your certificates.
PREPAYMENTS
The rate of distribution of principal of the Pool 2 certificates (and the
aggregate amount of interest payable on the Class 2-A4 and Class 2-A6
Certificates and the Pool 2 component of the Class S Certificates) will be
affected primarily by the amount and timing of principal payments received on or
in respect of the Pool 2 mortgage loans. Such principal payments will include
scheduled payments as well as voluntary prepayments by borrowers (such as, for
example, prepayments in full due to refinancings, including refinancings made by
GECMSI in the ordinary course of conducting its mortgage banking business, some
of which refinancings may be solicited by GECMSI, or prepayments in connection
with biweekly payment programs, participation in which may be solicited by
GECMSI) and prepayments resulting from foreclosure, condemnation and other
dispositions of the mortgaged properties, from repurchase by GECMSI of any Pool
2 mortgage loan as to which there has been a material breach of warranty or
defect in documentation (or deposit of certain amounts in respect of delivery of
a substitute mortgage loan therefor) and from an exercise by GECMSI of its
option to repurchase a Pool 2 mortgage loan that is a Defaulted Mortgage Loan.
Mortgagors are permitted to prepay the Pool 2 mortgage loans, in whole or in
part, at any time without penalty. In addition, as a result of the fact that
Pool 2 certificateholders (other than holders of the Class 2-A4, Class 2-A6 and
Class 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, Pool 2
Class PO Principal Distribution Amount or Pool 2 Junior Optimal Principal
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 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
certificateholders in the month following the month of receipt or payment. Any
A2-27
<PAGE> 127
prepayment of a Pool 2 mortgage loan or liquidation of a Pool 2 mortgage loan
(by foreclosure proceedings or by virtue of the purchase of a Pool 2 mortgage
loan in advance of its stated maturity as required or permitted by the
Agreement) will generally have the effect of passing through to the Pool 2
certificateholders principal amounts (or, in the case of the Class 2-A4, Class
2-A6 and Class S Certificates, reducing the Notional Principal Balance or Pool 2
Notional Principal Balance thereof, as applicable) 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
entitled to principal distributions during at least the first five years after
the date of initial issuance of the certificates, with such allocation being
subject to reduction thereafter as described herein. Among such Pool 2 senior
certificates, such amounts 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 entitled to principal distributions on each Distribution Date after
the Pool 2 Cross-Over Date. The resulting allocation between the Pool 2 Group I
Senior Certificates and the Class 2-A5 Certificates is designed to accelerate
the allocation of principal prepayments and certain other unscheduled recoveries
of principal on the Pool 2 mortgage loans to holders of the Pool 2 Group I
Senior Certificates relative to the Class 2-A5 Certificates through the earlier
of the Pool 2 Group I Final Distribution Date and the Pool 2 Cross-Over Date. In
addition, the Class 2-A5 Certificates will not receive any distributions of
scheduled principal payments during the first five years after the date of
initial issuance of the certificates, except as otherwise described herein on or
following the earlier of the Pool 2 Group I Final Distribution Date and the Pool
2 Cross-Over Date. Notwithstanding the foregoing, all distributions of principal
on the outstanding Pool 2 senior certificates entitled to principal
distributions will be made pro rata among such certificates on each Distribution
Date after the Pool 2 Cross-Over Date. See "Description of the Pool 2
Certificates -- Distributions on the Pool 2 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 certificateholders in the
month following its receipt and the amount of interest thus distributed to Pool
2 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 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
certificateholders to the extent described herein. See "Description of the Pool
2 Certificates -- Distributions on the Pool 2 Certificates -- Interest" herein.
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<PAGE> 128
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 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 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 2 certificates also
may be affected by any repurchase by GECMSI of the mortgage loans as described
under "The Pooling and Servicing Agreement -- Termination" herein.
SENSITIVITY OF THE CLASS 2-A4 AND CLASS 2-A6 CERTIFICATES
The yield to investors in the Class 2-A4 and Class 2-A6 Certificates will
be highly sensitive to the rate of principal payments (including prepayments) on
the Pool 2 mortgage loans. Investors in the Class 2-A4 and the Class 2-A6
Certificates should consider the associated risks, including the risk that
faster than anticipated rates of prepayments on the Pool 2 mortgage loans could
result in actual yields to investors that are significantly lower than
anticipated yields or the failure of such investors to fully recover their
investments. The Notional Principal Balance of each of the Class 2-A4 and Class
2-A6 Certificates at any time will equal the Class Certificate Principal Balance
of the Class 2-A3 Certificates at such time.
To illustrate the significance of prepayments on the distributions on the
Class 2-A4 and Class 2-A6 Certificates, the following tables indicate the
pre-tax yields to maturity (on a corporate bond equivalent basis) under the
specified assumptions at the different constant percentages of the Prepayment
Assumption shown. The yields were calculated by determining the applicable
monthly discount rate which, when applied to the related assumed stream of cash
flows to be paid on the Class 2-A4 and Class 2-A6 Certificates, would cause the
discounted present value of such cash flows to equal the assumed purchase price
percentage for such certificates stated in such tables and converting the
applicable monthly discount rate to a corporate bond equivalent rate. Implicit
in the use of any discounted present value or internal rate of return
calculations such as these is the assumption that intermediate cash flows are
reinvested at the discount rate or internal rate of return. Thus, these
calculations do not take into account the different interest rates at which
investors may be able to reinvest funds received by them as distributions on
such certificates and, consequently, do not reflect the return on any investment
when such reinvestment rates are considered. It is unlikely that the Pool 2
mortgage loans will prepay at any of the constant levels of the Prepayment
Assumption shown or any other constant rate until maturity or that all of the
Pool 2 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 2 mortgage loans, the greater the effect on an investor's yield to
maturity. As a result, the effect on an investor's yield of principal
prepayments occurring at a rate higher (or lower) than the rate anticipated by
the investor during the period immediately following the issuance of the
certificates will not be equally offset by a subsequent like reduction (or
increase) in the rate of principal prepayments.
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<PAGE> 129
The following tables have been prepared based on the Pool 2 Modeling
Assumptions (as defined herein) and the additional assumptions that:
(1) the assumed purchase price of each of the Class 2-A4 and Class
2-A6 Certificates is as specified (expressed as a percentage of the Class
Certificate Principal Balance thereof); and
(2) such purchase price is paid on April 29, 1999.
<TABLE>
<CAPTION>
PRE-TAX YIELD* TO MATURITY OF THE CLASS 2-A4 CERTIFICATES PRE-TAX YIELD* TO MATURITY OF THE CLASS 2-A6 CERTIFICATES
(ASSUMED PURCHASE PRICE PERCENTAGE = 0.875%) (ASSUMED PURCHASE PRICE PERCENTAGE = 0.250%)
PREPAYMENT ASSUMPTION PREPAYMENT ASSUMPTION
- ----------------------------------------------------------- -----------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
0% 125% 275% 375% 500% 0% 125% 275% 375% 500%
------ ------ ------ ------- ------- ------ ------ ------ ------- -------
25.355% 25.310% 24.234% 21.071% 13.114% 10.856% 10.515% 7.454% 1.780% (11.719%)
</TABLE>
- ---------------
* Corporate bond equivalent basis
The Pool 2 mortgage loans may not have all the characteristics assumed and
there can be no assurance that:
(1) the Pool 2 mortgage loans will prepay at any of the constant rates
shown in the table or any particular rate;
(2) the pre-tax yield to maturity on the Class 2-A4 Certificates will
correspond to any amounts shown herein; or
(3) the respective purchase prices of the Class 2-A4 and Class 2-A6
Certificates will be as assumed.
Each investor must make its own decision as to the appropriate prepayment
assumptions to be used in deciding whether or not to purchase a Class 2-A4 or
Class 2-A6 Certificate.
FINAL PAYMENT CONSIDERATIONS
The rate of payment of principal of the Pool 2 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 Pool 2 components of the junior
certificates, delinquencies and defaults could affect the actual maturity of the
Pool 2 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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<PAGE> 130
. 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 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 on such certificates or the applicable components
thereof. The interaction of the foregoing factors may have different effects on
the various classes of the Pool 2 certificates or 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 2 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 certificates. The
figures in the table are based on the actual characteristics of the Pool 2
mortgage loans expected to be included in 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 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) 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 $252,364,834.85;
(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;
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<PAGE> 131
(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 such
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 such mortgage loans;
(8) the scheduled monthly payment for each mortgage loan has been
calculated based on its outstanding balance, interest rate and remaining
term to maturity such that such mortgage loan will amortize in amounts
sufficient to repay the remaining balance of such mortgage loan by its
remaining term to maturity;
(9) the initial Class Certificate Principal Balance and interest rate
on the certificates for each class of Pool 2 senior certificates offered
hereby are as indicated in the summary of this prospectus supplement;
(10) the initial Component Principal Balances for the Pool 2 component
of each class of the junior certificates offered hereby are as indicated in
Annex 3, and the interest rate applicable to each such component is as
indicated in the summary of this prospectus supplement;
(11) the date of the initial issuance of the certificates is April 29,
1999; and
(12) the amount distributable to the Pool 2 certificateholders is not
reduced by the incurrence of any expenses by the trust.
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 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 would differ (which difference could be material)
from the corresponding information in the tables for each indicated percentage
of the Prepayment Assumption.
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<PAGE> 132
PERCENT OF ORIGINAL CLASS CERTIFICATE PRINCIPAL BALANCE
OUTSTANDING OF THE CERTIFICATES
<TABLE>
<CAPTION>
CLASS 2-A1 CLASS 2-A2 CLASS 2-A3+
-------------------------------- -------------------------------- -----------
DISTRIBUTION DATE 0% 125% 275% 375% 500% 0% 125% 275% 375% 500% 0% 125%
- ----------------- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<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..................... 99 96 92 89 86 100 100 100 100 100 100 100
April 2001..................... 97 87 75 68 59 100 100 100 100 100 100 100
April 2002..................... 95 76 55 42 27 100 100 100 100 100 100 100
April 2003..................... 94 65 37 21 5 100 100 100 100 100 99 99
April 2004..................... 92 56 23 6 0 100 100 100 100 0 98 98
April 2005..................... 91 48 12 0 0 100 100 100 51 0 96 96
April 2006..................... 89 41 4 0 0 100 100 100 0 0 95 95
April 2007..................... 87 34 0 0 0 100 100 78 0 0 94 94
April 2008..................... 85 29 0 0 0 100 100 31 0 0 93 93
April 2009..................... 83 24 0 0 0 100 100 0 0 0 92 92
April 2010..................... 80 20 0 0 0 100 100 0 0 0 90 90
April 2011..................... 78 16 0 0 0 100 100 0 0 0 89 89
April 2012..................... 75 12 0 0 0 100 100 0 0 0 88 88
April 2013..................... 72 8 0 0 0 100 100 0 0 0 87 87
April 2014..................... 69 5 0 0 0 100 100 0 0 0 86 86
April 2015..................... 65 2 0 0 0 100 100 0 0 0 84 84
April 2016..................... 62 0 0 0 0 100 95 0 0 0 83 83
April 2017..................... 57 0 0 0 0 100 68 0 0 0 82 82
April 2018..................... 53 0 0 0 0 100 43 0 0 0 81 81
April 2019..................... 48 0 0 0 0 100 20 0 0 0 80 80
April 2020..................... 43 0 0 0 0 100 0 0 0 0 78 78
April 2021..................... 38 0 0 0 0 100 0 0 0 0 77 66
April 2022..................... 32 0 0 0 0 100 0 0 0 0 76 55
April 2023..................... 26 0 0 0 0 100 0 0 0 0 75 45
April 2024..................... 20 0 0 0 0 100 0 0 0 0 74 35
April 2025..................... 13 0 0 0 0 100 0 0 0 0 72 27
April 2026..................... 5 0 0 0 0 100 0 0 0 0 71 19
April 2027..................... 0 0 0 0 0 68 0 0 0 0 70 12
April 2028..................... 0 0 0 0 0 0 0 0 0 0 53 5
April 2029..................... 0 0 0 0 0 0 0 0 0 0 0 0
Weighted Average Life (in
years)(1).................... 18.0 6.7 3.5 2.8 2.3 28.2 18.8 8.7 6.1 4.6 25.2 22.1
<CAPTION>
CLASS 2-A3+
------------------
DISTRIBUTION DATE 275% 375% 500%
- ----------------- ---- ---- ----
<S> <C> <C> <C>
Initial Percentage............. 100 100 100
April 2000..................... 100 100 100
April 2001..................... 100 100 100
April 2002..................... 100 100 100
April 2003..................... 99 99 99
April 2004..................... 98 98 87
April 2005..................... 96 96 33
April 2006..................... 95 80 3
April 2007..................... 94 52 0
April 2008..................... 93 36 0
April 2009..................... 90 27 0
April 2010..................... 73 20 0
April 2011..................... 60 15 0
April 2012..................... 48 12 0
April 2013..................... 39 9 0
April 2014..................... 31 7 0
April 2015..................... 25 5 0
April 2016..................... 20 4 0
April 2017..................... 16 2 0
April 2018..................... 13 1 0
April 2019..................... 10 0 0
April 2020..................... 8 0 0
April 2021..................... 6 0 0
April 2022..................... 4 0 0
April 2023..................... 3 0 0
April 2024..................... 2 0 0
April 2025..................... 1 0 0
April 2026..................... 0 0 0
April 2027..................... 0 0 0
April 2028..................... 0 0 0
April 2029..................... 0 0 0
Weighted Average Life (in
years)(1).................... 13.8 9.2 5.7
</TABLE>
- -------------------------
(1) The weighted average life is determined as described on page A2-30.
+ The weighted average life shown in the table for this class of certificates
represents the weighted average life of these certificates taken as a whole
and is not likely to reflect the experience of any particular investor.
Because holders of these certificates will receive distributions in
reduction of the Certificate Principal Balance of such certificates on the
basis of Principal Distribution Requests or by random lot, the weighted
average life of any such certificates owned by an individual investor may
vary significantly from the weighted average life of this class of
certificates taken as a whole.
A2-33
<PAGE> 133
PERCENT OF ORIGINAL CLASS CERTIFICATE PRINCIPAL BALANCE
OUTSTANDING OF THE CERTIFICATES
<TABLE>
<CAPTION>
CLASS 2-A4+ CLASS 2-A5 CLASS 2-A6+
-------------------------------- -------------------------------- -----------
DISTRIBUTION DATE 0% 125% 275% 375% 500% 0% 125% 275% 375% 500% 0% 125%
- ----------------- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<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..................... 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
April 2002..................... 100 100 100 100 100 100 100 100 100 100 100 100
April 2003..................... 99 99 99 99 99 100 100 100 100 100 99 99
April 2004..................... 98 98 98 98 87 100 100 100 100 100 98 98
April 2005..................... 96 96 96 96 33 98 96 93 91 89 96 96
April 2006..................... 95 95 95 80 3 97 92 85 81 76 95 95
April 2007..................... 94 94 94 52 0 95 86 75 68 51 94 94
April 2008..................... 93 93 93 36 0 93 79 64 55 34 93 93
April 2009..................... 92 92 90 27 0 91 72 52 41 23 92 92
April 2010..................... 90 90 73 20 0 89 65 42 31 16 90 90
April 2011..................... 89 89 60 15 0 87 58 35 24 11 89 89
April 2012..................... 88 88 48 12 0 84 52 28 18 7 88 88
April 2013..................... 87 87 39 9 0 81 47 23 13 5 87 87
April 2014..................... 86 86 31 7 0 78 42 18 10 3 86 86
April 2015..................... 84 84 25 5 0 75 37 15 7 2 84 84
April 2016..................... 83 83 20 4 0 72 33 12 6 2 83 83
April 2017..................... 82 82 16 2 0 68 29 9 4 1 82 82
April 2018..................... 81 81 13 1 0 64 25 7 4 1 81 81
April 2019..................... 80 80 10 0 0 60 22 6 4 * 80 80
April 2020..................... 78 78 8 0 0 56 19 4 3 * 78 78
April 2021..................... 77 66 6 0 0 51 16 3 2 * 77 66
April 2022..................... 76 55 4 0 0 46 13 3 1 * 76 55
April 2023..................... 75 45 3 0 0 40 11 2 1 * 75 45
April 2024..................... 74 35 2 0 0 34 8 2 1 * 74 35
April 2025..................... 72 27 1 0 0 28 6 2 * * 72 27
April 2026..................... 71 19 0 0 0 22 5 2 * * 71 19
April 2027..................... 70 12 0 0 0 15 3 1 * * 70 12
April 2028..................... 53 5 0 0 0 7 1 * * * 53 5
April 2029..................... 0 0 0 0 0 0 0 0 0 0 0 0
Weighted Average Life (in
years)(1).................... 25.2 22.1 13.8 9.2 5.7 20.8 14.7 11.3 10.2 8.7 25.2 22.1
<CAPTION>
CLASS 2-A6+
------------------
DISTRIBUTION DATE 275% 375% 500%
- ----------------- ---- ---- ----
<S> <C> <C> <C>
Initial Percentage............. 100 100 100
April 2000..................... 100 100 100
April 2001..................... 100 100 100
April 2002..................... 100 100 100
April 2003..................... 99 99 99
April 2004..................... 98 98 87
April 2005..................... 96 96 33
April 2006..................... 95 80 3
April 2007..................... 94 52 0
April 2008..................... 93 36 0
April 2009..................... 90 27 0
April 2010..................... 73 20 0
April 2011..................... 60 15 0
April 2012..................... 48 12 0
April 2013..................... 39 9 0
April 2014..................... 31 7 0
April 2015..................... 25 5 0
April 2016..................... 20 4 0
April 2017..................... 16 2 0
April 2018..................... 13 1 0
April 2019..................... 10 0 0
April 2020..................... 8 0 0
April 2021..................... 6 0 0
April 2022..................... 4 0 0
April 2023..................... 3 0 0
April 2024..................... 2 0 0
April 2025..................... 1 0 0
April 2026..................... 0 0 0
April 2027..................... 0 0 0
April 2028..................... 0 0 0
April 2029..................... 0 0 0
Weighted Average Life (in
years)(1).................... 13.8 9.2 5.7
</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 A2-30.
+ The information shown for this class of certificates is for illustrative
purposes only, as this class of certificates is not entitled to
distributions of principal and has no weighted average life. Because the
Notional Principal Balance of this class of certificates will be determined
by reference to the Class Certificate Principal Balance of the Class 2-A3
Certificates, reductions in the aggregate Notional Principal Balance of this
class of certificates will occur concurrently with the reduction in the
Class Certificate Principal Balance of the Class 2-A3 Certificates as
described herein. The weighted average life shown for these certificates has
been calculated on the assumption that a reduction in the Notional Principal
Balance thereof is a distribution of principal.
A2-34
<PAGE> 134
ANNEX 3
THE JUNIOR CERTIFICATES
This Annex 3 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. Each class
of junior certificates will consist of two components, each representing an
interest in either Pool 1 or Pool 2. Amounts collected on each pool of mortgage
loans will go only toward distributions on the component related to that pool.
The components comprising each class of junior certificates are not separable
and may not be represented by separate certificates. Holders of any class of
junior certificates will have an undivided interest in those certificates in
their entirety, and any amounts distributed in respect of either component will
be distributed pro rata to the holders of such class of certificates.
The initial Component Principal Balances of the Pool 1 and Pool 2
components of the junior certificates are as follows:
<TABLE>
<CAPTION>
INITIAL POOL 1 INITIAL POOL 2
COMPONENT PRINCIPAL COMPONENT PRINCIPAL
BALANCES BALANCES
------------------- -------------------
<S> <C> <C>
M.................................. $8,354,000.00 $4,668,000.00
B1................................. 3,387,000.00 1,893,000.00
B2................................. 2,032,000.00 1,010,000.00
B3................................. 2,258,000.00 1,261,000.00
B4................................. 903,000.00 505,000.00
B5................................. 1,129,516.04 757,750.36
</TABLE>
The Certificate Principal Balance of each class of junior certificates on
any Distribution Date is the sum of the Component Principal Balances of the
components thereof on such date.
The Class B3, Class B4 and Class B5 Certificates are not offered by this
prospectus supplement, and the initial component principal balances above are
set forth only for the information of prospective investors in the certificates
offered hereby in making an investment decision. Each component of the classes
of junior certificates offered hereby will accrue interest at the certificate
interest rate for the applicable class of certificates set forth in the summary
of this prospectus supplement.
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
Component Principal Balance of the Pool 1 components of the junior certificates
will equal approximately 4.00% of the aggregate Certificate Principal Balance of
the Pool 1 certificates, and the aggregate Component Principal Balance of the
Pool 2 components of the junior certificates will equal approximately 4.00% of
the aggregate Certificate Principal Balance of the Pool 2 certificates.
A3-1
<PAGE> 135
The rights of the holders of the junior certificates to receive
distributions with respect to either the Pool 1 component or the Pool 2
component of their certificates will be subordinate to such rights of the
holders of the corresponding senior certificates, to the extent described in
"Annex 1 -- Distributions on the Pool 1 Certificates" and "Annex 2 --
Distributions on the Pool 2 Certificates."
The subordination of the Pool 1 and Pool 2 components of the junior
certificates is intended:
(a) to enhance the likelihood of timely receipt by the holders of the
related Pool 1 and Pool 2 senior certificates (to the extent of the
subordination of the Pool 1 and Pool 2 components of the junior
certificates) of the full amount of the scheduled monthly distributions of
principal and interest allocable to the related Pool 1 and Pool 2 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 Pool 1 and Pool 2 components of
the junior certificates) protection against Realized Losses, to the extent
described in the applicable annex.
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 related
Pool 1 component or Pool 2 component of the junior certificates, in
accordance with the paydown rules specified under "-- Distributions on the
Pool 1 Certificates -- Allocation of Available Pool 1 Funds" in Annex 1 or
under "-- Distributions on the Pool 2 Certificates -- Allocation of
Available Pool 2 Funds" in 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, with respect to
such date and, if necessary, by the right of such holders to receive future
distributions on the mortgage loans in Pool 1 or Pool 2, as applicable,
that would otherwise have been payable to the Pool 1 component or Pool 2
component of the junior certificates, as applicable;
(2) the allocation to the Pool 1 component or Pool 2 component of the
junior certificates, as applicable, of the principal portion of the
applicable Non-PO Percentage of any Realized Loss (other than an Excess
Loss or a Debt Service Reduction) on a Pool 1 mortgage loan or Pool 2
mortgage loan, as applicable, to the extent set forth herein; and
(3) the allocation to the Pool 1 component or Pool 2 component of the
junior certificates of the applicable PO Percentage of the principal
portion of any Realized Loss (other than an Excess Loss or a Debt Service
Reduction) on a Pool 1 mortgage loan or Pool 2 mortgage loan, as
applicable, to the extent set forth herein through the operation of the
Pool 1 Class PO Deferred Payment Writedown Amount or Pool 2 Class PO
Deferred Payment Writedown Amount, as applicable.
The allocation of the principal portion of Realized Losses (as set forth
herein) on the Pool 1 mortgage loans or Pool 2 mortgage loans to the Pool 1
component or Pool 2 component, as applicable, of the junior certificates on any
Distribution Date will decrease the protection provided to the related Pool 1 or
Pool 2 senior certificates then outstanding on future Distribution Dates by
reducing the aggregate Component Principal Balance then
A3-2
<PAGE> 136
outstanding of the Pool 1 components or Pool 2 components, as applicable, of the
junior certificates.
In addition, in order to extend the period during which the Pool 1 and Pool
2 components of 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 Pool 1 mortgage loan or a Pool 2 mortgage loan will
be allocated to the Pool 1 or Pool 2 senior certificates entitled to principal
distributions, 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 or Pool 2 mortgage loans evidenced by the Pool 1 or Pool 2 components
of the junior certificates. These amounts will be allocated among the Pool 1
senior certificates as described in Annex 1 and among the Pool 2 senior
certificates as described in Annex 2.
After the payment of amounts distributable in respect of the Pool 1 or Pool
2 senior certificates and the Pool 1 and Pool 2 components of the Senior
Component Certificates on each Distribution Date, the related components of the
junior certificates will be entitled on such date to the remaining portion, if
any, of the Pool 1 Available Funds or Pool 2 Available Funds, as applicable, in
an aggregate amount equal to the Accrued Certificate Interest on the related
components of the junior certificates for such date, any remaining undistributed
Accrued Certificate Interest on the related components of the junior
certificates from previous Distribution Dates, and the sum of the Allocable
Shares of the related components of the junior certificates. Amounts so
distributed to the Pool 1 and Pool 2 components of the junior certificates 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, the two components of which are subordinate in right of
distribution to the components of the junior certificates offered hereby to the
extent described herein, will equal approximately 0.968% of the initial
aggregate Certificate Principal Balance of all of the certificates and
approximately 24.20% of the initial aggregate Certificate Principal Balance of
all of the junior certificates.
As of the date of the initial issuance of the certificates:
(1) the aggregate Component Principal Balance of the Pool 1 components
of the Class B3, Class B4 and Class B5 Certificates will equal
approximately 0.95% of the aggregate Certificate Principal Balance and
Component Principal Balance of the Pool 1 certificates and approximately
23.75% of the aggregate Component Principal Balance of the Pool 1
components of all of the junior certificates; and
(2) the aggregate Component Principal Balance of the Pool 2 components
of the Class B3, Class B4 and Class B5 Certificates will equal
approximately 1.00% of the aggregate Certificate Principal Balance and
Component Principal Balance of the Pool 2 certificates and approximately
25.00% of the aggregate Component Principal Balance of the Pool 2
components of all the junior certificates.
A3-3
<PAGE> 137
On each Distribution Date, the Pool 1 or Pool 2 component 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 Pool 1 Available Funds or Pool 2 Available Funds, as applicable, prior to any
distribution being made on such date on the Pool 1 or Pool 2 component of 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 mortgage loan or Pool 2 mortgage loan
(other than a Debt Service Reduction or an Excess Loss), as applicable, and any
Pool 1 Class PO Deferred Payment Writedown Amount or Pool 2 Class PO Deferred
Payment Writedown Amount, as applicable, will be allocated, to the extent set
forth herein, in reduction of the Component Principal Balances of the related
components of the junior certificates in inverse order of priority of such
certificates. The effect of the allocation of such Realized Losses and of the
Pool 1 Class PO Deferred Payment Writedown Amount or Pool 2 Class PO Deferred
Payment Writedown Amount, as applicable, to the Pool 1 or Pool 2 component of a
class of junior certificates will be to reduce future distributions allocable to
such component and increase the relative portion of distributions allocable to
more senior components or classes.
In order to maintain the relative levels of subordination among the Pool 1
components and the Pool 2 components of the junior certificates, respectively,
the applicable Non-PO Percentage of prepayments and certain other unscheduled
recoveries of principal in respect of the Pool 1 mortgage loans or Pool 2
mortgage loans, as applicable (which will not be distributable to the applicable
components of the junior certificates for at least the first five years after
the date of initial issuance of the certificates, except as otherwise described
in Annex 1 or Annex 2 on or following the Pool 1 Senior Final Distribution Date
or Pool 2 Senior Final Distribution Date, as applicable), will not be
distributable to the related components of any class of Class B Certificates on
any Distribution Date for which the related Pool 1 Class Prepayment Distribution
Trigger or Pool 2 Class Prepayment Distribution Trigger, as applicable, is not
satisfied, except as described above. See Annex 1 -- "Distributions on the Pool
1 Certificates" or Annex 2 -- "Distributions on the Pool 2 Certificates," as
applicable. If the Pool 1 Class Prepayment Distribution Trigger or Pool 2 Class
Prepayment Distribution Trigger, as applicable, is not satisfied with respect to
a particular Pool 1 or Pool 2 component of a class of Class B Certificates, the
amortization of more senior ranking Pool 1 or Pool 2 components, as the case may
be, of junior certificates may occur more rapidly than would otherwise have been
the case and, in the absence of losses in respect of the related mortgage loans,
the percentage interest in the principal balance of the Pool 1 mortgage loans or
Pool 2 mortgage loans, as the case may be, evidenced by such component of such
Class B Certificates may increase.
As a result of the subordination of the Pool 1 or Pool 2 component of any
class of junior certificates, such component will be more sensitive than more
senior ranking Pool 1 components or Pool 2 components, as applicable, and more
sensitive than the related group of senior certificates to the rate of
delinquencies and defaults on the Pool 1 mortgage loans or Pool 2 mortgage
loans, as applicable, and under certain circumstances investors in the
certificates comprised of such components 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
A3-4
<PAGE> 138
principal (including both scheduled and unscheduled payments) of the mortgage
loans underlying the certificates. For a discussion of relevant factors relating
to the mortgage pools underlying each of the Pool 1 and Pool 2 components of 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 or Annex 2, as applicable. 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 on your certificates.
THE CLASS M, CLASS B1 AND CLASS B2 CERTIFICATES
The rate of payment of principal, the aggregate amount of distributions and
the yield to maturity of the Class M, Class B1 and Class B2 Certificates will
depend upon the rate of payment of principal and the amount of distributions on
each of the Pool 1 and Pool 2 components of such classes of certificates.
Principal payment rates and distributions on each of the Pool 1 and Pool 2
components will be affected by the rate of prepayments on the Pool 1 mortgage
loans or Pool 2 mortgage loans, as applicable, as well as the rate of mortgagor
defaults resulting in Realized Losses on such mortgage loans, by the severity of
those losses and by the timing thereof. See "Description of the Pool 1
Certificates -- Allocation of Realized Losses on the Pool 1 Certificates" in
Annex 1 and "Description of the Pool 2 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 certificates or the components
thereof. 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 mortgage loans and/or 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.
Depending on the relative performance of the Pool 1 mortgage loans and Pool
2 mortgage loans, the yields to maturity on the classes of Class B Certificates
with higher numerical designations may 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 may be more sensitive to such losses than the yields on the other
classes of Pool 1 or Pool 2 certificates. Similarly, the yields to maturity on
the Class M Certificates may be more sensitive to such losses than the yields on
the Pool 1 or Pool 2 senior certificates and less sensitive than the yields on
the Class B Certificates. The applicable components of the junior certificates
will be more sensitive to losses due to liquidations of defaulted mortgage loans
in the related pool because the entire amount of such losses will be allocable
to such components in inverse order of priority, either directly or through the
allocation of the Pool 1 Class PO Deferred Payment Writedown Amount or Pool 2
Class PO Deferred Payment Writedown Amount, as applicable, except as provided
herein. If the performance of one mortgage pool is significantly worse than the
other, however, it is possible that the higher-ranking components related to
that mortgage pool will be allocated losses prior to the lower-ranking
components related to the other mortgage pool. As a result, for example, higher-
ranking junior certificates may suffer losses while lower-ranking junior
certificates are still outstanding. 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
A3-5
<PAGE> 139
relatively greater effect, depending on the relative performance of the Pool 1
and Pool 2 mortgage loans:
(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 Pool 1 or Pool 2
certificates; and
(3) on the yields to investors in the Class M Certificates than on the
yields to investors in the Pool 1 or Pool 2 senior certificates.
As described in the applicable annex, amounts otherwise distributable to
the Pool 1 or Pool 2 components of any class of Class B Certificates will be
made available to protect the more senior ranking components or classes of the
Pool 1 or Pool 2 certificates, as applicable, against interruptions in
distributions due to certain mortgagor delinquencies. Amounts otherwise
distributable to the Pool 1 or Pool 2 components of the Class M Certificates
will be made available to protect the holders of the Pool 1 or Pool 2 senior
certificates, as applicable, 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 on each component that is faster than
that actually received, its actual yield to maturity may be lower than that so
calculated.
FINAL PAYMENT CONSIDERATIONS
The rate of payment of principal of each of the Pool 1 and Pool 2
components of the junior certificates will depend on the rate of payment of
principal of the Pool 1 mortgage loans or Pool 2 mortgage loans, as applicable
(including prepayments, defaults, delinquencies and liquidations), which, in
turn, will depend on the characteristics of the Pool 1 mortgage loans or Pool 2
mortgage loans, as applicable, 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 any mortgage loan in either mortgage pool 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 Pool 1 or Pool 2 components of the Class B3, Class B4
and/or Class B5 Certificates, delinquencies and defaults could affect the actual
maturity of the junior 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 "Annex 1 -- Yield and Weighted Average Life Considerations."
Tables of Junior Certificate Principal Balances
The following tables set forth the percentages of the initial Class
Certificate Principal Balance of each class of junior certificates offered
hereby that would be outstanding after
A3-6
<PAGE> 140
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 set forth in the table, it is
assumed with respect to each of the mortgage loans 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 as of the
Cut-off Date of the Pool 1 mortgage loans is $451,582,304.25, and the
aggregate outstanding Scheduled Principal Balance of the Pool 2 mortgage
loans is $252,364,834.85;
(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 and interest rate
on each class of certificates offered hereby are as indicated in the
summary of this prospectus supplement or in this Annex 3;
(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 mortgage loans differ from those used in
calculating the percentages set forth in the tables, the actual class
certificate principal balance of each class of junior certificates outstanding
at any time and the actual weighted average life of each class of junior
certificates would differ (which difference could be material) from the
corresponding information in the tables for each indicated percentage of the
Prepayment Assumption.
A3-7
<PAGE> 141
PERCENT OF ORIGINAL CLASS CERTIFICATE PRINCIPAL BALANCE
OUTSTANDING OF THE CERTIFICATES
<TABLE>
<CAPTION>
CLASSES M, B1 AND B2
------------------------------------
DISTRIBUTION DATE 0% 125% 250% 275% 375% 500%
- ----------------- ----- ----- ----- ----- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Initial Percentage.......................................... 100% 100% 100% 100% 100% 100%
----- ----- ----- ----- ---- ----
April 2000.................................................. 99 99 99 99 99 99
April 2001.................................................. 98 98 98 98 98 98
April 2002.................................................. 97 97 97 97 97 97
April 2003.................................................. 95 95 95 95 95 95
April 2004.................................................. 94 94 94 94 94 94
April 2005.................................................. 93 90 88 88 86 83
April 2006.................................................. 91 86 81 80 76 71
April 2007.................................................. 89 81 72 71 64 56
April 2008.................................................. 88 74 62 60 51 42
April 2009.................................................. 86 67 52 49 39 28
April 2010.................................................. 84 61 43 40 29 19
April 2011.................................................. 81 55 36 32 22 13
April 2012.................................................. 79 49 29 26 17 9
April 2013.................................................. 76 44 24 21 13 6
April 2014.................................................. 74 39 20 17 9 4
April 2015.................................................. 71 35 16 14 7 3
April 2016.................................................. 67 31 13 11 5 2
April 2017.................................................. 64 27 11 9 4 1
April 2018.................................................. 60 23 8 7 3 1
April 2019.................................................. 56 20 7 5 2 1
April 2020.................................................. 52 17 5 4 1 *
April 2021.................................................. 47 15 4 3 1 *
April 2022.................................................. 43 12 3 2 1 *
April 2023.................................................. 38 10 2 2 * *
April 2024.................................................. 32 8 2 1 * *
April 2025.................................................. 26 6 1 1 * *
April 2026.................................................. 20 4 1 1 * *
April 2027.................................................. 14 3 * * * *
April 2028.................................................. 7 1 * * * *
April 2029.................................................. 0 0 0 0 0 0
Weighted Average Life (in years)(1)......................... 19.7 13.9 11.2 10.8 9.7 8.7
</TABLE>
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* 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 A1-39.
A3-8
